Subawards

OMB Circular A-133.210 Subrecipient and Vendor Determinations distinguishes between subrecipients and vendors.

1. Definition of a Subrecipient

A subrecipient serves as a co-investigator, is responsible for the end results of the research effort equally with the principal investigator where federal funds are being passed through to another entity. A Subrecipient:

Has its performance measured against whether the objectives of the Federal program are met;
Determines who is eligible to receive what federal financial assistance;
Has responsibility for programmatic and/or administrative decision making;
Has responsibility for adherence to applicable Federal program compliance requirements; and
Carries out a program of the organization as compared to providing goods or services for a prime recipient

A subrecipient is required to meet various federal regulatory and compliance regulations in accordance with OMB Circular A-133. As recipient, The University Corporation is required to monitor the compliance.

1.2 Definition of a Vendor

A vendor is responsible for providing goods or services necessary to conduct the research effort. A vendor is not responsible for the research results. A vendor:

Provides the goods and services within normal business operations;
Provides similar goods or services to many different purchasers;
Operates in a competitive environment; (i.e. competes with others who can provide a similar service)
Provides goods or services that are ancillary to the operation of the Federal program; and
Is not subject to compliance requirements of the Federal program

A vendor is only required to meet the terms of the procurement contract and the OMB Circular A-110 requirements. Compliance requirements do not pass through to vendors.

1.3 Judgment in Making Determination

There may be unusual circumstances or exceptions to the listed characteristics. In making the determination of whether a subrecipient or vendor relationship exists, the substance of the relationship is more important than the form of the agreement. It is not expected that all of the characteristics will be present and judgment should be used in determining whether an entity is a subrecipient or vendor.

1.4 Importance of Making the Proper Determination

It is important to be aware that it is the nature of the relationship that determines whether or not an entity is a subrecipient or a vendor. The dollar amount of the purchase order or subcontract is not a determining factor. A careful review of the nature of services to be provided and an appropriate determination as part of the proposal budget review process will eliminate such post award problems as:

Obtaining sponsor prior approval for unbudgeted subcontracts;
Delays in processing requisitions for purchased services budgeted as subcontracts;
Meeting audit and compliance requirements with for-profit organizations where a vendor relationship should exist

By making a proper determination in the proposal stage, the appropriate relationship can be established from the start. This is especially true for an unbudgeted subcontract. If the unbudgeted subcontract is of a subrecipient nature, sponsor approval is required prior to entering into a subcontract. If it is a vendor relationship, no sponsor approval is required unless specified in the award terms and conditions. Making the determination is also important to the vendor or subrecipient. Additional auditing requirements and other compliance regulations apply if the subcontractor is a subrecipient. It is best to make the determination at the proposal stage so if a subrecipient relationship exists, that relationship is recognized by the awarding agency and approved in advance. It is unlikely that an unplanned subrecipient relationship would arise in the course of a sponsored research effort. If this occurs, sponsor approval is required.

1.5 For-Profit Subrecipient

Since the requirements for non-profit subrecipients do not apply to for-profit subrecipients, the pass-through entity is responsible for establishing requirements, as necessary, to ensure compliance by for-profit subrecipients. The contract with the for-profit subrecipient should describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for federal awards made to for-profit subrecipients may include pre-award audits, monitoring during the contract, and post-award audits.

1.6 Subrecipients under Federal Contracts (Not Grants)

In order to establish a subrecipient relationship under federal contracts it is important that the contractor not subcontract technical or scientific work without the contracting officer's advance knowledge (Federal Acquisition Regulation-FAR 35.009). During the negotiation of a cost-reimbursement R&D contract, the contracting officer must obtain complete information concerning the contractor's plans for subcontracting any portion of the experimental, research, or development effort." Thus, if a subrecipient relationship is not approved as part of a proposal submitted to the agency, written sponsor approval would be required before any unbudgeted subrecipient subcontract could be established.

As pass-through entity, The University Corporation together with the Principal Investigator is responsible for:

Award Identification

At the time of the award, identifying to the subrecipient the Federal award information (e.g., CFDA title and number, award name, name of Federal agency) and applicable compliance requirements.

During-the-Award Monitoring

Monitoring the subrecipient's use of Federal awards through site visits or other means to provide reasonable assurance that the subrecipient administers Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved.

Subrecipient Audits

Ensuring required audits are completed within nine months of the end of the subrecipient's audit period, issuing a management decision on audit findings within six months after receipt of the subrecipient's audit report, and ensuring that the subrecipient takes timely and appropriate corrective action on all audit findings. In cases of continued inability or unwillingness of a subrecipient to have the required audits, the pass-through entity shall take appropriate action using sanctions.

Pass-Through Entity Impact

Evaluating the impact of subrecipient activities on the pass-through entity's ability to comply with applicable Federal regulations.

Principal Investigators (PIs) have primary responsibility for monitoring subrecipients to ensure compliance with federal regulations and subrecipient award terms and conditions.

