Navigating Funding Uncertainty: Strategies for Life Sciences Organizations to Mitigate Risk

In the life sciences sector, where innovation often relies on grant funding, financial stability has become increasingly uncertain. Federal budget constraints and shifting political priorities pressure organizations to adopt a proactive approach to managing grants. As opposed to reacting to changes as they happen, AAFCPAs advises that clients anticipate potential funding risks and implement strategies to best navigate. By effectively tracking expenditures, assessing financial exposure, and preparing for funding reductions, those in the life sciences can safeguard their operations and continue to advance critical research.

Assessing Risk

Shifting federal budgets may lead to key grant program reductions or cancellations. While some grants, particularly those in biotech and medical devices, may be less vulnerable to immediate cuts, clients will still need to assess their exposure to potential funding shifts. A comprehensive risk assessment is one way to prepare for those changes.

Identifying essential programs and expenses tied to specific grants, analyzing the contribution margin of grant-funded programs, and evaluating the financial impact of reduced, delayed, or discontinued funding are valuable first steps in assessing risk. Additionally, organizations should identify areas that would be directly impacted by cost reductions, such as workforce adjustments.

Understanding the full financial impact of funding reductions requires a detailed analysis of contribution margins and fixed costs. AAFCPAs can help guide organizations through this process, offering insight into how indirect rates may shift under different funding scenarios. This strategic approach ensures an organization can remain financially resilient in uncertain times.

Strengthening Compliance Practices

Strengthening compliance practices is essential for organizations managing federal grants. Recent updates have raised the threshold for program-specific audits from $750,000 to $1 million, but compliance requirements remain the same regardless of whether an audit is triggered. Organizations must continue to track expenses accurately and ensure financial reporting aligns with grant stipulations. Taking a more strategic approach, such as maintaining thorough records and strong internal controls, can help prevent compliance challenges down the road.

Specifically, AAFCPAs advises that clients establish a clear chart of accounts for tracking grant-related expenses, implement policies for documenting allowable costs and indirect cost allocations, regularly review compliance guidelines to stay ahead of regulatory changes, and prepare for audits, even when you fall below the new threshold.

Leveraging Advisory Support

External advisory support is critical when refining and optimizing grant management strategies. AAFCPAs collaborates with clients to assess risks, develop financial models that anticipate funding fluctuations, and align compliance practices with federal regulations. Our approach identifies vulnerabilities and delivers actionable strategies to support long-term financial stability.

Whether securing funding for the first time or strengthening existing processes, life sciences organizations benefit from tailored guidance at every stage. AAFCPAs reviews policies and procedures for compliance, assesses financial risks, and provides insights into how funding arrangements may affect financial sustainability.

Partnering with AAFCPAs provides access to specialized expertise in grant compliance and financial planning. We streamline grant management, reduce administrative burdens, and help organizations adapt to evolving financial requirements while maintaining compliance.

How We Help

AAFCPAs’ Life Sciences practice supports organizations at all stages of growth, from startup to IPO. We offer tailored accounting, tax, audit, and advisory solutions that address the unique challenges faced by life science companies, including biotech, pharmaceuticals, and medical device firms. Our expertise spans tax-efficient entity formation, regulatory compliance, R&D cost management, and IPO readiness.

We work closely with life science organizations to streamline financial operations, improve cash flow, and mitigate risks associated with clinical trials, research funding, and complex regulatory frameworks. Our Outsourced Accounting and Fractional CFO solutions provide strategic guidance in areas such as budgeting, forecasting, and financial reporting, ensuring your organization remains financially strong while you focus on innovation.

These insights were contributed by Lauren M. Duplin, CPA, Partner & Consulting CFO, Ashleigh Marks, CPA, Consulting CFO, and Richard O’Neil, CPA, Partner. Questions? Reach out to our authors directly or your AAFCPAs partner. Subscribe to get alerts and insights in your inbox.