In the case of Hungarian and direct European Union tenders, the audit of a grant is mandatory and depending on the value limit. When auditing a grant, the auditor should be familiar with the details of the grant agreement and the tender. The grant provider usually prescribes item by item the criteria, under which the auditor should review the financial accounts.
When does the audit of a grant begins?
After winning a grant, many are faced with the serious administrative conditions that must be met to be able to submit successful financial accounts. Therefore, it is worth starting the preparation on time and establishing the mandatory records required by the contract. However, these records can not always be established retrospectively, so it is advisable to consult an expert before starting the project.
The most important steps in the preparation of a grant financial report
Winning a grant → Establishing mandatory records → Continuous monitoring of the fulfilment of the grant → Compilation of financial accounts based on records → Audit of the financial report → Submission of a grant report
The most common accounting errors we encounter when auditing grants:
- When accounting for wages, the labor records are incomplete and do not support the recognized costs.
- The costs recognized are not related to the project and do not qualify as eligible costs.
- The applicant does not have the necessary documents related to the recognized costs.
- General costs are not allocated in accordance with the rules of procedure.
Proper preparation and ongoing consultation with the auditor will bring the desired results.
In addition to Hungarian and EU grants, we have already audited sources from the Swiss and Norwegian funds. Based on our experience and references, we can audit grants ranging from a few hundred million to billions of forints.
Grant auditors are typically required to be independent of the supported entity. This means, inter alia, that the auditor cannot be involved in compiling the financial report.
In auditing a grant, the auditor must observe the Terms of Reference or ToR specified by the grant provider.
Finally, the auditor issues a report in a pre-defined format. In the report, the auditor shall express an opinion that the financial report is supported by the costs incurred in all material respects as defined in the grant agreement. Also, it states if the project revenue has been used in accordance with the terms of the agreement.