3.1 Influencing Factors

Following are examples, which may affect the nature, timing, and extent of during-the-award monitoring:

Program Complexity
Programs with complex compliance requirements have a higher risk of non-compliance.
Percentage Passed Through
The larger the percentage of program awards passed through the greater the need for subrecipient monitoring.
Amount of Awards
Larger dollar awards are of greater risk.
Subrecipient Risk
Subrecipients may be evaluated as higher risk or lower risk, using techniques such as site visits and closer monitoring for new subrecipients and subrecipients that are otherwise considered higher risk (e.g., based on past history of non-compliance, new personnel, new or substantially changed systems).

3.2 Monitoring Activities

Monitoring activities normally occur through-out the year and may take various forms, such as:

Reporting
Reviewing financial and performance reports submitted by the subrecipient.
Site Visits
Performing site visits at the subrecipient to review financial and programmatic records and observe operations.
Contact
Regular contacts with subrecipients and appropriate inquiries concerning program activities.

4.1 Oversight Responsibility

The ultimate oversight responsibility for subrecipients remains with the Principal Investigator. The University Corporation and the Office of Research and Sponsored Projects (OSRP) will assist the Principal Investigator in conducting an effective monitoring process. Under certain circumstances a professional audit firm may be employed to conduct an audit of the subrecipient.

Responsibilities of the Principal Investigator

Principal Investigators are responsible for monitoring periodic progress reports and invoices from the subrecipients for compliance with the terms of the contract. Invoices should be checked to ensure that they are reflective of progress. Non-compliance with technical reporting requirements or dissatisfaction with level of subrecipient progress should be reported immediately to the Office of Research and Sponsored Projects (OSRP).

Responsibilities of The University Corporation-Sponsored Programs

The University Corporation-Sponsored Programs will be responsible for:

Ensuring that a current certification or an A-133 audit report is submitted annually.
Reviewing reports and letters submitted by subrecipients for instances of noncompliance or reported findings to determine whether adjustments are needed to the University's records.

4.2 Determination of Subrecipient

The determination of the potential need for a subaward to a business/organization is normally made at the proposal stage. The Principal Investigator identifies the scope of work to be performed by the potential subawardee and must be prepared to justify the selection. When selecting a potential subawardee, the Principal Investigator should be aware of the 'Codes of Conduct' section (Subpart C.42) of OMB Circular A-110 ("Uniform Administrative Requirements for Grants and Agreements for Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations") which states the following:

"C.42 Codes of conduct. The recipient shall maintain written standards of conduct governing the performance of its employees engaged in the award and administration of contracts. No employee, officer, or agent shall participate in the selection, award, or administration of a contract supported by Federal funds if a real or apparent conflict of interest would be involved. Such a conflict would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in the firm selected for an award. The officers, employees, and agents of the recipient shall neither solicit nor accept gratuities, favors, or anything of monetary value from contractors, or parties to subagreements. However, recipients may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value. The standards of conduct shall provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the recipient."

Note: Principal Investigators must also consider the University's policy on Conflict of Interest as well as that of the granting agency, if applicable.

4.3 Administrative Procedure

After receiving the award, the Office of Research and Sponsored Projects (OSRP) will notify The University Corporation via the Project Data Sheet of a subaward being included in the project The University Corporation-Sponsored Programs (TUC-SP) will enter the subaward and subrecipient information into the A-133 Subrecipient Monitoring Liste. Within a few weeks after the entry into the list, but not later than March 31, of each year, TUC-SP will notify the subrecipient in writing of his responsibilities.

After the end of the fiscal year, The University Corporation-Sponsored Programs (TUC-SP) will request a statement from the subrecipient, regarding the A-133 audit, and if applicable request a copy of the report.

4.4 Review for Higher Risk Cases

The Office of Research and Sponsored Projects (OSRP) and The University Corporation will review all active subcontracts for which monitoring is mandated and ask the Principal Investigator to inquire further into those that are deemed to require closer scrutiny in light of considerations such as:

Size of the subrecipient award. Large awards (for example with annual budgets >$500K) would receive substantial and frequent review and monitoring; mid-sized awards (annual budget $100K - $500K) would receive proportionately less substantial and less frequent monitoring; smaller awards (< $100K) would receive general review with the least frequent oversight
Award size relative to the subrecipient's sponsored research portfolio
Percentage passed through: the larger the percentage of program award passed through, the greater the need for subrecipient monitoring
Award complexity, sensitivity of the work and/or extensiveness of the governing regulations
Prior experience with the subrecipient, e.g. a new subrecipient, an inexperienced subrecipient, a history of non-compliance, having new personnel, or having new or substantially changed systems
Subrecipient location or for-profit status (remoteness from CSUN may mandate more oversight); increased risk associated with some foreign and for-profit subrecipients dictates that they would merit a greater degree of review, evaluation and attention
Degree of external oversight by auditors or sponsoring agencies. Note that The University Corporation is obligated to monitor subrecipients of its federal awards, regardless of the subrecipients being subject to A-133 audits
Sophistication of the subrecipient's systems and administrative operation

In addition to routine monitoring procedures, the Office of Research and Sponsored Projects (OSRP) and The University Corporation will work with Principal Investigators to establish channels of communication with subrecipients that require further scrutiny. Administrators at such subrecipients may be asked to complete questionnaires documenting their internal controls and grants management procedures. In addition, subrecipients that are not subject to A-133 may be asked to submit supporting documentation in the form of original receipts, copies of payroll records, audits, etc. if circumstances warrant.

