Subcontract Subcontract ManagementManagement

ObjectivesObjectives

• Understand the distinction between a Understand the distinction between a subaward and a purchased servicesubaward and a purchased service

• Know your monitoring and Know your monitoring and compliance responsibilitiescompliance responsibilities

• Be able to create and amend a Be able to create and amend a purchase requisition for a subaward purchase requisition for a subaward agreementagreement

• Understand the process of F&A Understand the process of F&A recovery when subawards are recovery when subawards are involvedinvolved

DefinitionsDefinitions

• AwardAward• SubawardSubaward• Prime RecipientPrime Recipient• SubrecipientSubrecipient• Statement/Scope of WorkStatement/Scope of Work

Federal AwardFederal Award

• Financial assistance that provides Financial assistance that provides support or stimulation to accomplish a support or stimulation to accomplish a public purpose.public purpose.

• Awards include grants and other Awards include grants and other agreements in the form of money or agreements in the form of money or property in lieu of money, by the Federal property in lieu of money, by the Federal Government to an eligible recipient. Government to an eligible recipient.

• It does not include procurement It does not include procurement contracts, used to buy goods or services contracts, used to buy goods or services from vendors. from vendors.

SubawardSubaward

• Subaward means an award of financial Subaward means an award of financial assistance in the form of money, or assistance in the form of money, or property in lieu of money, made under property in lieu of money, made under an award by a recipient to an eligible an award by a recipient to an eligible subrecipient or by a subrecipient to a subrecipient or by a subrecipient to a lower tier subrecipient. lower tier subrecipient.

• It does not include procurement It does not include procurement contracts, used to buy goods or contracts, used to buy goods or services from vendors. services from vendors.

Prime RecipientPrime Recipient

• The prime recipient is the entity that The prime recipient is the entity that is the direct recipient of the is the direct recipient of the sponsor’s funds and in this capacity sponsor’s funds and in this capacity assumes a number of assumes a number of responsibilities, including responsibilities, including management of subawards.management of subawards.

SubrecipientSubrecipient

• Subrecipient means the legal entity Subrecipient means the legal entity to which a subaward is made and to which a subaward is made and which is accountable to the recipient which is accountable to the recipient for the use of the funds provided.for the use of the funds provided.

Statement of WorkStatement of Work

• The statement of work outlines the The statement of work outlines the procedures and methods the procedures and methods the subrecipient will employ in subrecipient will employ in accordance with the goals of the accordance with the goals of the project proposed by the prime project proposed by the prime recipient.recipient.

Purchased Service vs. Purchased Service vs. Subaward AgreementSubaward Agreement

• Usually the distinction between the Usually the distinction between the two is clear – but when it’s not…look two is clear – but when it’s not…look outout

• It is important to understand the It is important to understand the relationship in order to use the relationship in order to use the proper “mechanism”proper “mechanism”

• Statutory requirements for Statutory requirements for procurement of services is quite procurement of services is quite different from those of subawardsdifferent from those of subawards

Definitions of Purchased Definitions of Purchased ServiceService

• US Code, Title 31, Subtitle V, US Code, Title 31, Subtitle V, Chapter 63, Section 6303, Using Chapter 63, Section 6303, Using procurement Contracts:procurement Contracts:– The principle purpose of the instrument The principle purpose of the instrument

is to acquire (by purchase, lease, or is to acquire (by purchase, lease, or barter) property or services for the barter) property or services for the direct benefit or use of the US direct benefit or use of the US Government…Government…

Definitions of Purchased Definitions of Purchased ServiceService

• OMB Circular A-133, Section ___210:OMB Circular A-133, Section ___210:(c) Payment for goods and services. (c) Payment for goods and services.

Characteristic indicative of a payment for Characteristic indicative of a payment for goods and services received by a vendor are goods and services received by a vendor are when the organization:when the organization:(1) Provides the goods and services within (1) Provides the goods and services within normal business operations;normal business operations;(2) Provides similar goods or services to (2) Provides similar goods or services to many purchasers;many purchasers;(3) Operates in a competitive environment;(3) Operates in a competitive environment;(4) Provides goods or services that are (4) Provides goods or services that are ancillary to the operation of the Federal ancillary to the operation of the Federal program; and,program; and,(5) Is not subject to compliance requirements (5) Is not subject to compliance requirements of the Federal Program.of the Federal Program.

