Chapter 8: Preparing for Audits and Ensuring Compliance - The Missing Manual for After-School Programs

School administrators in California’s afterschool programs have to manage multiple tasks: coordinating enrichment activities, staffing, family communication, and student needs, all while ensuring the program meets strict state and federal guidelines. One aspect looms especially large for those receiving funding from ELO-P, ASES, and/or 21st CCLC: audits. The word “audit” can add another layer of stress to an already full plate. But with a bit of planning and strong day-to-day practices, audits can turn into an opportunity to confirm that everything is on track and to demonstrate accountability for continued funding.

This chapter outlines which missteps commonly trigger audits, how to prepare your documentation ahead of time, what to expect during both internal and external reviews, and how two real-life districts overcame audit challenges to strengthen their afterschool programs.

Common Audit Triggers and How to Organize Data in Advance

Afterschool programs that receive state and federal funding are subject to a variety of compliance requirements, ranging from attendance thresholds to financial spending caps. Failing to meet these obligations can trigger substantial scrutiny in an audit, and in some cases lead to funding reductions. By recognizing these common triggers, administrators can stay one step ahead of potential pitfalls.

Attendance and Program Hour Requirements

One of the most frequent triggers relates to attendance and operational hours. Both ASES and 21st CCLC programs must generally run after school each regular school day—often until at least 6:00 PM—and maintain a minimum average daily attendance (ADA) consistent with their grant agreement. If attendance dips too far below the projected target (commonly 85%), the state may reduce funding proportionally. ELO-P, in turn, has its own set of attendance and hour requirements, including ensuring a nine-hour combined instructional and enrichment day for TK-6 students and offering at least thirty days of intersession programming (e.g., during the summer). Programs that cannot prove they met these hours or made their program available to all eligible students risk findings and financial penalties.

Financial Management and the 85/15 Rule

Another common audit trigger relates to how the money is spent. California afterschool funds come with strict rules about how money should be spent and documented. For ASES and 21st CCLC, at least 85% of grant funds must pay for direct services to students, leaving up to 15% for administrative or indirect costs. If an audit determines a grantee (or its subcontractors) spent more than 15% on administrative overhead, the program can be found noncompliant and potentially owe money back. Other red flags include claiming expenses for items outside allowable uses or failing to support spending with clear, site-specific documentation.

Matching Funds for ASES

Because ASES is a state-funded program, it also requires local matching contributions worth at least one-third of the grant amount (in cash or in-kind services). No more than 25% of this match can come from facilities or space usage. An audit will check that the district or partner agencies documented all contributions. Some districts fail to track volunteer hours, donated snacks, or the value of facility use, which can jeopardize proof of meeting this one-third match.

Early Release and Late Arrival Policies

Another frequent audit finding in California results from a lack of (or unenforced) early release and late arrival policies. If the program is meant to run until 6:00 PM, parents typically must sign out a child who leaves early with an approved reason. If these policies are not in place, or if sign-out records never show the reason for early departures, auditors may note a compliance violation—even if the program is strong in other respects.

Documentation and Record-Keeping

At the core of every audit is the need for clear documentation. Whether verifying attendance thresholds or the 85/15 spending rule, auditors will ask to see comprehensive records. These commonly include sign-in/sign-out sheets (with parent signatures), daily attendance summaries, staff time and effort reports, job duty statements, inventory logs for items purchased with grant funds, and ledger documentation of expenses. Programs should also retain records for at least five years, as prior-year files can be requested to confirm past compliance. Federal funds, like those under 21st CCLC, come with an added “supplement vs. supplant” requirement, meaning the money should add to—not replace—what the district already funds. Auditors often examine staff time sheets or any replaced local services to catch supplanting.

Organizing Data in Advance

As we discussed in our previous chapter, rather than storing documents haphazardly, many districts create a central “audit folder”—physical or digital—for each program year. This folder contains attendance logs, financial reports, budget versus actual spending trackers (highlighting direct vs. administrative costs), local match documentation (for ASES), and relevant policies like early release sign-out. At a glance, an administrator can retrieve any paper or online record an auditor might request. One program coordinator described this system as not only a time-saver during audits but also a daily management tool that helps keep the entire afterschool team aligned.

