Subrecipient Monitoring: What s Required

1. Subrecipient Monitoring: What�s Required?

2. Agenda Summary of Monitoring Requirements & Obligations Monitoring Obligations at Time of Proposal Monitoring Obligations Prior to and at Issuance A-133 Audit Review Exercise Risk Assessment Exercise Monitoring Obligations During the Life of the Subaward

3. Monitoring Obligations Imposes monitoring responsibilities on: Your institution (Pass Through Entity) The Subrecipient The lack of appropriate monitoring of federal funds and their proper use could result in substantial risk to Stanford. The Pass-Through Entity (SU) is responsible for oversight of the subrecipient and is accountable for the overall conduct of the work and cost regardless of lower-tier assignment(s). Check RPH 3.7, Subcontracts http://www.stanford.edu/dept/DoR/rph/3-7.html The lack of appropriate monitoring of federal funds and their proper use could result in substantial risk to Stanford. The Pass-Through Entity (SU) is responsible for oversight of the subrecipient and is accountable for the overall conduct of the work and cost regardless of lower-tier assignment(s). Check RPH 3.7, Subcontracts http://www.stanford.edu/dept/DoR/rph/3-7.html

5. Audit Objectives under A-133Pass-through entity is tested for.. Test for internal controls Effectiveness, reliability and compliance Review of monitoring policies and procedures Scope, frequency, and timeliness of monitoring activities Test award documents Properly identified information and flow-downs Approved only allowable activities Test for monitoring activities Test for subrecipient audit documents Complete & up-to-date Management decision issued on audit reports Follow-up on any corrective action

6. Finding Copies of Audit Reports Federal Audit Clearinghouse for A-133 (aka Harvester) http://harvester.census.gov/sac/ Non-A133 entities Audit questionnaire or agreed-upon procedure engagement For-profit entities DCAA-cognizant or ONR Resident Representative can review for you

7. Monitoring at Proposal

8. Risk Decisions at Proposal Ensure proper classification (subaward or vendor transaction) Decide if agreed-upon procedure or other audit/site visit costs must be included in the proposal Obtain subrecipient institutionally-endorsed Statement of Work and Budget? Check financial viability of the proposed subrecipient? How difficulty will it be to obtain a different subrecipient? Who prepared the budget? (your PI or subrecipient PI?) Who will pay if costs are higher than proposed? If FB or F&A rates are wrong? How critical is the sub to the conduct of the project? Alternatives: List subrecipient as TBN with estimated cost and work statement How difficulty will it be to obtain a different subrecipient? Who prepared the budget? (your PI or subrecipient PI?) Who will pay if costs are higher than proposed? If FB or F&A rates are wrong? How critical is the sub to the conduct of the project? Alternatives: List subrecipient as TBN with estimated cost and work statement

9. Monitoring Prior to Issuance

10. Before Authorizing Work to Begin: Determine financial adequacy of the subrecipient Acceptable A-133 or DCAA audit or financial questionnaire Obtain satisfactory evidence of F&A rates/FB rates Conduct and document formal or informal cost & pricing analysis and certificate if needed Verify Subrecipient is not debarred or suspended Verify all necessary approvals have been received Agency prior approval normally needed for contracts Some agencies require prior review of text Ensure all compliance approvals have been obtained Make high-risk/low-risk determination Dun and Bradstreet check? Dun and Bradstreet check?

12. Subs with audit findings Subrecipient is U.S. university, but has audit findings, Interpreting OMB Circular A-133, sections ___.400(d)(5) and ___.405 http://www.whitehouse.gov/omb/circulars/a133/a133.pdf Do findings �relate to� your Institution�s subaward to the Subrecipient, or to the same CFDA number? Do findings �relate to� the Research and Development Cluster of funding? Variation in Institutional sensitivities, policies. Write management decision letter

13. A-133 Audit Review Exercise

14. Debarred/Suspended CFR Part 29, Section 97.35 Grantees and subgrantees must not make any award or permit any award (subgrant or contract) at any tier to any party which is debarred or suspended or is otherwise excluded from or ineligible for participation in Federal assistance programs under Executive Order 12549, ``Debarment and Suspension.'' Search excluded parties list at: http://www.epls.gov/

15. Potential Indicators of High-Risk Factors that may affect the extent of monitoring required: Significant audit findings relative to research and development, or failure to have a current audit report History of non-compliance History of non-performance or failure to use funds for their authorized purposes New subrecipient (or new to this type of project) New personnel or systems Large subaward/large percentage pass-through Award size relative to subrecipient�s sponsored research portfolio Criticality to overall success of pass-through entity�s project Program complexity Type of subrecipient (is the subrecipient already subject to A-133?) (financial, delivery of satisfactory reports or deliverables, compliance with terms and conditions, human and animal subjects, etc.)(financial, delivery of satisfactory reports or deliverables, compliance with terms and conditions, human and animal subjects, etc.)

