Subrecipient Monitoring

1. Subrecipient Monitoring CCIA Spring Conference Sheena Tran, Rancho Santiago CCD Tania Walden, Los Rios CCD Tracy Young, Coast CCD May 2013

2. Agenda • Defining Subrecipients • Regulatory Requirements • Monitoring • Importance of Relationships • Proposed Grant Reform

4. Is every entity a subrecipient? No. There is a difference.

5. What is a Subrecipient? • “Entity that expends…awards received from a pass-through entity to carry out a … program…A subrecipient relationship exists when funding from a pass through entity is provided to perform a portion of the scope of work or objectives of the pass through entity’s award agreement with the….awarding agency.” --OMB A-133 §___.105

6. What is a Vendor? • “A dealer, distributor, merchant or other seller providing goods or services that are required for the conducts of a…program…for example, supplies, expendable materials, or data processing services in support of the project activities.” --OMB A-133 §___.105

7. What’s the Difference? • Most important factor: substance rather than form • The same organization may have different relationships with the pass through entity based upon the grant and/or contract terms • An organization can be a recipient, subrecipient and a vendor in three different grant programs

8. What’s the Difference? cont The key difference between a subrecipient and a vendor is that subrecipient activities directly executethe mission, whereas vendors provide products or services that indirectly support the mission.

9. Determine Relationship ASAP • Identify subrecipient relationships early. • Early determination is important in the selection of the subrecipient, and whether the resulting agreement includes appropriate terms and conditions that comply with program requirement • Responsibilities affect level of oversight required and impact a program’s integrity and overall success.

10. Subrecipient/Vendor Checklist Handout

11. Subrecipient Contracts • Include clauses permitting the district and the funding agency the right to: • Perform subrecipient reviews • Request financial statements, and • Review the subrecipient agency’s records related to the grant.

12. So Why Do We Monitor Subrecipients? • To ensure compliance with requirements described in OMB A-133 • To verify good business practices are in place to ensure the authorized agency disburses federal funds in accordance with grant requirements.

13. Purpose of Review (from OMB A-133) • Federal award information and compliance requirements identified to subrecipients • Subrecipient activities are monitored. • Subrecipient audit findings are resolved. • The impact of subrecipient non-compliance is assessed. • The subrecipient obtained the required audits and took appropriate corrective action on audit findings.

14. Best Practices • Develop a monitoring plan • Written procedures defining scope and frequency • Include corrective action follow up • Create a monitoring schedule • Develop/implement a monitoring checklist • Assess risk – i.e., determine factors for frequency and method of monitoring

15. Risk Assessment • Identify appropriate risk indicators, assign a value or weight • Evaluate and rank subrecipients and programs based on relative risk • Identify available monitoring resources and staff – weigh against needs • Adjust monitoring plan, including monitoring activities and schedule based on risk and resource assessments.

16. Risk Indicators • Size of sub federal award portfolio • Prior findings: A-133, federal program monitoring, grantee monitoring • Program performance • Change in program scope or activities • Financial stability • Complaints

17. Risk Assessment • Evaluate subrecipients and programs against risk indicators • Rank subrecipients and programs by risk • Use data analysis and automation to make process more efficient (large number of subs) • Perform analysis regularly to account for changes in risk.

18. Resource Assessment • Determine amount and types of resources needed to monitor subs and programs • Identify available resources – assign responsibility • Address resource limitations

19. Monitoring Plan • Reconcile between need and availability of resources • Adjust monitoring schedule based on risks and available resources • Schedule technical assistance based on identified risks.

20. Risk Indicators • Program risk • Complexity • Percentage of program awards passed through recipient. • Dollar amount of award • Subrecipient Risk • Dollar amount of award • New recipients • History of non-compliance • New personnel • New or substantially changed systems

21. Skit #1

22. Subrecipient Monitoring • Audited financial statements • Current organization chart – names and positions • Completed Subrecipient Questionnaire (handout) • Supporting documentation for Questionnaire • Signed Management Certification • Site visit (as needed)

23. Subrecipient Monitoring cont • Based upon results of the documentation received and the risk assessment, additional work may be required, including but not limited to: • Interviews with key personnel • Follow up on audit findings • Testing of grant related transactions • Assessing compliance with grant and/or contract

24. Penalties/Sanctions • If a subrecipient fails to submit requested information, funding may be withheld until information is received. • Suggest including this verbiage in contract with subrecipient.

25. SKIT #2

26. Relationships • Internal Auditor Communication and Relationships – handout • What to do with an non-responsive sub • Site visits – building the relationships • Obstacles to compliance • Delays • No response • Finding the right contact person

27. SKIT 3

28. Proposed Grant Reform • Section 501 Subrecipient Monitoring and Management is created to co-locate guidance on oversight of subawards that previously was located in different places in different OMB Circulars. • To provide greater clarity into the expectations for subaward oversight across the Federal government. • Section 502 Standards for Financial and Program Management and other minor language throughout the guidance is updated to align the objectives for performance monitoring and measurement with those described for Federal agencies in OMB Circular A-11.

29. Proposed Grant Reform - cont • Section .501 Subrecipient Monitoring and Management explicitly requires pass-through entities to either honor the indirect cost rates negotiated at the Federal level, negotiate a rate in accordance with Federal guidelines, or provide the minimum flat rate. Aimed at ensuring that entities who receive Federal funds primarily indirectly nevertheless are appropriately reimbursed for the allowable costs associated with the award. • Address questions about the required level of subrecipient oversight, OMB has consolidated and clarified relevant guidance on subrecipient monitoring requirements in section .501 Subrecipient Monitoring and Management.

30. Proposed Grant Reform - cont • Subrecipient Monitoring—The pass-through entity • (1) Made sub-awards only to eligible entities, • (2) identified awards, compliance requirements, and payments to the subrecipient prior to disbursement, • (3) monitored subrecipient activities to ensure subrecipient compliance, and • (4) performed the audit resolution function (e.g., ensured proper audit submitted on time, followed up on audit findings, including issuance of a management decision, and ensuring that subrecipients took timely and appropriate corrective action). • https://www.federalregister.gov/articles/2013/02/01/2013-02113/reform-of-federal-policies-relating-to-grants-and-cooperative-agreements-cost-principles-and#h-43

31. Questions? • Sheena Tran, CPA - Rancho Santiago CCD • (714) 480-7588 • tran_sheena@rsccd.edu • Tania Walden, CIA, CBA, MBA - Los Rios CCD • (916) 568-3083 • waldent@losrios.edu • Tracy Young, Coast CCD • (714) 438-4604 • tyoung@mail.cccd.edu