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Subawards vs Service Agreements

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Derek Brown

on 14 May 2013

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Transcript of Subawards vs Service Agreements

Presented by the University of Idaho and Washington State University Subawards and Service Agreements Definitions What distinguishes a subaward/subcontract from a service agreement/consultant? Service Agreements What is a subaward/subcontract?

“…an award of financial assistance in the form of money, or property, made under an award by a recipient to an eligible subrecipient or by a subrecipient to a lower tier subrecipient. The term includes financial assistance when provided by any legal agreement, even if the agreement is called a contract, but does not include procurement of goods and services or any form of assistance that is excluded from the definition of award.”

What is a subrecipient?

“…a nonfederal entity that expenses federal awards received from a pass-through entity to carry out a federal program. It does not include an individual that is a beneficiary of such a program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency.”
“…the legal entity to which a subaward is made and which is accountable to the recipient for the use of the funds provided.” Definitions Part 2 What is a Service/Consulting Agreement?

“A Service or Consulting Agreement is a legal contract between the university’s purchasing department and an individual or company identified by the Principal Investigator to do a specific scope of work.”

What is a vendor?

“…a dealer, distributor, merchant or other provider of goods or services that are needed to administer a federal program. These goods or services may be for an organization’s own use or for the use of beneficiaries of the federal program.” Under a subaward, a subrecipient generally:

Determines who is eligible to receive federal assistance;
Has its performance measured against whether the objectives of the federal programs are met;
Has responsibility for programmatic decision-making;
Has responsibility for adherence to applicable federal program compliance requirements; and
Uses federal funds to carry out a program of the organization as compared to providing goods or services for a program of the pass-through entity. Should the consultant be an independent contractor or an employee?

Common Law Rules: A list of 20 questions the IRS uses to determine if a worker is an independent contractor or employee. What distinguishes a subaward/subcontract from a service agreement/consultant? Part 2 Under a Service/Consulting agreement:

Individual/Company operates in a competitive environment;
Individual/Company must have the qualifications necessary for work being contracted;
Decision making is limited to how to achieve the desired scope of work;
Terms and conditions are specific to the contract;
The services provided are ancillary to the main objective of sponsored project; and
Individual/Company is not subject to compliance requirements of the sponsor. Comparison Chart WSU Subawards - A three tiered approach 1. Department: Proposal and budget development, initiate subcontracting process with OGRD (once Prime Award is finalized and processed to the Controllers Office), continuous project monitoring and subaward invoice approvals.

2. Pre-Award (OGRD): Initial financial assessment, risk determination, drafting/completion of subcontract agreement, issue of amendments.

3. Post-Award (SPS): Verify A-133 compliance, account setup, invoice/payment processing, continuous risk assessment UI Subawards - OSP Approach: 1. Department: Proposal and budget development, initiate subcontracting process with OSP after account setup via the subaward request form, continuous project monitoring and subaward invoice approvals.

2. OSP Post Award: Risk assessment check or determination, review of compliance materials, issuance of subaward.

3. Amendments: Department sends the Subaward amendment request form to postaward@uidaho.edu and Post award processes the request and issues an amendment if all compliance aspects are met. Responsibilities “Recipients are responsible for managing and monitoring each project, program, subaward, function or activity supported by the award. Recipients shall monitor subawards to ensure subrecipients have met the audit requirements as set forth in §74.26.” (45 CFR Part 74 Subpart C – Post Award Requirements, Section 51)

“Federal agencies shall apply the provisions of the sections of this Circular to non-Federal entities, whether they are recipients expending Federal awards received directly from Federal awarding agencies, or are subrecipients expending Federal awards received from a pass-through entity (a recipient or another subrecipient).” (OMB Circular A-133 Preamble Memorandum) Responsibilities Part 2 A-133 _____.400 Responsibilities (d)

Identify Federal Awards
Advise subrecipients of requirements
Monitor activities of subrecipients
Ensure subrecipients meet audit requirements
Issue a management decision
Consider whether subrecipient audits necessitate adjustment
Require access to records & financials….

Section M Control Objectives
Award monitoring – factors in determining the extend, nature and timing.

Program complexity
Percentage of pass through dollars
Amount of awards
Subrecipient Risk Departmental Responsibilities at WSU Initiate Subcontract with OGRD - Initiation Sheet, financial documents, SOW/Budget

Develop the overall plan for commitment of funds:
Approve all expenditure requests
Review budget statements, proposal/budget breakdown, and invoices for reasonableness of hours/costs, indirect rate issues, and any other irregularities in the sub proposal
Ensure that all expenditures are directly related to the SOW and are:
Consistent Departmental Responsibilities at WSU Part 2 Certify his or her effort and the effort of other employees working on the project
Certify that all cost sharing obligations have been met
Initiate and approve subcontract agreement and payments
Verify that all appropriate expenditures have been posted
Review invoice for allowability, allocability, reasonableness and timeliness
Appropriate signatory signs/codes invoices by approved budget objects and send back to SPS for payment
Reviews technical/progress reports to ensure making progress/meeting milestones/reporting requirements
Requests additional supporting documentation on question costs
Monitor subcontractor compliance with regulations of both the Prime and subaward terms and conditions
Ensures that the subrecpient has proper control over property
Forwards copy of property, invention and cost-share reports to SPS WSU OGRD Responsibilities Assist with submitting the Prime Award proposal and award negotiation and and draft/negotiate a subcontract.

