Research income & research funding assurance

For many universities, the Higher Education Research Data Collection (HERDC) is treated as an annual compliance task. It is far more than that. HERDC determines each institution’s share of the Commonwealth’s research block grant pool, $2.37bn allocated across 42 providers in 2026 through the Research Support Program and Research Training Program, and every return must be certified by the Vice-Chancellor (VC) as compliant with the annual specifications.

That combination of large funding at stake, personal VC certification, and specifications that change every year is exactly why HERDC deserves the same governance and control discipline as any other significant regulatory submission. And as research funding increasingly flows across borders, from Europe and the United States as well as Canberra, universities now face not one assurance obligation, but three.

Why the risk is rising

HERDC data is pulled together from Research Offices, Finance, Faculties, and Shared Services, drawing on multiple systems and interpretations of what counts as eligible R&D income. The specifications are updated annually, usually released in draft each December and confirmed the following February, so last year’s approach is rarely a safe guide to this year’s return.

The risks we see most often are:

• misclassification of income across the four HERDC categories
• inconsistent interpretation of eligibility, particularly around shared income, affiliates, and subsidiaries, an area the specifications have repeatedly clarified
• thin supporting evidence for income included in the return, reinforcing the principle that the contract is king, if it does not read as research, it is not
• manual, key-person dependent extraction and reconciliation processes
• limited executive visibility of where the real reporting risks sit.

Left unchecked, these translate directly into funding adjustments, audit findings, regulator challenges, and reputational exposure.

Our view

Leading universities now treat HERDC as a high-risk external reporting process, not simply a funding exercise. Management should be able to demonstrate clear accountability for HERDC decisions, consistent application of the specifications, effective controls over data integrity, robust audit trails behind eligibility calls, and genuine independent challenge before the Vice-Chancellor signs.

Independent assurance is what allows executive teams and Boards to say, with evidence, that reported research income is accurate, compliant, and defensible.

Three funding streams, three different assurance obligations

This is where universities often need help separating the mandatory audit from the broader assurance they may want, and where SW can support the full research funding picture. As research partnerships globalise, more institutions now carry all three of the obligations below at once.

HERDC audit — the mandatory compliance audit (Australian funding)

Every provider must obtain a Special Purpose Audit Report under ASA 800 certifying that Category 1–4 R&D income in the return is correct, attributed to genuine R&D and to the right category, and identified by transparent transactions. The report is due to the department by 30 June each year. SW audits HERDC for clients including Deakin University, La Trobe University, Swinburne University, and Victoria University, and also runs pre-submission preparation and staff training workshops to lift return quality before the audit even starts.

Horizon audits — certifying EU-funded research spend (European funding)

Where a university draws funding from the EU’s Horizon Europe (or legacy Horizon 2020) programme, a Certificate on the Financial Statements (CFS) becomes mandatory once the EU contribution to a single beneficiary reaches €430,000.

This is a different animal to HERDC as it certifies that declared costs are real, eligible, and properly supported, delivered as an agreed-upon-procedures engagement (ISRS 4400) rather than an ASA 800 income audit, and without it, the European Commission can withhold the final payment. With Australia’s association to Horizon Europe concluded in 2026 and direct Pillar II funding flowing from January 2027, far more Australian universities will soon cross the CFS threshold.

Uniform Guidance audits — acquitting US federal research dollars (United States funding)

Australian universities are significant recipients of US Government research funding, grants from agencies such as the NIH, the Department of Defense and the National Science Foundation, received directly or as pass-through funding.

Any institution that expends US$1m or more of these federal awards in a year must obtain a Single Audit under the US Office of Management and Budget’s Uniform Guidance (2 CFR Part 200, Subpart F) a threshold recently lifted from US$750,000. Unlike HERDC, this applies an unfamiliar US framework — US GAAP reporting, cost-eligibility, and internal-control testing under US auditing standards — to funds administered a long way from Washington.

SW is the Uniform Guidance auditor for leading universities across Australia and New Zealand, delivering each engagement locally, while leveraging the extensive expertise, methodologies, and practice aids of our US partner firm, which conducts more than 100 Uniform Guidance audits internationally each year.

In short, HERDC assures research income for Australian block-grant funding. A Horizon CFS assures research expenditure for EU grant funding, and a Uniform Guidance Single Audit assures research expenditure for US federal funding. Universities with strong international research partnerships increasingly need all three.

The Horizon market is about to open & universities will need help

Until now, Horizon audits have been a niche requirement for the handful of Australian universities drawing EU research funding under third-country rules, where entities typically had to self-fund their participation. That’s changing fast, and it changes the size of the opportunity.

In June 2026, the EU and Australia concluded negotiations on Australia’s association to Horizon Europe — the EU’s €93.5bn (≈A$155bn) research and innovation programme. Australia will associate to Pillar II, worth more than €53.5bn, covering digital and industry, space, climate and energy, health, food, and the bioeconomy, priorities that map directly onto Australia’s own National Science and Research Priorities. From January 2027, under a transitional arrangement, Australian universities move from third-country status to being treated as eligible entities from an associated country, meaning direct, routine EU funding on the same terms as EU member states, including the ability to lead consortia.

The signal is already there. Australian organisations have taken part in 239 Horizon Europe projects to date, with a 24.39% application success rate, close to one in four. The Group of Eight has stepped in to fund the association fee, and universities from Sydney to Melbourne have publicly welcomed the move. As direct funding flows from 2027, the number of Australian institutions crossing the €430,000 CFS threshold, the point at which an independent Certificate on the Financial Statements becomes mandatory before the EU releases final payment will grow materially.

What this means for universities

More EU funding is unambiguously good news, but it brings an assurance obligation many Australian research offices have not had to manage at scale before. A CFS is not a HERDC audit and not a standard financial statement opinion, it’s an agreed-upon-procedures engagement against the European Commission’s prescribed template, certifying that declared costs are actually incurred, properly recorded, and eligible under the grant agreement. Get the documentation wrong and final payment can be withheld or clawed back.

How SW can help with the Horizon opportunity

SW can help universities:

• get ahead of the threshold — flag likely CFS obligations early in a project’s life and budget for them (the audit cost is itself an eligible, reimbursable project cost), so certification isn’t a scramble at final reporting
• build cost-eligibility discipline up front — align time recording, cost allocation, and documentation to EU grant agreement rules from day one, rather than reconstructing evidence years later
• deliver the CFS itself — independent, APES 110–compliant certification against the Commission’s template, drawing on our existing Horizon and Uniform Guidance experience
• join the dots across research funding — few advisors can sit across HERDC, US Uniform Guidance, and EU Horizon assurance under one roof. We already do, which lets research-finance teams consolidate their external assurance with a single sector specialist.

The universities that plan for this now, ahead of the 2027 funding switch, will avoid the late-stage documentation problems that catch first-time EU grant recipients. That’s the conversation we should be starting with our Research Office and Research Finance contacts today, on the back of the HERDC relationships we already hold.

How we help with HERDC assurance

Our independent HERDC assurance review sits alongside, not instead of, the mandatory audit, and covers:

• governance and oversight — accountability, executive and committee oversight, certification process, and escalation
• compliance — alignment to current specifications, eligibility methodology, consistent categorisation, and supporting documentation
• controls and process — end-to-end reporting, review and approval, reconciliations, and audit readiness
• data integrity — source-to-submission traceability, data quality, manual adjustments, and the reliability of management reporting.

Why SW

We know research funding assurance because we live in this sector. Our dedicated Education Industry Group has more than 50 years’ experience and has worked with 35 of Australia’s major universities.

• Laura Toscano, Director — 17 years in internal audit, risk, and compliance, leading HERDC audits across Deakin University, Swinburne University, La Trobe University, and Victoria University. Laura is a 2026 finalist in the Women in Banking & Finance awards for Risk, Regulation & Compliance and is an APRA-approved independent expert on governance and risk remediation, the exact skill set HERDC governance assurance calls for.
• Matt Paull, Associate Director — 15 years specialising in education audit, with HERDC audits for Deakin University, La Trobe University, Victoria University, and Swinburne University, as well as HERDC preparation support and staff training workshops. Matthew also manages Uniform Guidance audits across Australia and New Zealand.
• Brent Sheers, Partner — Assurance & Advisory — 12+ years delivering external audit, assurance, and financial due diligence across the listed, education, and not-for-profit sectors, and the SW Engagement Partner on our Uniform Guidance and European Horizon audits for universities. A Registered Company Auditor with both ASIC and Fairwork, Brent also sits on the Board and Finance & Audit Committee as an independent director of both a Melbourne based disability services organisation and independent girl’s school, giving him a first-hand read on exactly what Boards and audit committees expect from their auditor.
• Steve Allan, Partner — 30 years advising the sector and National Chair of our Education Focus Group, providing commercial, tax, and structuring advice to more than 30 Australian universities. Steve’s deep relationships across research and finance leadership open the door for the assurance conversation.

We also stay close to the sector’s own forums, presenting HERDC and technical updates through ARMS, AUSFOG, and university CFO and tax manager networks, so our advice reflects where the specifications and the sector are actually heading, not just where they’ve been.

Contributors

Matthew Paull | Associate Director, Assurance and Advisory Services