Sand 9: Accounting Assurances Behind Incremental NSF Grant Payments

Sand 9 agreed to pay $625,000 to resolve False Claims Act allegations concerning the accounting assurances behind incremental NSF grant payments, in a settlement the Justice Department announced. The government alleged that the company certified how it had spent grant money without keeping accounts that tracked spending by grant and approved budget category. According to the government, those progress reports released more money. For someone working in research finance, the question is familiar: what could the company actually show when it told the funder that the money had been spent as promised?

The Cambridge, Massachusetts company received two Small Business Innovation Research Phase II grants from the National Science Foundation, in February 2009 and March 2011. They supported research into micro-electromechanical system timing products for wireless and wired communications systems.

What Sand 9 Allegedly Told the National Science Foundation

The United States alleged that Sand 9 misrepresented its accounting and timekeeping systems to obtain the grants, then failed to maintain complete employee timekeeping records while receiving grant funding for labor.

This grant-fraud case turns on what Sand 9 told the National Science Foundation about its accounting and what its employee and expenditure records could support.

What Is a False Certification?

The alleged false certifications were in Sand 9’s progress reports: assurances of compliance with grant terms and, in certain reports, that all committed funds had been spent as the grant budget designated.

Sand 9 allegedly failed to maintain an accounting system that tracked expenditures separately by grant or according to the approved budget categories. Yet the reports represented that the spending followed the budget. According to the government, those reports caused the National Science Foundation to release incremental payments.

The company allegedly gave a definite answer about spending that its accounts did not separately track.

We see the problem: the assurance did the work the accounting was supposed to do.

Why Award-Level Cost Records Matter

The alleged accounting gap concerned both the grant charged and the budget category assigned to the spending. A company-wide total would not answer the question the certification put to the funder: had this grant’s money been spent as its budget designated?

For an insider, that makes the alleged mismatch concrete. A finance employee may understand whether the accounts distinguish the awards. A researcher may know what work the labor entry describes. Someone preparing a progress report may know what information was available when the spending assurance went out. We bring those perspectives together around the particular certification and payment.

The Same Accounting Gap in Other Grant Cases

In the Aquasent case, the government also alleged false financial-management and timesheet representations used to obtain NSF Small Business Innovation Research funding. For Sand 9, the question was what the company could substantiate about labor and spending when it sought and received grant money.

What Proof Do You Need as a Whistleblower?

That is what we work out with you. In an accounting-assurance case, we examine what the company told the funder, what the records behind that statement show and how the statement connected to a payment.

An insider’s contribution can be knowing how those records fit together. The person maintaining the ledger may understand what an account code actually means. The person doing the research may recognize when the work described by a labor charge differs from the work performed. The person involved in reporting may know the basis for the assurance sent to the agency.

The Sand 9 Settlement and Whistleblower Cases

The Justice Department announced Sand 9’s civil settlement on May 14, 2015. The U.S. Attorney’s Office for the Eastern District of Virginia and the National Science Foundation’s Office of Inspector General investigated the company’s accounting and timekeeping representations and progress-report certifications.

The case shows why an employee who understands the accounts can have something valuable to contribute. The grant award, the labor records and the spending certification describe connected decisions. An insider may recognize the gap between them long before a completed report makes it apparent.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know What the Accounts Could Support

If a grant report certified spending you could not reconcile to the accounts, speak to one of our whistleblower experts about the assurance behind that payment. We build the case with you and bring in NSF grant fraud whistleblower lawyers who understand research accounting and payment certifications. We stay alongside you through the case, bringing our expertise to your knowledge of the work and the money.