Receive the subcontract initiation form and backup documents
Check Visual Compliance Database (EPLS) and OGRD subcontracting websites
Check for DUNS#, Sam.gov registration (if federal), and E-Verify/ARRA/PHS FCOI/A-133/FFATA applicability
Check that subaward is within Scope, dates of Prime award, and that funding allocation has been set aside
Send A-133 request letter with subaward for signature, check for A-133 response for post award monitoring
If needed, do risk assessment for post-award monitoring
Act as advocate for PI and University in sub-agreement issues WSU SPS Responsibilities After subaward is signed and received at SPS:

Review subaward agreement and translate into computer systems
Verify the rate agreement, A-133 response, and completion of all documents
Process subcontract invoices for payment
Annually request and review the subcontractors most current audit document
Complete risk assessment form, if necessary, based upon latest audit report
Alert all parties if the audit review demonstrates a concern for WSU
Acts as advocate for PI and University in sub-agreement issues UI Departmental Responsibilities Pre-award:
Work with the OSP pre-award Sponsored Programs Administrator (SPA) to collect all necessary proposal information prior to submission.

Work with Accounts Payable to create a GID (if one is not present already) for use when entering the funding requisition.
Submit the required subaward request form or amendment form to postaward@uidaho.edu with all required documentation attached (www.uidaho.edu/osp/forms).
Assist with appropriate collection of data and documentation as needed for risk assessment or subaward issuance.
Monitor spending and progress by reviewing and approving invoices and progress reports when received. Ensure cost share, if appropriate, is being met. Send approved invoices to Wendy Kerr at OSP for approval and payment through Accounts Payable.
Alert OSP to take the appropriate termination action if spending or progress is not appropriate or meeting the subaward/subcontract requirements. UI Departmental Responsibilities Part 2 Departmental Subrecipient Monitoring Checklist

1.Did A/P properly segregate the P.O. into account codes E5171 (first $25,000, subject to UI overhead) and E5172 (anything greater than $25,000, exempt from UI overhead)?
2.Have you prepared a tracking system to monitor the invoice amounts, dates, and cumulative total?
3.Have you prepared a tracking system for technical reports due from the subcontractor?
4.Have you prepared a tracking system for required cost share from the subcontractor?
5.Review of invoice upon receipt by department:
a)Are the P.O. and subcontract numbers referenced?
b)Are expenses charged to the proper budget categories?
c)Is the total correct?
d)Is the cumulative amount less than or equal to the subcontract total?
e)Has the contractor submitted technical reports to support expenditures?
f)Is the required cost share reported on the invoice?
g)Is this cost allowable under OMB Circular A-21? UI Departmental Responsibilities Part 3 Departmental Subrecipient Monitoring Checklist cont.

6.Processing of invoice by department:
a)Update departmental records, summary sheets, etc.
b)Write expense account code on invoice.
c)Principal Investigator indicates approval on invoice by original signature.
d)Forward invoice to OSP.
f)When the subcontract is completed, notify OSP & A/P. Disencumber any remaining balance on the P.O.
7. Before final payment processing:
a)Technical report submitted or enclosed?
b)Patent reports submitted or enclosed?
c)Property reports submitted or enclosed?
d)Closing authorization from subcontractor?
e)Cost sharing requirement met? UI OSP Responsibilities Pre-award: Review all subrecipient proposal documents as part of the proposal review process to ensure compliance with sponsored project administration, A-133 and University policies and procedures. Collect required subrecipient commitment form, F&A rate agreement information, and PHS FCOI information as needed.

Post-award: Upon receipt of the subaward request form or subaward amendment request form the post-award unit works with the cost accounting unit to assess risk prior to creation of the subaward/subcontract. After a risk level is assigned the Post Award Manager proceeds as follows:
Check Visual Compliance Database (EPLS or sam.gov);
Verify F&A, FCOI, E-Verify, etc.;
Ensure that a requisition or PO is entered and approved for this subrecipient at the appropriate amount, using the appropriate E-codes;
Check the request form against the proposal to ensure accuracy of information;
Create and issue the subaward/subcontract;
Review returned document for completion of all attachments and accuracy of statements, collect protocol assurances as needed, and do final data input to the subaward monitoring system (OSPRE) prior to final signature and execution. Close Out Procedures Ensure all subcontractors invoices have been received/paid, including a final marked "final"
All progress reports/deliverables have been received
All encumbrance cleared (except F&A)
All overdrafts have been cleared
All expenses are allowable and within the time period of the award
Review your file to ensure that all contact history has been documented and is in the file Subrecipient Monitoring A-133, Subpart B, Section ___225, allows WSU to take one or more of the following actions for subcontractors who are unwilling or unable to comply with the monitoring requirements.