Definitions of a Definitions of a SubawardSubaward

• US Code, Title 31, Subtitle V, Chapter 63, US Code, Title 31, Subtitle V, Chapter 63, Section 6304, Using Grant Agreements:Section 6304, Using Grant Agreements:(1)(1)The principle purpose of the relationship is to The principle purpose of the relationship is to

transfer a thing of value to the State, local transfer a thing of value to the State, local government, or other recipient to carry out a government, or other recipient to carry out a public purpose of support or stimulation public purpose of support or stimulation authorized by a law of the US instead of authorized by a law of the US instead of acquiring (by purchase, lease, or barter) acquiring (by purchase, lease, or barter) property or services for the direct benefit of property or services for the direct benefit of the US Government; and,the US Government; and,

(2)(2)Substantive involvement is not expected Substantive involvement is not expected between the executive agency and the State, between the executive agency and the State, local government, or other recipient when local government, or other recipient when carrying out the activity contemplated in the carrying out the activity contemplated in the agreement.agreement.

Definitions of a Definitions of a SubawardSubaward

• OMB Circular A-133, Section ___210:OMB Circular A-133, Section ___210:(b) Federal award. Characteristics indicative of (b) Federal award. Characteristics indicative of

a Federal award received by a subrecipient a Federal award received by a subrecipient are when the organization:are when the organization:(1)(1) Determines who is eligible to receive what Federal Determines who is eligible to receive what Federal

financial assistance;financial assistance;(2)(2) Has its performance measured against whether the Has its performance measured against whether the

objectives of the Federal program are met;objectives of the Federal program are met;(3)(3) Has responsibility for programmatic decision-Has responsibility for programmatic decision-

making;making;(4)(4) Has responsibility for adherence to applicable Has responsibility for adherence to applicable

Federal program compliance requirements; and,Federal program compliance requirements; and,(5)(5) Uses the Federal funds to carry out a program of Uses the Federal funds to carry out a program of

the organization as compared to providing goods the organization as compared to providing goods or services for a program of the pass-through or services for a program of the pass-through entity.entity.

Tips for Determining the Tips for Determining the Best MechanismBest Mechanism

• Where a preponderance of the funding is Where a preponderance of the funding is being spentbeing spent

• Avoid trying to circumvent the charging of Avoid trying to circumvent the charging of F&AF&A

• Focus on the nature of the relationshipFocus on the nature of the relationship• Can you defend it to the auditors, prime Can you defend it to the auditors, prime

sponsors, the news media, and the sponsors, the news media, and the general publicgeneral public

• Beware of consultants – they will not be Beware of consultants – they will not be subawardssubawards

Subaward Process - Subaward Process - Proposal PhaseProposal Phase

• For NIH grant applications or other For NIH grant applications or other programs using NIH forms - ORSP will programs using NIH forms - ORSP will need a signed application face page and need a signed application face page and checklist from the organization to which checklist from the organization to which we are subcontracting.we are subcontracting.

• For non-NIH applications – ORSP will For non-NIH applications – ORSP will need a signed “letter of intent to form a need a signed “letter of intent to form a subcontract agreement”subcontract agreement”

• Scope of work is also helpful.Scope of work is also helpful.

Subaward Process - Subaward Process - Proposal PhaseProposal Phase

• New NIH budget pages New NIH budget pages • Be careful when calculating F&A costs Be careful when calculating F&A costs

when subcontracts are involvedwhen subcontracts are involved• The subrecipient will request their full The subrecipient will request their full

F&A rate from the prime recipientF&A rate from the prime recipient• Consequently, the amount up to $25,000 Consequently, the amount up to $25,000

that is passed through is charged F&A by that is passed through is charged F&A by both the prime recipient and the both the prime recipient and the subrecipientsubrecipient

Subaward Process Subaward Process

• ORSP will need budget, scope of work, ORSP will need budget, scope of work, and contact information.and contact information.

