Grant Management & Financial Oversight
Subrecipient Monitoring: Keys to Successful Subrecipient Relationships
Navigating the complex dynamics of a subrecipient collaboration between institutions can be a daunting task. From initial proposal to closeout, effective oversight of internal controls, good time management, and clear communication all help lead to successful outcomes.
A subrecipient is a legal entity that receives a subaward in which your organization serves as the prime recipient (pass through entity) of a grant. The subrecipient is responsible for carrying out a portion of the programmatic effort of the proposed project.
In the proposal phase, it’s imperative to determine if the entity is a subcontractor (subaward, subrecipient) or is this a contractor. This will determine how the proposal, and subsequent award, is monitored and managed.
Let’s define the criteria for a subrecipient:
- Determines who is eligible to receive federal assistance
- Has its performance measured in relation to whether objectives of a federal program have been met
- Responsibility for programmatic decision making
- Responsible for adherence to applicable federal program requirements specified in the federal award
- In accordance with its agreement, uses the federal funds to carry out a program for a public purpose specified in authorizing statute
Now, let’s look at the criteria for a contractor:
- Provides goods and services within normal business operations
- Provides similar goods or services to many different purchasers
- Normally operates in a competitive environment
- Provides goods or services that are ancillary to the operation of the Federal program
- Is not subject to compliance requirements of the Federal program because of the agreement, though similar requirements may apply for other reasons
Many organizations use checklists that pre-award specialists complete to help determine whether an external entity should be classified as a subrecipient or contractor. These checklists are often included as part of the subaward documentation within the proposal package.
Once we’ve confirmed that the entity is a subrecipient, let’s focus on next steps in establishing the consortium. The collaborating institution will need to provide a subaward proposal package to the lead institution during proposal development and submission. The following documents are typically required: Scope of Work: This is supplied so that your PI can confirm the subaward will meet the goals and objectives of the overall project, and for the sponsor to be aware of the subaward’s contributions to science.
Budget: Unless there is a cap from the sponsor, the subrecipient institution should use their federally negotiated rate or the de minimis rate (15%) if they do not have a negotiated rate.
Their allowable expenses fall in line with any other federal project: Personnel, Supplies, Travel, Other Expenses, etc.
Once the proposal is awarded, it is time to execute an agreement with the subrecipient. You will want to touch base with your counterpart at the cooperating institution again for updated contact information.
Review awarded budget with your PI to determine if any adjustments have been made to the overall budget. Do you need to request an updated budget from the subrecipient?
Ensure with your PI that the scope of work remains the same (especially if the budget has been adjusted). Substantial changes to the aims will require sponsor approval.
Another area to review is risk assessment of the subrecipient. This is typically done by a centralized sponsored research office. An institutional form may be sent with the subaward package, listing a set of questions concerning previous audits, etc., and may also require a copy of their most recent single audit. This copy can also be obtained from the FDP Clearinghouse.
It is vital that internal controls for subrecipient monitoring be established and maintained during the life of the award and collaboration. The passthrough entity (PTE) is responsible for monitoring the programmatic and financial activities of its subrecipients to ensure proper stewardship of sponsor funds.
The purpose of subrecipient monitoring is to confirm that your subrecipient is complying with all laws, regulations, and provisions of grant agreements, and that performance goals are obtained. The subrecipient is accountable to the PTE for the use of the federal funds provided pursuant to this subaward. In order to comply with OMB Uniform Guidance to ensure accountability for the use of federal funds, PTE reserves the right to request full documentation for all invoices. Full expense documentation includes, but is not limited to, general ledger(s), receipts, vendor invoices, prior approval documentation, time & effort reporting certifications, time sheets, travel documentation, equipment bids, etc. Recent changes have occurred with the issuance of federal funded subawards to foreign entities. Be sure to review all relevant federal guidance, terms, and conditions.
The department/PI is usually responsible for the following:
- Obtaining prior approvals for any re-budgeting required.
- Confirming subrecipient is submitting invoices on time.
- Ensuring invoices are submitted in accordance with subaward requirements
- Ensuring that duplicate costs or invoices have not been submitted. Revised invoices can be submitted if any of these have been found.
- Ensuring invoices only contain expenses that are allowable, allocable, and reasonable.
- Verifying that costs are incurred within the period of performance.
- If applicable, verifying cost sharing is appropriately reflected and documented.
- Collecting technical progress reports.
- Maintaining regular contact with the subrecipient and checking in regularly with the PI that this is being done.
The department (PI, grants manager, business manager) should review and approve invoices. Remember, the PI is reviewing from the scientific standpoint. The grants manager and/or business manager is reviewing from the budget perspective. The invoice, once approved, is forwarded to the sponsored projects office for final approval. The sponsored projects office usually forwards to accounts receivable to be paid.
The central office is usually responsible for the following:
- Account setup
- Federal Funding Accountability & Transparency Act (FFATA) Reporting: How the government reviews for waste, fraud, and abuse (https://sam.gov/fsrs).
There are a few potential issues to safeguard against. If there will be a change in PI at the subaward institution, it must be provided in writing to the institution, and an amendment to the subaward will need to be made. This also usually requires a prior approval from the sponsor as the PI at the subaward institution is usually senior/key personnel.
As typically stated in the agreement, either party has the right to terminate, in whole or in part. The institution agrees to compensate the subrecipient for any work completed prior to the termination.
For-profit foreign entities are accountable to the PTE for use of the federal funds. These entities are not required to submit audits under Uniform Guidance, but the institution requires the right to request backup documentation for any invoice (Subpart F-Audit Requirements).
Any of these issues could be subject to an internal audit of the subaward. Per the agreement, the institutional auditors, or those designated by the institution, shall have the option of auditing all accounts pertaining to the agreement. If this occurs, the subrecipient must make these records available for audit during normal business hours.
These items will be included:
- Ensure that subrecipients expending $1,000,000 or more in federal awards during the subrecipient’s fiscal year have met the audit requirements.
- Issue a management decision on audit findings within six months after the receipt of the subrecipient’s audit report.
- Ensure that the subrecipients take timely and appropriate corrective action on all audit findings.
- If a subrecipient is not willing or is unable to have the required audits, then the institution will take appropriate actions using sanctions.
The sponsored projects office is responsible for following up on audit findings. This could include requiring the subrecipient to provide responses to the audit findings and a timely corrective action plan.
When an invoice has questionable expenses, sponsored projects may request the ledger of the subrecipient and other supporting documents before applying the invoice.
In conclusion, as with the management of any sponsored funding, internal controls, time management, and proper communication are the key ingredients to a successful collaboration with a subaward recipient. Each partner in the consortium, internal and external to both institutions, plays a role in maintaining a solid, compliant relationship.
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