BUSINESS GRANT APPLICANTS - DISCLOSURE AND DUE DILIGENCE REQUIREMENTS
Government granting agencies fund projects. The first step to obtaining grant funding is to identify a project your organisation proposes to undertake. The project must not be “business as usual” and should address, for example, product, service or process innovation, technical feasibility studies, new business models, energy efficiency, environmental sustainability, capability building or the development of new international export markets.
The different funding agencies and government departments have diverse requirements around applicant disclosure and what may be termed “due diligence”. It is the applicant’s responsibility to ensure that all company-related disclosure is true, accurate and correct. The types of information that may be requested, or arise during either the application or review process, may include but are not limited to:
Financial Disclosure
Project Plan and Budget
- Annual accounts for each complete financial year, up to a number of years, as specified
- Latest management accounts, including income statement and balance sheet
- Cash-flow forecasts for the duration of the project for the funds being sought
- Independent financial audits by a Chartered Accountant
- Bank statements
Project Plan and Budget
- A documented project plan with objectives, deliverables, time-frame and budget
- Estimates or quotes from third party suppliers
- Estimates of internal time spent and costs incurred for the duration of the project
- Calculations for residual values of prototypes created during the project
- Project risk and risk mitigation
- CVs of project team members
Market Validation
Intellectual Property
- Independent market research reports validating the the target market size and value
- Business models showing the value proposition of a proposed new product or service
- Letters or expressions of interest from potential customers
- Identification of the stakeholders and other beneficiaries of the outputs of the project
Intellectual Property
- Copies of patents or IP protection documents
- IP protection strategies
- Signed copies of Non-Disclosure agreements between the applicant and other parties contracted to the project
Project Benefit
- Evidence that the project will generate export revenues
- Evidence that the project will generate net economic benefits to New Zealand
- Evidence that the project will generate sustainability benefits
- Evidence that the project will have benefits beyond the intended outcome including job creation and human capital development
DUE DILIGENCE AND DISCLOSURE AROUND RESEARCH AND DEVELOPMENT EXPENDITURE
Applicants for research and development grants and R&D Loss Tax Credit claimants are required to disclose their expenditure on research and development. The disclosure may be required to cover, for example, the two most recent financial years. The R&D expenditure calculations may need to be evidenced by an audit from an independent chartered accountant and accompanied by an “Annual Review Certificate”. Both the IRD and grant funding agencies provide guidelines on how research and development expenditure is defined. Mostly they refer to accounting definitions of R&D, namely FRS 13 and NZIAS 38. Agencies publish lists of activities or costs they specifically exclude from R&D.
Research and Development Definitions
Research is defined as original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. R&D is distinguished from non-R&D by the presence or absence of an appreciable element of innovation. If the activity departs from routine or breaks new ground it is normally R&D; if it follows an established pattern it is normally not R&D.
Development is defined as the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production or use.
Research and Development Expenditure
Research and development expenditure falls across different categories. Expenditure calculations must be evidenced by records for a specified reporting period. Where used apportionment methods need to be documented and justified. R&D expenditure must be spent on eligible R&D activities and incurred on goods or services to the extent that they relate to R&D. The categories of expenditure include:
- Salaries and wages of employees and shareholders wholly or partially engaged in R&D
- Overheads apportioned to R&D
- Materials and consumables used in R&D
- Depreciation of tangible assets used in R&D
- External expenditure on third party experts, consultants and contractors
How we can Help Calculate your R&D Expenditure
We are experienced in working with applicants, their tax accountants and research providers to define, record and claim eligible R&D expenditure.
We are experienced in working with applicants, their tax accountants and research providers to define, record and claim eligible R&D expenditure.
R&D Loss Tax Credits
We provide R&D loss tax credit claimants with advice and assistance including preparation of the Statement of R&D Activity; setting-up the record keeping required to evidence and calculate R&D expenditure; and submitting a claim to the IRD through the IMS portal.
We provide R&D loss tax credit claimants with advice and assistance including preparation of the Statement of R&D Activity; setting-up the record keeping required to evidence and calculate R&D expenditure; and submitting a claim to the IRD through the IMS portal.
R&D Grants
We are experienced helping companies apply for R&D grants. We use an agenda and template driven process. We can help you with the application and business case preparation and on-line submission as well as reports, claims; and liaison with the funding agencies.
We are experienced helping companies apply for R&D grants. We use an agenda and template driven process. We can help you with the application and business case preparation and on-line submission as well as reports, claims; and liaison with the funding agencies.
GRANT APPROVAL AND GRANT CLAIMS
How are Grants Approved?
Government grants are assessed against set criteria. Sometimes these criteria are published and sometimes they are not. Some grants are contestable and others are available "on-demand". Some grant schemes require the applicant to show they have the funds to cover 100% of the total budgeted project cost as a pre-condition of approval. As a general rule the better your business case matches the eligibility criteria the higher your chance of approval. Some schemes use review panels of independent experts to assess applications. Sometimes schemes rate grant applications using scorecards, key criteria, ranking scales or other "quantitative" techniques.
How do I Claim my Grant?
Most grants require you to prepare a report on the progress or outcome of your project as part of the claim. Claims are often required to be completed by a due date. This date is set by the agency that approves your grant and will form part of your contract. A claim usually requires the applicant to present a detailed statement of the project costs to date, or the costs you are claiming in the reporting period. Evidence will be required including internal records, invoices, and bank account records showing proof of payment to third party suppliers.
Grant recipients must keep suitable records to demonstrate they (a) carried out eligible activities, (b) had eligible expenditure in relation to those activities, and (c) meet all the other eligibility and reporting requirements of the funding scheme.
Government grants are assessed against set criteria. Sometimes these criteria are published and sometimes they are not. Some grants are contestable and others are available "on-demand". Some grant schemes require the applicant to show they have the funds to cover 100% of the total budgeted project cost as a pre-condition of approval. As a general rule the better your business case matches the eligibility criteria the higher your chance of approval. Some schemes use review panels of independent experts to assess applications. Sometimes schemes rate grant applications using scorecards, key criteria, ranking scales or other "quantitative" techniques.
How do I Claim my Grant?
Most grants require you to prepare a report on the progress or outcome of your project as part of the claim. Claims are often required to be completed by a due date. This date is set by the agency that approves your grant and will form part of your contract. A claim usually requires the applicant to present a detailed statement of the project costs to date, or the costs you are claiming in the reporting period. Evidence will be required including internal records, invoices, and bank account records showing proof of payment to third party suppliers.
Grant recipients must keep suitable records to demonstrate they (a) carried out eligible activities, (b) had eligible expenditure in relation to those activities, and (c) meet all the other eligibility and reporting requirements of the funding scheme.
How to Get Started Applying for a Government GrantIs your team thinking about applying for a government business grant? We provide a guide to help you prepare the business case for your application. This includes a description on the typical due diligence and company disclosure requirements common to most New Zealand government business grants. To obtain your copy complete the enquiry form on the contact us page.
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This page was last updated on 2 June 2017