Subcontracting

1. Subcontracting Presented by:Derek Brown, OGRDJennifer Reyes, SPS

2. Recording date of this workshop is January 31, 2014 Some of the rules and procedures discussed in this workshop are subject to change. Please check university resources before relying exclusively on this recorded presentation.

3. Overview • Proposal/Award Cycle • Definitions • Roles and responsibilities • Risk assessment • Sub-recipient monitoring • Examples of audit results

4. Proposal/Award Cycle • Proposal Development • Proposal Submission • Award Acceptance and Set-up • Award Management • Closeout

5. Definitions • What is a subcontract? • “…an award of financial assistance in the form of money, or property in lieu of money, made under an award by a recipient to an eligible subrecipient or by a subrecipient to a lower tier subrecipient. The term includes financial assistance when provided by any legal agreement, even if the agreement is called a contract, but does not include procurement of goods and services…” (OMB Circular A-110 Subpart A, Section 2)

6. Definitions • What is a subrecipient? • “…a non-Federal entity that expends Federal awards received from a pass-through entity to carry out a Federal program, but does not include an individual that is a beneficiary of such a program. A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency.” (OMB Circular A-133 Subpart A - Definitions) Also... the legal entity to which a subaward is made and which is accountable to the recipient for the use of the funds provided. (OMB Circular A-110 Subpart A, Section 2)

7. “I have been awarded, now what?” – Subcontract Initiation Process • 1: Check approved subrecipient website: http://www.ogrd.wsu.edu/subrecipient.asp • 2 (If necessary): If subrecipient is not on our approved website, we need to perform a financial review on them. We have a duty to ensure subrecipients maintain adequate internal financial management controls. • Audit report, financial statements, tax records, etc. • 3: Once the financial review is complete, send completed initiation sheet, SOW/Budget, F&A Rate agreement (if receiving F&A dollars) and any other necessary items to OGRD for review.

8. Subcontract vs. Personal Services Agreement – How to Tell the Difference – OGRD Memo 22 • Subcontract/Subrecipient Characteristics: • Carries out a portion of the statement of work – Co-PI / Co-Author • Performance is measured against meeting the objectives of the program • Has authority for administrative and programmatic decisions over the SOW • Is responsible for applicable program compliance requirements

9. Subcontract vs. Personal Services Agreement – How to Tell the Difference - Continued • Personal Service/Vendor Characteristics: • Provides a service available to many different purchasers at similar rates • Operates in a competitive environment with other offering similar services When making your determination, the substance of the relationship is more important than the form of the agreement. Not all of the characteristics may be present in all circumstances…judgment should be used... (OMB Circular A-133 Subpart B – Subrecipient and vendor determinations)

10. Responsibilities • “Recipients are responsible for managing and monitoring each project, program, subaward, function or activity supported by the award. Recipients shall monitor subawards to ensure subrecipients have met the audit requirements as set forth in §74.26.” (45 CFR Part 74 Subpart C – Post Award Requirements, Section 51) • “Federal agencies shall apply the provisions of the sections of this Circular to non-Federal entities, whether they are recipients expending Federal awards received directly from Federal awarding agencies, or are subrecipients expending Federal awards received from a pass-through entity (a recipient or another subrecipient).” (OMB Circular A-133 Preamble Memorandum) • WSU monitors all federal AND non-federal subrecipients.

11. Responsibilities - Continued • “A-133 _____.400 Responsibilities (d) • Identify Federal Awards • Advise subrecipients of requirements • Monitor activities of subrecipients • Ensure subrecipientsmeet audit requirements • Issue a management decision • Consider whether subrecipient audits necessitate adjustment • Require access to records & financials….

12. Responsibilities - Continued Award monitoring – factors in determining the extent, nature and timing. • Program complexity • Percentage of pass through dollars • Amount of awards • Subrecipient Risk

13. Possible A-133 Indicators of High Risk • A qualified audit report or failure to have a current audit report • Inadequate response to financial questionnaire • History of non-compliance or non-performance (failure to use funds for authorized purposes) • New subrecipient (or new to this type of project) • Award size relative to subrecipient’s sponsored research portfolio • Type of subrecipient

14. Possible Mitigations to High Risk Assessment • Corrective Action Plan • Special Monitoring Plan (PI/Dept/OGRD/SPS) • More frequent contact with subrecipient or • More frequent technical reports • Add more detailed or frequent invoicing requirement • Backup documentation • Tie receipt of technical progress reports to payments • Require on-site monitoring (technical and financial) • Add more stringent termination or stop-work language for failure to comply with requirements • Site visits

15. Departmental Responsibilities Develop the overall plan for commitment of funds: • Approve all expenditure requests. • Review budget statements, proposal/budget breakdown, and invoices for reasonableness of hours/costs, indirect rate issues, and any other irregularities in the sub proposal. • Ensure that all expenditures are directly related to the scope of work and are: • Allowable • Allocable • Reasonable • Consistent

16. Departmental Responsibilities - Continued • Certify his or her effort and the effort of other employees working on the project. • Certify that all cost sharing obligations have been met. • Initiate and approve subcontract agreements and payments. • Verify that all appropriate expenditures have posted.

