Northwestern University InfoEd Implementation Overview

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Subrecipient Monitoring RADG Meeting Boston,
MA December 13, 2006
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Panelists

• Thomas W. Egan, Assistant Director, OSP Research
  Subawards Office
• Massachusetts Institute of Technology (MIT)
• tegan_at_MIT.EDU
• Bethanne Giehl, Assistant Director, Office of
  Research Funding
• University of Massachusetts Medical School
  (UMASS)
• bethanne.giehl_at_umassmed.edu
• Andrew Chase
• Huron Consulting Group, Higher Education and
  Health Care
• Achase_at_huronconsultinggroup.com
• John Sites
• Huron Consulting Group, Higher Education and
  Health Care
• Jsites_at_huronconsultinggroup.com
• Gary Smith (MODERATOR), Administrative Director
  Research, Dept. of Surgery
• Massachusetts General Hospital (MGH)
• Chair, NCURA Region 1
• GSMITH4_at_PARTNERS.ORG

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Presentation Overview

• Definitions
• What Are My Responsibilities?
• Risk Assessment
• Risk Analysis Nonprofit vs. Commercial
• Current Practices
• International Entities
• The Costs of Monitoring

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Definitions
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Definitions

• Subaward - an award of financial assistance in
  the form of money, or property in lieu of money,
  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 (OMB Circular A-110 Subpart A, Section
  2)
• Subrecipient - the legal entity to which a
  subaward is made and which is accountable to the
  recipient for the use of the funds provided. The
  term may include foreign or international
  organizations (such as agencies of the United
  Nations) at the discretion of the Federal
  awarding agency. (OMB Circular A-110 Subpart A,
  Section 2)
• Subrecipient - a non-Federal entity that
  expends Federal awards received from a
  pass-through entity to carry out a Federal
  program, but 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. (OMB Circular A-133 Subpart A -
  Definitions)

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Definitions - Continued

• Characteristics indicative of a subrecipient are
  when the organization
• Has its performance measured against whether the
  objectives of the program are met
• Has responsibility for programmatic decision
  making
• Has responsibility for adherence to applicable
  program compliance requirements and
• Uses the funds to carry out a program of the
  organization as compared to providing goods or
  services for a program of the pass-through
  entity.
• Characteristics indicative of goods and
  services are when the organization
• Provides the goods and services within normal
  business operations
• Provides similar goods or services to many
  different purchasers
• Operates in a competitive environment
• Provides goods or services which are ancillary to
  the operation of the program
• ...In making the determination ofsubrecipient
  or vendor, the substance of the relationship is
  more important than the form of the
  agreementnotall of the characteristics will be
  present and judgment should be used(OMB Circular
  A-133 Subpart B Subrecipient and vendor
  determinations)

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What are my Responsibilities?
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What Are My 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)

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What Are My Responsibilities? - Continued

• Advise subrecipients of requirements imposed on
  them by Federal laws, regulations, and the
  provisions of contracts or grant agreements as
  well as any supplemental requirements imposed by
  the pass-through entity.
• Monitor the activities of subrecipients as
  necessary to ensure that Federal awards are used
  for authorized purposes in compliance with laws,
  regulations, and the provisions of contracts or
  grant agreements and that performance goals are
  achieved.
• Ensure that subrecipients expending 300,000
  (500,000 for fiscal years ending after December
  31, 2003) or more in Federal awards during the
  subrecipient's fiscal year have met the audit
  requirements of this part for that fiscal year.
• Issue a management decision on audit findings
  within six months after receipt of the
  subrecipient's audit report and ensure that the
  subrecipient takes appropriate and timely
  corrective action.
• Consider whether subrecipient audits necessitate
  adjustment of the pass-through entity's own
  records.
• Require each subrecipient to permit the
  pass-through entity and auditors to have access
  to the records and financial statements as
  necessary for the pass-through entity to comply
  with this part.
• (OMB Circular A-133, Subpart D Federal Agencies
  and Pass-Through Entities Responsibilities)

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Risk Assessment
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Risk Assessment

• Areas of Risk
• Weakness in internal control isolated business
  unit or pervasive throughout the entity
• New and recently modified computer systems
• Prior audit findings
• Noncompliance with the provisions of the laws,
  regulations, contracts or grant agreements
• The nature of the program may indicate risk
• Pre and Post Award Audits
• AICPAs generally accepted auditing standards or
  attestation standards
• GAGAS and Program Specific Audit Guide (if
  applicable)
• Other Resources
• DB Subscription Service
• https//www.dnb.com/product/birsampl.htm
• Previous audits, associated findings and
  corrective action plan, if any

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Risk Assessment Example Weighted Guidelines
Method

• Monitoring During the Contract
• Weighted Guidelines Method DFAR 215.404-70 / DD
  Form 1547
• How does the Government measure risk?
• 215.404-71-1 General.
• (a) The weighted guidelines method focuses on
  four profit factors
• (1) Performance risk
• (2) Contract type risk
• (3) Facilities capital employed and
• (4) Cost efficiency
• 215.404-71-2 Performance risk.
• (a) Description. This profit factor addresses the
  contractor's degree of risk in fulfilling the
  contract requirements. The factor consists of two
  parts
• (1) Technical--the technical uncertainties of
  performance.
• (2) Management/cost control--the degree of
  management effort necessary--
• (i) To ensure that contract requirements are
  met and
• (ii) To reduce and control costs.

