What’s your friend up to? Subrecipient Monitoring Issues Tom Egan, MIT OSP Jeannette Gordon, Division of Grants Compliance and Oversight OPERA, OER, NIH Sally Tremaine, Quinnipiac University

SUBRECIPIENT MONITORING ISSUES OMB Compliance Requirements OMB Compliance Requirements Subrecipient Monitoring Classes Subrecipient Monitoring Classes Subrecipient Monitoring Approaches Subrecipient Monitoring Approaches A-133 Audit Report Review A-133 Audit Report Review Subrecipient Monitoring -- Financial Subrecipient Monitoring -- Financial Subrecipient Monitoring -- Technical Subrecipient Monitoring -- Technical

QUESTIONS What are the OMB compliance requirements? What are the OMB compliance requirements? How do you evaluate “risk”? How do you evaluate “risk”? How do you monitor subrecipients? What monitoring activities can or should you do? How do you monitor subrecipients? What monitoring activities can or should you do? How do you measure or ensure compliance by subrecipients? How do you measure or ensure compliance by subrecipients?

DEFINITION OF SUBAWARD Financial assistance, or procurement, or contract made by a recipient to an eligible subrecipient Financial assistance, or procurement, or contract made by a recipient to an eligible subrecipient Includes any financial assistance when provided by legal agreement, even if the agreement is called a contract Includes any financial assistance when provided by legal agreement, even if the agreement is called a contract Does not include the purchase of goods and services Does not include the purchase of goods and services

DEFINITION OF SUBRECIPIENT The legal entity to which a subaward is made and which is accountable to the recipient for the use of funds provided. The legal entity to which a subaward is made and which is accountable to the recipient for the use of funds provided. See agency implementations of A-110 to determine what type of entity can be a subrecipient. See agency implementations of A-110 to determine what type of entity can be a subrecipient. Note guidance on distinguishing between subrecipient and a vendor. Note guidance on distinguishing between subrecipient and a vendor.

SUBAWARD AGREEMENTS Funding from a prime recipient to a subrecipient to carry out specific program activities. Funding from a prime recipient to a subrecipient to carry out specific program activities. May be termed a subgrant from an assistance award May be termed a subgrant from an assistance award May be termed a subcontract from a procurement award May be termed a subcontract from a procurement award The term “subrecipient” and “subawardee” are used interchangeably. The term “subrecipient” and “subawardee” are used interchangeably.

QUESTION What are the OMB requirements for subrecipient monitoring? What are the OMB requirements for subrecipient monitoring?

SUBRECIPIENT MONITORING OMB Compliance Requirements: Attachment M Subrecipient Monitoring The March 2004 Compliance Supplement was revised to clarify OMB’s expectations related to subrecipient monitoring. Annual request for subrecipient’s A-133 report is not sufficient. Annual request for subrecipient’s A-133 report is not sufficient. On-going review and oversight are expected and may include: On-going review and oversight are expected and may include: -Reviewing financial and performance reports -Reviewing financial and performance reports -Performing site visits to review information and observe operations -Regular contact and appropriate inquires

QUESTION How do you evaluate “risk”? How do you evaluate “risk”?

Subrecipient Monitoring: Classes Four “Classes” of Subrecipients Not-for-profits with Federal expenditures in excess of $500,000 Not-for-profits with Federal expenditures in excess of $500,000 Not-for-profits with Federal expenditures less than $500,000 Not-for-profits with Federal expenditures less than $500,000 Non-US-based entities Non-US-based entities For-profit entities For-profit entities

Subrecipient Monitoring: Approaches Factors such as the size of awards, percentage of the total program's funds awarded to subrecipients, and the complexity of the compliance requirements may influence the extent of monitoring procedures Factors such as the size of awards, percentage of the total program's funds awarded to subrecipients, and the complexity of the compliance requirements may influence the extent of monitoring procedures “Monitoring activities may take various forms …” “Monitoring activities may take various forms …” Risk-Based Approach Risk-Based Approach

Subrecipient Monitoring: Not-for-profits > $500,000 Well-defined in OMB Circular A-133 Well-defined in OMB Circular A-133 Review of the entity’s A-133 Audit Review of the entity’s A-133 Audit Options – Web, Report, confirmation Options – Web, Report, confirmation Look for items that affect subrecipients Look for items that affect subrecipients Significant items not directly affecting subrecipients should be investigated Significant items not directly affecting subrecipients should be investigated When identified, issues should be resolved in a timely manner When identified, issues should be resolved in a timely manner

Subrecipient Monitoring: Not-for-profits < $500,000 Entities receiving less than $500,000 in total Federal monies are not required to receive an A-133 audit Entities receiving less than $500,000 in total Federal monies are not required to receive an A-133 audit Prime recipient should require the subrecipient to confirm in writing that they did not receive over $500,000 Prime recipient should require the subrecipient to confirm in writing that they did not receive over $500,000 May be done with a confirmation May be done with a confirmation

Subrecipient Monitoring: Non-US-based & For-profits Prime should perform a risk assessment before award is granted Prime should perform a risk assessment before award is granted Key policies governing internal controls should be examined Key policies governing internal controls should be examined Visit to the subrecipients place of work to assess control environment Visit to the subrecipients place of work to assess control environment Other audits and reporting Other audits and reporting Development of a plan to monitor Development of a plan to monitor Remember – this is based upon Risk Remember – this is based upon Risk

QUESTION What tools can you employ to help monitor subrecipients? What tools can you employ to help monitor subrecipients?

