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Financial Capability Reviews

Overview/Purpose

The National Science Foundation (NSF) may conduct a Financial Capability Review to verify that a prospective awardee is financially stable, has sufficient resources to complete its proposed research program, and has sufficient funds to pay operating expenses. The evaluation of financial capability of a prospective awardee is of particular importance and will require more detailed analysis where the prospective awardee:

  • Is a newly formed organization
  • Has not implemented any NSF-funded awards with NSF within the preceding 24 months
  • Is applying for a Small Business Innovation Research (SBIR) or a Small Business Technology Transfer (STTR) award

Roles

NSF’s Cost Analysis and Audit Resolution Branch (CAAR) conducts the Financial Capability Review on behalf of NSF. The CAAR analyst gathers and reviews the information from the awardee and makes an overall assessment of the awardee’s financial viability over the proposed award period.

Upon completing the review, CAAR submits a recommendation to NSF’s Division of Grants and Agreements (DGA), which makes a final decision on funding based on CAAR’s recommendation. Generally, NSF does not fund a proposal if there are concerns with the financial viability of an awardee organization.

Prospective awardees are responsible for providing timely and accurate information to NSF in a timely manner during the review.

Topics Covered by the Review

Information required and the scope of the Financial Capability Review will be determined by CAAR staff. The review will include an analysis of a prospective awardee’s solvency, debt obligations, liquidity, historical profit and loss, cash flow, operating trends and financial commitments. CAAR will require financial statement submission and perform an analysis for the two most recent accounting years following a two-step process:

  1. The review of financial statements, including an assessment of an organization’s tax returns, recent audit reports, balance sheets (assets, liability, and equity), income statements, detailed budgets for the proposed project period, documentation relating to existing or contemplated credit or financing arrangements or changes in financial position and a review of funding from other Federal agencies for indications of financial difficulty.
  2. If significant indications of financial difficulty are found in step 1, the CAAR analyst will review secondary information, such as cash flow forecasts, pending proposals and/or any other potential of funding, loans and details on liabilities. Additionally, if a prospective awardee has little or no funding history with NSF, the CAAR analyst will assess what, if any, prior experience the prospective awardee has in managing Federal funds in order to:
    • Better understand the organization’s financial capability
    • Identify other information and events that suggest an organization is stronger than indicated in the financial statements.
    • Understand management’s plans for improving the organization’s financial position

Resources and References

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