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Risk Assessment Example Weighted Guidelines
Method - Continued

• (d) Evaluation criteria for technical.
• (1) Review the contract requirements and focus on
  the critical performance elements in the
  statement of work or specifications
• (2) Above Normal Conditions
• (3) Below Normal Conditions
• (4) Technology Incentive Range
• (e) Evaluation criteria for management/cost
  control.
• (1) The contracting officer should evaluate--
• (i) The contractor's management and internal
  control systems
• (v) The expected reliability of the contractor's
  cost estimates (including the contractor's cost
  estimating system)
• (vi) The adequacy of the contractor's management
  approach to controlling cost and schedule and
• (vii) Any other factors that affect the
  contractor's ability to meet the cost targets
  (e.g., foreign currency exchange rates and
  inflation rates).
• (2) Above Normal Conditions
• (3) Below Normal Conditions

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Risk Analysis Nonprofit vs. Commercial
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Risk Analysis Nonprofit vs. Commercial

• (a) Recipients and subrecipients that are
  institutions of higher education or other
  nonprofit organizations (including hospitals)
  shall be subject to the audit requirements
  contained in the Single Audit Act Amendments of
  1996 (31 U.S.C. 75017507) and revised OMB
  Circular A133, Audits of States, Local
  Governments, and Non-Profit Organizations.
• (b) State and local governments shall be subject
  to the audit requirements contained in the Single
  Audit Act Amendments of 1996 (31 U.S.C.
  75017507) and revised OMB Circular A133,
  Audits of States, Local Governments, and
  Non-Profit Organizations. (45 CFR Part 74
  Subpart C Post Award Requirements, Section 51)
• Since this part does not apply to for-profit
  subrecipients, the pass-through entity is
  responsible for establishing requirements, as
  necessary, to ensure compliance by for-profit
  subrecipients. The contract with the for-profit
  subrecipient should describe applicable
  compliance requirements and the for-profit
  subrecipient's compliance responsibility. Methods
  to ensure compliance for Federal awards made to
  for-profit subrecipients may include pre-award
  audits, monitoring during the contract, and
  post-award audits. (OMB Circular A-133 Subpart
  B Audits, Section 210(e) )

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Risk Analysis Nonprofit vs. Commercial -
Continued

• (c) For-profit hospitals not covered by the audit
  provisions of revised OMB Circular A133 shall be
  subject to the audit requirements of the Federal
  awarding agencies.
• (d)(1) Recipients and subrecipients that are
  commercial organizations (including for profit
  hospitals) have two options regarding audits
• (i) A financial related audit (as defined in the
  Government Auditing Standards, GPO Stock
  num020000002654) of a particular award in
  accordance with Government Auditing Standards, in
  those cases where the recipient receives awards
  under only one HHS program or, if awards are
  received under multiple HHS programs, a financial
  related audit of all HHS awards in accordance
  with Government Auditing Standards or
• (ii) An audit that meets the requirements
  contained in OMB Circular A133.
• (2) Commercial organizations that receive annual
  HHS awards totaling less than OMB Circular
  A133's audit requirement threshold are exempt
  from requirements for a non-Federal audit for
  that year, but records must be available for
  review by appropriate officials of Federal
  agencies. (45 CFR Part 74 Subpart C Post Award
  Requirements, Section 51)

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Risk Analysis Nonprofit vs. Commercial -
Continued

• In cases of continued inability or unwillingness
  to have an audit conducted in accordance with
  this part, Federal agencies and pass-through
  entities shall take appropriate action using
  sanctions such as
• (a) Withholding a percentage of awards until
  the audit is completed satisfactorily
• (b) Withholding or disallowing overhead costs
• (c) Suspending awards until the audit is
  conducted or
• (d) Terminating the Federal award.

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Current Practice
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Current Practice

• Pre-Award
• Initial Assessment of subrecipeint
• Pre-Qualification from prior experience with
  subrecipient
• Disqualification from prior experience with
  subrecipient
• Conflict of Interest
• Award Set-up
• A-133 Verification / Review of findings / Follow
  up with findings
• Federal Clearinghouse (FAC) database
  (http//harvester.census.gov//sac)
• Accumulation / Review of additional documentation
  
• Incorporation of language in the contract
• Included as part of contract negotiation process?
• Post Award
• Monitor Progress reports / Technical deliverables
• Review and approve Invoices
• Additional monitoring? Annual Reviews?

