Subrecipient Monitoring

1. Subrecipient Monitoring OFFICE OF RESEARCH ADMINISTRATION 2010

2. Definition: Subcontract Subaward Consortium agreement Subrecipient agreement All are treated the same . . . . . . . . . . . . . . . All are initiated by Grant Services . . . . . . .

3. Subaward Versus Vendor Agreement • Subrecipient: • performance is measured against the objectives of the federal program • has responsibility for programmatic decision making • is responsible for adherence to applicable Federal compliance requirements • does not provide goods or services for the program • is usually another higher education institution, hospital, or other non-profit organization

4. Subaward Versus Vendor Agreement cont… • Vendor: • provides goods and services within normal business operations • provides similar goods or services to many different purchasers • operates in a competitive environment • provides goods or services ancillary to the Federal program • is not subject to the compliance requirements of the Federal program • is usually a company or may be an individual

5. Why is the type of agreement important? • Problems with classifying a subaward as a vendor: • Federal compliance requirements do not flow down to vendor • no subcontract monitoring • costs might not be charged in accordance to budget • no restrictions on publicity or media releases • not subject to conflicts of interest or research misconduct policies • potential for audit findings if misclassified

6. Why is the type of agreement important? • Problems with classifying a vendor agreement as a subaward: • procurement standards required by Federal Circular A-110 are bypassed (competitive bid process, cost and price analysis, sole source justifications, etc. • lack of IU Board of Trustee review, etc. for high dollar requisitions) • may impose unnecessary administrative and compliance burdens on the vendor (effort report system, annual audits, etc.) • requires our subrecipient monitoring • limits vendor profits

7. Audits: • Annual A-133 audit of federal and federal pass through accounts • Ad hoc agency audits • IU Internal Audit completed FY08 • IA Key Findings: • additional risk analysis needed • additional training needed

8. How it works: Prime funding agency IUB & regional awards IUPUI awards Subrecipient 1 Subrecipient 2, etc. Subrecipient1 Subrecipient 2, etc. Subrecipient Monitoring

9. Federal Non-Profit Foundations Higher Education State of Indiana Other Governmental Commercial Can be Federal Pass Through Federal funds do not lose their Federal identity when being passed through to a lower tier recipient Types of sponsors:

10. We require from the subcontractor at the proposal stage: WHAT • Institutional letter of support • Work statement • Detailed budget • F&A rate agreement WHY • States where to send agreement for signature • Makes clear for both parties what will be accomplished • For ORA review in line with prime agency regulations • To ensure subcontractor applies correct rate to IU

11. The subcontracting process: Grant Services Reviews subcontractor’s budget for completeness and adherence to agency guidelines. Processes proposal. Grant Services Contract Officer After award received, writes subcontract; obtains all approvals. Project Director Writes proposal ---- subcontract in budget. Fiscal Officer Initiates requisition Procurement Services Initiates purchase order Grant Services Consultant Approves PO, records subcontract in FIS. Research Administration ACE Team Monitors subrecipient institution, reviews risk

12. Monitoring Responsibilities Grant Services Teams Fiscal Officer State Board of Accounts Internal Audit Research Administration ACE Team Project Director

13. Risk Analysis: Risk may be high if: • Lack of good documented internal controls • No previous IU experience with this subcontractor • Lots of findings on previous A-133 reports • Small entity not subject to A-133 • Foreign institution • For-profit with no audited financial report • Subcontract agreement provideing more than 75% of the award to the subcontractor

14. Risk may be moderate if: • Previous A-133 findings related to IU • Subcontract fails to respond to our request for A-133 report certification (ACE Team) • Subcontractor fails to submit timely program/technical reports as requested in the subcontract agreement

15. Risk may be low if: • Another educational institution in the State of Indiana that is audited by the State Board of Accounts (Purdue, Ball State, Indiana State, etc.) • Subcontract dollar amount low – less than $5,000 • The subcontract agreement is with another educational institution having consistently good A-133 reports

16. Things to note: • We do not initiate subcontracts on underwritten accounts • A risk determination can change during the life of a subcontract if: • IU findings are noted on A-133 report • Subcontractor fails to submit progress reports • Subcontractor does not submit final invoices by the required date

17. Research Administration Role: • Collects subcontract info at proposal stage • Award setup, account setup, budget setup • Prepare, negotiate, and sign subcontract • Establish subcontractor risk • Financial reporting • Fiscal compliance monitoring

18. Project Director Role: • One-on-one collaboration with subcontractor PD • Oversee programmatic aspects of subcontract – is work is in line with subcontractor’s proposed work statement and our expectation • Determine if work is proceeding at a reasonable rate • Overall management and responsibility for expenditures • Monitor changes in subcontractor’s key personnel where IU approval is required

19. Fiscal Officer Role: • Initiate requisitions • Review and approve subcontract invoices • Review rate of spending with project director • Ensure that IU account is charged correct indirect cost under object code 4073, 4074,or 4075 • Collect final invoice within 60 days after subcontract end date.

20. How to monitor invoices: PROJECT DIRECTOR • Rate of spending is reasonable given the work completed to date • Costs are reasonable • Subcontractor’s progress reports are submitted on time as outlined in the agreement FISCAL OFFICER • Time Period: Expense incurred within subcontract period • Expense: detailed by budget line • Costs: allowable per prime agency and appear reasonable to the project • Subcontractor’s indirect cost agrees with their F&A rate agreement

21. A word about object codes: • 4073 • 4074 • 4075

22. Resources: • Office of Research Administration web http://researchadmin.iu.edu/index.html • Subrecipient Monitoring Guidance on our web http://researchadmin.iu.edu/GrantContract/gc-ace/ace_sub_monitoring.html • Important Notice 04-1, Subrecipients http://www.ovpra.indiana.edu/cg/imp_notice/04-1.asp • Project Director Reports https://fdrs.fms.indiana.edu/cgi-bin/pdw/Welcome.pl • OMB Circulars http://www.whitehouse.gov/omb/circulars_default/

23. Jan Young ACE Manager (Audit, Compliance, Effort) Office of Research Administration jyoung@indiana.edu 855-5326