16. Risk Assessment Exercise Evaluate each case study and complete a risk analysis matrix for each one to determine if the subrecipient might be considered low, medium or high risk. Are there any special considerations needed? What controls might you put in place? Using the case studies below, answer the questions above. Case Study #1 Professor Elm is submitting a proposal to the National Institutes of Health for a large project studying AIDS. He would like UCSF to participate in the study specializing in the area of pediatric AIDS. Case Study #2 A PI Tells you that she is preparing a proposal and one of the things she needs can be done by a survey center that does this kind of work for PIs all over the country. The survey center will gather data from 1,000 respondents using telephone surveys developed by your PI. The center will collate the data in an electronic database and deliver it for analysis to your PI. The cost is $30 per respondent or $30,000. Case Study #3 Professor Maple is working with the Office of Naval Research (ONR) to develop a new generation of smart robots. He will be submitting a research proposal and would like a company (SmartRobot, Inc.) to actually build the robot from his specifications. The robot will be then given to ONR as a deliverable on the contract. Using the case studies below, answer the questions above. Case Study #1 Professor Elm is submitting a proposal to the National Institutes of Health for a large project studying AIDS. He would like UCSF to participate in the study specializing in the area of pediatric AIDS. Case Study #2 A PI Tells you that she is preparing a proposal and one of the things she needs can be done by a survey center that does this kind of work for PIs all over the country. The survey center will gather data from 1,000 respondents using telephone surveys developed by your PI. The center will collate the data in an electronic database and deliver it for analysis to your PI. The cost is $30 per respondent or $30,000. Case Study #3 Professor Maple is working with the Office of Naval Research (ONR) to develop a new generation of smart robots. He will be submitting a research proposal and would like a company (SmartRobot, Inc.) to actually build the robot from his specifications. The robot will be then given to ONR as a deliverable on the contract.

17. Potential Responses to High Risk Subrecipients Corrective Action Plan Smaller increments of time/money Discuss need for special monitoring with PI/dept. Ask for extra contact between PI and Sub�s PI Ask for more frequent technical reporting Add more detailed or frequent invoicing requirements Add requirement for expenditure backup materials Tie receipt of technical progress reports or other deliverables to payments Require on-site monitoring (technical and financial) Add more stringent termination or stop-work language for failure to comply with requirements

18. Choose the Right Instrument

19. Fixed Price versus Cost-Reimbursement Cost-Reimbursement (Pass-through assumes greatest risk) Work cannot be precisely defined or cost precisely estimated (much of what we do!) Allows greatest flexibility (add $$ or time as mutually agreed and perform work within scope until funds/time are exhausted) Common for other educational institutions, hospitals, and non-profits Fixed Price (Subrecipient assumes greatest risk) Appropriate if there can be a clear work scope, solid cost estimate and well-articulated deliverables Lower administrative burden for prime Common for foreign entities and for-profits May be appropriate for small entities

20. Remember that subawards: Protect the sponsor�s and your interests, and flow down requirements of the prime award Demonstrate your institution�s commitment to due diligence and proper stewardship of sponsor funding Should not add undue administrative burden to a subrecipient Clearly specify: What will happen in the case of non-performance Deliverables, and their expected form/format and timetables Prior approval requirements Invoice requirements Include Obligation to Promptly Notify You if: Compliance approvals lapse Conflict of interest arises or management plan changes Audit status changes Additional Tips When Drafting the Agreement

21. Monitoring During the Award

22. Key Life-of-Award Monitoring Requirements

24. Monitoring Subrecipient Expenditures

25. Approving Invoices: PI or Dept Scenario - You are 90% through the period Scenario - You are 90% through the period

26. Central Subaward Monitoring What subawards should have been modified by now (e.g., add time/money) but haven�t been? What subawards haven�t had an invoice paid in the last 4 months? In overdraft? What subawards are over but haven�t been closed out Transaction testing Pick a random sample of subawards and test Pick extra transactions for high-risk subs Pick all the subs from a given subrecipient Pick all the subs from a given department

27. Central Subaward Monitoring Transaction testing Has the subrecipient invoiced in a timely manner? Has the U paid the invoices timely? Have the costs on the subawards been appropriately reviewed and approved? Are the compliance approvals current? Were rebudgeting requests received and approved when needed? Are all award modifications issued timely? Has the subrecipient complied with key provisions of the subaward (e.g., NIH Public Access policy)