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Subcontracts Presented by: Victoria Tugade Subcontract Process This process is the same for most modifications. Victoria Tugade, 626-5782 Email: [email protected] Department Requisition:

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Subcontracts l.jpg

Subcontracts

Presented by:

Victoria Tugade


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Subcontract Process

This process is the same for most modifications.

Victoria Tugade, 626-5782

Email: [email protected]

  • Department

  • Requisition:

  • Object code 3350 for the first $25K encumbered on any new subcontract and object code 3340 for the remaining funds

  • Fax to our office (626-4520) the following documentation: Scope of Work, Budget, Sole Source Justification, and Subcontract Monitoring Responsibilities Form.

  • Department

  • Approval:

  • ORCA e-mails the draft to the dept for approval. The business manager and/or PI review the information and make any necessary changes.

  • We also ask for any additional documentation at this time.

  • ORCA

  • Drafting the Agreement:

  • ORCA receives the requisition after department and SPS approval. We then write the draft.

  • ORCA

  • Finalizing the Agreement:

  • ORCA receives the fully executed document from the subcontractor and sends a PDF via email to the business office for their files.

  • ORCA

  • Processing the Agreement:

  • ORCA receives the dept approval and initiates signatures once a PO has been assigned by purchasing.

IMPORTANT!!!!!

NO Invoices may be paid until the subcontract is fully executed and the business office has received their fully-executed copy.


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New Subcontract or Modification?

  • Modification

    • Existing Subcontract

    • Same FRS Account No.

    • Carryforward Allowed

    • Same Project

    • Same Project but different FRS Account No.

  • New Subcontract

    • New Project

    • Prime Award Change (New FRS Account No.-with some exceptions.)

    • Need for Separate Accounting for Each Year (with some exceptions)


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When is a Modification Necessary?

  • ORCA needs to issue a written modification to the subcontract whenever one of these items change:

    • The Budget increases or decreases

    • The Scope of Work is modified

    • The termination date is extended (No-cost extension)

    • The PI changes

    • The legal name of the Subcontractor changes

    • Any other terms or conditions are modified (i.e. when invoices are to be received, total estimated cost of the project, as policy changes require changes to contract language, etc.)

  • A Change Order (CH type) requisition only needs to be entered for a no-cost extension, a legal name change, or a budget modification.


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Subcontractors vs. Vendors

  • A subcontract involves a collaborative working relationship between a UA Principal Investigator and a PI at another institution, company or individual:

    • The Subcontractor PI makes program decisions and collaborates with the UA PI.

    • Performance measured against a pre-designed scope of work.

    • Accountable to UA for the use of any funding provided through the Subcontract.

    • For a subcontract, the University’s IDC is only charged on the first $25,000 of the total amount (this is the standard case, although it sometimes changes).

  • The other option is to appoint a vendor to complete a part of the work:

    • A vendor provides goods or services as a regular part of its business operations as part of a competitive environment.

    • For a standard purchase from a vendor, the University’s IDC is charged on the entire amount of the purchase.

    • This type of collaboration is processed through PACS

  • Sometimes a “subcontractor” can have vendor-like features, at which point ORCA and the department will work together to determine if a subcontract should be issued.

  • http://www.sps.arizona.edu/FAQs/Postaward-Expense%20Allowability.htm#SubVendor


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Prior Approval for Subcontracts

  • If a subcontract is not listed in the prime award budget, a subaward disclosure form is required.

    • Please contact your fund accountant for this form.

  • If the prime award does not require prior approval for a subcontract, the Prime Sponsor is notified of the new subcontract in the form of a letter. This letter must be written by the department. The Letter template is located on the SPS website http://www.sps.arizona.edu/post-award.htm and is titled “New Subaward Disclosure Template”.

  • The Letter requires the PI’s approval as well as Institutional Approval through SPS.

    • Please contact your fund accountant for assistance with or questions about this procedure.


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EAR/ITAR

  • The terms and conditions in the prime award will flow down to the Subcontractor.

    • If your prime award has EAR/ITAR compliance issues these issues will flow down to the Subcontractor.

    • EAR/ITAR issues should be disclosed and discussed at the onset of the subcontracting process with both ORCA and the Subcontractor.

  • ORCA completes a Visual Compliance check on the PI and Organization when the Subcontract is a foreign institution.

  • Please see the Export Compliance, handout number 1

  • For EAR/ITAR issues please contact Nora Moriarty at 626-2423 or [email protected]


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IDC and Object Codes

  • Object Codes: The object codes for Subcontracts are 3350 and 3340.

