A formal agreement between the university and an external organization to carry out specific work outlined in the funded proposal is a Subcontract. If the proposal results in a grant award, the agreement assumes the work to be performed has the approval of the sponsor. The agreement is created in the ORSP and approved by legal counsel before it is executed. A copy of the subcontract must be forwarded to Grants Accounting.
Sub-recipients: KSU is responsible for the programmatic and financial monitoring of its sponsored research award sub-recipients. A sub-recipient is a third-party organization performing a portion of KSU research projects or other sponsored programs. The terms of KSU-sub-recipient relations are documented in and governed by sub-grant/subcontract/consortium agreements. Guidelines and Procedures for Monitoring Sub-recipients (Guidelines) are provided to assist responsible KSU Faculty and Staff in ensuring that sub-recipients conduct their portion(s) of research projects in compliance with applicable laws and regulations as well as with the terms and conditions of awards and sub-awards. The Guidelines also help to ensure that project costs incurred by sub-recipients are reasonable and allowable.
Roles and Responsibilities
Principal Investigators. Principal Investigators (PIs), assisted by the ORSP staff, are primarily responsible for monitoring sub-recipients to ensure their compliance both with federal regulations and with the primary and sub-recipient award terms and conditions.
Department Administrators. Department administrators (chairs, deans) are responsible for assisting PIs in the implementation of their projects at the departmental and school level. This includes monitoring sub-recipient activities, including review of invoices, requests for reimbursement, and reviewing reports. Department administrators will report, as directed by the funding agency, the results of their monitoring activities for each of their sub-recipients.
KSU’s Office of Sponsored Programs/Grants and Contracts Accounting. The KSU Office Research and Sponsored Programs (ORSP) together with Grants and Contracts Accounting (GCA) are responsible for ensuring that KSU’s sub-recipient monitoring procedures are compliant with federal and other applicable regulations and are consistent with sound business practices. ORSP and GCA will provide further training, monitoring, and guidance in interpreting applicable regulations and sub-recipient award terms and conditions, and in interpreting and executing these Guidelines.
When applicable, the ORSP will prepare and issue subcontracts to sub-recipients when identified in the prime award. As such, continuous monitoring of the sub-recipients, as directed by OMB Uniform Guidance, Audits of States, Local Governments, and Non-Profit Organizations (OMB Uniform Guidance), must be performed. All sub-recipients will be cross referenced in the Excluded Parties List System (EPLS) at www.epls.gov. Certification will be made on the document (i.e. requisitions, contracts, etc.) with verification that the EPLS has been reviewed. Should the organization be listed, the university will contact the organization or individual and report the cancellation of all agreements and/or activities until such time that the organization is no longer listed on the EPLS. If the sub-recipient organization is not listed in the EPLS system, KSU will issue a subcontract to the organization based upon the allowance in the prime award. The sub-recipient must supply a Statement of Work and a Budget request for consideration of award. Upon approval of the sub-recipients’ information, the sub-agreement will be issued. As a part of the required sub-recipient monitoring, all Sub-Recipients will be requested to submit a copy of their latest Audit Report as required by the Uniform Guidance. Upon receipt of requests for payment of any sub-recipient invoices, the PI will verify all charges; after which, the PI will requisition the invoice for payment. In the event that the audit has not been received, the sub-recipient may be subject to delayed payment of invoices. Additionally, delays in payment of sub-recipient invoices may occur if the sub-recipient has not submitted the required technical and/or financial reports as specified in the sub-contractual document’s reporting requirements.
Sub-recipient Monitoring Guidelines
On an annual basis, ORSP and GCA will review all active subcontracts for which monitoring is mandated and inquire further into those that are deemed to require closer scrutiny in light of considerations such as:
- Size of sub-recipient award. Large awards (e.g., awards with annual budgets in excess of $500,000) would receive substantial and frequent review and monitoring; mid-size awards (e.g., awards with annual budgets between $100,000 and $500,000) would receive proportionately less substantial and less frequent monitoring; and smaller awards (e.g., awards with annual budgets less than $100,000) would receive general review with the least frequent oversight.
- Relative award size; research portfolio. The larger the award size relative to the sub-recipient’s sponsored research portfolio, the greater the need for sub-recipient monitoring.
- Relative award size passed through. The larger the percentage of the program award passed through to the sub-recipient, the greater the need for sub-recipient monitoring.
- Award complexity. The more complex the award, the more sensitive the work, and/or the more extensive the governing regulations, the greater the need for sub-recipient monitoring.
- Prior experience. New sub-recipients, inexperienced sub-recipients, and/or sub-recipients with a history of non-compliance, new personnel, and/or new or substantially changed systems will require increased monitoring.
- Location. Sub-recipients who are geographically remote from KSU may require more monitoring and oversight.
- Foreign: for-profit status. Foreign sub-recipients and for-profit sub-recipients are associated with increased risks and therefore may require a greater degree of review, evaluation, and attention.
- Degree of external oversight by auditors or sponsoring agencies. The greater level of external oversight there is by auditors and/or sponsoring agencies, the less the need there will be for monitoring by KSU. Note, however, that KSU is obligated to monitor sub-recipients of its federal awards regardless of the fact that the sub-recipients are subject to Audits.
Upon identification of those sub-recipients that require closer scrutiny based on the above review criteria, the ORSP and GCA will take appropriate monitoring actions to ensure compliance with sub-agreement performance requirements, financial terms and conditions, and all applicable federal rules and regulations. The ORSP will coordinate communications with other KSU departments or offices to avoid any duplication of effort.
