Lifecycle of a Subaward: Making the Connection between

Departmental and Central Responsibilities

Dennis J. Paffrath, Assistant Vice President, SPAUniversity of Maryland, Baltimore

Vicki Krell, CRA, Research Advancement Supervisor College of Liberal Arts and Sciences Dean’s Office

Arizona State University

What is a Subcontract ?• A legally binding agreement between

two parties in which:– Prime recipient provides funding to another

organization to conduct a portion of the project work, which fulfills part of the prime recipient’s obligation to the sponsor.

– Performed using sub’s own resources– Sets forth the work to be performed, deliverables

expected, agreed payment for the work and flows-down the terms of the Prime Award.

Terminology• Prime Award

the grant/contract from the Sponsor (funds the subaward)

• Subrecipient the party providing work under the subaward

• Subcontractor term used for subrecipient when the prime is a contract

• Subawardee term used for subrecipient when the prime is a grant or cooperative agreement

• Flow-down or Flow-throughapplying the terms and conditions in the Prime Award to the subaward

A “Sub” by any other name, would be … a sub!

• Subcontract• Subaward• Subagreement• Subrecipient agreement• Consortium agreement

Proposals• Subrecipient or Vendor?

• Proposal preparation

• Subrecipient Assessment

Subrecipient or VendorOMB A-133

SUB-RECIPIENT• Has responsibility to

perform some of the project’s technical objectives

• Responsible for programmatic decision-making

• Subject to the Federal compliance regulations (e.g. human subjects, animal use, PHS FCOI, etc.)

VENDOR• Provides the goods and

services within the scope of its normal business operations

• Provides similar goods and services to many purchasers

• Operates in a competitive environment

• Provides goods and services that are ancillary to the performance of the project

• Not subject to the Federal compliance regulations

Proposal PreparationPI/Department

Obtain from the sub-recipient

• Statement of Work– describing the work the subrecipient investigators will perform in

the project

• Proposed budget & justification• Institutional approval

– letter of intent to enter into a consortium or similar acknowledgement

• Other items required by Sponsor– biosketches, facilities, assurances, small business subcontracting

plan, etc.

• Sponsor Guidelines that apply to Prime, also apply to sub

ProposalsSubrecipient Assessment

PI / Department• Review RFP/PA guidelines to

determine applicability to institution/subrecipient

• Determine subrecipient’s Scope of Work

• Obtain subrecipient’s proposal• Assess technical capabilities and

qualifications of Subrecipient investigators and facilities

• Reasonableness of subrecipient’s proposed costs to perform the work

Research Office• Analyze RFP/PA guidelines and

determine applicability to subrecipient

• Review sub’s budget for compliance with cost principles– reasonable, allowable,

allocable, necessary• Verify F&A rate• Review certifications and

assurances• Verify debarment and

suspension status• Require authorized official’s

approval

ProposalsResearch Office

• Verifying Debarment or Suspension– Search for excluded entities:

http://www.epls.gov• Risk Assessment– Past Experience with this Subrecipient?– Does Sub have a negotiated F&A rate

agreement?– A-133 audit report or audited financial

statements -- findings? – Responses to financial review? Appropriate

controls & systems to comply with A-110?

Issuing the Sub-Award

• Prior Approval• Documentation Needed• Type of Award Document to

Use• Terms and Conditions

Prior Approval to issue Sub• If Sub recipient’s work was included in the

proposal and approved by the sponsor– Approval may be noted in Prime– Section B.4. Advance Understandings (Fed

Contracts)

• If Sub-Award is proposed during award period– Check terms of Prime Award– Always need prior approval for

• foreign sites• subs under Federal contracts• If scope of the Prime Award is affected

Issuing the Sub-AwardDocumentation & Responsibilities

Research Office

• Assessment for OMB A-110 and A-133 requirements

• Prime Award document• Prior approval from Sponsor, if

applicable• Determine appropriate type of

sub agreement• Determine flow-down terms &

conditions• Determine appropriate cost-

basis for sub agreement• Intellectual Property issues

PI / Department

• Updated SOW for sub• Updated budget for sub• Current IRB/IACUC assurances,

if applicable• Contact info for sub institution• Internal Institutional approval

routing (if not done previously)

