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Accepting A Non-Dilutive Government Grant? 5 Surprising Mistakes To Avoid

Non-dilutive grants are a great way to fund your research, provided you’re working on a project that directly benefits the government according to current needs. Many companies pursue non-dilutive government grants because they don’t require giving away ownership in the company. 

According to Upcounsel, typical non-dilutive grants include research grants, translational grants, and SBIR/STTR program contracts. The largest grants are about $150,000 for a phase I award and can reach $1 million for a Phase II award.

Are you pursuing a non-dilutive government grant or contract? If so, you’re pursuing funds from a reliable source. However, be aware of the following mistakes that could cost you the contract:

1. Not meeting contract deliverables.

As the recipient of a grant, you’re required to meet certain deliverables. Not meeting your deliverables can result in a canceled contract. For example, eCivis describes three scenarios where grant recipients’ contracts were canceled. The first grant was revoked because the recipients of school supplies did not meet the requirements set forth in the grant terms. The second recipient was required to show proof of a 20-year lease, but only had 13 years left. The third grant was canceled when staff failed to close ten or more cases per month per contract deliverables.

Before accepting a contract, make sure you’re able and willing to meet all of your deliverables. Grant money is not free money – it’s conditional. The government isn’t lenient when it comes to enforcing contracts, so make sure you can meet all requirements before agreeing to the terms.

2. Erasing rather than crossing out, rewriting, and initialing changes.

It sounds trivial, but all timesheet changes must be crossed out and initialed rather than being erased. You’re also required to have basic written procedures that state specific timesheet rules. Government contract CPAs from Jameson & Company explain that written policies must include the following terms:

  • Timesheets must be filled out daily in ink
  • All employees who charge their time directly or indirectly to the government award are required to record all their time
  • Timesheets must be signed by the employee and their supervisor
  • There is no erasing. All changes must be crossed out and initialed

All of the above rules must be clearly outlined in your written policies, no exceptions. Otherwise, if you face an audit, you could be in trouble. Worse, without written policies, your team is unlikely to remember all the rules and might accidentally record time incorrectly. 

3. Uncompensated overtime.

Not keeping accurate time records makes it impossible to prove you’ve paid proper overtime to salaried employees and contractors. If you can’t prove you’ve paid proper overtime, how do you know it’s been paid in the first place?

Calculating overtime for salaried employees is more difficult than it is for hourly employees. With salaried employees, it’s easy to miss overtime compensation without accurate accounting records.

For example, say you have an employee making $85,000 per year. Their cost is $40.86 per hour based on an estimated 2,080 working hours in a year. You’ll bill the government at this rate on a weekly basis. This might seem perfectly fine, until the end of the year when you add up all hours worked.

At the end of the year, say that employee worked a total of 2,400 hours. If that employee is exempt from overtime pay, they’ve worked 320 additional hours making their actual cost $35.42 per hour. You’ve already billed the government at a rate of $40.86 per hour. This discrepancy matters and needs to be reflected in your time records.

On the other hand, if that employee is non-exempt, you haven’t properly compensated them for 320 overtime hours worked. A discrepancy is expected, but you will be expected to adjust for owed overtime. The consequences for not doing so can reach tens of thousands of dollars in fines.

4. Not having a supervisor sign employee time sheets.

Your time sheets are a daily task that need to be completed in full, to specific standards according to the Federal Acquisition Regulations. Part of those regulations requires employers to sign all timesheets to denote their approval before handing them off to the accounting department. It’s a simple yet tedious task that must be done without exception.

Compliance isn’t difficult when you follow the rules.

Complying with contract requirements isn’t hard when you have written policies in line with FAR regulations. It may seem tedious at first, but in case of an audit, you’ll be glad you took the time to understand and play by the rules. 

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