GAP 200.280, Subrecipient Monitoring

  1. Applicability
  2. General
  3. Definitions
  4. Subrecipient Compliance Risk Assessment
  5. Subrecipient Monitoring
  6. Roles and Responsibilities
  7. Special Conditions and Escalation Procedures

I. APPLICABILITY

Federal awards issued prior to December 26, 2014 should be managed in accordance with OMB Circulars A-21, A-110, and A-133. Federal awards issued on or after December 26, 2014 should be managed in accordance with 2 CFR Part 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (The Uniform Guidance). Verification/determination of the applicable regulations to award is essential. Documentation of appropriate regulations may be found in the Award Notice issued by the funding agency. Note that subawards issued under this GAP follow the same regulatory applicability as the prime award.

These guidelines pertain to federally sponsored projects and should be used as guidance for all sponsors unless specifically addressed in a Non-Federal sponsor’s policies and/or procedures.

This GAP supersedes previous GAP versions, Duke Policies, Guidelines, etc.  Unless otherwise noted, this GAP applies to all sponsored projects, unless superseded by guidelines from Non-Federal sponsors.

II. GENERAL

A subrecipient (subcontractor or subawardee) is a third-party organization that receives funding from Duke to collaborate in carrying out an externally funded program.

Duke University is responsible for monitoring the programmatic, financial, and conflict of interest (COI) compliance of its sponsored project award subrecipients.  Subrecipient monitoring responsibilities are shared among the department (the PI and the grant administration staff), Research Costing Compliance, and the Pre- and Post-award offices.

The following guidelines and procedures are provided to address institutional responsibilities and to assist responsible faculty and staff in ensuring that subrecipients conduct their portions of research projects in compliance with regulations and that their expenses are reasonable and allowable.

2 CFR PART 200—UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS (UG) requires that institutions receiving federal awards have financial management systems and internal controls which:

  • provide reasonable assurance that the use of federal funds is consistent with laws, regulations, and award terms;
  • safeguard federal funds against waste, loss, and misuse;
  • obtain, maintain, and fairly disclose reliable data in reports.

As a pass through entity providing federal funds to a subrecipient, Duke University must:

  • Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the information specified in 2CFR PART 200.331 numbers 1-6 at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modifications;
  • Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining appropriate subrecipient monitoring activities;
  • Consider imposing specific subaward conditions upon a subrecipient, if appropriate, based on the subrecipient’s compliance risk assessment;
  • Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved;
  • Verify that every subrecipient is audited as required;
  • Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to Duke University’s own records;
  • Consider taking enforcement action against subrecipients when noncompliant activities related to the subaward are discovered.

III. DEFINITIONS

The Non-Federal entity may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor, depending on the substance of its agreements with Federal awarding agencies and pass-through entities. Therefore, a pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. The Federal awarding agency may supply and require recipients to comply with additional guidance to support these determinations provided such guidance does not conflict with this section.

(a) Subrecipients. A subaward is for the purpose of carrying out a portion of a federal award and creates a federal assistance relationship with the subrecipient. See §200.92 Subaward. Characteristics which support the classification of the Non-Federal entity as a subrecipient include when the Non-Federal entity:

(1) Determines who is eligible to receive what federal assistance;

(2) Has its performance measured in relation to whether objectives of a federal program were met;

(3) Has responsibility for programmatic decision making;

(4) Is responsible for adherence to applicable federal program requirements specified in the federal award; and

(5) In accordance with its agreement, uses the federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.

(b) Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity's own use and creates a procurement relationship with the contractor. See Uniform Guidance §200.22 Contract. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the non-Federal entity receiving the Federal funds:

(1) Provides the goods and services within normal business operations;

(2) Provides similar goods or services to many different purchasers;

(3) Normally operates in a competitive environment;

(4) Provides goods or services that are ancillary to the operation of the Federal program; and

(5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons.

(c) Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases, and the pass-through entity must use judgment in classifying each agreement as a subaward or a procurement contract.

§200.74 Pass-through entity.
Pass-through entity means a Non-Federal entity that provides a subaward to a subrecipient to carry out part of a federal program.

§200.93 Subrecipient.
Subrecipient means a Non-Federal entity that receives a subaward from a pass-through entity to carry out part of a federal program; but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency.

§200.92 Subaward.
Subaward means an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract.

§200.22 Contract.
Contract means a legal instrument by which a Non-Federal entity purchases property or services needed to carry out the project or program under a federal award. The term as used in this part does not include a legal instrument, even if the Non-Federal entity considers it a contract, when the substance of the transaction meets the definition of a federal award or subaward (see §200.92 Subaward).