• Subaward Request Form– PI approval to issue sub– Provide account # for P.O.– Special instructions

Type of Award Document• Federal Demonstration Partnership (FDP) Subaward

Templateshttp://www.thefdp.org/Subawards_Forms.html– Appropriate when Prime is Federal grant and there are

minimal risk• Institution-created boiler-plate agreements, customized

per requirements of the Prime Award– with for-profit entities – Sub-sites for clinical trials– with foreign entities– under State or Foundation Awards common in your institution

• Master Agreement with Task Orders

FDP

Applicable to subs under Awards from all Federal Agencies

Specific to the Federal Agency funding the Prime AwardplusSpecial terms particular to this Award(e.g. restrictions)

Contact infofrom each institution

Specific to the reporting requirements of the Prime Award

Terms & ConditionsNon-FDP Agreements

• Statement of Work• Period of Performance• Consideration and Payment, Financial Reports• Key Personnel• Flow-through Prime Sponsor’s policies & regulations• Reports (Technical)

– Annual/final (standard research award)– Milestones if your PI’s work is dependent upon receipt of sub’s

results• Confidential Information

– Flow through specifics from Prime

Terms & Conditions continued• Publications (innies: get University

FARs)• Rights in Data• Intellectual Property (innies: get Bayh-

Dole)• Human Subjects, Animal Use, HIPAA,

Select Agents…• Indemnification, Liability, Insurance• Audit requirements, record retention• Administrative Contacts• Dispute Resolution• Modification of Agreement• Independent Contractors• Termination

Crafting the Agreement as Partners

PI / Department

• Statement of Work• Key Personnel• Period of

Performance• Max amount

payable• Preferred cost-basis• Technical Reporting

Research Office

• Intellectual Property, Data Rights

• Indemnification, Liability• Export Controls• HIPAA, Human Subjects,

Animal Use• Publication, Confidentiality• Audit Requirements• Flow-down requirements• Disputes, Termination

Cost-BasisCost reimbursement

• Payment based on actual expenses incurred

• Budget of estimated costs used to determine “maximum amount payable”

• Unobligated balance not paid to subrecipient; provisions for carryforward?

• Common for research grants and contracts

Fixed-Price• Amount per unit or total

amount for project• Subrecipent assumes risk - if

estimated amount does not cover all actual costs, no additional compensation and vice versa

• solution when cost accounting system capabilities are uncertain

• Appropriate when SOW is providing deliverables, e.g. fee per sample, fee per subject completed

Issuing the Sub-AwardPayment Terms

Cost reimbursement

• Line-item budget with effort commitments for salary and estimated costs necessary to complete project work

• Invoice by line-item expenses incurred

Fixed-Price• Amount per unit or total amount for

projectinclusive of direct and indirect costs

• Payment Schedule– Upon receipt of deliverable (patient

data, sample, report)– Quarterly, monthly– Upon providing 25% of expected

deliverable– Advance, then earned payments

applied to reduce advance– Non-refundable set-up costs upfront– Final payment should not be made

until after receipt of final deliverable

Fun Foreign Facts• State Department Clearance• U.S. Currency Preferred• Advance Payment Issue• Wire Transfers• IRB/IACUC Translation Fees• CRDF – Former Soviet States

& the Tax Issue• Export Controls – EAR/ITAR/OFAC

Life of the Sub-Award• Federal Regulations• Subrecipient Monitoring• Amendments• Closeout

Federal RegulationsOMB Circular A-110• General Definitions:

Award, Equipment, Subaward

• Establishes applicability to Subawards– Revision of budget and

program– Management and

distribution of property– Procurement standards

and procedures– Reports and record

keeping

OMB Circular A-133• Sec 2.10 guidance for

distinguishing between a federal award (financial assistance) and payments for goods and services (vendor)

