Preparing for a grant audit can feel complex, but having the right documentation in place will help the process run smoothly and efficiently.
What is a grant audit?
A grant audit is an independent review of how grant funding has been claimed and spent. Its purpose is to confirm that:
- Costs are eligible under the grant agreement
- Claims are accurate and supported by evidence
- Public funds have been used appropriately.
Grant audits are commonly required by bodies such as Innovate UK, Horizon H2020, or ARIA, to name but a few and often focus on staff costs, project expenditure, procurement processes, and VAT treatment.
Grant audit documentation checklist
While every grant audit has its own requirements, the documents below are typically requested.
Grant funding offer
- A signed copy of the Grant Offer Letter (GOL)
- Confirmation of original project start and end dates
- A detailed project budget breakdown
- Copies of any amendments issued by the funder
- Project Change Request (PCR) documentation for:
- Changes to eligible costs
- Subcontractor changes
- No cost extensions.
These documents form the foundation of the grant audit and help verify eligibility criteria.
Claims evidence
- Full details of all grant claims submitted
- Screenshots or exports from funding portals, where applicable
- Evidence of the final draft claim prior to submission.
Clear claim evidence helps reduce queries and speeds up the review process.
Staff-related costs
Staff costs are frequently scrutinised during a grant audit, so accurate records are essential.
You will usually need to provide:
- Timesheets clearly showing time spent on the funded project
- Payroll records detailing:
- Gross pay
- Employer National Insurance contributions
- Employer pension contributions
- A calculated hourly rate that complies with the grant agreement terms
Errors in staff cost calculations are one of the most common causes of audit adjustments.
Project expenditure and procurement
To support project costs claimed under the grant, auditors typically request:
- Invoices, receipts, and expense claims linked to project activity
- Bank statements or payment confirmations
- Evidence of compliant procurement, including:
- Procurement policies
- Competitive quotes for subcontracted services or major purchases
Strong procurement evidence demonstrates value for money and compliance with funder rules.
Common pitfalls
Incorrect staff cost calculations
Misreporting gross salaries or excluding employer National Insurance or pension contributions can result in ineligible costs. These errors often require retrospective corrections during the grant audit.
Insufficient procurement evidence
Missing quotes or weak justification for supplier selection may breach funder requirements. This can lead to costs being disallowed during the grant audit review.
VAT reporting errors
Claiming costs inclusive of VAT when VAT is recoverable from HMRC can result in overclaiming. Grant audits typically require costs to be reported net of reclaimable VAT.
How PEM can support you
At PEM, we help organisations prepare with confidence. Our experienced team identifies potential issues early, clarifies documentation requirements, and works closely with you to ensure a smooth, efficient audit process.
If you need a grant audit or have questions about compliance, our team is here to support you at every stage.
