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Post-offer in principle due diligence support: a vital step to securing your grant funding

Director - Grant Advisory
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When businesses apply for grant funding from the UK government, they often invest significant time and effort in preparing their submission. However, the application process doesn’t end once the grant offer in principle is issued by the relevant government department. This is especially the case for grant amounts exceeding £3 million. Post-offer grant in principle due diligence is equally critical and can significantly impact the timeline and the success of the project. At worst it can cause delays and at best require applicants to proceed with expenditure at their own risk until the due diligence is completed.

The pre-application process for grant funding

Grant advisers and the businesses they work on behalf of often fall into the trap of focusing all their effort and attention on the process up to the point of submitting a grant application.

Of course, identifying suitable funding opportunities, establishing eligibility, assessing project feasibility and preparing a compelling and comprehensive grant application are all vitally important steps.

But the hard work doesn’t end once the application has been made, or even when it has been granted in principle. What follows can make or break a successful grant-funded project.

What happens next? The post-application phase

Unfortunately, many businesses – particularly those new to grant applications – often underestimate the important role of due diligence. Government departments and agencies will usually require a due diligence report from a third-party expert to substantiate and check the fundamentals of any grant application. It’s vital for the grant-funding body because it helps to ensure that taxpayers’ money is being spent in the most effective way and one that aligns with agreed policy goals. It helps to identify risks, enabling all parties to put mitigation in place.

1) Alignment with funding objectives

Part of the post-award due diligence process is checking that the project aligns with the funding objectives. For example, if a fund is established to support the development of manufacturing capability in the life sciences sector, grant applications should clearly evidence how this will be achieved. If the objective is to create jobs, a robust economic impact assessment will be expected to estimate the number and type.

2) Auditing project costs

Grant awards will usually contribute to a proportion of overall project costs so how these costs are quantified is important. The due diligence report will independently review these calculations to identify any omissions or inaccuracies to ensure that the amount of grant awarded is the absolute minimum needed to achieve the grant award objectives.

3) Financial health checks

As well as reviewing project-specific figures, the due diligence report will check the financial health of the overall organisation to ensure it is sustainable over the course of the project lifecycle and beyond.

4) Compliance and governance

The grant due diligence process will include a full review of the company’s governance policies and the qualification of the project team and their relevant experience in managing projects of a similar scale.

The challenge of finding a grants due diligence partner

Prior to COVID-19 and the subsequent global supply chain shock, the UK government focused predominantly on tax incentives to encourage inward investment. However, with the post-pandemic crisis exposing issues and weaknesses in the UK’s manufacturing capabilities, the government turned to grant awards to encourage onshoring of manufacturing, particularly in key sectors such as life sciences and automotive.

During this time, many large advisory firms under-invested in grant advisory capabilities and focused on tax incentives advisory instead. This means that there are only a few advisers in the market with the requisite expertise that can support the due diligence effort. A further complicating factor is that due to conflict of interest, any advisory firm involved in the preparation of the application cannot be the due diligence provider on the same application. This further limits the pool of trusted advisors that the applicant can rely on, meaning that an independent third party must be found.

Case study: Automotive client due diligence

One recent collaboration saw ForrestBrown assist an automotive manufacturer, which was awarded a grant offer of principle of £5m towards a total investment of £30m. This was to support the transition of its existing manufacturing site in the UK from producing combustion engine vehicle components to producing electric vehicle components in support of the UK’s automotive sector and its journey to net zero. The project is forecasted to create 100 new jobs and safeguard more than 240.

ForrestBrown worked with a partner transaction advisory team to help deliver the due diligence report within six weeks of the due diligence kick off ready for review by the various stakeholders.

Remember: the grant journey doesn’t end with an offer in principle – it’s just the beginning. ForrestBrown can assist with a range of grant due diligence, including:

  • Sources and uses of funding
  • Case for assistance: additionality
  • Case for assistance: minimum amount of aid needed
  • Employment impact
  • Subsidy control

Why choose ForrestBrown for grants due diligence?

  • Expertise: more than 25 years combined grant advisory and due diligence experience.
  • Agility: able to deliver within the requisite timeframes.
  • Authority: relationships with top tier transaction advisory firms.
  • Sector knowledge: deep understanding of the grants landscape.
  • High standards: award-winning innovation incentives specialists.

Speak to us to access grant due diligence

To find out more about how we might be able to support your grant due diligence, contact our team for more information. Or discover more about our grant advisory services.