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I've reviewed all the material that has been sent to me and have comments below. I've done contract audits before and essentialiy it boils down to compliance with the contract as well as applicable regulations and laws. Regardless of the reasons for non- compliance, if you're out of compliance-that's it! Monies paid for items not in compliance must be paid back. That's exactly how an auditor will look at this.

I've commented only on those areas where I felt your response was weak and an argument could be made to counter their position. As far as the other items, I felt that either your argument was sufficient (that doesn't mean they'll agree) or that I agree with their position----based on the contract or regulations.

My Comments

$104,683 It is a reasonable expectation that a workday would consist of 71/2 hours. What is budgeted and subsequently claimed, was for 7 Yz hours of project-related work each day. Since these individuals clearly work well beyond 7 Yz hours each day, it is safe to assume that non-NIST activities are conducted within the scope of the hours each day beyond the 7 Y2. Therefore, these costs are fully chargeable and should not be disallowed.

F133 These amounts should not be disallowed in consideration of the following:

-+ Verbal approval was received for the Fiscal Control employee -+ Budget appro va wa equested from NIST as required -+ The positions were nee e , justified and warranted, especially in tight of OIG commen1Sfega:rdiIrg111e condition of the books -+ The amount bud eted for Personnel clearly allows for additional staffing as necessary to meet project goals.

/e request that NI~;n~ issue the appropriate budget approval for these positiO;J

l $48,989 Based on 48CFRPart 31-205-6 (a)(3), it would be an unreasonable expectation that such an extremely small company such as Computer Aided Surgery, Inc. be required to have an "established compensation" plan. In such a situation, it is reasonable and fair to expect compensatIOn to be base upon the "practice followed" as employee needs arise which is what has occurred here. Consequently the $48,989 should be allo~

V3,238 This amount for education costs must be a above as the "practice" which will now be followed.



This amount should be allowed as NIST



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wed based on the regulations cited