• Sets forth obligation of Prime Recipient to monitor Subrecipients’ compliance with federal regulations; and

• Subrecipient’s responsibility to comply with Federal Single Audit requirements

OMB A-133Prime Recipient’s Responsibilities

• Identify Award for Subrecipient– CFDA #– Award #– Federal Agency– Applicable Federal requirements

• Monitor Subrecipient’s Activity– Review financial and technical reports– Review invoices for allowable costs & activities– Site visits when necessary– Regular contact with subrecipient

OMB A-133Prime Recipient’s Responsibilities

• Subrecipients’ A-133 Audits, what Prime should look for:– Review annually for any audit findings– Issue Management Decision regarding relevant findings– Follow-up on Sub’s carry-through on corrective actions

• Prime’s A-133 Audit, what Federal auditors look for:– Proper Identification of awards and flow-down of regulations– Proper review invoices for allowable costs & activities– Effective, consistent monitoring policies and procedures– Complete, current audit documentation from subrecipients with

evidence of Management Decisions and follow-through– PI approval of actions taken

OMB A-133Prime Recipient’s Responsibilities

Finding Audit Reports• Federal Audit Clearinghouse for A-133– http://harvester.census.gov/sac/

• Non-A133 subrecipients– Audit questionnaire– Review Financial Statement

• For-profit entities– DCAA cognizant Agency or ONR Resident

Representative can assist you

Subrecipient MonitoringOMB A-133

• A-133 # 315 (d) “…Pass-through entity shall (3) monitor the activities of sub-recipients as necessary to ensure Federal awards are used for authorized purposes, in compliance with laws, regulations, and the provisions of contracts and grant agreements, and that performance goals are achieved”

Subrecipient MonitoringOMB A-110

• Applicability of A-110 - 3. Policy - Recipients shall apply the provisions of this Circular to sub-recipients performing substantive work under agreements that are passed through or awarded by the primary recipient if such recipients are (higher education, hospitals or non-profits)

Subrecipient MonitoringPI / Department

• Monitor Subrecipient’s Activity– Review financial and

technical reports– Review invoices for

allowable costs & activities- PI sign to approve (do not pay if sub is not performing or costs do not seem to be reasonable, allowable, allocable, necessary)

– Site visits when necessary– Regular contact with

subrecipient

Research Office• Subrecipients’ A-133

Audits, look for:– Review annually for any

audit findings– Issue Management

Decision regarding relevant findings

– Follow-up on Sub’s carry-through on corrective actions

• Interpret Terms and Conditions

• Handle contractual disputes

AmendmentsPI / Department

• Determine need for change in the subaward– Non-competing

continuation– Supplement– Decrease– No-cost extension

• Determine if there are changes to Sub’s SOW

• Notify Central Research Office

• PI must approve

Research Office

• Determine if prior approval is required

• Determine what terms are affected

• Prepare amendment to sub agreement and obtain both parties’ signatures

FFATA• New contracts with prime contract value of

$25,000 or over; and

• Grants over $25,000 and awarded after 10/1/10. The grants subaward reporting functionality is now available via www.fsrs.gov.

• Reporting of Sub-contracts of Federal contracts and sub-grants of Federal grants where these sub-contracts and sub-grants are $25,000 and over.

Close-out PI / Department

• Final invoice from subrecipient

• Verify receipt of final report, all deliverables

• Assist Research Office with obtaining missing compliance information

• Close-out P.O. (disencumber balance)

Research Office

• Verify Final Technical Reports obtained

• Verify Final Payment made

• Obtain and submit Final Invention Report

• Obtain Release of Claims• Obtain Assignment of

Refunds, Rebates & Credits

• Obtain Final Property Report (if applicable)

Questions?

Best Case Scenario

Contact UsDennis J. Paffrath

dpaffrat@umaryland.edu

Vicki Krell vicki.krell@asu.edu