3 Thoughts on SBIR Re-Authorization & Accounting in 2012

We are excited to see our hard work toward SBIR Re-Authorization has proved successful.  Our firm was at the fore-front of the battle, attending fly-in’s toWashingtonDCand contacting our Representatives to talk about the importance of Job Creation and American Innovation via the SBIR/STTR Programs.

Considering the new Re-Authorization however, some of our clients & contacts have checked in with our firm over the past few weeks, wondering what the new Re-Authorization will mean for SBIR Accounting moving forward.

The answer is obvious, but more important than ever…. SBIR Accounting compliance is required by Federal law.  Whether you’re an SBIR Sole-Proprietor working out of your home office, or a budding success story of the program, the laws and rules still apply.

In particular with the new Re-Authorization, you should pay attention to these important changes that will affect you and your new proposals:

1.  All Eyes on SBIR– With the passage of SBIR in a somewhat controversial National Defense Bill that has seen passage, a lot of eyes will be on the program, especially during the heat of a Presidential Election year.  With more money in the pool, more eyes will be watching to ensure tax-payer money is being spent appropriately.  Because of this timing, we are anticipating more audits than ever before.

2.  SBIR/STTR Awards are Larger — Considering Phase I and Phase II awards will see significant increases, budgeting and accounting will become more complex than what was seen in 2011 and years previous.  We anticipate that grantors in the SBIR program will come across the OMB A-133 audit (For companies with > $500k in annual grant revenue) far more often than in years past.  You will no longer be able to squeak by with a $499,990 grant. Phase II’s are now set to $1.5 million, meaning a 2 year award will see $750k in revenue each year.  The OMB A-133 audit will test 40 separate functions within your accounting system to maintain compliance.  This audit is a Federal requirement, and you will be responsible to submit it (DOE & NIH, take particular note).  Failure to do so can lead to criminal prosecution, heavy fines, holds on funding, and freezes on future proposal submissions and awards.

3.  Phase I Can Now Be By-passed – This is great news for many small businesses who have immediate feasibility and are on the Fast Track to commercializing their goods & services.  However, if you bypass Phase I, you will be required to be immediately implement a compliant accounting system.  Your Accounting System must be able to differentiate between Direct, Indirect & Un-Allowable costs, track Job Costs across all assigned cost pools, and Develop & Project Indirect Rates.  Since Phase II is typically Cost + Fixed Fee, negotiating your indirect rate immediately upon winning an award is as important as ever.  Taking a provisional indirect rate by your agency, will almost always handcuff the growth of a company and cost them thousands of lost dollars left on the table.  Projecting and negotiating your true indirect rates are absolutely imperative for a growing successful business, and are a requirement for most SBIR awarding agencies.

Our firm is nationally recognized as the Go-To CPA firm for SBIR Accounting.  Have a question?  Please feel free to message me on linked-in, or contact me via phone or email.

Best of luck in 2012, and we hope to see you soon at an SBIR event,

–Tom Pistone

Business Development Manager
Jameson & Company CPAs LLC

781-862-5170 x110  |  tom@www.jamesoncpa.com

www.jamesoncpa.com  |  www.twitter.com/jamesoncpa

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