What Is an Independent Accountant’s Report (IAR)?

Organisations receiving grant funding are often required to demonstrate that funds have been spent in line with the terms and conditions of the award. One of the most common ways funders seek this assurance is through an Independent Accountant’s Report (IAR).

An Independent Accountant’s Report provides an objective assessment by an independent registered statutory auditor, who reviews financial information, grant expenditure and supporting evidence against the specific requirements of the funding agreement.

For charities, universities, businesses and public sector bodies, an IAR can be a critical part of the grant compliance process. It helps assure funders that grant claims are accurate, eligible and supported by appropriate records.

In this guide, we explain what an Independent Accountant’s Report is, when it is required, how the process works and how organisations can prepare effectively.

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What Is an Independent Accountant’s Report?

An Independent Accountant’s Report is a formal report issued by an independent professional accountant following a review of grant-related financial information.

The exact scope depends on the requirements set by the funding body, but the purpose is generally to provide assurance that:

• Grant expenditure has been incurred appropriately
• Costs claimed are eligible under the funding agreement
• Expenditure can be supported by adequate documentation
• Grant conditions have been followed
• Claims submitted to the funder are accurate

Unlike a statutory financial statement audit, an IAR is usually focused on a specific grant, project or funding claim rather than the organisation’s overall accounts.

Many UK funding bodies require an Independent Accountant’s Report before releasing funding, approving final claims or closing a project.

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Why Is an Independent Accountant’s Report Important?

An Independent Accountant’s Report helps build confidence between funding recipients and funders.

Grant funding often originates from public money, charitable funds or research funding programmes. As a result, funders need assurance that resources have been used for their intended purpose.

An IAR helps organisations demonstrate:

• Good financial governance
• Effective grant management
• Transparency and accountability
• Compliance with funding conditions
• Robust record keeping

We often find when speaking to clients that organisations underestimate how much emphasis funders place on documentation. In many cases, expenditure may be entirely legitimate but can still be challenged if sufficient evidence cannot be produced.

Independent assurance can therefore help safeguard both funding and stakeholder confidence.

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When Is an Independent Accountant’s Report Required?

The requirement for an Independent Accountant’s Report will be specified within the grant agreement or award terms and conditions.

Common examples include:

Research and Innovation Funding

Many research and innovation programmes require independent certification of expenditure, including:

• Innovate UK grants
• UK Research and Innovation (UKRI) funding
• Horizon Europe projects
• Scottish Enterprise grants
• Collaborative research programmes

For organisations involved in research funding, our article on Horizon Europe funding opportunities provides additional insight into funding requirements and compliance considerations.

Education and Mobility Programmes

Funding programmes such as the Turing Scheme may require certified expenditure or assurance reports as part of the claim process.

You can read more in our guide to Turing Scheme funding certification.

Charitable and Third Sector Grants

Charitable trusts, foundations and public funding bodies may require independent verification of expenditure where funding values exceed specified thresholds.

Public Sector and Government Funding

Scottish Government, UK Government and local authority grants frequently include assurance requirements to support accountability and transparency.

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Is an Independent Accountant’s Report the Same as a Grant Audit?

Not necessarily.

Although the terms are often used interchangeably, an Independent Accountant’s Report and a grant audit are not always the same engagement.

The requirements depend on the funder’s instructions.

Independent Accountant’s Report

Typically involves:

• Agreed-upon procedures
• Verification of grant expenditure
• Testing of supporting records
• Reporting factual findings

Grant Audit

May involve:

• More extensive testing
• Wider review of grant compliance
• Internal control assessment
• Additional assurance requirements

The key distinction is that the scope is determined by the funding body.

For a broader understanding of grant assurance requirements, visit our page on https://hlca.co.uk/services/grant-audits/.

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What Does an Independent Accountant Review?

The review usually focuses on whether costs claimed under the grant are eligible and properly supported.

