Grant Audits

Ensuring compliance and building trust

Grant audits are a key part of the funding process, ensuring that businesses meet the requirements set by funding providers. They verify that grant funds are used appropriately and in line with the conditions outlined in the funding agreement.

Audits not only protect your business from financial risks, such as penalties or fund repayments, but they also build trust with funders. A strong track record of compliance can enhance your reputation and increase your chances of securing future funding.

What is a grant audit and when does a business need one?

A grant audit ensures compliance with the terms and conditions of grant funding. It verifies that the expenditure declared was accurate and that the funds were spent appropriately and in line with the funding agreement.

Typically, grant audits are required after funding has been awarded and can follow different assurance frameworks. This includes, ‘reasonable assurance’, ‘limited assurance’ or ‘agreed-upon procedures’. We ensure that the type of report we issue is fit for purpose by reviewing the terms and conditions of the grant scheme and the related offer letter. Generally, ‘reasonable assurance’ engagements may cost more than ‘limited assurance’ engagements, while ‘agreed-upon procedures’ are typically the most cost-effective engagement. This is due to the level of testing required for the different types of frameworks.

Is the landscape of businesses receiving grants changing?

The grant landscape has shifted in recent years. Before Brexit, European grants were far more common. However, post-Brexit, there has been an increase in grant audits for Innovate UK and other UK Research and Innovation (UKRI) funding bodies. Grants are now generally easier to apply for, with a broader range available beyond purely technology-focused projects, opening up opportunities across more sectors.

Our grant audit services

Grant audits aren’t one-size-fits-all – each funding body has its own unique auditing requirements, and we can provide tailored solutions to meet the specific needs of your grant engagement. Whether you’re applying for funding or requiring an audit for an ongoing project, we work with you from start to finish. From monitoring costs to ensuring accurate reporting, our services support you in successful funding outcomes.

Each grant has its own requirements depending on the funding provider, the size of the award, and the type of audit engagement (e.g. limited assurance or reasonable assurance). Some examples of providers we complete grants audits for include:

Innovate UK
Horizon Europe (H2020)
Interreg
Department for Environment, Food & Rural Affairs (DEFRA)
Local Enterprise Grants
Norwegian Ministry of Foreign Affairs (NMFA)

Familiarity with procurement policies

Procurement policies often play a critical role in grant audits, particularly for claims involving subcontractor costs. Funding providers typically require evidence that subcontractor services were selected in line with their procurement rules, such as obtaining multiple quotes.

We also assist clients with complex cost calculations, including staffing costs. For businesses new to grant funding, this can be time-consuming and challenging. We help ensure that your calculations are accurate and that the amounts declared align with the grant requirements.

Why choose Price Bailey for your grant audit?

Extensive experience: We have successfully completed grant audits for a wide range of funding bodies, including Innovate UK, Horizon Europe, Interreg, DEFRA, and many more.
Strong relationships with funders: We maintain excellent relationships with funding bodies by attending their webinars, staying up to date with their latest developments, and understanding their unique requirements.
Trusted by funders: We are proud to be a recommended registered auditor for certain funding bodies, which reflects the quality of our work and our expertise.
Support for all businesses: From small businesses to large organisations focused on innovation, we provide tailored support for grant audits of all sizes and complexities. Whether you’re managing a single grant or multiple funding streams, we ensure compliance every step of the way.

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The grant audit process: from initial consultation to report

We guide our clients through every step of the grant audit process to ensure compliance, accuracy, and efficiency.

Reviewing the grant agreement

The first step is a detailed review of the grant agreement. This helps us understand the specific requirements, expectations, and any potential challenges or pitfalls. Key aspects we review include:

The type of expenditure covered by the grant.
The methodologies used by the client for cost declarations, such as staff costs (we can provide support if clients are unsure).
The number and nature of transactions expected.

Based on this initial review, we prepare a quote and agree on a timeline with the client. This ensures clarity, expectations and sets the foundation for a smooth audit process.

Interim review

For some grants, we offer an interim review during the early stages of the project. This helps us assess whether the costs declared, and methodology applied, for the initial claim align with the grant agreement.

During this stage, we:

Identify any issues or discrepancies early on.
Suggest improvements or efficiencies that could make the process smoother for future claims.

This step is especially useful for clients new to grant funding or with larger grants, as it minimises the risk of errors later in the process.

Breakdown of declared items

Once the reporting period ends, the client provides a breakdown of the items they’ve declared to the funder. From this, we:

Select a sample of transactions for review.
Request supporting documentation for each sampled item, such as invoices, receipts, or payroll records.

This ensures that all declared costs meet the grant’s requirements and are supported by adequate evidence.

Review procedures and follow-up

Our Partners and Managers conduct a continuous review throughout the process to identify and address any issues promptly. Follow-up time is built into the process to address client queries should they arise.

Before finalising and issuing the audit report, we:

Cross-check the financial statement section with the declared items to ensure complete accuracy.
Confirm with the client that everything in the report aligns with what has been submitted to the funder.

This thorough review ensures the final report meets all compliance standards and is ready for submission to the funding body.

What are some frequently asked questions our grant auditors receive?

What documents do we need to prepare for a grant audit?

To ensure a smooth grant audit, you’ll need to prepare and provide the following documents:

Staff costs:
- Timesheet records showing how long specific staff members have worked on the funded project.
- Payroll reports detailing gross salary, employer’s National Insurance contributions, and employer’s pension contributions.
- An hourly rate calculation, maintained and aligned with the grant requirements.
Other expenditure:
- Purchase invoices, expense claims, and proof of bank payments.
- Any applicable procurement policies and evidence showing how your processes comply with these policies (e.g., obtaining competitive quotes for subcontractor work).

Providing these documents ensures compliance and speeds up the audit process.

How often will I need a grant audit?

The frequency of grant audits depends on your funding provider and the size of the award. For instance:

Some providers like Interreg may require an audit every time a claim is made.
Larger grants may require multiple audits, such as an initial audit at the start of the claim process and ongoing audits for each reporting period or anniversary.
Smaller grants or limited-assurance engagements might only require a single audit at the end of the project.

Your grant agreement will specify the exact timeline for audits, and we’ll help you stay on track.

Are there common issues grant audits uncover?

Yes, some issues we’ve encountered include:

VAT treatment: Declaring expenditure as gross instead of net, resulting in double funding if the awardee is able to reclaim input VAT from HMRC. .
Hourly rate calculations: Miscalculations in staff costs, such as missing employer’s National Insurance or pension contributions, or incorrectly reporting gross salaries. This can lead to over- or under-claiming and may require adjustments to the claim.
Procurement policy compliance: Inadequate evidence of following procurement policies, such as failing to obtain multiple quotes for subcontractor work, which could result in disallowed expenses.