Accounting System Reviews

NSF may decide not to issue new funding or secure existing funding to an organization that cannot demonstrate that it maintains an accounting system which can track and segregate costs by awards and projects. 

During the review, NSF assesses whether an organization's accounting system can:

• Assist with new proposal budget preparation based on actual, supportable cost data.
• Classify expenditures as direct, indirect or unallowable as they are incurred.
• Track costs by project, grant or funding source and by NSF budget line-item expense category.
• Provide complete and accurate financial information (e.g., balance sheets, income statements, project cost ledgers and award summary reports).
• Maintain adequate source documentation supporting all expenditures and cost sharing claimed on NSF awards, when cost sharing is required under an NSF award.
• Maintain internal controls and segregation of duties to ensure that no one employee has complete control of accounting transactions or processes.

Policies, procedures and practices aren't documented
Awardee organizations often have good practices but have incomplete or no written policies and procedures. Written policies are essential to demonstrate good practices and ensure consistent compliance, especially during times of staff turnover.

Budget information isn't incorporated into accounting system
Rather than incorporating budget information into the accounting system, some organizations compare budget information maintained in separate spreadsheets with accounting information downloaded or manually entered, a process that is cumbersome and prone to error.

Accounting system doesn't generate summary financial reports
If an accounting system cannot generate summary financial reports that can also compare budgeted amounts to actual expenditures, awardees and external reviewers cannot easily determine the financial status of the award.

Award costs aren't posted to the accounting system
Some awardee organizations manually calculate expenditures (e.g., indirect recovery costs, fringe benefits) and fail to post them to the accounting system in a timely manner. This often results in reimbursement requests that don’t align with expenditures in the accounting system and the appearance of excess cash on hand.