Do I Need Audited Accounts to Apply for Grants?

Introduction

When applying for grants, one of the most common questions charities and community organisations ask is whether they need audited accounts. Funders often request financial information to assess an organisation’s stability and reliability, but that does not always mean you must have a formal audit.

The requirement for audited accounts depends on your charity’s size, income, and the funder’s specific criteria. This article explains when audits are legally required, why funders may ask for them, and how to prepare suitable financial statements even if your charity does not need a full audit.

What Are Audited Accounts?

Audited accounts are financial statements that have been examined and verified by a qualified, registered auditor. The auditor checks that the accounts give a true and fair view of the charity’s financial position and comply with accounting standards, including the Charities Statement of Recommended Practice (SORP).

An audit provides the highest level of assurance that a charity’s finances are accurate and well managed. However, not every charity is required by law to have one.

When a Charity Legally Needs Audited Accounts

Under the Charities Act 2011, a charity must have its accounts formally audited if either of the following applies:

• Its annual income exceeds £1 million, or

• Its annual income is over £250,000 and its total assets exceed £3.26 million

If your charity’s income falls below these thresholds, you are not legally required to have an audit. Instead, your accounts will usually need an independent examination — a less formal review by a qualified person who checks that records are accurate and properly maintained.

Charitable companies registered with Companies House have additional requirements, but most small and medium charities do not need audited accounts unless their governing document or a funder specifies it.

Why Funders Ask for Audited or Examined Accounts

Even when an audit is not mandatory, many funders ask to see financial statements as part of their due diligence. They use these documents to confirm that your organisation is financially stable and capable of managing grant money responsibly.

The level of detail required depends on the size of the grant:

• Small local grants may accept basic income and expenditure accounts or bank statements.

• Larger grants (for example, from national or corporate funders) often request audited or independently examined accounts.

• Multi-year or high-value funding may require full audited accounts to demonstrate long-term financial control.

Funders want reassurance that you have good financial systems in place and that grant money will be spent as intended.

Independent Examination vs Audit

An independent examination is usually sufficient for smaller charities and meets most funders’ requirements. It is a review conducted by an independent person, often an accountant, to check that the accounts are consistent with the charity’s records and free from significant error.

The main differences are:

• Audit: A formal, regulated process providing high-level assurance. It is more detailed and costly.

• Independent examination: A lighter review that confirms accounts are accurate but does not provide the same depth of testing.

Most funders understand this distinction and accept an independent examination as long as it is performed by a qualified professional.

What to Provide if You Do Not Have Audited Accounts

If your charity is small or newly established, you may not yet have a full set of audited accounts. In this case, you can still apply for grants by providing alternative financial information, such as:

• Independently examined accounts

• Management accounts or internal financial reports

• A projected budget for the coming year

• Recent bank statements

• Evidence of how you track income and expenditure

Smaller funders often value transparency and organisation over formal audits. Make sure your records are clear, up to date, and show how money is managed responsibly.

Example Scenario

Imagine Bright Start UK, a small youth charity with an annual income of £80,000, applies for a £25,000 grant from a local foundation. The charity does not have audited accounts but provides independently examined financial statements, a budget breakdown for the proposed project, and a clear explanation of how funds will be controlled.

The funder accepts this evidence, as the organisation’s accounts demonstrate good governance and a sustainable approach to managing money.

By contrast, a large environmental charity applying for a six-figure national grant would be expected to submit fully audited accounts to meet funder requirements.

Tips for Strengthening Grant Applications

1. Keep financial records accurate and transparent. Whether audited or not, your accounts should clearly show income, expenditure, and reserves.

2. Prepare annual accounts on time. Submitting late returns to the Charity Commission can raise concerns about reliability.

3. Include budgets and forecasts. Funders like to see how their money will be used and how it fits within your organisation’s overall finances.

4. Work with an accountant. Professional support ensures your financial reports are clear, compliant, and credible.

5. Be honest about your size and capacity. Funders appreciate openness. If you are small but well organised, say so and demonstrate your controls.

The Role of an Accountant

An accountant familiar with charity finance can help you:

• Prepare financial statements that comply with charity accounting rules

• Carry out an independent examination or audit when required

• Create project budgets and forecasts for grant applications

• Strengthen internal financial systems and reporting

• Communicate clearly with funders about your financial position

Having an accountant review your accounts adds credibility and can make your grant applications more competitive.

Common Mistakes to Avoid

• Assuming all grants require audited accounts

• Submitting incomplete or outdated financial information

• Failing to reconcile bank statements or explain large variances

• Providing inconsistent figures between your accounts and application

• Waiting until a funder requests documents before preparing them

Being proactive and organised with your finances improves your chances of securing funding and helps maintain funder confidence.

Conclusion

You do not always need audited accounts to apply for grants. Most small and medium charities can apply successfully with independently examined or well-prepared accounts, provided they demonstrate sound financial management.

Audits are only mandatory for charities above certain income and asset thresholds or where a funder specifically requires them. What matters most is transparency, accuracy, and the ability to show that your charity handles money responsibly.

Working closely with an accountant ensures your financial records meet the right standard for your size and helps you present strong, professional grant applications that inspire funder confidence.