The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs provide essential funding for small businesses engaged in cutting-edge research and development. However, recipients of these awards must ensure compliance with federal regulations through various audits. Understanding the different types of audits and how to prepare for them is key to maintaining good standing and avoiding potential penalties.
This article explores the various SBIR and STTR audit types and offers expert tips on navigating them successfully.
Financial Audits for SBIR and STTR Recipients
A financial audit examines the financial records of SBIR and STTR recipients. The goal is to verify that the expenditure of funds meets federal guidelines. It includes reviewing direct and indirect costs, cost-sharing requirements, and overall fund allocation.
Preparation Tip: Maintain organized, up-to-date financial records and use a reliable accounting system to track SBIR/STTR funds.
Compliance Audits: Ensuring Adherence to Federal Guidelines
Compliance audits verify that SBIR and STTR recipients follow all award-specific terms, from cost allocation to reporting requirements. These audits ensure the appropriate use of funds.
Preparation Tip: Keep detailed records of all SBIR/STTR reports, subawards, and any communication related to your award.
Single Audits
Under the Single Audit (Uniform Guidance 2 CFR 200), businesses receiving over $1,000,000 in federal funds must have an audit. This comprehensive audit reviews financial statements, internal controls, and compliance with federal regulations.
Preparation Tip: Stay proactive with fund tracking and maintain thorough documentation to prepare for a Single Audit.
Program-Specific Audits: Targeting Project-Specific Concerns
Program-specific audits get triggered by concerns such as irregularities in project progress or requests for additional funding. These audits typically focus on a specific project’s performance and the proper use of funds.
Preparation Tip: Regularly assess your SBIR/STTR project and ensure you achieve all deliverables and milestones.
Cost Incurrence Audits: Verifying Direct and Indirect Costs
A cost incurrence audit evaluates whether the direct and indirect costs charged to the SBIR or STTR award are reasonable, allowable, and allocable as per federal regulations.
Preparation Tip: Implement a cost-tracking system and have a financial professional review your processes for accurate cost allocation.
Performance Audits: Measuring Project Effectiveness
A performance audit assesses the efficiency and effectiveness of the SBIR/STTR project in meeting its goals. It compares project progress against the proposed timeline and evaluates the impact of the work.
Preparation Tip: Regularly track your project milestones and document progress to facilitate a smoother performance audit.
Conclusion: Navigating SBIR and STTR Audits
Successfully managing federal funding through SBIR and STTR programs requires careful compliance with audit requirements. By maintaining organized financial records, meeting reporting deadlines, and being prepared for various audits, you can ensure that your project continues to thrive without unnecessary complications.
References
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U.S. Small Business Administration. (2020). Small Business Innovation Research (SBIR) Program. Retrieved from https://www.sba.gov/funding-programs
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U.S. Small Business Administration. (2020). Small Business Technology Transfer (STTR) Program. Retrieved from https://www.sba.gov/funding-programs
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U.S. Government Accountability Office. (2019). SBIR and STTR Programs: Federal Agencies Face Challenges in Ensuring Proper Use of Funds. Retrieved from https://www.gao.gov
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U.S. Department of Energy. (2019). SBIR and STTR: Financial Reporting Requirements. Retrieved from https://www.energy.gov
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U.S. Department of Defense. (2021). SBIR/STTR Funding Opportunities and Compliance Requirements. Retrieved from https://www.defense.gov
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National Institutes of Health. (2020). SBIR/STTR: Policies & Guidelines. Retrieved from https://www.nih.gov/grants-funding
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U.S. General Services Administration. (2020). Understanding Audit Readiness for SBIR and STTR Grants. Retrieved from https://www.gsa.gov
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U.S. Department of Health and Human Services. (2020). Uniform Guidance 2 CFR 200: Requirements for Single Audits. Retrieved from https://www.hhs.gov
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National Science Foundation. (2020). NSF SBIR/STTR Proposal & Award Policies & Procedures Guide. Retrieved from https://www.nsf.gov
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Internal Revenue Service. (2020). IRS Guidance on Tax Implications for SBIR and STTR Grants. Retrieved from https://www.irs.gov