The Auditors Are Coming!an NIH Perspective
Department of Health & Human ServicesNational Institutes of Health / OD / OALM / OAMPDivision of Financial Advisory Services
Amarilys Mercado-Robles, Senior AuditorAmanda Smith, CPA Senior Auditor
National SBIR/STTR ConferenceMay 24, 2016
About the Division of Financial Advisory Services (DFAS)SBIR/STTR 40% IDC ruleSpecific cost issuesAudit requirements
DFAS Division DirectorHruta Virkar (Acting)
Branch AEmma Smith, ChiefNegotiates IDC rates forNIHcommercial contractors
Special Reviews BranchHruta Virkar, ChiefResolves Single Audit & OIG Audit FindingsPerformsFinancial Capability Reviews.PerformsCostAnalysis
BranchBVacantNegotiates IDC rates for all NIH SBIR/STTR grantees and contracts.
BranchCVacantNegotiatesIDC rates for all DHHSOPDIVS grantees and contractors
Forty percent rule on SBIR/STTR awards:Phase I =40% max. rate w/out negotiationPhase II =40% max. rate w/out negotiationIf you haveonly Phase I awards, you can not request IDCs at > 40% of TDC.Once you are awardedyour first Phase II award, you may negotiate rates if yourrequested IDCis > 40% of TDC.(see NIH Guide Notice: NOT-OD-09-038)
SBIR/STTR - 40% IDC Rule
So, does this mean I can request a 40% IDC rate without justification?Absolutely not. You can only request what you can support.Eventhough IDC rates are not negotiated at 40% or less, the rates are subject to audit at any time.
SBIR/STTR - 40% IDC Rule
NIH Salary Cap – tied to Executive Level II salary, currently$185,100See NIH Guide Notice:NOT-OD-16-045PublicLaw114-113restricts the amount ofdirect salaryto Executive Level II of the Federal Executive pay scale, currently set at$185,100effective January10, 2016.Salary cap summary:http://grants.nih.gov/grants/policy/salcap_summary.htmCommercialization (toincludebusinessdevelopment,sales,marketing, advertising, etc.)http://grants.nih.gov/grants/how-to-apply-application-guide/forms-d/sbir-sttr-forms-d.pdf(seePage B-68 andB-69)
Specific Cost Issues
Independent Research & Development (IR&D)45 CFR Part 75.476“Independent research and development is research and development which is conducted by an organization, and which is not sponsored by Federal or non-Federal awards, contracts, or other agreements. Independent research and development shall be allocated its proportionate share of indirect costs on the same basis as the allocation of indirect costs to sponsored research and development. The cost of independent research and development, including their proportionate share of indirect costs, are unallowable.”
Specific Cost Issues
Audit? Who said anything about having an audit?The Department of Health & Human Services did!HHSspecifies requirements for audits of commercial organizations in Title 45 CFR Part75.501.
A for-profit organization is required to have an audit if:it expended $750,000 or more under HHS awards in the fiscal year*ANDat least one of the awards is an HHS grant* The threshold wasformerly $500,000
Audit period– The audit period is the awardee’s fiscal year(i.e.,notthe grant budget period, the grant project period or the Government’s fiscal year.)Audit due date– The earlier of:30 days after you receive the auditor’s reportOR9 months after the end of your fiscal year
Audit reports should be submitted to:Departmentof Health and Human ServicesOIG / Office of Audit ServicesNational External Audit Review Center1100 Walnut St, Suite 850Kansas City, MO 64106-2197
What happens once the audit report is submitted to NEARC?The National External Audit Review Center(NEARC) willprocess the auditreport –checking for adequacy and identifying audit findings.NEARC will code each finding for trackingpurposes. TheTransmittal Letter identifying each coded finding is sent to the auditee. The auditeeshould promptlyrespond to the Transmittal Letter. A copy ofthe Transmittal Letter and theauditreportis also senttothe respective awarding components.The Special ReviewsBranch (SRB)of DFAS is responsible for resolving findings coded by NEARC relating to NIH awards.SRB is required to resolve all NIH audit findings withinsix monthsafter NEARC receives the audit report.
There are many external audit (CPA) firms in the market, but the question is “which one will you choose?”For small business owners, here are some important tips for choosing an external auditor or audit firm:-Professionallicense requirements to performanaudit- Auditor’sindependence- Audit reputation and trackrecord- Qualifications of the audit firm and the auditteam- The right auditor for your business type andsize- The auditfee
Selecting an Auditor
Resources for finding external auditors/CPA firms:State Accountancy BoardsGovernment Audit Quality Center (http://www.aicpa.org/INTERESTAREAS/GOVERNMENTALAUDITQUALITY/RESOURCES/AUDITEERESOURCECENTER/Pages/AuditeeResourceCenter.aspx)Yourstate’swebsite for the society of CPAs
Selecting an Auditor – Cont.
DFAS has two mailboxes whereyoucan direct your inquires:Indirect Cost Inquiries –firstname.lastname@example.orgAuditRequirement Inquiries –email@example.com