Internal vs. External Audits—What to Expect and How to Respond to Findings

Audits and compliance reviews come in different forms. Understanding the difference between internal and external audits can help programs prepare thoroughly, address small problems early, and remain confident when a formal, external inspection arises.

Internal Audits and Self-Monitoring

Often, districts carry out their own internal audits as part of a routine check-up. These can help identify small issues—like missing sign-out sheets or slightly inaccurate attendance tallies—before they become bigger ones. Typically these come in the form of a mid-year check by an internal auditor or a district compliance officer. Some programs conduct “self-monitoring,” encouraging site coordinators to verify attendance logs each month and confirm all students are properly signed out with parent signatures. By proactively identifying discrepancies—like over-reporting or missing records—internal audits prevent the unpleasant surprise of an external reviewer discovering the same issue months later. A key benefit is that findings from internal audits rarely lead to penalties. Instead, they guide corrective measures: improved training, new attendance forms, or budget reclassifications.

External Audits and Monitoring

By contrast, an external audit generally follows a set procedure and can be more formal. Districts typically receive an annual financial and compliance audit by an independent auditing firm. Meanwhile, the CDE has its own reviews, such as Federal Program Monitoring (FPM) or ELO-P compliance visits. These auditors may sample your attendance data, review expense ledgers in detail, observe program activities, or interview staff members and even parents. Discrepancies—like paper sign-in logs that don’t match attendance figures reported to the state—are recorded as “findings,” which may require corrective actions or, in some cases, repayment of funds.

Responding to Audit Findings

When an external audit or FPM review surfaces an issue, administrators generally have an opportunity to respond. If the program agrees with the finding, they must draft a corrective action plan. For instance, if staff time charged to the afterschool grant exceeded allowable limits, the district may propose better time tracking or reassign certain costs outside the grant’s budget to keep administrative spending below 15%. When the program disputes the finding, it can provide additional evidence to clarify any misunderstanding—such as presenting sign-in sheets or local match logs previously overlooked. Either way, the key is to act swiftly. Delayed or inadequate responses can escalate the situation, potentially triggering partial repayment of funds. On the other hand, swift and effective corrective actions often persuade auditors that the program will not repeat the error.

How Districts Overcame Audit Challenges and Reformed Their Processes

Mistakes happen, but they need not threaten the viability of a well-intentioned program. Here are the stories of several California districts that have experienced audit findings, corrected them, and emerged with better processes as a result.

Case Study 1: La Mesa–Spring Valley’s Attendance Discrepancies

La Mesa–Spring Valley School District faced an audit finding when discrepancies arose between the attendance numbers reported to the state and the paper sign-in sheets maintained at afterschool sites. Though the net error did not drop attendance below 85%—so funding was ultimately not lost—the audit identified lax reconciliation processes as the underlying cause. In response, the district implemented monthly attendance reconciliations at each site. Coordinators were trained to cross-check daily sign-in sheets against reported totals, correcting mistakes before any data went to the CDE. By the subsequent year, no further attendance findings were noted. This approach illustrates how even a small process tweak (routine reconciliations) can avert major compliance risks.

An audit in Pittsburg Unified School District revealed that some sign-in sheets had vanished for entire months, while certain sites’ reported numbers exceeded what the sheets (where they did exist) showed. Although attendance remained above 85% overall, auditors cited “insufficient controls” as a glaring concern. In reaction, the district enforced stricter record retention policies—reiterating that sign-in/out sheets must be preserved for at least five years—and introduced monthly reviews similar to La Mesa–Spring Valley’s. By the following audit cycle, missing logs were no longer an issue. This case reaffirms the importance of consistent, long-term record-keeping practices to avoid expensive errors.

Case Study 3: Addressing Early Release Policy Gaps

In a hypothetical composite scenario based on real California FPM reviews, a district discovered that some school sites allowed parents to pick up students early without stating a reason or signing out properly. Auditors cited the absence of a defined Early Release Policy. The district responded by drafting a board-approved policy, training staff to enforce it, and redesigning sign-out sheets to include a “reason for early departure” box. Although the policy seemed like an administrative detail, it drove real improvements in data integrity—parents understood the importance of these afterschool hours, and staff tracked attendance more accurately. In a follow-up review, auditors praised the district’s newly standardized approach as an example for other programs.

