NSF & the NSF Accounting Requirements

Today ReliAscent conducted a webinar about the NSF accounting requirements, especially related to the SBIR Phase II award.  ReliAscent is partnering with Dawnbreaker® on this effort.  For those of you not familiar with Dawnbreaker®, they are a firm that NSF has contracted with to help NSF SBIR award winners to develop commercialization plans for the technology developed in the SBIR award.  The NSF noticed that there were a number of companies selected for a Phase II award and then declined an award due to failure in the verification process.  The NSF asked Dawnbreaker® to give some guidance on this subject to the companies they were working with.  This is where we came in.  Brian Sperry, a veteran of many years work with NSF SBIR grants, and I teamed up for the presentation.  I thought mentioning some of the highlights would be worthwhile here in the blog. 

The NSF looks at 3 basic things prior to award after a company's SBIR proposal has been selected.  These 3 areas are:

  • Adequacy of the Awardee's Accounting System (Go/NoGo)
  • Financial Viability of the Awardee (Go/NoGo)
  • Budgetary Review (Adjustment/Negotiation)

The process works something like this.  First the Program Officer (PO) from the NSF will notify the company that their proposal has been selected for the technical and scientific merit.  This notification triggers the company to provide some information to the NSF and they have 10 days to supply this information, including the Financial Management Systems Questionnaire.  This information is submitted to the office of Cost Analysis and Audit Resolution (CAAR).  The CAAR will then enlist the help of an independent CPA firm to help them complete the analysis of the awardee.  The two areas that the CAAR is responsible for reviewing, and making recommendations to the Grants Officer (GO), are the Adequacy of the Accounting System and the Financial Viability.  Both of these items will be a "Go" or "NoGo" recommendation so either the company passes or fails.  The NSF is trying to establish, first of all, if the company has an accounting system that is adequate for tracking the expenses during the project so that they can perform the work at the budget level proposed.  Secondly, the Financial Verification is intended to prove to the NSF that the company is viable and will stay in business during the term of the award.  Or in other words, assuring the NSF that the work will be completed.  The CAAR will usually take about 5 days once the information is submitted by the awardee to review and then select a CPA firm.  The CPA firm will have 10 to 15 days (depending on what type of indirect rate structure is used) to evaluate and ask for more information from the awardee.  Thus the awardee will not be dealing direct with the CAAR but instead with the CPA firm who will report the findings to the CAAR.  The CAAR then has 8 days to get this information put together in a report to the Grants Officer.  This report will be in the form of either a "Go" or "NoGo" decision on the two areas (Accounting Adequacy and Financial Viability).  The Grants Officer usually accepts the CAAR recommendation but they can choose to ignore it if they want.  The Grants Officer is a Warranted Official for the government and is the only one authorized to make an agreement with the company.  At this point the Grants Officer has 10 days to issue the award or decline it. 

As you can see, the NSF process is quite a bit different from the process a DoD contractor might go through with the DCAA or a DoE contractor might go through with a CPA firm in the case of a Yellowbook audit.  The basis of the accounting system is very similar, with some modifications and different requirements for the NSF.  Give us a call, i would be happy to discuss it with you.