FAQs – Innovate UK

If you have received a grant of more than £50,000 from Innovate UK then you will almost certainly need at least one grant audit, also referred to as an independent accountants report. The number and frequency of these reports is dependent on the size of the grant award and the duration of the project.

The usual Innovate UK audit intervals are based on the size of the grant award (not the project size) at an individual entity level (not across all parties involved in the project) as follows:

• Grant of under £50k = no independent accountants report required
• Grant of £50k to £100k = 1 accountants report required at the end of the project
• Grant of £100k to £500k = accountants report required with first claim and final claim
• Grant of £500k to £2m = accountants report required with first claim, final claim and on each anniversary of the project start date
• Grant of over £2m = accountants report required with all claims

Note that each report covers the period from either the start of the project or from the cut-off date of the previous report such that all project expenditure has been subjected to audit by the end of the project.

Innovate UK grant award conditions require that independent accountants reports are signed by an accountant who is a qualified member of one of the CCAB bodies. Always check with your intended audit provider that they can satisfy this requirement. Clive Owen LLP have a team of auditors qualified with CCAB bodies such as ICAEW and ACCA, who are able to sign our independent accountants reports.

The vast majority of Innovate UK grant awards operate on the basis of one claim per calendar quarter.

Defrayed expenditure means that project costs have been invoiced by a supplier and that this invoice has been paid in full. Grant schemes usually only permit grant claims to be based on defrayed expenditure and not against invoices which have not been settled.

Labour costs should be based on actual amounts paid to employees, including gross salary, employers national insurance and employers pension contributions. Only those individuals on the payroll of the company should be included. Dividend payments are not eligible for inclusion.

The value of labour costs allocated to the grant funded project should be based on the number of days worked on the project as a proportion of the number of working days for each employee over a year. The total workings days for an employee for a year should be calculated based on actual working days, therefore holiday allowances and statutory holidays should be deducted.

Clive Owen LLP can provide a pro-forma expenditure tracker to allow labour rates to be calculated. This document also makes the tracking of other project related costs straightforward, ensuring grant claims are accurately compiled.

The specific items selected for audit testing will vary depending on the level of grant being claimed. Innovate UK set a materiality level of 10% of eligible costs as the basis for the audit testing.

Typical documentation the auditors may expect to see includes:

• Payroll records for gross pay and on-costs
• Timesheets recording hours worked on the project
• Employment contracts for employees included within the labour claim
• Bank statements evidencing payroll costs
• Invoices for materials and other expenditure items
• Expenses claims and receipts
• Evidence of invoice and expenses payments
• Basis of calculations for overheads where not set at the standard 20% and supporting financial information such as management accounts