    • If a requisition is entered for a subcontract and the object codes are entered as anything other than 3350 and 3340 the requisition will not be routed to me and will not be processed as a subcontract.

    • 3350 is for the first $25,000 of a subcontract when Indirect Cost (IDC) is charged. Any amount over $25,000 encumbered on 3340 at a Modified Total Direct Cost (MTDC) cost base

    • 3340 is used for the entire subcontract amount only when the Prime Award does not allow for IDC. In this case no amount is encumbered/charged to 3350.

    • Please see IDC information, handout number 2


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Budget and Scope of Work

  • The budget you provide for a subcontract, or a subcontract modification, must match the amount on the requisition that encumbered the funds.

  • The scope of work should be very clear regarding the work you are expecting to be done, the deliverables you are expecting to receive, and a timeline in which you are expecting the work to be completed and the deliverables received.


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Subrecipient Monitoring

  • “Subcontract Risk Monitoring” form for all subcontracts

    • Delineates the responsibilities of the department and Principal Investigator in ensuring that only ALLOWABLE expenditures are being paid.

    • The PI is required to approve all charges on each invoice and write “Approved” or “OK to pay” with a signature

    • The Departmental authorized offical is also required to approve invoices before they are sent to accounts payable.

    • The level of monitoring required for each subcontract is determined by ORCA and provided to you at the draft stage.

  • Risk level is assessed by ORCA, based on:

    • Amount, Type of institution, Subcontractor’s performance in prior agreements with the University, Relevant findings on the Subcontractor’s audit, and Departments compliance with University policy and process.

  • Change in Risk Level:

    • Changes in the contract circumstances or behavior of Subcontractor can trigger a change in risk level. ORCA and Department will work together to make appropriate decisions on changes to risk level

  • Please note that this form is a requirement of the State of Arizona Purchasing System.

  • Please see Risk Monitoring forms and matrix, handout number 3


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Sole Source Justification

  • A Sole Source Justification (SSJ) must be completed with each and every New Subcontract.

  • The SSJ asks the UA PI to answer three questions

    • Why was this particular subcontractor selected to perform the work?

    • Were competitive bids sought?

    • Do you or any member of your project staff, or any member of you or your project staff’s immediate families, have any personal or financial interest in the proposed subcontractor?

  • Each of these questions must be answered and the form must be signed by the PI and returned to ORCA via fax

  • If this information was contained in your proposal to the Sponsor, you may cut and paste that justification.

  • Please note that this form is a requirement of the State of Arizona Purchasing System.

  • Please see SSJ form, handout number 4


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Independent Contractor Form

  • We are now requiring that an Independent Contractors form be completed when subcontracting to an individual.

  • This form can be found at http://uabis.arizona.edu/eforms/#I.

  • Completing this form will assist both ORCA and Purchasing with the timely completion of internal paperwork to process your Subcontract

  • Please see IC form, handout number 5.


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Draft Documents

  • Drafts:

    • A draft that is sent to you for review is an internal only document and should not be forwarded to the subcontractor for review by your office.

    • The SC-227 Subcontract Approval Form is included in the draft. Please ensure that you provide any information that is needed as indicated by the x in the box corresponding to the needed document.

    • Remember that the draft cannot be finalized for signatures until the SC-227 and any requested information is received by my office.

    • Please see SC-227 template, handout number 6


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Subcontracts with No Auto-carryover

  • For Subcontracts that do not have automatic carryforward:

    • You must receive an invoice that is clearly marked FINAL after the end of each budget period and that final invoice must be received prior to the UA’s financial due date to the Prime award.

    • When entering a requisition for the next years funding the requisition type should be CH and, if the FRS number is changing, the FRS number should be changed on the requisition.

    • If the FRS number is changing from year to year, you must unencumber any remaining funds from the previous years FRS.


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Paying Invoices on Your Subcontract

  • NO payment can be made until we have received the fully signed subcontract.

  • NO payment can be made on funds added in a modification until we have received the fully signed modifications.

    • Any payments made without a signed subcontract or modification are at the risk of the PI and department.

  • In order to send an invoice for payment the PI and Department administrative official must review invoices and complete the Subcontract Payment Authorization Form.

    • The completed form must accompany any subcontract invoice sent to Accounts Payable for payment. Accounts Payable will reject your invoice for payment if the form is not included, or if the form is included but not filled out properly.