IV. SUBRECIPIENT COMPLIANCE RISK ASSESSMENT

Duke University has established a formal process for evaluating the capacity of a subrecipient to perform the work proposed and compliantly manage federal funds. This process consists of extensive evaluation of audit findings, financial reports and other documents, review of past performance and experience with a subrecipient and escalation of risk assessment procedures as warranted. Based on specific metrics, subagreement language is customized and adjusted to ensure appropriate documentation and management of federal funds. The pre-award offices (ORA/ORS) utilize a formal risk assessment metric tool to produce a scoring range for initial evaluation which is then correlated with the specific scope of work to be performed, resulting in a customized subagreement.

Duke University has developed a database for accumulating risk assessment data. This database is populated by annual audit reviews of all subrecipients. When a new subrecipient agreement is initiated the appropriate pre-award office (the Office of Research Administration (ORA) or the Office of Research Support (ORS)) completes a Subrecipient Risk Assessment in the database, generating the Subrecipient Risk Assessment Form.  This form contains the risk rankings mentioned above and, upon completion by the pre-award office, provides the final compliance risk level for the subrecipient.  The pre-award offices will use this final risk level to determine the appropriate structure of the agreement currently in development, if there is a need to adjust any other agreements currently in force with the subrecipient, and what monitoring is appropriate for the subrecipient moving forward. 

If the new subrecipient agreement is with an institution that has not previously worked with Duke University, the pre-award office will contact OSP and RCC to request a compliance risk assessment of the new subrecipient including the creation of a new record in the database.  Subagreements may be issued prior to receipt of the requested audit; however, OSP/RCC will notify the pre-award offices of elevated risk elements upon receipt and review of the requested audit.  Such notification may, at the discretion of the pre-award office(s), result in a modification of the original subagreement.

OSP performs an annual review of each active subrecipient in the database.  New audit information is obtained and compiled in the database.  RCC is engaged if findings are present and the subrecipient’s compliance risk assessment is updated. 

As warranted, the Office of Sponsored Programs will contact the subrecipient and request additional information regarding corrective action specific to certain audit findings. The Office of Sponsored Programs maintains a current listing of all subrecipients from which corrective action is expected and ensures that follow-up occurs on a timely basis. If the subrecipient fails to establish that corrective action has been taken, the Office of Sponsored Programs will inform the appropriate Pre-award Office and the proper course of action will be determined. In noted instances of non-compliance, the Office of Sponsored Programs will maintain documentation of action taken and the results of such action.

 

V. SUBRECIPIENT MONITORING

Duke University’s monitoring of the subrecipient must include: reviewing audit and recording financial performance as evidenced in invoicing practice; following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the subaward detected through audits, on-site reviews, and other means; and implementing additional measures to ensure compliance is effectively managed.

Departments have the responsibility to manage the financial and programmatic conduct of the sponsored project after the subaward has been negotiated and signed by both parties.  This includes:

  • reviewing the terms and conditions of the subaward for special restrictions and/or conditions, and monitoring the progress of the sponsored projects according to those terms/conditions as applicable;
  • ensuring that invoices are received in a timely manner from the subrecipient;
  • reviewing and approving invoices upon receipt of the check request and supporting documentation, and escalating questionable costs to the Principal Investigator, or to OSP as warranted;
  • coordinating the Principal Investigator to ensure the work performed by the subrecipient is appropriate and timely, and assisting the PI in escalating poor performance issues to the appropriate pre-award office, and;
  • ensuring timely and accurate closeout of the subawardee’s programmatic and financial obligations

 

VI. ROLES AND RESPONSIBILITIES

Principal Investigators (PIs) have primary responsibility for:

Reviewing the award document and advising ORA/ORS of any required adjustments and/or changes, monitoring the programmatic and related fiscal progress of the subrecipient’s SOW, and for advising ORA/ORS of problems or issues to be addressed with subrecipient performance.  The PI is also responsible for approval of reports, invoices and related documentation submitted by the subrecipient during the project and ensuring a timely closeout of subrecipient activities.  Closeout responsibilities include: verification that appropriate progress has been made by the subrecipient (which may include review of a final formal report or other means of suitable verification); verification that all costs expended by the subrecipient as allowable, allocable and reasonable; and, approval of final invoice costs and justifications as appropriate and within budget limitations.