4.5 Monitoring Procedures

The Principal Investigator may consider the following subrecipient monitoring procedures when appropriate:

Review of Technical Performance Reports
Any unusual or unforeseen items should be investigated and documentation thereof should be retained in the files for ready access. In some cases, subaward terms may require specified deliverables in addition to, or in lieu of, technical reports.

Review of Invoices and Expenses-to-Budget
Evidence of the regular review should be in place and retained on file. "Evidence" can be in the form of a Principal Investigator's initials or authorizing signature on invoices, e-mail communications, and notes of meetings with the department grant administrator, etc.

Clarification of Invoiced Charges
Request explanations of any unusual, miscellaneous, apparently excessive or other charges invoiced by the subrecipient. If the explanations are not sufficient to render judgment on the allowability of the cost, and the terms of the subcontract permit, request detailed justifications from subrecipients. Request, if the terms of the subcontract permit, particularly from high-risk subrecipients, detailed support for selected invoiced charges to verify their appropriateness and reasonableness. Examples of detailed justifications that may be requested from subrecipients include:
- Payroll records/data
- Copies of paid invoices showing the cost of items purchased and Vendor Justification Forms if required by Federal contract
- Descriptions of services rendered by consultants including hourly rates and time reports
- Details of incurred travel charges, stating the purpose, airfare, meals, ground transportation, unallowable costs, etc.
- Costs determined to be unallowable or unreasonable should be disallowed
In circumstances where questionable costs remain unresolved, particularly when subcontract terms do not permit requesting supporting documentation, it may become necessary to conduct a definitive audit of all or a portion of questionable costs.

On-site Visits
On-site visits conducted by the PI to evaluate both compliance with the scientific objectives of the project and the appropriateness of the subrecipient's administrative systems, processes, and charges should be documented via correspondence, meeting notes, trip reports, etc. and retained on file.

Audits
Discretionary audits of subrecipients are an acceptable monitoring procedure under federal regulations, and all of the subrecipient agreements contain "right-to-audit" clauses. Formal audits are performed infrequently, however, and the Principal Investigator should contact the Office of Research and Sponsored Projects (OSRP) and The University Corporation.

Review A-133 audit reports online
Review A-133 reports filed by subrecipients that expend $500,000 or more of federal funds during the fiscal year and are subject to A-133. View the subrecipient's A-133 report in the Federal Audit Clearinghouse (FAC) database (http://harvester.census.gov/sac). This web site provides evidence to verify that the subrecipient has completed an A-133 audit and to assess the presence of audit findings. This FAC verification would be done in lieu of reviewing A-133 reports submitted by the subrecipient. In cases of continued inability or unwillingness of a subrecipient to have the required audits, the Office of Research and Sponsored Projects (OSRP) and The University Corporation may consider taking appropriate sanctions.

When subrecipients have A-133 audit findings
Consider issuing a management decision on audit findings, when appropriate, and evaluate subrecipient corrective actions cited in response to audit findings. Corrective actions cited by the subrecipient should be verified to ensure subrecipient compliance and may necessitate on-site monitoring. This may also consider whether subrecipient audit findings necessitate adjustment of our own records.

Subrecipients not subject to A-133, including foreign and for-profit entities
Because A-133 does not apply to foreign or for-profit subrecipients, The University Corporation may establish its own requirements, as necessary, to ensure compliance by such subrecipients. The Office of Sponsored Programs should consider using subrecipient monitoring techniques similar to those used for entities that are subject to A-133. Contracts with foreign or for-profit subrecipients should describe applicable compliance requirements and responsibilities. Methods to assess compliance with federal subawards made to foreign or for-profit subrecipients may include pre-award audits, and on-site visits.

General Information

Office of Research and Sponsored Projects (ORSP)
Scott Pérez
Director
(818) 677-2901
scott.perez@csun.edu
Mail Stop: 8232

General Information - A-133 Audit Report Compliance

The University Corporation, Sponsored Programs (TUC-SP)
Georg Jahn
Director, Sponsored Programs
(818) 677-2698
gjahn@csun.edu
Mail Stop: 8309

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Sub-Recipient Monitoring

1.1 Subrecipients/Vendor Determination