WHAT IS A GRANT AUDIT?
Grant providers need to gain assurance on how recipients use their grant funding.
An audit is an independent review of the figures included in the claim. The auditors review the costs incurred and check that they meet the terms and conditions of the grant.
An accountant’s report is then produced, stating whether expenditure meets the requirements of the grant. The report template is often stipulated by the grant provider.
DO I NEED A GRANT AUDIT?
The offer letter will be the best place to start. This should tell you if and when you require an audit, and also detail the eligible costs and requirements for the claim. A common requirement is that costs must be invoiced and paid to be included. If you are uncertain give us a ring, as a grant audit may not always be necessary, and our team will be able to advise whether your company needs one or not.
Some grant providers require quarterly or annual reports, others only require reports if you breach spending limits.
The cost of grant auditing is often not included in the grant funding. However, always read the small print as it may be claimable.
Our specialist Grant Audit team is always on hand to help with any questions you might have.
WHO CAN COMPLETE A GRANT AUDIT?
Most funding organisations require that the audit is completed by a registered auditor.
Richardsons are registered auditors and grant audit specialists with extensive grant audit experience. We complete Independent Accountants’ Reports (IARs) for a range of grant providers, including:
- Innovate UK (IUK)
- Horizon Europe (previously Horizon 2020)
- UK Space Agency (UKSP)
- ESA (European Space Agency)
We have worked on grant audits from many sectors, including space, biochemistry development companies, universities, fashion, and software companies.
The grant project, if research and development, may also qualify for R&D Tax Credits under the RDEC scheme.
DEADLINES AND TIMINGS
Grant providers often have deadlines for the reports to be submitted. It is important that you are aware of any deadlines stipulated by the funding provider.
If necessary, grant audits can be completed quickly.
HOW MUCH DOES A GRANT AUDIT COST?
The cost of a grant audit depends on the type of grant audit and the amount of work that would be required. We operate on a fixed fee basis that would be agreed upon before work commences.
GRANT AUDIT PROCEDURES
We will request the breakdown of costs being claimed, and then verify that a sample of these costs has been claimed in accordance with the terms and conditions of the grants.
Some grant providers have more detailed reporting requirements which means that more evidence would be required, and some projects require 100% testing.
As terms vary on a grant-to-grant basis, the information required will differ depending on the funding body, but we would expect to require the following information:
- Payroll reports for the period
- Timesheets for the period
- Original invoices
- Evidence of payment of cost
Many European grant providers also require us to review employment contracts and procurement procedures.
COMMON GRANT AUDIT ISSUES
We conduct many grant audits every month for several different grant providers. Below are the most common issues we encounter:
Costs incurred or paid outside of the eligible dates
Grant funders often stipulate that costs can only be claimed if the invoice date and payment date are within the grant period. We often see claims where payments of large costs have been mistimed making them ineligible. We recommend that before the project ends you review your expenditure and make sure that all project invoices have been paid.
Ineligible VAT costs included in the claim
Generally, VAT and other taxes are not allowed in the claim. We frequently find that claimants have used their bank statements to identify their costs and therefore unintentionally include VAT in their claims.
Miscalculation of daily rates
Daily rates are often understated as companies do not include all eligible costs when calculating the rate. The rate should be based on gross salary, employer’s NICs, and employer’s pension costs. If employee salaries change, the rates may also change, but check your funding requirements as some grants require fixed rates for the period.
Capital usage (depreciation) not meeting requirements
Grant providers usually have specific requirements when it comes to claiming capital usage or depreciation of fixed assets. Check your funder’s requirements if you are claiming these costs.
Overspend on an individual cost category
Most grant funders stipulate the value that can be claimed under each cost category. If you overspend in one cost category but haven’t used your full grant, it is worth speaking to the grant provider rather than missing out on claiming the full amount.
‘We have worked with Richardsons from the beginning of our journey as a start-up and continue to use their services as we scale commercially. Richardsons are a fantastic firm, flexible, and responsive with a huge range of capabilities under one roof. Whenever I have picked up the phone to ask a technical question on anything from grant audit processes, R&D tax claims, or management accounting practice, I have always received well-considered answers and decisive action. I can’t imagine getting the sort of service we get from Richardsons from one of the larger firms’
Pete Armstrong, CEO of environmental tech Oxford Spin-out, Mixergy
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