Appropriate personnel in the Departments have responsibility for:

Oversight and monitoring of subrecipient fiscal matters, including review and approval of invoices, ensuring timely closeout, and identifying performance issues requiring escalation to ORA or ORS throughout the conduct of the project.   Monitoring the activities of the subrecipient as necessary to assure that the subaward funds are used for authorized purposes in compliance with federal statutes, regulations, and terms and conditions of the subaward.  Reporting concerns and/or questions regarding financial aspects of subaward spending to the appropriate pre-award office.

The Pre-award Offices (Office of Research Administration and Office of Research Support) have responsibility for:

Evaluating the risk level of the potential subawardee using a prescribed table of risk elements.  Pre-award offices are granted the right to apply discretionary judgement when appropriate and to document risk evaluation decisions on the risk assessment tool. The pre-award offices also review debarment and/or suspension status of the potential subrecipient, including the entity’s eligibility to receive federal funds.  Pre-award is responsible for issuing a subagreement consistent with the compliance risk and for ensuring that appropriate terms and conditions are passed down to the subrecipient.  Pre-award also provides the department managing the subaward agreement with sufficient information regarding terms and conditions of the subaward so as to manage effectively.

The Post-award Office (Office of Sponsored Programs) has responsibility for:

Maintaining invoicing data in the OSP database, performing invoice reviews, managing payments, and financial closeout.  OSP is also responsible for obtaining, evaluating and recording audit information from all subrecipients, and for recording fiscal performance of current subs used for further review and compliance risk assessments.

The Pre-award and Post-award Offices are also responsible for:

Responding to issues and/or concerns raised by the managing department in regards to performance and/or fiscal matters.  Responding to issues and/or concerns raised by OSP or RCC regarding problematic invoicing and/or audit findings.  (See Special Conditions and Escalation Procedures)

Research Costing Compliance has responsibility for:

Reviewing audit reports with findings, evaluating the relevance and significance of audit findings to the current subaward, reviewing non-verifiable compliance situations, and informing ORA/ORS of issues that may require adjustments to current subagreements. 

The Office of Audit Risk and Compliance (OARC) has responsibility for periodic review of departmental and central office practice in regards to the conditions of this GAP, and of current and/or modified federal standards.

VII. SPECIAL CONDITIONS AND ESCALATION PROCEDURES

OSP and RCC regularly review audit reports from current and pending subrecipients according to a predetermined schedule.  Generally, if the subrecipient has already established a subagreement contractual relationship with Duke University, OSP will request an updated audit report three months after the close of the subrecipient’s fiscal year.  New subrecipients not in the OSP database will receive a request for current audit at the time of the subaward, and modifications to the subaward agreement may be made, depending on the receipt and review of the audit.  Audit findings are noted in the OSP database and matched to current awards.  OSP/RCC makes the determination of materiality of findings and has the option of advising the pre-award offices of findings that may impact current awards.  The pre-award offices may, at their option, modify current agreements if findings are determined to be so significant as to impact compliant management on the part of the subawardee.  OSP/RCC will issue a compliance review letter to those subrecipients with significant repetitive findings to require further documentation of the subawardees plan to address and remediate non-compliant practices.  OSP/RCC reviews subawardee responses to the compliance review letter and advises the pre-award offices as to perceived level of risk.  The pre-award offices may, at their option, revise the subagreement based on this information.

At time of renewal, pre-award offices require verification from the PI that appropriate progress has been made on the project to warrant renewal.  PI’s are also required to verify the subaward conditions have remained the same and to verify subaward amounts.  Pre-award consults the shared database to ensure that no adverse audit findings and/or performance issues are present that would warrant adjustment of the terms and conditions of the subagreement.

Duke University recognizes that research collaborations are essential to the conduct of meaningful research. Duke University reserves the right to decline to enter into a subrecipient agreement if it is determined that the subrecipient may not have the capacity to perform the work proposed or to manage federal funds as per federal regulations. Every effort will be made to ensure that the subrecipient monitoring process does not impede research. Appeals to decisions made by the pre-award offices should be directed to the Associate Vice President and Research Financial Compliance Officer who in concert with RACI will discuss the assessment of institutional risk A decision by RACI as to whether Duke University will or will not enter into a subagreement with the entity is final.  Similarly, ORA, ORS, OSP and RCC may bring concerns regarding areas under their assigned responsibilities to the Associate Vice President and Research Financial Compliance Officer for escalation as warranted.

Note: This guidance is administrative in nature and is not a cost reimbursement policy. Failure to comply may or may not result in adjustments of charges to the award. Noncompliance with this policy does not mean this cost is unallowable from an external perspective. Any adjustments of charges will be as required under applicable federal cost reimbursement principles. If a cost is removed from an award for any reason, whether or not related to this guidance, the cost will generally be charged to departmental funds.