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
Lorraine Trexler, Director
Daniel Milstead, Deputy Director
National SBIR/STTR Conference
June 16, 2015

2. Agenda About the Division of Financial Advisory Services (DFAS)
SBIR/STTR 40% IDC rule
Specific cost issues
Audit requirements

3. About DFAS DFAS Division Director Lorraine Trexler
Admin Support
Deputy Director Dan Milstead
Indirect Cost Branch Emma Smith, Chief
Negotiates IDC rates for DHHS commercial contractors
Special Reviews Branch Hruta Virkar, Chief
Resolves Single Audit & OIG Audit Findings
Performs Financial Capability & Accounting System Reviews
Performs Cost Analysis
Negotiates IDC rates for non-SBIR/STTR grantees
SBIR / STTR Pilot
Negotiates IDC rates for all NIH grantees and contractors that receive the majority of their funding through the SBIR/STTR program.

4. (see NIH Guide Notice: NOT-OD-09-038)
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 IDC is > 40% of TDC.
(see NIH Guide Notice: NOT-OD )

5. 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.

6. Specific Cost Issues
NIH Salary Cap – tied to Executive Level II salary, currently $183,300
See NIH Guide Notice: NOT-OD
Public Law restricts the amount of direct salary to Executive Level II of the Federal Executive pay scale, currently set at $183,300 effective January 11, 2015.
Salary cap summary:
Business Development (to include sales, marketing, advertising, etc.)
See page I-124

7. Specific Cost Issues Independent Research & Development (IR&D)
45 CFR Part “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.”

8. 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 (d)

9. 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

10. Audit Requirements
Audit period – The audit period is the awardee’s fiscal year (i.e., not the 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 report OR
9 months after the end of your fiscal year

11. 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

12. Questions? DFAS has two mailboxes where your can direct your inquires:
Indirect Cost Inquiries –
Audit Requirement Inquiries –