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SUBRECIPIENT PROCEDURES AT MIT UMASS MEDICAL

• Discussions
• Subrecipients A-133 report Federal Audit
  Clearing House
• Subrecipient Monitoring Financial
• Subrecipient Monitoring Technical

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University of Massachusetts Medical School

• Decentralized Grants Management
• Multiple Offices and Departments share
  responsibility for Subrecipient Monitoring
  Research Funding Services and Grant Accounting
  share primary responsibility for procedure/policy
  and determination of risk
• Subrecipient Monitoring is evolving based on
  recent events.
• Formal written procedure/policy now exists and
  defines responsibilities. Current
  procedure/policy has been reviewed as part of OIG
  audit.
• Policy/procedure will be reviewed annually to
  strengthen/change as needed.

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University of Massachusetts Medical School

• Current Responsibilities in Procedure/Policy
• Research Funding Services (Pre-award Office)
• At the time of application
• Review of initial consortium paperwork at the
  time of submission
• Initial review of subrecipient based on prior
  experience
• Award Set-up
• A-133 Verification
• Review of findings (Federal Audit Clearinghouse)
• Follow up for any findings
• Additional information requested (if necessary
  for review)
• Contract language changes based on risk analysis

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University of Massachusetts Medical School

• Current Responsibilities in Procedure/Policy
• Grant Accounting (Post-award Office)
• Review of invoice activity/spending rate
• Alert Department and Research Funding regarding
  any concerns
• Department
• Post Award
• Department Administrator reviews invoice
• Principal Investigator approves invoice for
  payment
• Monitor technical progress and reporting

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Subrecipient MonitoringA-133 Audit Report Review

• Research and review results of subrecipients OMB
  Circular A-133 audit reported in the Federal
  Audit Clearinghouse. This is the primary
  monitoring step for the Research Administrator.
  Information presented within Federal Audit
  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 internal
  controls
• Has no material weaknesses reported
• Has no reportable conditions related to Federal
  awards

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FEDERAL AUDIT CLEARINGHOUSE
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(No Transcript)
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Subrecipient Monitoring A-133 Audit Report Review
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Subrecipient Monitoring A-133 Audit Report Review
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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.

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Subrecipient MonitoringA-133 Audit Report Review

• Upon receipt of applicable information, evaluate
  for materiality, any findings or questioned costs
  noted during the above procedures. Consider the
  impact of any corrective action plan as well as
  other related actions undertaken by subrecipient
  management. Notify the proper Institute
  administrative departments of those findings and
  questioned costs determined to have a material
  impact on Federal awards.

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Subrecipient Monitoring A-133 Audit Report
Review
MITs request for more detailed information
regarding the subrecipients audit findings
and/or reportable conditions
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Subrecipient Monitoring A-133 Audit Report
Review
MITs response to subrecipients audit status
query
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Subrecipient Monitoring

• Consider PI Annual Question Yes or No
• Does the Subrecipient invoice in a timely manner?
• Are the amounts invoiced reasonable based on the
  technical progress of the project?
• Is the subrecipient satisfactorily performing
  the scope of work?
• Are the reports/deliverables satisfactory?

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Subrecipient Monitoring FINANCIAL

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

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Subrecipient Monitoring TECHNICAL

• Scientific progress
• Invention reports
• Timely submission of deliverables
• Final reports

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Subaward AgreementSubrecipient Questionnaire
Letter request for more detailed information
regarding the cost proposal
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International Institutions
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International Institutions

• Financial Considerations
• Payments How, Where, When?
• Currency Fluctuations
• Audit Requirements/Records Paper vs. Electronic
• Local Expertise
• Existing Standards / Cultural Considerations
• European Union Dont Tread on Me
• Russian Federation Well give it to you but
• Canada Canadian Federal Standards
• Language Considerations
• Translation Services
• In-Country Expertise
• English, Local Language or both?
• Which version governs in a dispute?
• Associated Costs
• Direct Charge Onsite Visit vs. Local
  Representative
• Management Fee Institutional Distribution

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The Costs of Monitoring
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The Costs of Monitoring How do we pay for this?

• Allowable Costs
• Unless prohibited by law, the cost of audits
  made in accordance with the provisions of this
  part are allowable charges to Federal awards. The
  charges may be considered a direct cost or an
  allocated indirect cost
• Unallowable Costs
• (1) The cost of any audit under the Single Audit
  Act not conducted in accordance with this part.
  
• (2) The cost of auditing a non-Federal entity
  However, this does not prohibit a pass-through
  entity from charging Federal awards for the cost
  of limited scope audits to monitor its
  subrecipients provided the subrecipient does
  not have a single audit. For purposes of this
  part, limited scope audits only include
  agreed-upon procedures engagements conducted in
  accordance with either the AICPAs generally
  accepted auditing standards or attestation
  standards, that are paid for and arranged by a
  pass-through entity and address only one or more
  of the following types of compliance
  requirements activities allowed or unallowed
  allowable costs/cost principles eligibility
  matching, level of effort, ear marking and,
  reporting. (OMB Circular A-133 Subpart B
  Audits, Section 230 Audit Costs )

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Questions ?