Areas commonly tested include:

Staff Costs

The accountant may review:

• Payroll records
• Employment contracts
• Timesheets
• Staff allocation methodologies

Procurement and Purchases

Evidence may include:

• Supplier invoices
• Purchase orders
• Tender documentation
• Payment records

Travel and Subsistence

Supporting documentation often includes:

• Travel receipts
• Expense claims
• Approval records
• Project allocation evidence

Capital Equipment

Reviews may include:

• Asset purchase documentation
• Invoices
• Allocation calculations
• Evidence of project use

Indirect and Overhead Costs

Where funding permits overhead recovery, calculations and supporting methodologies may be examined.

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How Does the Independent Accountant’s Report Process Work?

Most engagements follow a structured process.

Step 1: Review Funding Requirements

The accountant reviews:

• Grant agreements
• Claim guidance
• Funder instructions
• Reporting templates

Every funder has its own expectations, making this a critical stage.

Step 2: Request Supporting Documentation

A documentation request is typically issued covering:

• Financial records
• Payroll information
• Contracts
• Procurement evidence
• Project documentation

Step 3: Test Selected Transactions

The accountant performs testing against the funder’s requirements.

This may involve verifying:

• Eligibility
• Accuracy
• Timing
• Supporting evidence
• Correct project allocation

Step 4: Resolve Queries

Questions or exceptions are discussed with the organisation.

This stage helps clarify issues before reporting is finalised.

Step 5: Issue the Report

Once work is completed, the Independent Accountant’s Report is issued in the format required by the funder.

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Factors That Affect a Successful Independent Accountant’s Report

Several factors can significantly influence the efficiency and outcome of the process.

Quality of Record Keeping

Complete and organised records are often the single biggest contributor to a smooth review.

Understanding Grant Conditions

Different funders may define eligible expenditure differently.

Organisations should ensure project teams understand funding rules from the outset rather than relying on retrospective reviews.

Consistency of Project Documentation

Clear documentation helps demonstrate:

• Project activity
• Decision making
• Approvals
• Resource allocation

Timely Preparation

Leaving preparation until the end of a project often creates avoidable challenges.

Maintaining evidence throughout the grant lifecycle is generally more effective.

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Client Insight

“While perhaps more known for our gardens as opposed to research, we at RBGE have an ever-increasing research portfolio from a range of funders both nationally and internationally. We have used Henderson Loggie on three occasions over the last 12 months, auditing grants for us from UKRI, Darwin Initiative and the EU. The service we received from HL in all three instances was efficient, informative, constructive, helpful and while not a pre-requisite in audit but hugely important to us – friendly. They have an incredibly detailed knowledge of the complexities of research funding which, as a client, was invaluable to us.”

Alexander Walker, Royal Botanic Garden Edinburgh

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Common Challenges Organisations Face

Organisations preparing for an Independent Accountant’s Report often encounter similar issues.

These include:

• Missing timesheets
• Insufficient procurement evidence
• Incomplete project records
• Incorrect cost allocations
• Claims including ineligible expenditure
• Weak document retention processes

Many of these challenges can be avoided through proactive grant management and regular compliance reviews.

Our resource on common grant audit failures explores these risks in greater detail.

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How Independent Assurance Supports Better Grant Management

An Independent Accountant’s Report is not simply a compliance exercise.

The process can help organisations:

• Strengthen governance arrangements
• Improve project controls
• Identify compliance gaps
• Enhance documentation practices
• Reduce risk in future claims

For organisations managing multiple grants, lessons learned from one review can improve compliance across the wider funding portfolio.

Those new to grant-funded projects may also benefit from understanding the wider grant funding process and how assurance requirements fit within the overall lifecycle.

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Preparing for a Successful Independent Accountant’s Report

An Independent Accountant’s Report is an important assurance mechanism used by many UK grant funders to confirm that grant expenditure has been claimed correctly and in accordance with funding requirements.

While specific requirements vary between funders, the underlying objective remains the same: providing confidence that public, charitable or research funding has been used appropriately and transparently.

Organisations that maintain strong records, understand their funding conditions and prepare proactively are generally best placed to complete the process efficiently and minimise compliance risk. Where grant requirements are particularly complex, specialist advice and independent assurance can help organisations navigate obligations with confidence while protecting valuable funding relationships.

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