In addition to routine monitoring procedures, the ORSP and GCA will work with PIs and department administrators to establish channels of communication with sub-recipients that require further scrutiny. Administrators at such sub-recipient sites may be asked to complete questionnaires (to be filed at KSU) documenting their internal controls and grants management procedures. In addition, sub-recipients that are not subject to Audits may be asked to submit supporting documentation in the form of original receipts, copies of payroll records, and/or audits, if and as circumstances warrant.
Department Level Sub-recipient Monitoring Procedures
The frequency and scope of departmental monitoring procedures should be determined jointly by the responsible PI and department administrators. A “risk-based” approach to sub-recipient monitoring is recommended with the frequency and intensity of monitoring driven by the criteria stated in the above Guidelines. Under this approach, monitoring will focus on those sub-recipients at the greatest risk of or potential for non-compliance.
Department administrators, with guidance or assistance from the ORSP and GCA staff, should annually consider the following sub-recipient monitoring procedures when appropriate:
- Review of technical performance reports. Technical performance reports should be reviewed in a timely manner by the PI. Any unusual or unforeseen items should be investigated and documentation thereof should be retained in the department’s files for ready access by regulators. In some cases, sub-award terms may require specified deliverables in addition to, or in lieu of, technical reports.
- Review of invoices and expenses-to-budget. Invoices and expenses-to-budget should be reviewed for cost-reimbursement sub-agreements. The sub-recipient’s invoices showing both current period and cumulative expenses-to-budget are generally required. The Principal Investigator should compare sub-recipient invoices to established sub-award budgets. Evidence of the regular review of invoices by the PI should be in place and retained on file.
“Evidence” can take various forms which include but are not limited to: PI initials, authorizing signature on invoices, e-mail communications, and/or notes of meetings with the department administrator.
- Clarification of invoiced charges. The Principal Investigator should request clarification of charges invoiced by the sub-recipient that are unusual, miscellaneous, apparently excessive, or which otherwise stand out. If explanations provided are insufficient to render a prudent judgment on the allowability of the cost and the terms of the subcontract so permit, department administrators may request detailed justifications from sub-recipients. The Principal Investigator may also periodically request, if the terms of the subcontract permit and particularly from high-risk sub-recipients, detailed support for selected invoiced charges to verify their appropriateness and reasonableness.
Examples of detailed justifications that may be requested from sub-recipients include, without limitation:
- Payroll records/data.
- Copies of paid invoices showing the cost of items purchased and Vendor Justification Forms if required by federal contract.
- Descriptions of services rendered by consultants including hourly rates and time reports.
- Details of incurred travel charges stating the purpose, airfare, meals, ground transportation, and unallowable costs.
- Costs determined to be unallowable or unreasonable must be disallowed.
- In circumstances where questionable costs remain unresolved, particularly when subcontract
terms do not permit requesting supporting documentation, it may become necessary to
conduct a definitive audit of all or a portion of questionable costs. (see Audits
below) In these cases department administrators may contact GCA for coordination
of subsequent actions.
- On-site visits. On-site visits are discretionary monitoring procedures. On-site visits are conducted by the PI to evaluate both compliance with the scientific objective of the project and the appropriateness of the sub-recipient’s administrative systems, processes, and charges. Such visits should be documented via correspondence, meeting notes, and/or trip reports and retained on file.
- Audits. Discretionary audits of sub-recipients are an acceptable monitoring procedure under federal regulations, and all of the University’s cost-reimbursement sub-recipient agreements contain “right-to-audit” clauses.
- Reporting results of monitoring procedures. Department administrators will report to ORSP and GCA on an annual basis the results of their monitoring activities for each of their sub-recipients.
KSU Sub-recipient Monitoring Procedures
- Review Audits on-line. ORSP staff should review Audits filed by sub-recipients which expend $500,000 or more of federal funds during the fiscal year and are subject to A-133 Audits. GCA may view the sub-recipient’s Audits in the Federal Audit Clearinghouse (FAC) database (http://harvester.census.gov/sac). This website provides evidence to verify that the sub-recipient has completed Audits and to assess the presence of audit findings. This FAC verification may be done in lieu of reviewing Audits submitted by the sub-recipient to KSU. In cases of a sub-recipient’s continued inability or unwillingness to submit the required audit report KSU reserves the right to withholding of final payment, and/or further obligations of time and funding to the sub-recipient.
- When sub-recipients have Audit findings. ORSP and GCA may consider issuing a management decision on audit findings, when appropriate, and evaluating sub-recipient corrective actions in response to audit findings. Corrective actions cited by the sub-recipient should be verified to ensure sub-recipient compliance and may necessitate on-site monitoring. The ORSP and GCA may also consider whether sub-recipient audit findings necessitate adjustment of their own records.
Sub-recipients not subject to Audits, including foreign and for-profit entities. Because A-133 Audits do not apply to foreign or for-profit sub-recipients, KSU may establish its own requirements, as necessary, to ensure compliance by such sub-recipients. ORSP and GCA should consider using sub-recipient monitoring techniques similar to those used for entities subject to Audits. Contracts with foreign or for-profit sub-recipients should describe applicable compliance requirements and responsibilities. All foreign or for-profit sub-recipients not subject to Audits will be required to complete a questionnaire in order for KSU to assess capability of compliance with federal regulations. These may also include pre-award audits, periodic or regular on-site visits, or invoice and expenses-to-budget review.