Audit and Assurance

How to prepare for audits and when will they occur

The Audit Process

The right to carry out audit and assurance visits are within the award agreements of all the major funders. This is to check the Terms & Conditions of the award have been met and to provide assurance that funds have been spent with due regard to value for money and in accordance the policies and procedures of the beneficiary.

For some research funding programmes there may also be a requirement within the reporting at interim or final stages to provide an audit certificate prepared by an independent external auditor verifying the expenditure in the claim. Where these are required Research Grants Section will organise and liaise with the appointed auditors.

As well as financial audits, Scientific (Technical) reviews may be included or a Systems and Processes Audit may be an approach taken by the funding bodies.

If you receive notification of an audit announced on your award please contact your Research Grants Administrator for guidance.

Financial audits will be arranged and managed through your Research Grants Team.

Managing your project to be prepared for audit

Give consideration to compliance requirements for monitoring and audit at an early stage in the project.

Review your research project regularly to ensure that it is being carried out in accordance with funders’ terms and conditions, University practices and procedures, legal and ethical requirements.

Eligibility of Costs

All expenditure in relation to research projects must be checked to ensure that it is in line with the terms and conditions of funding.

As a general rule, and in order to justify any expenditure, consideration should be given as to whether the cost:

was included in the original Justification of Resources/Proposal
was subsequently awarded
is of direct benefit to the research and proper use of public funds
is economic, necessary and solely attributable to the project
is not deemed to be in any way excessive or reckless

Acountability for compliance with College policy and Funder requirements ultimately rests with the Principal Investigator (PI). The PI is accountable to their Head of Department.

Financial Audits

For financial audits, generally the following items will be looked at:

Reconciliation of Income and Expenditure with submitted claims
Copies of invoices and expense claims
Supporting backup for personnel costs and payroll information
Staff employment contracts, subsequent contract extension or contract change letters
Staff Timesheets if applicable for the project
Evidence procurement processes have been correctly followed
Evidence that reimbursement of expenses in line with Institutional practices
Check of costs back to bank statements

Technical Audits

Technical audits will normally consider:

Degree of fulfilment of the project work plan and deliverables for the relevant period
Continued relevance of the objectives
Management procedures and methods of projects
The beneficiaries’ contributions and integration within the project
Use of resources in relation to the achieved progress
Expected impact of the project with focus on dissemination

UKRI Assurance Programme

Under the UKRI Funding Assurance Programme institutional visits or desk based reviews are undertaken to provide assurance relating to the regularity and accountability of public funds provided for research, ensuring funds are managed with integrity and used for the purposes intended. Compliance with the terms and conditions is checked across four “pillars” of assurance

Research Grants and Fellowships
Doctoral Training funding
Transparent Approach to Costing
Non-Financial terms and conditions

Enhanced scrutiny is afforded to the most research-intensive Research Organisations who should expect assurance activity approximately every three years.

Go to UKRI Assurance Programme

EC Audit requirements under current Framework programme of Horizon 2020

For H2020 projects, a Certificate on the Financial Statements (Audit) covering all reporting periods will be required with the final claim when the total requested reimbursement is €325,000 or more on direct costs (excluding indirect costs). Some H2020 projects may not need to be certified that apply flat rates to claims such as Marie Sklodowska-Curie Actions (MSCA).

Certificate of Financial Statements (CFS)

One audit at end of project covering all reporting periods
Where EU requested contribution for direct costs is equal to/or greater than €325,000
Undertaken by auditors appointed by beneficiary
Sample of costs checked under standard procedures
Audit fee eligible cost (provision of service not subcontracting under H2020)

School guide – Preparing for an H2020 Audit

On FP7 projects, the earlier EC Funding Programme, costs need to be certified when the EC contribution reaches €375,000 (cumulative). This includes Marie Curie Actions.

University of Edinburgh holds a Certificate of Methodology for this programme which exempts Edinburgh from interim audits when threshold reached and only the one audit at final reporting is required covering full project.

External Audit launched by EC

EC arrange audits through an appointed firm of auditors, with their own staff in the Commission or EC Court of Auditors may launch an audit
Can occur anytime throughout the duration of the project and up to 2 years after final payment is made (for H2020).
Generally more rigorous audit than for CFS, often 100% of costs checked, review beyond purely transactional checks to include test of systems and controls plus a risk assessment
Reviews the implementation of the project and its compliance with the grant agreement
Covers scientific elements and technical implementation of action
PI and researchers often interviewed

The following document summarises the most common errors and some key findings/recommendations from the various EC grants audits.

2020-21 EU Audits Summary | Findings and Recommendations

Annual NIH (US federal) audit

The University of Edinburgh is subject to an annual audit of projects funded by the U.S. Department of Health and Human Services, which the NIH (National Institutes of Health) are part of.

This annual audit usually starts in February each year.

The following document summarizes some key points to be considered when managing NIH awards and learning from previous UoE NIH annual audits findings.

Download summary of NIH audit learnings

Documents requested at audit

Full list supplied may vary between auditors and includes but not limited to:

Grant Agreement plus any Amendments
Signed Consortium Agreement
Financial Reports and costs statements submitted to EC with all supporting schedules
Reconciliations back to underlying accounting records/general ledger
Supporting documents (sample selected but may request full backup)
Any evaluations or external audit reports relating to programme
Bank statements showing receipt of EC funding
Sample of expenses claimed through to bank statements to prove payments made
Activity (narrative reports) submitted

Category of expenditure	Supporting evidence
Personnel costs	Breakdown of personnel costs claimed in the financial statements including hourly rate and number of hours Calculation of hourly rate Employment contracts, job descriptions, descriptions of the work they performed/involvement in project Authorised timesheets Declarations for staff 100% on project Leave records Payroll records showing breakdown of salary payments
Travel & Subsistence	full backup of receipts, invoices, tickets, exchange rate at which non sterling receipts converted for reimbursement. Any deliverables/outputs associated with the travel which relates to project activities
Equipment	invoices, delivery notes, procurement procedures followed, details of location of equipment, calculations of depreciation
Consumables	invoices, procurement route followed
Internal charges	supporting back-up showing calculation of rates/charges
subcontracting	signed copies of agreements/contracts, description of the services /supplies provided, procurement / tendering documentation supporting the selection, invoices, evidence of services provided i.e. in progress reports

The Audit Report

The audit report will set out the findings against the set review procedures undertaken by the auditor. The Beneficiary has a chance to repond to the draft report and supply further evidence to support the use of funds or procedures under question. It is vital that record keeping is in order so this process can be carried out quickly and efficiently other wise delays to finalisation of reporting and claw back of funding can be a consequence. We work with you to ensure that all audit queries are responded to in a timely manner and audit feedback and recommendations are recognised in grant management practices.

This article was published on 15 Nov, 2023