Subaward Guidance

Overview

Purpose

The federal administrative requirements, cost principles and audit requirements in 2 CFR 200, also referred to as the Uniform Guidance, includes information and federal expectations on subrecipient monitoring. Pass-through entities such as MSU are required to monitor the activities of subrecipients to ensure proper use of federal funds to meet performance goals. MSU has elected to extend the principles in 2 CFR 200 to non-federally funded subawards for consistency (2 CFR 200.330 – 2 CFR 200.332). This page provides information to assist in understanding the federal requirements and in complying with such requirements.

The federal requirements for subrecipient monitoring and management are noted in 2 CFR 200.331.

Acronyms and Definitions

Roles and Responsibilities

MSU’s process for issuing and managing subawards on sponsored program accounts (RC accounts) include responsibilities from both central and departmental offices. The below information is not all inclusive but provides an overview of office roles in MSU’s subaward process.  More information related to international subawards can be found at "Roles and Responsibilities Guidance".

Principal Investigator

• Identifies potential subrecipients and approves their scope of work in proposals.
• Responsible for the oversight of all subrecipient activities.
  • Monitors the subrecipient activities for compliance with the terms and conditions of the award.
  • Receives programmatic reports and performance according to the expected work plan.
• Communicates regularly with the subrecipient regarding project related objectives.
• Reviews and approves all payment requests, certifying that work was performed satisfactorily.
• Considers requests from the subrecipient for modifications to subaward, including change in scope of work.

Departmental Administrator / Fiscal Officer

• Obtain all required information/documents from subrecipient.
• Reviews all required supporting expense documentation from subrecipient for accuracy and allowability.
• Initiates payments to subrecipients in MSU’s financial system.
• Acts as a liaison between the subrecipient’s business office and CGA/OSP regarding the subaward, as well as any modifications.

Contract and Grant Administration

• Drafts and executes subaward documents and modifications compliant with prime award terms and conditions for agencies that participate with the Federal Partnership Demonstration (FDP).
  • Verifies that required, applicable information is included in the subaward/modification, such as award number, project dates, project title, ALN/CFDA number, prime grantor and required flow-down provisions.
• Reviews, and approves if appropriate, subrecipient requests for payment for compliance with applicable terms and conditions.
• Ensures that subrecipient debarment status and risk level are reviewed when expired.
• Acts as the primary point of contact for all audits.
• Reports FFATA information as required.
• Processes changes to the performance schedule and/or scope of work as requested by the PI.
• Follows-up to ensure that the subrecipient's Single Audit, Single Audit certification form, or other applicable documentation is current.
• May conduct financial reviews, desk audits, and in highly unusual situations, on-site audits to monitor subrecipient financial compliance.

Office of Sponsored Programs / Business Connect

• Submits proposals that include subrecipient information.
• Drafts and executes subaward documents compliant with prime award terms and conditions for agencies that do not participate with the Federal Demonstration Partnership (FDP).
  • Verifies that required, applicable information is included in the subaward, such as award number, project dates, project title, ALN/CFDA number, prime grantor and required flow-down provisions.
• Verifies that subrecipient debarment status and risk level are reviewed when expired.
• Processes changes to the performance schedule and/or scope of work as requested by the PI.
• Responsible for negotiating and executing FAR based subcontracts. 
  • Ensures that the appropriate flow-down provisions from the prime federal contract are incorporated into any related subcontracts for property administration and disposition.

Subaward Execution

In most cases, subawards will be listed in proposals, including a subaward budget, justification, scope of work, and signed subrecipient commitment form (Proposing Subawards).  A subaward will only be established after the prime agreement between MSU and the awarding agency has been executed. In addition, all required documents must be completed and accepted by OSP/CGA prior to subaward execution. Once fully executed, OSP/CGA will send a copy of the subaward to the PI and department administrator/Fiscal Officer.

Cost Reimbursable v. Fixed Price Subawards

• Cost reimbursable subawards require subrecipients to invoice for actual costs incurred.
  • Standard cost reimbursable agreements require the subrecipient to submit an invoice to MSU after project costs have been incurred.
    • The standard for most federally funded projects.
    • Used when there is less assurance of a specific deliverable being met.
    • Allows MSU and the subrecipient more flexibility for cost fluctuations.
    • Minimizes the risk of compliance violations.
  • Fixed payment schedules allow the subrecipient to invoice set amounts based on a schedule, not on actual costs incurred.
    • Subrecipient is required to submit a final financial report of actual costs and must refund unused payments to MSU after the project end date.
    • Is typically utilized when required by the sponsoring agency.
• Fixed price subawards establish payments by completed deliverable.
  • Used when there is a well-defined scope of work and high degree of assurance that the deliverable will be met.
  • Costs are assessed for reasonableness prior to subaward execution. Financial reports are not required, nor will actual costs be audited during the life of the subaward.
  • May be used when work is performed in areas where there is more difficulty obtaining documentation for small expenses and where currency fluctuations are common.
  • If anticipated costs increase, the subaward amount will not typically change.
  • Fixed price subawards over $150,000 require agency approval when federally funded.

Subaward Advances

At times, it may be in the project's best interest to provide the subrecipient with an advance of funds to ensure that work can be performed. Approved advances, as well as the payback schedule which outlines when and how the subrecipient should reconcile the advance payment(s) with actual costs, should be incorporated into the subaward document. All requests for subrecipient advances must be submitted to OSP/CGA with a business purpose, explaining the necessity and how the requested amount was determined to be appropriate. Depending on the amount of the advance request, additional approvals may be required.