Subrecipient Monitoring: A-133 Audit Report Review Research and review results of subrecipient’s OMB Circular A-133 audit reported in the Federal Audit Clearinghouse. Information presented within the Clearinghouse is relied upon as sufficient evidence of compliance with the provisions of OMB Circular A-133 if the organization: Research and review results of subrecipient’s OMB Circular A-133 audit reported in the Federal Audit Clearinghouse. Information presented within the Clearinghouse is relied upon as sufficient evidence of compliance with the provisions of OMB Circular A-133 if the organization: Receives an unqualified opinion on the financial statements Receives an unqualified opinion on the financial statements Receives an unqualified opinion on internal controls Receives an unqualified opinion on internal controls Has no material weaknesses reported Has no material weaknesses reported Has no reportable conditions related to Federal awards Has no reportable conditions related to Federal awards

FEDERAL AUDIT CLEARINGHOUSE

Subrecipient Monitoring: A-133 Audit Report Review

For subrecipients not listed in the Federal Audit Clearinghouse, the Research Administrator should make inquiries by forwarding a confirmation request letter to determine whether an audit was required and, if so, the status of the audit. Retain copy of inquires and make subsequent inquiries as needed to acquire audit information.

Subrecipient Monitoring: A-133 Audit Report Review MIT’s response to subrecipient’s audit status query

Subrecipient Monitoring: A-133 Audit Report Review For the subrecipients that are not subject to an OMB circular A-133 audit, employ the most cost-effective method of monitoring.

Subrecipient Monitoring : A-133 Audit Report Review MIT’s request for more detailed information regarding the subrecipient’s audit findings and/or reportable conditions

Subrecipient Monitoring: Subrecipient Info Gathering Letter

Subrecipient Monitoring: A-133 Audit Report Review For subrecipients that are identified with a reportable condition, gain an understanding of relevant findings or questioned costs stated in the Federal Audit Clearinghouse and/or request a copy of the subrecipients A-133 report with all appendices. For subrecipients that are identified with a reportable condition, gain an understanding of relevant findings or questioned costs stated in the Federal Audit Clearinghouse and/or request a copy of the subrecipients A-133 report with all appendices.

Subrecipient Monitoring: A-133 Audit Report Review Evaluate for materiality any findings or questioned costs. Evaluate for materiality any findings or questioned costs. Consider the impact of any corrective action plan as well as other related actions undertaken by subrecipient management. Consider the impact of any corrective action plan as well as other related actions undertaken by subrecipient management. Notify the proper administrative departments of those findings and questioned costs determined to have a material impact on Federal awards. Notify the proper administrative departments of those findings and questioned costs determined to have a material impact on Federal awards.

QUESTION What are the roles for What are the roles for Principal Investigator Principal Investigator Department Administrator Department Administrator OSP OSP

Subrecipient Monitoring: FINANCIAL Track subrecipient allocations separately Track subrecipient allocations separately Process for review and approval of invoices Process for review and approval of invoices PI for programmatic PI for programmatic OSP for administrative/financial OSP for administrative/financial Reimbursement for disallowances Reimbursement for disallowances Verify cost sharing commitments Verify cost sharing commitments

Subrecipient Monitoring: TECHNICAL Scientific progress Scientific progress Invention reports Invention reports Timely submission of deliverables Timely submission of deliverables Final reports Final reports

REFERENCE DOCUMENTS OMB Circular A-21 OMB Circular A-21 OMB Circular A-110 OMB Circular A-110 OMB Circular A-133 OMB Circular A-133 FDP Subrecipient Template FDP Subrecipient Template Catalog of Federal Domestic Assistance (CFDA) Catalog of Federal Domestic Assistance (CFDA)

GLOSSARY FINANCIAL ASSISTANCE – Provides support or stimulation to accomplish a public purpose. Award is grant or cooperative agreement. FINANCIAL ASSISTANCE – Provides support or stimulation to accomplish a public purpose. Award is grant or cooperative agreement. PROCUREMENT – Purchase of goods and services to accomplish a government purpose; services can include research. Award is a contract. PROCUREMENT – Purchase of goods and services to accomplish a government purpose; services can include research. Award is a contract. OTHER TRANSACTIONS – Process to acquire research or goods where, by statute, the normal regulations (A-21, A-110, Bayh-Dole) do not apply. OTHER TRANSACTIONS – Process to acquire research or goods where, by statute, the normal regulations (A-21, A-110, Bayh-Dole) do not apply.

GLOSSARY SUBRECIPIENT VS. VENDOR See OMB Circular A-133, __.210 See OMB Circular A-133, __.210 Subject to same audit standards as recipients Subject to same audit standards as recipients Payments received for goods and services are vendor agreements and not subject to audit as subrecipient agreements Payments received for goods and services are vendor agreements and not subject to audit as subrecipient agreements

GLOSSARY CHARACTERISTICS OF A VENDOR Provides goods and services within normal business operations and to many purchasers Provides goods and services within normal business operations and to many purchasers Operates in a competitive environment Operates in a competitive environment Provides goods and services ancillary to the operation of the federal program Provides goods and services ancillary to the operation of the federal program Not subject to compliance requirements of the federal program Not subject to compliance requirements of the federal program

QUESTIONS AND COMMENTS

WEB SITES FDP Homepage: thefdp.org/ FDP Subaward Demonstration Project: thefdp.org/Subawards_Forms.html Lists of Parties Excluded from Federal Procurement & Nonprocurement Programs Federal Audit Clearinghouse: harvester.census.gov/sac/ MIT Office of Sponsored Programs: web.mit.edu/osp/www web.mit.edu/osp/www NCURA: Financial Research Administration Neighborhood lists resources for subrecipient monitoring

CONTACTS Tom Egan: Tom Egan: Jeannette Gordon: Sally Tremaine: