Draft - OALM 2013 PPT Template - choice 1

The Auditors Are Coming! an NIH Perspective Department of Health & Human Services National Institutes of Health / OD / OALM / OAMP Division of Financial Advisory Services Amarilys Mercado-Robles, Senior Auditor Amanda Smith, CPA Senior Auditor National SBIR/STTR Conference May 24, 2016 Agenda About the Division of Financial Advisory Services (DFAS) SBIR/STTR 40% IDC rule Specific cost issues

Audit requirements 2 About DFAS DFAS Division Director Hruta Virkar (Acting) Admin Support Deputy Director Daniel Milstead Branch A

Emma Smith, Chief Negotiates IDC rates for NIH commercial contractors Branch B Vacant Branch C Vacant Negotiates IDC rates for all NIH SBIR/STTR grantees and contracts.

Negotiates IDC rates for all DHHS OPDIVS grantees and contractors Special Reviews Branch Hruta Virkar, Chief Resolves Single Audit & OIG Audit Findings Performs Financial Capability Reviews. Performs Cost Analysis

3 SBIR/STTR - 40% IDC Rule Forty percent rule on SBIR/STTR awards: Phase I = 40% max. rate w/out negotiation Phase II = 40% max. rate w/out negotiation If you have only Phase I awards, you can not request IDCs at > 40% of TDC. Once you are awarded your first Phase II award, you may negotiate rates if your requested IDC is > 40% of TDC. (see NIH Guide Notice: NOT-OD-09-038) 4

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. Even though IDC rates are not negotiated at 40% or less, the rates are subject to audit at any time. 5 Specific Cost Issues NIH Salary Cap tied to Executive Level II salary, currently $185,100 See NIH Guide Notice: NOT-OD-16-045

Public Law 114-113 restricts the amount of direct salary to Executive Level II of the Federal Executive pay scale, currently set at $185,100 effective January 10, 2016. Salary cap summary: http://grants.nih.gov/grants/policy/salcap_summary.htm Commercialization (to include business development, sales, marketing, advertising, etc.) http:// grants.nih.gov/grants/how-to-apply-application-guide/forms-d/sbir-sttr-forms-d .pdf (see Page B-68 and B-69) 6 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. 7 Audit Requirements Audit? Who said anything about having an audit? The Department of Health & Human Services did!

HHS specifies requirements for audits of commercial organizations in Title 45 CFR Part 75.501. 8 Audit Requirements A for-profit organization is required to have an audit if: it expended $750,000 or more under HHS awards in the fiscal year * AND at least one of the awards is an HHS grant * The threshold was formerly $500,000 9

Audit Requirements Audit period The audit period is the awardees fiscal year (i.e., not the grant budget period, the grant project period or the Governments fiscal year.) Audit due date The earlier of: 30 days after you receive the auditors report OR 9 months after the end of your fiscal year 10

Audit Requirements Audit reports should be submitted to: Department of Health and Human Services OIG / Office of Audit Services National External Audit Review Center 1100 Walnut St, Suite 850 Kansas City, MO 64106-2197 11 Audit Requirements What happens once the audit report is submitted to NEARC? The National External Audit Review Center (NEARC) will process the audit

report checking for adequacy and identifying audit findings. NEARC will code each finding for tracking purposes. The Transmittal Letter identifying each coded finding is sent to the auditee. The auditee should promptly respond to the Transmittal Letter. A copy of the Transmittal Letter and the audit report is also sent to the respective awarding components. The Special Reviews Branch (SRB) of DFAS is responsible for resolving findings coded by NEARC relating to NIH awards. SRB is required to resolve all NIH audit findings within six months after NEARC receives the audit report.

12 Selecting an Auditor 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: - Professional license requirements to perform an audit - Auditors independence - Audit reputation and track record - Qualifications of the audit firm and the audit team - The right auditor for your business type and size - The audit fee

13 Selecting an Auditor Cont. Resources for finding external auditors/CPA firms: - State Accountancy Boards - Government Audit Quality Center ( http://www.aicpa.org/INTERESTAREAS/GOVERNMENTALAUD ITQUALITY/RESOURCES/AUDITEERESOURCECENTER/Pages/Au diteeResourceCenter.aspx ) - Your states website for the society of CPAs 14

Questions? DFAS has two mailboxes where you can direct your inquires: Indirect Cost Inquiries [email protected] Audit Requirement Inquiries [email protected] 15

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