What exactly do we know about how grant monies are spent? The ICAEW's Audit and Assurance Faculty has published technical release AAF 01/10, Framework document for accountants' reports on grant claims.This outlines good practice principles for grant-paying bodies to obtain assurance on how grant funding spends are monitored.
How public money is spent is important; after all, it is our money, we are the taxpayers. Many organisations rely on support from government departments in the form of grants. Individual grants can be given for millions of pounds for big capital projects, while others can be for relatively small amounts, used to set up a business or perhaps even to save it from bankruptcy.
Whatever the reason for the grant, this source of funding is important to many UK organisations, as it is one way that government and other organisations can provide support to businesses, researchers and voluntary organisations. Over recent years, considerable amounts have come from the European Union.
However, what exactly do we know about how our money is being spent? More importantly, do we know how government departments monitor that spend to make sure that the money is used for the purposes intended? In the current financial climate, limited grant monies need to achieve the maximum impact. Therefore, ensuring that public funds are spent efficiently and only for the purposes intended is more important than ever for grant-paying bodies. The accountabilities and responsibilities that come with grant funding are a crucial part of the grants process.
The ICAEW's Audit and Assurance Faculty has published technical release AAF 01/10, Framework document for accountants' reports on grant claims (www.icaew.com/index.cfm/route/170857). This outlines good practice principles for grant-paying bodies to obtain assurance on how grant funding is spent. One of the aims of the document is to make the process of obtaining grant funding economical, efficient and more effective while providing grant-paying bodies with the reassurance that their money has been spent properly. All of this needs to be done without creating an additional regulatory burden for the grant recipients.
Increasingly, grant-paying bodies look towards finance professionals to provide them with assurance on how grants are spent and whether they are spent in accordance with terms and conditions and for the purposes intended. Over many years, reports from accountants have been sought since these provide a valuable and independent source of assurance.
If grant-paying bodies are to obtain the assurance that they require then they need to do more than simply put into place a requirement for an accountant's report. There needs to be a proper structure and framework that underpins the public funding process. This should include reviewing the way in which grant schemes are designed and refocusing the way in which terms and conditions are set.
The new framework brings together the roles and responsibilities of the main parties involved in the grant-funding process. It highlights the importance of the grant-paying body, the accountant and the grant recipient entering into a dialogue to discuss and clarify expectations about the scope of work, the form of report, the level of assurance required and the timing of the work.
The guidance does not replace Audit 03/03, which remains extant for existing grant schemes, but it recommends that the principles in the new framework document be applied for new schemes. There is nothing, however, to stop grant-paying bodies from applying the principles to existing schemes.
The full version of this article can be found in Accountancy magazine, April 2010
Sumita Shah, Technical Manager, ICAEW, Public Sector Group News - April 2010