Sub-Award Risk Management: Pre-&-Post Award

Sub-Award Risk Management: Pre-&-Post Award Georgia State University 14 November, 2011 Robert G. Bingham-Roy Director of Operations Board of Regents Sponsored Programs

Workshop goals • Look at familiar grants management components with an eye toward risk assessment and management • Look at opportunities where research administrators can control risk • Discuss some specific monitoring tools

Key Terms (A-110) • Award • Recipient • Subaward • Subrecipient • Vendor

What is an Award • Award means financial assistance that provides support or stimulation to accomplish a public purpose • Awards do not include “technical assistance, which provides services instead of money; other assistance in the form of loans, loan guarantees, Interest subsidies or insurance; direct payment of any kind to individuals; and; contracts which are required to be entered into and administered under procurement laws and regulations • (2CFR 215.2(e))

Who is a Recipient? • an organization receiving financial assistance directly from federal awarding agencies to carry out a project or program • (2CFR 215.2(cc)) • The recipient takes on the role of the federal government and responsibility for monitoring • Technical • Financial • Compliance

What is a Subaward? • “Subaward means 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.” • (2CFR 215.2(ff))

Who is a Subrecipient • A Subrecipient is a legal entity to which a sub award is made and which is accountable to the recipient for the use of funds provided. • (2CFR 215.2(gg))

A Rose is a Rose • Awardee: • Also called: • Recipient or prime recipient • Lead institution • University • Grantee or prime grantee • Pass-through entity • Subawardee: • Also called: • Subrecipient • Collaboration institution • Collaborator • Subgrantee • Subcontractor • Sponsored research administration 3705.:4

Who is 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 • Provides goods or services that are ancillary to the operation of the federal program • Is not subject to compliance requirements of the federal program

Subrecipients vs. Vendors • OMB A-133 B.210 Federal award. Characteristics indicative of a Federal award received by a subrecipient are when the organization: Has its performance measured against whether the objectives of the Federal program are met; Payment for goods and services. Characteristics indicative of a payment for goods and services received by a vendor are when the organization: • Provides the goods and services within normal business operations; • Provides similar goods or services to many different purchasers; Design and Develop (Sub) vs. Configure (Vendor) • http://www.whitehouse.gov/omb/circulars/a133/a133.html#b

Subrecipients vs. Vendors • Vendors are Not Subrecipients: and therefore do not include the purchase of goods and services • Entities with in the Univ. System of GA can be an exception to this rule - an entities mission from a tax perspective Design and Develop (Sub) vs. Configure (Vendor)

Roles, Responsibilities & Risk • Office of Sponsored Programs (OSP):ensuring that the Institute’s subrecipient monitoring procedures are compliant with regulations. • Unit Financial Officers (Departmental/College Administrators):assist PI’s in carrying out their responsibilities. • Principal Investigators (PI): is ultimately responsible Regulations Documentation Verification

Project Viewpoint • Roles and Responsibilities: • PI has primary responsibility for monitoring subrecipients • Compliance with fed regulations • Award terms and conditions • Departmental administrators have responsibility for assisting the PI in carrying out their monitoring responsibilities • Reviewing invoices, questioning expenditures, documenting monitoring efforts, OMB – A21

Process Flow Pre-award Post Award Identify need for Sub-award Accept & IncorporateInto Proposal Find New Sub-award No PD/PI Initiate Sub-award Communicate with PI & support staff to address issues Addressed? Review Proposal Formal Request Yes No No Yes Approve Review and Affirm Compliance OSP Submit FormalRequest Submit ProposalApp. Sub-award Executed Yes Sub Review Terms Accept or Negotiate Terms Review Request Prepare & SendProposal

Project Viewpoint Sub-recipient monitoring begins at proposal development • An understanding of the capabilities of your sub-awardee can and should drive your budget development and monitoring plan • Know your sub-awardee • Assess the awardee • Review what can be monitored • Tailor the agreement

Proposal Preparation & Submission • There is the ideal world and then there’s the real world • Ideal world-the researcher contacts admin prior to writing or during the drafting of proposal and discusses all the potential issues for a sub-award in a timely manner • Real World-proposal is written and submitted less than 6 days before it is due and create/validate the budget as well as enter all the proposal information into the correct forms. (on grants.gov!) • Working toward changing behaviors • Progress toward the ideal • Understanding Roles and Responsibilities and Risky Business (Behaviors)

High Risk Behaviors • A-110 considers the following high risk behaviors of potential sub-recipients: • A history of unsatisfactory performance • Financial instability • Inadequate management systems • Failure to comply with terms and conditions of previous sub-awards • Is not otherwise responsible Ways of checking this information: • requesting a Dun and Bradstreet report; • reviewing the A-133 Single Audit; and • Government Debarment website - www.epls.gov/

Risk Factors • Size of the sub-award • Percentage of pass-through • Complexity of sub-award • Sub-recipient’s experience • Administering • Deliverables • Prior monitoring and audit results • Single year vs. multiyear sub-award • Type of entity • OMB-A-133 or not • Non-profit/Profit • Domestic/Foreign

Project Viewpoint • Know your sub-awardee • Assess the level of expertise (Institution/College/Department) • New personnel • New or substantially changed systems • Review the latest A133 audit • Assess the SOP for Documentation • IRB • IACUC • Effort reporting – overload payments • Committed Cost Share • F&A (not everyone uses MTDC) • Assess your risk

Project Viewpoint • Set your expectations and reporting requirements • Delineate your deliverables – put them in the sub-award contract

Subaward Agreements • Scope of Work and Budget • Program Authorizing Statute* • Program Regulations* • Public Policy Requirements* • Administrative Requirements* • *as described in the solicitation/RFP/BAA/etc.