17. Departmental Responsibilities - Continued • Reviews invoice for allowability/allocability/reasonableness and timeliness, ensuring that: • Contract number is on the invoice (G #) • Invoice time frame is identified. • Invoice amount (current and cumulative) is clearly identified. • Expenses are within the sub-award performance period. • All addition is correct. • Expenses are itemized according to sub-award budget, within allowed deviations. • Includes the required certification statement. • All required deliverables/reports have been received (technical reports, property reports, invention reports, etc...)

18. Departmental Responsibilities - Continued 8. Reviews invoice for allowability/allocability/ reasonableness and timeliness, continued: • The Principal Investigator is responsible for ensuring the subcontractor is meeting their obligations. The PI should certify expenditures are appropriate to the subcontract and that the work being invoiced was indeed completed or delivered received. • This responsibility may be delegated. It is suggested that delegation be in writing.

19. Departmental Responsibilities - Continued • Appropriate signatory signs/codes invoices by approved budget objects, and send back to SPS for payment. • Reviews technical/progress reports to ensure making progress/meeting milestone/reporting requirements. • Requests additional supporting documentation on questioned costs. • Monitor subcontractor compliance with regulations of both the Prime and subaward terms and conditions. • Ensures that subrecipient has proper control of property. • Forwards copy of property, invention and cost-share reports to SPS.

20. OGRD Responsibilities Assist with submitting the Prime Award proposal, award negotiation and drafting/negotiation of a subcontract. • Receive the subcontract initiation form and backup documents. • Check Visual Compliance Database (EPLS). • Check for DUNS#, Sam.gov registration, and E-Verify/ARRA/FCOI/A-133/FFATA/NSF F&A applicability. • Check that sub-award is within scope of work, within dates of the Prime Award and that funding allocation has been set aside.

21. OGRD Responsibilities - Continued • Send A-133 request letter with sub-award for signature. • Check for A-133 response for post-award monitoring. • If needed, do risk assessment for post-award monitoring. • Acts as advocate for PI and University in sub-agreement issues.

22. SPS Responsibilities After sub-award is signed and sub-award received at SPS: • Review sub-award agreement and translate into computer systems. • Verify the rate agreement, A-133 response, and completion of all documents. • Process subcontract invoices for payment. • Annually request / review the subcontractor’s most current audit document. • Complete risk assessment form, if necessary, based upon latest audit report. • Alert all parties if the audit review demonstrates a concern for WSU.

23. Close Out Procedures • Ensure all sub contractor’s invoices have been received/paid, including a final marked “final”. • All progress reports/deliverables have been received. • Ensure close out documents have been received.

24. Subrecipient Monitoring • A-133, Subpart B, Section ___225, allows WSU to take one or more of the following actions for subcontractors who are unwilling or unable to comply with the monitoring requirements. • With hold a percentage of funding until the Audit is complete. • With hold or disallow indirect costs. • Suspend funding or payments until audit is conducted. • Early termination of the agreement.

25. NSF Audit Results • January 2012 report • Johns Hopkins University • $169,532 questioned costs…($138,750 in direct expense and $12,925.34 of associated in-directs of which were determined to be unsupported payments to a subrecipient.) • JHU was determined to not adequately monitor subgrantee costs…which included 10 subcontracts amounting to over $8.22 million in claimed costs. JHU uses a risk based approach to determine who needs to be monitored and to what level of monitoring to be performed.

26. NSF Audit Results • January 2012 report • International Computer Science Institute; • NSF identified 3 major deficiencies in their management of funds – resulting in $451,189 in questioned costs. • 1) Inadequate sub-award monitoring • 2) Inadequate control over the timely review and certification of effort reports • 3) Inadequate controls over foreign travel restrictions

27. NSF Audit Results • January 2012 report • University of Notre Dame audit resulted in $244,430 in questioned costs. 1) $119,330 in unsupported participant support & travel costs 2) $44,300 for unsupported and unallowable subaward costs 3) $80,800 in participant support costs that were re- budgeted without the required prior approval of NSF

28. Contact Information • Derek Brown, Sub-Award & Reporting Administrator, OGRD 335-1672 derekbrown@wsu.edu • Jennifer Reyes, Fiscal Analyst 1, SPS 335-2074 jennifer.reyes@wsu.edu

29. This has been a WSU Training Videoconference If you wish to have your attendance documented in your training history, please notify Human Resource Services within three days of today's date: hrstraining@wsu.edu