  • Please see the Subcontract Payment Authorization Form, handout number 7.


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Terminating Your Subcontract

  • Each subcontract must be terminated with an official letter being sent to the Subcontractor informing them of the termination and requiring their counter signature.

    • You must receive an invoice that is clearly marked FINAL prior to the termination of the agreement. The final invoice must be received prior to the UofA’s due date for financials to the Prime Sponsor.

    • If a subcontract still has funding encumbered a termination requisition must be entered to remove the encumbrance. This requisition will trigger me to write the termination letter

    • If the subcontract has no funding encumbered an e-mail to me informing me that a termination is required will suffice. Please include the Subcontract PO and name in your message.


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University of Arizona Performance Audits

  • Every Subcontract issued by the University of Arizona is subject to audit. They can be audited by any one of the following:

    • ORCA Internal audit

    • University of Arizona Internal Audit

    • State of Arizona A-133 audit

    • Federal audit (if the subcontract is federally funded)

  • During the course of any audit, your department may be asked to produce documentation as proof of your compliance with subrecipient monitoring responsibilities, University of Arizona policy and procedure, and prime award requirements.


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Subcontractor Audits

  • ORCA is required to review the entire audit of any subcontractor. This generally involves an organizations A-133 audit

    • If an organization is not subject to A-133 audit (generally a small organization, for profit company, or foreign organization) they are required to provide alternative documentation for our review.

  • If ORCA feels that a finding can, in any possible way, have an affect on your subcontract, the Departmental authorized official will be notified by e-mail and will be provided the findings for review and consideration.

  • If ORCA feels that a finding is so significant as to hinder the completion of the University of Arizona’s responsibilities to the Prime Sponsor, ORCA will contact the PI and Departmental authorized official to discuss the next step. The Subcontract can possibly be cancelled.


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General Information

  • DON NOT PAY INVOICES WITHOUT A FULLY SIGNED AGREEMENT OR MODIFICATION.

  • Make sure you know your responsibilities for monitoring your subcontract.

    • The Risk monitoring form outlines the responsibilities for both the PI and the Business Manager. Each risk level carries a different level of monitoring responsibilities.

  • Ensure that the scope of work for the project is clear.

  • Do not send the draft of the Subcontract that you receive to the Subcontractor.

  • Remember that the termination process must be implemented when the Subcontract is finished.

  • Make sure that the Subcontractor PI has contacted his appropriate contracting officials.


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General Information

  • When Completing a requisition, please provide organization’s legal name, complete address, contact name and phone number. This includes change order requisitions.

  • Please make sure the contract type in entered correctly. Type CH is for a change order (modification) and Type PR is for a new subcontract.

  • Please enter the organization’s Tax ID number in the notes section if it is available. Purchasing cannot assign a PO number without this information.

  • Please fax all relevant documentation to my attention at 626-4520 (budget, scope of work, sole source justification-for new subcontract, risk monitoring responsibilities-for new subcontract, and any other information you feel is necessary for the completion of the action).

    • NOTE: The information that is attached to the DPR only goes to purchasing and is never received in this office. Purchasing does not require these attachments for Subcontracts.


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Ten Most Common Subcontract Mistakes

  • The department and PI do not follow the required subrecipient monitoring responsibilities as outlined by the Subrecipient Monitoring Form.

  • Budget does not match requisition amount

  • Budget does not contain sufficient detail and/or itemization

  • FRS object codes are not properly entered (SHOULD BE: 3350 for first $25,000 and 3340 for everything after)

  • Requisition does not contain project dates (beg. and end), project title, and Subcontractor’s PI, full legal name, full address, EIN for the organization.

  • Scope of work does not contain the purpose of the project i.e. reports, deliverables, etc.

  • Budget, scope of work and sole source justification are not faxed to our office in a timely manner

  • Sole source justification is incomplete or unacceptable

  • Our office is not notified of UA contact person for business office who is overseeing the subcontract

  • We are not contacted regarding no-cost extensions (the extension of the prime award does not automatically carryover to the Subcontract. There must be a no-cost requisition and modification to the subcontract.)


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Subcontracting Workload

FY 2009 July 1, 2008 through June 30, 2009

Total New Subcontracts 211

Total Subcontract Modifications 502

Q1 & Q2 FY10 July 1, 2009 through December 31, 2009

Total New Subcontracts 142

Total Subcontract Modifications 136

Total Active Subcontract Files – 748


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