Ten Red Flags in Your SR&ED Claim That Make CRA Auditors Nervous

Introduction

CRA auditors look for patterns. Some mistakes raise immediate suspicion—those are the red flags. Identifying them before submission can reduce adjustments, audit risk, and negotiation friction.

Below are ten of the most common red flags and how to neutralize them.

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Red Flag #1: Vague or Ambiguous Narrative

Phrases like “we improved performance” without metrics or context invite doubts. Always specify “how” and “by how much” under what conditions.

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Red Flag #2: Overclaiming Subcontractors

When subcontractor deliverables aren’t clearly mapped to your experimental plan, CRA may disallow portions.

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Red Flag #3: Retrofitted / Backdated Documentation

Logs, journals, or notes created after the fact lack credibility. CRA expects contemporaneous evidence.

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Red Flag #4: Unrealistic Hours / Ratios

If 70–80% of engineering time is claimed consistently year after year, that raises eyebrows. Be ready to explain and justify.

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Red Flag #5: Weak or No Test Evidence

Skipping failed runs, ignoring negative outcomes, or not logging parameter sweeps weakens your case.

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Red Flag #6: Cost / Narrative Mismatch

If your cost schedule claims far more than what your narrative describes, auditors may prune the excess.

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Red Flag #7: No Version / Change History

If you can’t show how your designs evolved (commits, changes, logs), the narrative looks like after-the-fact storytelling.

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Red Flag #8: Overclaiming Support Work

Supporting work (documentation, debugging) is only eligible if integral & subordinate to core experiments. Don’t overuse it.

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Red Flag #9: Shared / Multi-Use Equipment Misuse

Claiming 100% credit on machines also used for production invites disallowance unless usage logs justify allocation.

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Red Flag #10: Disorganized Submission Package

Poor indexing, missing cross references, or no attachments table makes it harder for reviewers—and hurts your credibility.

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Pre-Submission Scorecard

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How to Preempt These Flags

• Draft narrative during project, not at year-end
• Maintain version logs, test tables, experiment journals
• Cross-validate cost schedule with narrative line by line
• Use internal review checkpoints before submission
• Package your submission cleanly, with index, cross references, and appendix

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Example Story

A med device firm claimed calibration algorithm R&D. Their original narrative was vague. CRA disallowed ~40%. On appeal, they supplied version logs, parameter tables, and meeting notes, and ~25% was reinstated. The missing piece? The initial claim lacked linked evidence.

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How GovMoney Can Help

We apply the Red Flag Scorecard to your draft, identify risky spots, help you remediate, improve alignment between narrative & cost, and package your claim to reduce review adjustments.