SBIR 102-3: What Your CPA Should Be Doing for SBIR Accounting

June 3, 2019 / Ed Jameson / Blog Posts
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In general, the cost of staffing your Small Business Innovation Research (SBIR) Company´s accounting department is driven by the following three elements:

1. Number of employees

2. Annual revenue and volume of transactions

3. Reporting requirements and other terms and conditions imposed by contract or grant between your company and its customers.

The administration of government contracts and grants requires an experienced accountant with a strong cost accounting background and an intricate understanding of the Federal Acquisition Regulation (FARs).

According to an experienced CPA with this specialized knowledge would command an average salary exceeding $180,000 per year plus benefits…..and most small SBIR Companies couldn´t keep that person busy on a full time basis until they generate > $5MM per year in revenue.

As a result, smaller SBIR companies are forced to be as creative staffing their accounting department as they are developing their technology.

In smaller SBIR companies the day to day accounting should be handled by a competent bookkeeper with a working understanding of Generally Accepted Accounting Principles (GAAP). At a minimum, this person will need at least an associate´s degree in accountancy from an accredited school. Depending on your location $30-$60/hour is a fair range. Cost accounting experience or coursework is extremely important and a working knowledge of QuickBooks and Excel is essential. As you grow, a degreed accountant will command $80,000 – $120,000 per year plus benefits.

The role of outside CPAs

Most CPAs practicing in public accounting have Master´s degrees in either Accountancy (MSA) or Taxation (MST). The complexity of your annual corporate tax return may or may not require an MST, but these skills are generally irrelevant in the accounting and administration of government contracts and grants.

The key functions that will need to be supported are:

• Structuring the unique accounting system needs required by FAR Part 31 including the chart of accounts, timekeeping, vouchering and job cost reporting systems

• Working with management to create “allowable” policies and procedures

• Providing a check and balance on the accounting function by reconciling the checkbook; reconciling the labor distributed through the general ledger to the outside payroll service reports; and periodically testing transactions to ensure that the system is functioning properly and costs are properly recorded as direct, indirect or unallowable

• Budgeting and tracking actual indirect expenses vs. provisional rates

• Monitoring job cost reporting and alerting management of the need to manage projects more closely as significant changes occur, or the project funding and period of performance concludes

• Administration of contracts and grants including preparation of FSRs

• Providing billing support via the Payment Management System (PMS) and ensuring that the SF-425 is properly and timely filed on a quarterly basis

• Preparing the annual incurred cost submission and representing the Company during the incurred cost audit and negotiating the indirect cost rates

• For grantees whose total annual expenditures exceed $750,000 – representing the company during it´s Uniform Guidance Audit

As you can see, these tasks are not at all routine for most CPAs! Our firm provides outsourced accounting solutions specifically designed to meet the needs of smaller government grantees and contractors in a cost effective manner.

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Edward G. Jameson, CPA
What Your CPA Should be Doing to Help You With the SBIR/STTR Accounting Under NIH Grants Policy


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