How to prepare for a funding review

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How to prepare for a funding review before the questions arrive

This guide is for CICs, charities and community organisations holding grant or contract funding. It covers what funders ask for, where that evidence sits in your records, and what usually slows a claim down. Around nine minutes to read.

Updated 26 September 2026

9 min read

The short version

  • A funding review asks you to show where the money went, with records that were kept at the time.
  • Most requested evidence already exists in your bookkeeping, provided funds are coded as transactions are entered.
  • Shared costs need a written apportionment basis agreed by the board, applied every month rather than at claim time.
  • Some capital schemes want a letter from an accountant and name the professional bodies they accept.
  • A funding register, reconciled against income received, is how organisations find awards they never finished claiming.

Why funding reviews catch people out

Learning how to prepare for a funding review is mostly about one thing: being able to show where money went, quickly, from records that were kept at the time. Funders rarely ask difficult questions. They ask ordinary questions at short notice.

The pattern I see is consistent. The work was delivered, the outcomes were real, and the spending was proper. The trouble is that the evidence was never assembled as the money was spent. So a reasonable request turns into three weeks of searching an inbox, a filing cabinet and two bank accounts.

That costs more than time. Late or incomplete evidence slows an assessment, and some funders simply stop considering an application when the paperwork does not arrive by the deadline. Boards then get asked questions they cannot answer in the meeting.

This guide sets out what funders ask for, where each item should come from in your finance records, what an assurance visit involves, and the gaps that catch organisations out. It is general information rather than advice on your specific award, so read your own funding agreement alongside it.

What funders ask for, and how quickly

A funding review asks you to prove that money went where the award said it would.

The documents almost every funder wants

  • Your constitution or articles, with a current list of directors or trustees.
  • Bank statements covering the period of the award.
  • The most recent annual accounts, signed and filed.
  • A breakdown of costs, supported by supplier quotes where the scheme asks for them.
  • The policies the funder names, such as equal opportunities, safeguarding and child protection.
  • Minutes showing the board approved the application and the spending.

Local authority community funds often ask for at least two quotes on each cost line. Several also prefer applications that are not seeking the full cost of the project.

The extras that catch people out

Larger capital schemes ask for more. Some require a letter on headed paper from an accountant, confirming the organisation can fund the work from profits, reserves, loans or other arrangements. The scheme names the bodies it will accept, such as ACCA, ICAEW, CIPFA or CIMA. Check that list before you assume your own accountant qualifies, because arranging an alternative takes weeks you may not have.

Timing is tighter than people expect. One Defra capital scheme asks for all supporting information within ten days of the application being submitted. Evidence that arrives after the deadline can end the application there.

Where the evidence actually comes from

Almost everything a funder asks for already exists in your bookkeeping, if the bookkeeping is current.

Fund coding done as you go

Each transaction needs a fund and a cost category at the point it is entered. Coded months later from memory, the split becomes an estimate. A reviewer can usually tell.

Shared costs and apportionment

Rent, core salaries and software often serve several funds at once. Write down the basis you use, whether that is headcount, floor space or recorded hours. Get the board to agree it, minute the decision, and apply the same basis every month.

Payroll and staff time

Where a post is grant funded, expect to produce the contract, payslips and a record of hours worked on the funded activity. Time records written up at claim time read like time records written up at claim time.

Reconciled bank accounts

A reconciled bank account is the spine of the file. If the bank does not agree to the ledger, no report built on top of it can be checked back to anything.

A restricted fund balance you can state

You should be able to say, on any given day, how much of each restricted fund remains unspent. That single figure answers a surprising share of funder and board questions.

Why awarded money sometimes goes unclaimed

Funding can be awarded, spent against, and then never properly claimed.

During onboarding with a grant-funded not-for-profit, we reconciled funding awards against income actually received, line by line. The exercise turned up over £200,000 of funding for which the paperwork had never been completed. The work had happened. The claims had not.

Nobody had been careless in any obvious way. Awards had been made across different periods, staff had changed, and claim milestones sat in email threads rather than in a register. Each individual gap looked small. Added together, they were the difference between a tight year and a comfortable one.

Those claims were completed and submitted. The organisation now keeps a funding register, updated monthly and reviewed at every board meeting.