Case Study 4: Keeping Administrative Costs Under 15%

In another composite example, an external review found that a large afterschool program had allocated nearly 18% of its ASES budget to administration, exceeding the 15% limit. The shortfall arose largely because of an oversight: the district did not factor in the overhead charged by a subcontracted partner, which combined with district-level administrative costs to push the total over 15%. The district committed to ongoing quarterly reviews, ensuring both direct and indirect costs remained balanced at each site. They renegotiated with the subcontractor to cap overhead rates, and when the next audit cycle came, the program reported closer to 14% in administrative expenses, eliminating the discrepancy. This case highlights the importance of centralized oversight, particularly when multiple agencies or providers contribute to program operations.

Embracing Audits as a Path to Continuous Improvement

Although “audit” may sound intimidating, it doesn’t have to be. In reality, it can be a valuable opportunity to refine procedures, strengthen data accuracy, and reinforce your program’s long-term funding and success. Many districts that once struggled with attendance miscounts or missing early release forms now demonstrate impeccable compliance because they used audit findings to drive reforms rather than seeing them as mere criticisms. Setting up a robust record-keeping system, training staff regularly, and conducting self-reviews will position a program to sail through external audits with minimal findings. More importantly, by meeting attendance targets, adhering to financial caps, and offering consistent operational hours, an afterschool program fulfills its promise to students and families—delivering high-quality enrichment in a responsible, accountable manner.

No matter your district’s size or the scope of your afterschool initiatives, a well-designed plan for preparing, conducting, and responding to audits can elevate the overall program. By maintaining meticulous attendance logs, transparent financial documents, a clear local match record (for ASES), and thorough policies on releases and staffing, you will not only pass an audit but also lay the groundwork for continuous quality improvement. In this way, compliance becomes more than an administrative task; it is a safeguard of your program’s integrity and a testament to the community you serve.

Chapter Summary

Audits are an inevitable part of running state and federally funded afterschool programs in California. Rather than viewing them as a source of stress, this chapter reframes audits as opportunities to confirm program compliance and demonstrate accountability. The chapter identifies common audit triggers including attendance thresholds, the 85/15 spending rule, matching funds requirements for ASES, early release policies, and thorough documentation practices. By organizing data in advance through centralized “audit folders,” administrators can streamline both internal self-monitoring and external reviews. The chapter illustrates how several California districts transformed audit findings into process improvements—from implementing monthly attendance reconciliations to enforcing record retention policies and monitoring administrative costs. With proper preparation and responsive action to findings, audits become less of a burden and more of a pathway to program integrity and continuous improvement.

Key Takeaways

Common audit triggers include falling below attendance thresholds, exceeding the 15% cap on administrative costs, insufficient matching funds documentation for ASES, inadequate early release policies, and poor record-keeping practices.
Creating a centralized “audit folder” with attendance logs, financial reports, budget trackers, and policy documentation helps administrators quickly retrieve any records an auditor might request.
Internal audits and self-monitoring allow programs to identify and address small issues before they become significant compliance problems during external reviews.
When responding to audit findings, swift action through corrective plans or providing clarifying evidence can prevent escalation and potential funding reductions.
Districts that have successfully navigated audit challenges typically implement systematic improvements like monthly data reconciliation, standardized record retention, and regular budget reviews.

Action Checklist

Review your existing budget categories to ensure they clearly distinguish between direct service costs (85% of funding) and administrative costs (15% maximum). This simple classification saves time during audits and prevents costly funding reductions that occur when programs unknowingly exceed the administrative cap.
Create or update your Early Release Policy with specific approved reasons for early departures (medical appointments, family emergencies, parallel programs). Having this board-approved policy prevents one of the most common audit findings that can jeopardize funding, even when your program is otherwise strong.
For ASES programs: Set up a simple system to capture often-overlooked in-kind contributions that count toward your required one-third match. Many programs miss counting valuable contributions like parent volunteer hours, donated supplies, and facility usage (up to 25% of match), leaving money on the table during audits.
If you receive an audit finding: Use a structured response approach that includes acknowledging the issue, identifying root causes, outlining specific corrective steps, and establishing a clear timeline. Programs that respond quickly and thoroughly to findings are far less likely to face funding reductions.
Schedule a brief 20-minute check-in with site coordinators each quarter to specifically review the top audit triggers from this chapter. This small time investment prevents the much larger time drain of responding to formal audit findings later.