Preparing a Statement of Work: SOW • The Statement of Work is a document that: • lists and describes all essential and technical requirements for the effort to be performed • including standards to be used to determine whether the requirements have been met. • Set your expectation and reporting requirements early, put them in the sub-award

SOW should include: • Objective or Purpose • Period of Performance • Milestones • A list of detailed work requirements • Workload requirements • Personnel requirements • Resources (if any) to be furnished to the subcontractor

Budget • The budget identifies various costs associated with meeting the goals and objectives • Salaries • Fringe Benefits • Materials Supplies • The budget allows the pass-through entity to bench mark performance and identify any unanticipated spending patterns

Program Authorizing Statute • Program’s purpose • Objectives • Eligibility requirements • Matching requirements • Other requirements important to the administration of the project

Program Regulations • Flow down from the original grant • Eligibility requirements • Allowable program activities • Treatment of program income • Extensive and usually incorporated by reference, Example: • Title 24 of the Code of Federal Regulations Part 570 (HUD)

Process Flow Pre-award Post Award Identify need for Sub-award Accept & IncorporateInto Proposal Find New Sub-award No PD/PI Initiate Sub-award Communicate with PI & support staff to address issues Addressed? Review Proposal Formal Request Yes No No Yes Approve Review and Affirm Compliance OSP Submit FormalRequest Submit ProposalApp. Sub-award Executed Yes Sub Review Terms Accept or Negotiate Terms Review Request Prepare & SendProposal

Subrecipient Monitoring • “…the nonprofit subrecipient must comply with the requirements of the sub-award agreement that include many (if not all) of the terms of the federal agency/university agreement as well as any other conditions imposed by the university” • “…it is ultimately the primary grantee’s responsibility to ensure that federal funds are spent according to the prescribed federal requirements, including and subgranted funds.” Thompson, page 3, 2nd Edition

Pass Through Entity Responsibilities • Identify and provide information about federal awards (e.g., CFDA information) to subrecipients • Inform subrecipients about compliance requirements • Monitor subrecipients activities • Ensure subrecipients have single audits, if required • Provide technical advice and training, if necessary and feasible • Thompson 2nd Edition p.10

Pass Through Entity Responsibilities • Issue management decision within six months on Subrecipient single audit findings and ensure subrecipients take corrective action • Consider whether pass-through entity records must be adjusted as a result of subrecipient’s audits • Require subrecipients to permit the pass-through entity and its auditors access to their records for monitoring and audit purposes • Thompson 2nd Edition p.10

Sub’s Responsibilities • Administer the grant from award to closeout • Develop internal policies and systems to ensure effective management of federal funds and compliance with public requirements • Ensure the organization has a financial management system and other systems that are appropriate such as procurement and property management systems

Sub’s Responsibilities Cont’d • Establish a budget of the cost required to perform the program and a method for monitoring actual cost against the budget • Keep abreast of changes in policies, procedures or requirements and advise staff of any changes • Require prior approval when necessary • Make the most of site visits by the pass-through entity by showing organization al strengths and successes

Sub’s Responsibilities Cont’d • Prepare necessary reports • Keep the pass-through entity aware and informed about sub-award project progress

Keeping Risk In Mind… • What is your purpose of sub-recipient monitoring? • Compliance • Need for technical assistance • Follow-up • What is the associated risk of noncompliance • $50,000 vs. $5,000,000 • Experience of your sub-recipient

Project Viewpoint • Document a relationship between programmatic progress and financial expenditures • Document IRB oversight and that it remains current • Request supporting documentation for each invoice

Reports and Invoices • Reviewing sub-recipient reports and billings, and following-up on areas of concern • Does the billing/invoices amount accurately represent the amount of scientific data or progress by the sub? • Is there sufficient supporting documentation to determine if the expense on the invoice are allowable? (Think 3 years down the road)

Sub Invoice Payment Authorization Process Flow Generates Invoice Process Complete Payment Received Back to Sub for more detail Sub “Firsthand Knowledge” PD/PI No PI reviews Approve receives invoice Yes Dept.Admin Routes invoice for payment Add Meta Data Update A/P Check Issued Receive Invoice Code Invoice & post OSP Coding and scanning includes adding meta tags such as; PI, Fund #, and Amount

Project Viewpoint • Recommend quarterly reports with business official signature • Makes sure everybody is watching • Triggers and focuses review in manageable bites • Reconciles invoices / payments / receipt of payment • Include progress on cost share

