In 2022-23, 14% of total government expenditure – or £155.6bn – was spent by central government on grants, excluding grant-in-aid. However, the National Audit Office estimates that good grant management could generate potential savings of up to 4% of the value of each general grant scheme. This equates to potential annual savings of up to £1.9bn based on 2022-23 figures. 

Given the current state of public finances, this is a not insubstantial sum of money that could be used to support other key services across government.

A government grant is money that is intended to be permanently transferred from a government organisation to a grant recipient, usually to fulfil a policy or public interest need. Grants are made for a variety of reasons, ranging from those made to charities for charitable purposes, to grants made to help realise the implementation of new technologies.

Reducing fraud, waste and overpayments

Given the broad nature of the grant-making landscape, developing an effective assurance regime is an essential component of effective grant management. Grant-giving entities need to gain assurance that their monies are being spent in line with the grant agreement; this reduces the risk of fraud and waste, reduces the risk of overpayments and can help to save the taxpayer money.

With that in mind, ICAEW has published a new helpsheet for grant-paying government entities that highlights the importance of developing a robust grants assurance framework to enable effective grant management. Designed in liaison with ICAEW’s Special Reports of Accountants Panel, the helpsheet also sets out best practice advice for entities to consider and highlights common pitfalls to be avoided.

Furthermore, it explores some key considerations for entities when designing their grant schemes and when reviewing their wider reporting requirements. 

Overarching themes include the importance of embedding key reporting requirements into grant conditions, ensuring that sufficient consideration is given to an entity’s assurance requirements prior to the implementation of a new grant scheme, and ensuring that the subject matter of any engagement requested from an independent accountant is capable of being reliably measured and in line with an appropriate assurance framework. 

Tailor to the size, nature and risk of grants

ICAEW also highlights the importance of ensuring that any assurance and reporting framework is appropriately tailored to the size, nature and risk of the grant being awarded.

Jack Bower, ICAEW Public Sector Audit and Assurance Manager, says: “Effective grant management, at a time of dire constraints on public finances, must be seen as a critical tool for government entities to use in managing public funds. 

“However, the importance of effective grant management is more than just to save money – it is also a tool in helping to prevent fraud and error; it is a tool to enhance public trust in grant-paying entities; it can be used to improve grant outcomes; and ultimately, it increases the degree of confidence that grant monies are being spent in line with the grant agreement.”

Emma Cross, ICAEW Audit and Assurance Manager, adds: “We hope that ICAEW’s new helpsheet can assist government entities in developing a grants assurance and reporting framework that is appropriately tailored to their individual risk appetite and considers the size, nature and risk of grants that they award. We also hope that our helpsheet can help entities to avoid some of the many common pitfalls of grant management.”

Download ICAEW’s helpsheet