How to check your own position

List every award you hold, with the amount, the claim dates and the conditions attached. Then set the income you have actually banked against each line. Where the two do not agree, find out why before you do anything else.

This is the check most organisations have never run in full. It takes an afternoon for a small portfolio, and it is the single most useful piece of preparation you can do before a review.

Where organisations get caught out

The same handful of problems account for most delayed claims and awkward review meetings.

Eligible dates ignored

Costs incurred before the agreement start date are usually not eligible. Orders placed early, or deposits paid to hold a price, get disallowed on inspection.

One bank account and no fund tracking

Holding restricted money in the general account is allowed. Having no record of what belongs to which fund is the problem. When the balance dips, you cannot show that restricted money was still there in substance.

Cash flow on grants paid in arrears

Capital schemes commonly pay after the work is finished and claimed. You need to fund the spending first. Organisations agree to the work, then discover they are carrying the cost for months.

Quotes gathered afterwards

If the funder wants two quotes per cost line, collect them before you commit. Quotes obtained after the order was placed do not evidence value for money.

Board approval that was never minuted

Reviewers look for the decision, not just the outcome. Record the approval of the application, the budget and any later change of scope in the minutes.

What the board should see each month

Reviews are easier when the board has already seen the numbers a funder will ask about.

A workable monthly pack for a grant-funded organisation covers four things. First, the funding register: every award, the amount, what has been claimed and what is still to claim. Second, restricted fund balances, with movements for the month. Third, spending against budget for each fund, so overspends surface while there is time to move something. Fourth, the claims and reporting timetable for the next quarter.

Put a date on it. If the pack lands on the same day each month, before the board meeting, questions get asked while the answers still change something. Figures that arrive three months after the quarter end are a record, and a record is all they can be.

The other benefit is quiet. When a funder writes asking for a breakdown, you send the pack you already produced, with the supporting ledger behind it. The request stops being an event.

One practical note on filings: from 1 April 2026, CIC accounts must be filed with Companies House using accounts software. Web and paper filing routes for those accounts are closing, so check with whoever files for you.

What a formal assurance visit involves

Where funding comes through a government department, the review may be a structured audit rather than a request for documents.

The Department for Education’s funding assurance reviews run in three stages: planning, fieldwork and reporting. The work may be done by a departmental auditor or by an external firm appointed to do it.

The notice you get

Providers are told between two and four weeks before the review starts. A confirmation letter sets out the scope, including which funding streams are covered. You will be asked to complete a controls questionnaire and return it by an agreed date.

The sample

The auditor builds a sample from the data you have already returned, and shares that sample one to two weeks before fieldwork begins. That window is your chance to pull the underlying records together.

Answering the questionnaire properly

Reviewers of all kinds record the same weaknesses: thin planning information, and boxes marked not applicable with no explanation of why. If a control does not apply to you, say in one line what you do instead. Attach the evidence rather than referring to it.

The same discipline works for smaller funders who send a list of questions by email.

How to prepare, step by step

Work through these in order. The early steps make the later ones short.

  1. Read the award letter again — Pull out the conditions, the eligible cost categories, the start and end dates, the claim milestones and the reporting dates. Note anything requiring prior written approval, such as a change of scope or moving budget between headings. Most disputes trace back to a condition nobody had read since the application was signed.
  2. Build or update the funding register — One line per award: funder, amount, period, conditions, claim dates, amount claimed, amount received. Keep it somewhere the finance records and the board can both reach. This register is what turns a scramble into a lookup, and it is the document a reviewer will ask to see first.
  3. Reconcile awards against income received — Set the money banked against each award line. Investigate every difference, including partial receipts and deductions. This is the check that finds claims nobody completed, milestones missed and income posted to the wrong fund. Do it before the funder does it for you.
  4. Code the period properly — Make sure every transaction in the funded period carries the right fund and cost category, and that the bank is reconciled to the ledger. Write down the apportionment basis for shared costs and apply it consistently. Have the board agree that basis and minute the decision.
  5. Assemble the evidence file — One folder per fund, holding the award letter, the budget, invoices, quotes, payroll records, time records, bank statements and the relevant minutes. Name files so somebody else could find a given invoice in under a minute. Keep it current as spending happens rather than rebuilding it later.
  6. Rehearse the awkward questions — Ask your own board what it cannot currently answer about the funding. How much of each restricted fund is left. Which claims are due next quarter. How the finance officer’s salary is split across three awards. Whatever produces a pause is what the funder will ask about.