Project Audits • Single Audits (A-133 $500K+) • Limited-Scope Audits* • Desk Audits • Onsite Audits • Third Party Evaluation • Paid consultants (fiscal, property, procurement) • Beneficiaries of the sub’s services • Community organizations where sub provides its services * Cost of limited–scope audits is allowable only if the sub has not had a single audit

Single Audit • Subrecipients that expend at least $500,000 a year in federal funds must have a Circular A-133 single audit • The Primary must ensure that such subs have their audits performed (delay of 9 months post fiscal year close ) • If expenditures are < $500,000 the costs of single or financial statement audits are unallowable

Subaward Closeout • Mirror the process that is used by the federal agency • Submit • Final financial statement (Cost Share) • Technical reports, • invention reports • Property reports • As per terms and conditions • The institution is responsible for sending in all the subaward closeout information

Recent Audit Findings • Department of Health and Human Services • Office of Inspector General -- AUDIT • "Review of Subaward Costs Claimed Under University Of Massachusetts Medical School Prime NIH Grant Number 5 P01 HL56920-05 From February 1, 2001, Through August 31, 2002," (A-01-06-01501) • August 7, 2006 • Complete Text of Report is available in PDF format (491 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343. • EXECUTIVE SUMMARY: • Our objective was to determine whether the University of Massachusetts Medical School (UMMS) claimed allowable subrecipient costs for Yale University and Roger Williams Hospital in compliance with applicable Federal requirements. UMMS overstated its claim by $249,525, or about 33 percent of the total that it claimed for subrecipient costs. UMMS submitted overstated costs because the subrecipients did not follow established procedures or did not have adequate procedures for claiming costs and UMMS did not have adequate written procedures for monitoring subrecipients. We recommended that UMMS make a financial adjustment to NIH totaling $249,525 for costs that the subrecipients overstated and establish detailed written subrecipient monitoring procedures to ensure that subrecipients claim costs in compliance with applicable Federal requirements. UMMS agreed with our recommendations and said that it was taking appropriate corrective action.

Recent Audit findings • Department of Health and Human Services • Office of Inspector General -- AUDIT • "Review of Subaward Costs Claimed by Yale University on NIH Grant Number 5 P01 HL56920-05 From February 1, 2001, Through August 31, 2002," (A-01-05-01501) • February 3, 2006 • Complete Text of Report is available in PDF format (1.19 mb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343. • EXECUTIVE SUMMARY: • Our objective was to determine whether subaward costs claimed by Yale University (the University) under a University of Massachusetts Medical School (UMMS) grant from the National Institutes of Health (NIH) were in accordance with the terms of the subaward and applicable Federal regulations. The University claimed $193,779 in costs that did not comply with OMB Circulars A-21 and subaward terms. In addition, the Principal Investigator failed to provide the 25 percent level of effort proposed in the University’s subaward application. We recommended that the University (1) verify that cost transfers are adequately explained and documented, (2) improve procedures for direct charging of costs and comply with procedures for confirming effort reports, and (3) ensure that levels of efforts are satisfied. Because the University received its funds through a subaward from UMMS rather than directly from NIH, we will recommend under separate cover that UMMS reimburse NIH for remaining unallowable subaward costs totaling $193,779. The University acknowledges the $78,965 in disallowances and disagreed with the remaining $114,814.

Audit • Yale pays $7.6 Million to resolve allegations that it violated the False Claims Act in management of federal funded grants Jan 2000 Dec 2006 • “The investigation at Yale may have started with a simple DHHS audit of subrecipients in 2005” • Federal Grants News – April 2009

Overview & Closing Initiation Planning & Submission Closing/Transition Execution Monitor • SOW • Requirements • Milestones • Deploy Iterative: test & evaluation All RISK Assessment & Mitigation PD/PI Proposal Development & SOW Eligible Sub-recipient or vendors Reviewing Invoice Approve Deliverables Final Report & Deliverables Dept Proposal Routing Sheet Set up infrastructure for project and monitoring Maintain Scanned Invoices & documentation – sending to A/P Archivedocumentation for Audit OSP Verify Institutional Requirements Submit Proposal Debarred & Suspension Check Maintain Scanned InvoicesCompliance RequirementsAudit Letters CloseoutProcedures

Conclusion • Risk management begins at proposal development • All steps of the sub-award award process are controls and benchmarks for risk assessment and monitoring • The extent and cost of monitoring should be proportional to the risk level.

Project Viewpoint • And finally: • Document!

References: • Techniques for Monitoring Federal Sub-awards, 2nd edition – Thompson Publishing Group • Harvard University • NCURA Sponsored Research Administration Chapter 3700 • Ga Tech • P. Webb, and M. Pane NCURA PRA III 12 August ‘08

Discussion • How does the relationship between the sponsor and the awardee differ from the relationship between an awardee and a subawardee? • What does it mean to monitor a sub “before, during and after” an award? • Recently, audits have been targeting subs for audits. What kinds of things are they reviewing and what are they finding? Any Lessons to be learned?

Sub-Award Risk Management: Pre-&-Post Award