If you’re applying for funding from a grant provider such as Innovate UK, you may be required to periodically submit your project costs for a grant audit.
We know that probably sounds a little daunting and you may be wondering what that even means, but don’t worry, we’ll explore everything you need to know about grant audits within this blog.
To start with, what are grant audits?
When you apply for or receive funding for a project, some providers will set grant audit requirements as part of the grant agreements.
Audits are an independent financial inspection and examination of a project’s accounts. They’re basically a way for funding bodies to ensure that the project accounts and expenditure, meet with the specific terms and conditions of the relevant contract.
Funding is often released in stages and in order for the next instalment to reach you, a grant audit gives the funder peace of mind that the funds are being used correctly.
Think of it this way, if you were providing a large amount of funding to a business for a set purpose or project, you’d probably like some form of assurance that it was being used in the correct way!
How do I know if the funding I’ve applied for requires a grant audit?
As part of a funding application, you’ll need to outline what it is you want to do, why your business hits the funding application requirements and most importantly, how much you need.
Funding providers will outline the requirements at the application stage, so be sure to read up on what is and isn’t required.
On approving your funding application, you’ll also receive further clarification if and how often grant audits are expected.
When will our project need to be audited?
This can depend on how much funding you receive and can vary between providers.
It’s common for funders, for example Innovate UK, to split the projects costs up into up into three-month periods (which are referred to as quarters).
Sometimes a grant audit may only be required after the first quarter or at the end of the grant period. Alternatively, it may be once a certain expenditure threshold has been met.
What will be audited?
The specific procedures and checks will be detailed by the funding organisation, however it’s common for grant audits to include checks on:
- Capital usage
- Travel and subsistence expenses
Grant audits may involve cross-checking payroll costs, original invoices and receipts, tendering documentation, and evidence of payment.
Who can provide a grant audit?
Grant audits will need to be carried out by a registered auditor, who is qualified to complete the process in accordance with the relevant requirements and national legislation.
The criteria will be set out in the project’s grant agreement or contract.
ICAEW certified accountants can conduct grant audits for Innovate UK funding.
How can I prepare?
Ensure you fully understand the terms and conditions of the funding you’re applying for.
It’s best to seek advice from a certified accountant and/or appoint an auditor at the acceptance stage of your funding. Instead of say for example, leaving it until a week before the grant audit is required.
It’s better to plan ahead as it will keep everything far less stressful – take it from us!
Utilise the relevant technology! There’s a lot of technology and software out there which will help you keep record of your accounts and expenses. We really recommend use of Xero and Dext.
What else do I need to consider?
- A grant audit is separate to your annual account audits or day-to-day accounting processes
- Some funders will allow you to recover the cost of the audit
- There may be audit issues or errors – a good auditor will help outline what they are so you’re able to work on correcting them
How can Blu Sky help?
We’re able to carry out an independent grant audit for many grants. We can also help educate you around the software and technology that will help you keep track.
If you’d like to find out more, feel free to drop us an email!