Where it usually goes wrong

These four account for most of the delays I see on funding claims.

  • Treating evidence as an end task — Evidence gathered at the end of a project is reconstruction. Invoices go missing, suppliers close, and the person who ran the activity has left. Filing as you go costs a few minutes a week. Rebuilding two years later costs a fortnight and still leaves gaps you cannot close.
  • Restricted funds with no tracking — Holding all money in one account is fine. Having no ledger record of what belongs to each fund is not. Without fund coding you cannot state a restricted balance, which means you cannot answer the question funders and auditors ask most often.
  • Apportionment invented at claim time — Deciding that forty per cent of the manager’s time was on a grant, after the year has ended, is a judgement with nothing behind it. Agree the basis in advance, record it, and keep whatever supports it. A consistent basis applied monthly stands up. A retrospective one rarely does.
  • Assuming any accountant’s letter counts — Schemes that require a letter confirming you can fund the work usually list the professional bodies they accept. If your adviser is outside that list, you need to arrange the letter elsewhere, and that takes time. Check the requirement at application stage, not the week before the deadline.

When outside help starts paying

Plenty of organisations handle this themselves, and should. One award, one bank account, a treasurer with time and a tidy spreadsheet will cope well.

It gets harder in three situations. When several funders run at once with different periods and claim rules. When staff are part-funded across awards, so every payroll run needs splitting. When the board is asking questions mid-meeting that nobody can answer from the papers in front of them.

That is where Ardein tends to come in. We run bookkeeping with fund tracking underneath it, keep the funding register current, and produce the monthly evidence and board pack on an agreed date. Gavin is an IAB member and the practice is registered for anti-money-laundering supervision, working remotely with organisations across the UK from Chester.

If you want to know where your own gaps are before a funder finds them, start with the qualification review.

Frequently asked questions

How far back will a funder look during a review?

Usually the period of the award, plus anything relevant that sits either side of it. Retention requirements are set in the funding agreement and commonly run for several years after the final claim. Read that clause, because it governs how long you keep invoices, payroll records and bank statements, not your own filing habits.

Do we need an accountant’s letter for our application?

Only if the scheme asks for one, which tends to happen on larger capital awards. Where it is required, the funder confirms which professional bodies it accepts and what the letter must state, usually that the organisation can fund the work from reserves, profits, loans or other arrangements. Check the wording before commissioning it.

How do we evidence staff time spent on a grant?

With the employment contract, payslips and a contemporaneous record of hours worked on the funded activity. Where a post is split across funds, agree the basis in advance, minute it at board level, and apply it every payroll run. Timesheets completed at claim time carry very little weight with a reviewer.

What if we find a claim was never submitted?

Contact the funder promptly and ask what is still possible. Some claim windows close permanently, others allow late submission with an explanation. Either way, reconcile the whole portfolio first so you approach the funder once with a complete picture. Then put a register in place so it cannot recur quietly.

Is a spreadsheet enough for tracking restricted funds?

It can be, for a single award with few transactions. It stops being enough once several funds run at once, because the spreadsheet and the accounting records drift apart. Fund tracking inside the bookkeeping software means the restricted balance and the bank reconciliation come from the same place, which is what a reviewer wants.

Is anything changing for CIC accounts filing?

Yes. From 1 April 2026, CIC accounts must be filed with Companies House using accounts software rather than the web or paper routes. If you file your own accounts, check now that you have suitable software or an agent who does. It is a filing change and does not alter what your funders ask for.

Final thoughts

Knowing how to prepare for a funding review comes down to keeping the evidence as the money is spent, rather than assembling it under pressure afterwards. Fund coding at entry, a written apportionment basis, a reconciled bank account and a funding register will answer most of what any funder asks.

The reconciliation of awards against income received is worth doing this quarter, whatever else you postpone. It is how a grant-funded organisation found over £200,000 of funding that had never been claimed, and it takes an afternoon for a small portfolio.

If your board is asking questions the papers cannot answer, the qualification review will show you where the gaps sit before a funder does.

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