It is probably not the first thing that comes to mind when you are awarded a subsidy for a project, but it is crucial to know if the subsidy provider requires for the project to be audited. The simple reason is, you could write the perfect proposal, execute the project right as planned, have the results you hoped for, and then… At the very end of the project the funding is withdrawn because of some administrative requirement you missed. Okay, enough with the doom mongering. What should you do to avoid this?
When you are awarded a subsidy for a project, ensure you read the grant letter carefully from start to finish to ascertain whether your project requires an audit. Most commonly, the requirement is for the final project report to be accompanied by an audit certificate. Usually, there is a certain threshold of expenditure that must be reached. For example, €125.000 total expenditure for projects awarded by the Dutch government or €325.000 other direct costs for projects awarded by the European Commission projects.
WHAT DOES A SUBSIDY AUDIT INVOLVE?
Specific procedures and checks are often specified in detail by respective funding organizations. As a general guide, grant auditors expect to see at the very least, the following documentation:
Personnel Costs:
- Gross monthly payroll costs per employee
- Time records or other method proving allocation to project
- Employment contracts for personnel working on the project
- Whether the actual personnel costs are in line with the budget
Direct Costs:
- Original invoices
- Evidence of authorization and allocation to the project
- Tendering documentation if applicable
- Expenses claims and subsequent receipts
- Evidence of how travel claims are relevant to the delivery of the project
- Evidence that the beneficiary’s internal procurement and expenses procedures and rules were followed
In General:
- Is the actual incurred expenditure in line with the budget?
- Did all expenditure incur within the project period?
- Are there any project specific requirements stated in the grant letter?
- Was the project a success?
HOW TO SELECT THE PERFECT AUDITOR FOR THE JOB?
You can use your existing annual accounts statutory auditor to complete a subsidy audit. However, not all statutory auditors will not have the specialist knowledge required. Therefore, you may find it preferable and more efficient to choose an auditor who is fully conversant with the rules and nuances of grant auditing.
WHEN TO START PREPARING?
Right at the start of the project, you should already start preparing for the audit. Even though the audit can be years away, the required documentation should be available and complete from the very start of the project. Especially when it comes to the time records. By starting to prepare from the start of the project, you can be sure to avoid unexpected surprises during the audit itself.
When it comes to the actual audit, it is important to engage a subsidy auditor a few months prior to your deadline for submission of documents. In that way, the auditor has enough time to schedule the audit. It typically takes approximately two weeks, from start to finish, to complete a subsidy audit. However, this is heavily dependent on the size and complexity of the audit.
Good luck! And should you need any help, here at F.INSTITUTE we are always happy to assist you in preparing for subsidy audits.
This is part of an ongoing blog series about early stage finance and fundraising. If you’re interested to be first informed on our next posts you can click on this link.