With hold a percentage of funding until the Audit is complete.
With hold or disallow indirect costs.
Suspend funding or payments until audit is conducted.
Early termination of the agreement.

Subcontract Invoices are sent to departments for approval before paying.

Principle Investigator is responsible for ensuring the subcontractor is meeting their obligations. PI should certify expenditures are appropriate to the subcontract and that the work being invoiced was indeed completed or delivered received.

This responsibility may be delegated. It is suggested that delegation be in writing. Risk Assessment Possible A-133 Indicators of High Risk

A qualified audit report or failure to have a current audit report
Inadequate response to financial questionnaire
History of non-compliance or non-performance (failure to use funds for authorized purposes)
New subrecipient (or new to this type of project)
Award size relative to subrecipient’s sponsored research portfolio
Type of subrecipient Risk Assessment Part 2 Possible Mitigations to High Risk Assessment

Corrective Action Plan
Special Monitoring Plan (PI/Dept/OGRD/SPS)
More frequent contact with subrecipient or
More frequent technical reports
Add more detailed or frequent invoicing requirement
Backup documentation
Tie receipt of technical progress reports to payments
Require on-site monitoring (technical and financial)
Add more stringent termination or stop-work language for failure to comply with requirements
Site visits 20 Questions Is the worker required to comply with instructions about when, where and how the work is done?
Is the worker provided training that would enable him/her to perform a job in a particular method or manner?
Are the services provided by the worker an integral part of the business' operations?
Must the services be rendered personally?
Does the business hire, supervise, or pay assistants to help the worker on the job?
Is there a continuing relationship between the worker and the person for whom the services are performed?
Does the recipient of the services set the work schedule?
Is the worker required to devote his/her full time to the person he/she performs services for?
Is the work performed at the place of business of the company or at specific places set by the company?
Does the recipient of the services direct the sequence in which the work must be done? 20 Questions Part 2 Are regular oral or written reports required to be submitted by the worker?
Is the method of payment hourly, weekly, monthly (as opposed to commission or by the job?)
Are business and/or traveling expenses reimbursed?
Does the company furnish tools and materials used by the worker?
Has the worker failed to invest in equipment or facilities used to provide the services?
Does the arrangement put the person in a position or realizing either a profit or loss on the work?
Does the worker perform services exclusively for the company rather than working for a number of companies at the same time?
Does the worker in fact make his/her services regularly available to the general public?
Is the worker subject to dismissal for reasons other than non-performance of the contract specifications?
Can the worker terminate his/her relationship without incurring a liability for failure to complete the job? Service Agreement Procedure Service agreements or personal service contracts are run through the universities purchasing departments.

At WSU the web page is: http://purchasing.wsu.edu/PersonalServicesContract.html

At UI the web page is:
http://www.uidaho.edu/controller/purchasing/contractgeneralguidelines Service Agreement Procedure Part 2 Having critical research collaborators named in the grant documentation provides a very easy path forward to contract with them – They should be named in the grant proposal if appropriate and the use of that researcher or service provider should be justified.  Services that are not critical and that are generally available from many sources would not be appropriate to name in a grant and/or sole source and should be competitively awarded. Service Agreement Procedure Part 3 Office of Sponsored Programs (OSP) Review: Email or send a hard copy to OSP-Cost. We look at:

Check Sponsored Agreement (budget) for compatibility with SA.
Is a SA listed as an expected expense? Is service provider listed by name?
Check that scope of work in SA is detailed to reflect grant requirements.
Check that SA dates are compatible with Sponsored Agreement dates.
Check for conflict of interest
Employed by University of Idaho?
PI or primary UI employee on grant related?
Check if also a sub-awardee if so check for conflicts on sub-award.
Check that Contract Approval Document (CAD) and actual Contract Agreement are filled out completely, correctly and are in agreement with each other. Scope of Work Requirements for Service Agreements Needs to be well defined and detailed enough to be defendable should a dispute arise.

Should answer the following questions:

What is the provider supposed to accomplish specifically?
Do the services need to be performed in a specific way?
When do the services need to be performed? A specific day or time?
Is time of the essence?
Do the services need to be performed at a specific place?
Are deliverables expected? If so when and in what format?
Is scope consistent with what was submitted in accepted proposal. Service Agreement Procedure Contractors/consultants cannot be paid without a W-9 form on file. 

Wait to have the consultant start work, until a fully signed contract is in hand. Service Agreement Procedure
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