Accountability for grants

We ask for complete financial statements. Even if we only issue a grant for some of the activities. These financial statements should include a statement of income and expenditure (profit and loss statement) and the balance sheet.

Income and expenditure statement

The statement of income (received) and expenditure (paid) provides information on the money available and what money has been spent on. This statement clearly shows the local grant as income.

Balance sheet

The balance sheet provides information on the structure of equity, provisions and reserves.

The notes must contain:

• An explanation and substantiation of the financial results;
• a comparison between the result and the budget sent with the grant application. With explanations of the differences, the causes of the differences and their possible consequences;
• information on special income and/or special expenses;
• the changes in reserves (what went in and out). An explanation of where the amount for a reserve comes from and the plans for using the reserve;
• Whether the closing balance (profit or loss) was determined before or after the changes to the reserve.

The auditor’s audit meets the following general requirements

• The audit focuses on:
  • the reliability of financial statements and
  • the legality of the use of the issued grant.
• By checking reliability, we mean:
  • checking whether the financial statements correspond to the actual situation;
  • checking whether the financial accountability corresponds with the requirements set by the municipality in the decision (and appendices) of the grant award;
  • checking that the substantive report does not contain any inconsistencies with the financial statements.
• By checking legality, we mean:
  • checking whether the financial statements are in line with applicable laws and regulations;
  • verifying that the grant was used for the purpose and period of the grant.
• We expect the auditor to also:
  • determine whether the financial administration is accessible, reliable and accountable;
  • ensure the correction of identified errors that affect the amount of the grant;
  • factor uncorrectable errors into the audit opinion;
  • pay attention to proper and complete accounting for co-financing contributions.

The determination of reliability must meet the following requirements

• A percentage of at least 95% is used for the degree of reliability.
• The extent of the inaccuracies and/or contingencies are expressed as a percentage of the grant received. In which the following conclusions are operated:
  • inaccuracies < 1%: unqualified
  • inaccuracies ≥ 1% and ≤ 3%: with limitation
  • inaccuracies > 3%: qualified
  • contingencies < 3%: unqualified
  • contingencies ≥ 3% and ≤ 10%: with limitation
  • contingencies > 10%: withholding judgment
• An explanation of the conclusion if the percentage of inaccuracies is ≥1% and/or contingencies is ≥3%.

The auditor lays down the results of his audit in an audit opinion.
This audit opinion also states whether the grant was spent correctly.

Example of an audit opinion

• The financial statements reliably reflect:
  • the size and composition of total holdings at 31 December <year>
  • the profit/loss over <year>
  • that the financial accountability is in accordance with the general requirements.

• We declare that:
  • the grant was spent for the purpose and activities for which it was awarded;
  • the activities are correctly represented in number and scope;
  • the conditions set out in the grant decision have been complied with;
  • the financial statements for <year> include an accurate comparison between the financial statements and the budget.

What if an auditor does not give an unqualified opinion?

In that case, the grant may be reduced. This is stated in Article 24(5) of the General Subsidy Ordinance City of Leeuwarden 2018.

For substantive accountability, the local authority requires an annual report detailing the activities carried out, goals and results for which the grant was given. The annual report meets the specific requirements set by the local authority in the grant award decision.

Were certain activities not carried out or goals and results not achieved?

In that case, the annual report or a letter accompanying the annual report must state which results were not achieved and why. This must explain possible conclusions, solutions or plans for improvement