• Mailed to subcontract organization along Mailed to subcontract organization along with disclosure formswith disclosure forms

• When returned, PI signs, Tim Atkinson When returned, PI signs, Tim Atkinson signssigns

• ORSP sends out an “ORSP Cover Page” to ORSP sends out an “ORSP Cover Page” to department.department.

• Purchase Order sent to ORSP who sends Purchase Order sent to ORSP who sends to subcontractor.to subcontractor.

• Please be patient!Please be patient!

Subcontract Subcontract AmendmentsAmendments

• ORSP will need budget for new year, ORSP will need budget for new year, carryover amount (if any), changes carryover amount (if any), changes to scope of work (if any).to scope of work (if any).

• Same process as original Same process as original subcontract, just fewer pages.subcontract, just fewer pages.

ResponsibilitiesResponsibilities

• ORSP is responsible for the development ORSP is responsible for the development of the subaward and for inclusion of all of the subaward and for inclusion of all applicable OMB requirements, applicable OMB requirements, disclosures, and for obtaining the proper disclosures, and for obtaining the proper signatures on the subawardsignatures on the subaward

• PI/Department Administrators are PI/Department Administrators are responsible for monitoring periodic responsible for monitoring periodic progress reports and invoices from the progress reports and invoices from the subrecipients for compliance with the subrecipients for compliance with the terms of the agreement.terms of the agreement.

ResponsibilitiesResponsibilities

• Grants Accounting is responsible for Grants Accounting is responsible for monitoring the subrecipient’s monitoring the subrecipient’s compliance with audit, financial and compliance with audit, financial and equipment reporting requirements.equipment reporting requirements.– Desk AuditsDesk Audits– Financial ReportingFinancial Reporting– A-133 Audit resultsA-133 Audit results

Basis for F&ABasis for F&A

• F&A costs shall be distributed to F&A costs shall be distributed to applicable sponsored agreements applicable sponsored agreements …. …consisting of all salaries and …. …consisting of all salaries and wages, fringe benefits, materials wages, fringe benefits, materials and supplies, services, travel, and and supplies, services, travel, and subawards up to the first subawards up to the first $25,000 of each subaward$25,000 of each subaward……

How to Calculate F&A for How to Calculate F&A for SubawardsSubawards

• What would the indirect cost What would the indirect cost recovery be for each year of the recovery be for each year of the grant under the following conditions, grant under the following conditions, presuming a 10% indirect cost rate presuming a 10% indirect cost rate with three subawards?with three subawards?

Year 1 Year 2 Year 3

Contract Invoiced Contract Invoice Contract Invoice

1 10,000 10,000 10,000 10,000 10,000 5,000

2 25,000 15,000 25,000 25,000 25,000 35,000

3 30,000 10,000 30,000 30,000 30,000 35,000

F&A CalculationF&A Calculation

Year 1 Year 2 Year 3

Contract Invoiced Contract Invoice Contract Invoice

1 10,000 10,000 10,000 10,000 10,000 5,000

2 25,000 15,000 25,000 25,000 25,000 35,000

3 30,000 10,000 30,000 30,000 30,000 35,000

35,000

3,500

F&A CalculationF&A Calculation

All

All

All

Year 1 Year 2 Year 3

Contract Invoiced Contract Invoice Contract Invoice

1 10,000 10,000 10,000 10,000 10,000 5,000

2 25,000 15,000 25,000 25,000 25,000 35,000

3 30,000 10,000 30,000 30,000 30,000 35,000

35,000 35,000

3,500 3,500

F&A CalculationF&A Calculation

All

10,000

15,000

Year 1 Year 2 Year 3

Contract Invoiced Contract Invoice Contract Invoice

1 10,000 10,000 10,000 10,000 10,000 5,000

2 25,000 15,000 25,000 25,000 25,000 35,000

3 30,000 10,000 30,000 30,000 30,000 35,000

35,000 35,000 5,000

3,500 3,500 500

F&A CalculationF&A Calculation

All

none

none

Questions?Questions?