Grants

Usually, the grant recipient appoints an accountant to complete this review, but this is done in line with the terms set out in the offer letter, which will have been agreed between the funder and the recipient. This usually means that the audit can be completed without the involvement of the funder, and the recipient can manage the process directly. Generally, this includes arrangements around fees payable to the accountancy firm for their work, which can often be outside of the expenditure recoverable under the terms of the grant.

The Independent Accountants Report (IAR) is produced, stating whether expenditure meets the requirements of the grant. The grant provider often stipulates the report template.

Upon completion of the audit, the IAR will be issued to the recipient, usually on the understanding that it will be shared with the grant funder.

How will I know if I need an audit?

The terms of the grant are set out in the offer letter, which the funder will ask to be signed to acknowledge your agreement to the terms of the offer.

The offer letter will lay out both the eligible costs and the reporting and audit requirements.

A key point is that an audit is not always required, only at the end of the project being funded, and this sometimes catches out grant recipients. For bigger projects or those that spread over several years, funders often require ongoing monitoring.

• At the end of the project – these tend to be smaller and short-term projects.
• At the end of the first and last quarter of the project – projects with higher values which spread over several quarters often need to have an audit of the first and last claim. This is to comfort the funder at quarter one that everything is operating as expected. Then at the end of the last quarter, a final claim will be completed on all other expenditure, i.e. everything other then quarter one expenditure.
• An anniversary audit – when expenditure covers several years, an annual audit of expenditure is sometimes required.
• Quarterly certificates – for larger projects.

Funders set deadlines for submitting the reports or tether them into claim submissions. It is important to be aware of the timetable of audit requirements, as delays might mean that your funding could be delayed or paused.

Although we can usually respond quickly to grant audit requests from recipients, we do look to diarise in our audits with you so that we can be sure to work to these deadlines with you.

Level of assurance required by funder Funders require varying levels of assurance.

For simplicity, we have referred to these assignments as ‘audit’ in this information sheet but in reality, they are not audits under International Standards on Auditing.

In fact, they are almost always ‘limited assurance’ or ‘agreed-upon procedures’ assignments. Usually, the work is sample-based, but occasionally, accountants are required to look at 100% of the costs. Some funders have quite prescriptive requirements regarding both the nature and extent of our procedures whilst in other cases, it is left to our judgement.

What might you need to provide to your independent accountant?

The first essential document is the signed grant offer letter/funding agreement. Also, any separate guidance issued by the funder regarding reporting and certification.

The claimant entity is responsible to maintain suitable records of project expenditure and to produce the claim calculations.

We would undertake a planning exercise with you to gain a clear understanding of these records, your controls over the expenditure and the documentation you will provide to us.

The offer letter will lay out eligible costs and we will request the breakdown of costs incurred in the grant claim period which you are submitting to the funder.

Testing

We will test a sample of these costs as appropriate to ensure that the costs in the claim are valid and that they are in accordance with the grant offer.

Read more in our dedicated leaflet: