SBIR Accounting - Audits and NSF SBIR Grants

Because each agency determines the rules under which the SBIR will operate, the number of audits and likelihood of audits is different for different agencies. This article discusses NSF grants and audits.

Audits of NSF grants are conducted by the Office of Audits which is part of the Office of the Attorney General. They conduct all financial audits of NSF's awards and awardee institutions to determine whether costs claimed by awardees are allowable, reasonable, and properly allocated. An NSF grant will only be audited at the request of the program officer.

For NSF grants, there are two kinds of audits: financial audits and performance audits. Financial audits review cost sharing, indirect costs, timekeeping, and subrecipient monitoring. Performance audits occur if the program officer suspects that Phase I results may have been exaggerated or falsified or in a case of plagiarism.

For a financial audit, typical findings include lack of time records to support labor costs, lack of consulting agreements and invoices to support award related services, indirect cost recoveries exceeded contract specified amount, unallowable costs included as billable costs, expenditures in categories not detailed in proposal, and general lack of supporting documentation.

To avoid being audited, make sure that your budget is clear and you are sticking to it. If you need to make a change, notify your program manager sooner rather than later and always in writing. Make sure that all of your reports are turned in on time. Do not exaggerate any of your findings.

To make sure that you will have no findings if you are audited, keep good time and salary reporting documentation, adhere to your cost sharing agreement, provide adequate equipment purchase justification, and most importantly, keep a paper trail of every decision you make and every change you make.

In general, the NSF tends to give the awardee the benefit of the doubt; however, this does not mean that the penalties for failing to meet your award conditions are any less severe than any of the other agencies.

Ms. Worrall is the President of Worrall Consulting, LLC. Worrall Consulting is a finance and business strategy consultancy providing professional services to high growth, early stage companies. The company provides capital formation assistance, market research and business intelligence, and business planning strategy.