• Requests up to $50,000, when representing 25% or less of the total amount obligated on the subaward, require PI approval.
• Requests from $50,000 to $100,000, when representing 25% or less of the total amount obligated on the subaward, require Chair level approval.
• Requests more than $100,000, as well as those representing more than 25% of the total amount obligated on the subaward, require Dean level approval.

Human Subjects / Animal Use

If the subaward scope of work includes human subjects or animal use, the subrecipient must have the appropriate compliance approvals in place prior to starting the related work. OSP/CGA may ask for documentation to demonstrate that the approval has been received or for certification that the related work is covered under MSU's approval document.

Subrecipient Monitoring

The level of MSU oversight varies by subrecipient and/or subaward, depending on the relative risk of noncompliance and nonperformance that each subrecipient or agreement presents. MSU subrecipient monitoring procedures include an annual risk assessment of each subrecipient with a current subaward from MSU, as well as an annual debarment verification.

• For Cost Reimbursable agreements to subrecipients, MSU will conduct an annual risk assessment, as well as sampling of subaward invoices for review. If the current assessment is expired, CGA will update the risk assessment prior to making further payments to the subrecipient.
• For Fixed Price agreements to subrecipients, OSP/CGA will conduct a one-time pre-audit prior to executing the subaward, including a review of the budget for reasonableness. Additional support may be requested from the department as needed.

Determination of Subrecipient Risk

MSU will ensure that a current risk assessment has been conducted prior to subaward execution, as well as on an interim basis. MSU will utilize a Risk Assessment Questionnaire to establish the subrecipient risk level and will classify each subrecipient’s risk level as elevated or low.

• Management of elevated-risk recipients typically will include a requirement in cost reimbursable subawards that the subrecipient provide a copy of all supporting documentation/receipts prior to payment and may involve site visits by the PI and/or other financial personnel.
• Management of low-risk recipients will include a requirement in cost reimbursable subawards that the subrecipient provide documentation/receipt copies upon MSU's request.

Uniform Guidance (2 CFR 200.500) requires that a non-federal entity which expends $750,000 or more of Federal funds in a year shall have a single or program-specific audit conducted for that year. For subrecipients subject to this requirement, MSU will review their Single Audit, or a Single Audit certification form as part of the risk assessment. For subrecipients that are not subject to the requirement, MSU will review other financial documentation provided by the subrecipient as part of their risk assessment. This may include an independent audit report and/or alternate financial information. MSU will issue a management decision to the subrecipient for audit findings that pertain specifically to MSU funded subawards per 2 CFR 200.331 and 2 CFR 200.531.

Retention of the Subrecipient’s risk assessment, including other applicable documents such as the Subrecipient Commitment Form, Single Audit report, or other financial information will be maintained in MSU's central files.

Sampling of Subrecipient Costs

CGA will sample costs included in subrecipient invoices, based on the following criteria:

• Prior to payment authorization by MSU on cost reimbursable subawards to elevated risk subrecipients.
  • CGA may review the support documentation for some or all costs in the first invoice from the subrecipient that includes actual costs.
  • CGA will review the support documentation for all costs included in the final invoice.
• After payment authorization by MSU on cost reimbursable subawards.
  • CGA will select a sample of paid subrecipient invoices and conduct an invoice audit.
  • CGA will request the invoice's supporting documentation, review the documents and communicate results/findings to the subrecipient.

Subaward Specific Factors Impacting Risk

Prior to the execution of a subaward, OSP/CGA will review several considerations to determine the appropriate level of oversight to be included in each specific subaward document. For example, subrecipients considered to be low risk may have additional reporting requirements included in their subaward if other elevated risk factors are present. These factors include, but are not limited to, funding source, type of contracting mechanism, percentage of MSU's award being obligated to the subrecipient, involvement of human or animal subjects, and past experience.

Debarment Verification

OSP/CGA will verify that a current debarment check is on file for each subrecipient, as well as the main subrecipient PI, prior to subaward execution. CGA will complete the debarment status verification in Visual Compliance on an interim basis. MSU will not issue federally funded subawards, or will terminate subawards, to subrecipients who are debarred.

Subaward Payments

Subrecipients typically send invoices to the applicable MSU department for review and payment initiation. Department administrators/Fiscal Officers will process a Disbursement Voucher (DV) in MSU's financial system using the appropriate financial information, including object codes, and will attach the invoice, PI certification, and other documentation required by the subaward, if appropriate.

• Subrecipient’s invoice:
  • The invoice should contain the required information as included in the subaward, such as subaward number, period covered by the billed expenses, current and cumulative costs, expense detail per budget category, and cost share.
  • A certification signed by an authorized official certifying to the truth and accuracy of the invoice should be included on the invoice.
• PI certification:
  • The DV should include the following, or a similar statement, certified by the PI: “The services for which reimbursement is requested have been satisfactorily rendered and the costs thereof are proper and due in accordance with the terms of the agreement. If this payment is for an advance, it is in accordance with the terms of the agreement and necessary to further project objectives."
  • There are three methods of documenting PI certification:
    • The PI can sign a separate document that includes the statement, which can be attached as a note on the DV.
    • The statement and PI signature can be added to the subrecipient’s invoice, which should be attached to the DV.
    • The PI can personally add a note to the DV that contains the statement.

CGA's approval is required in the workflow for all subaward payments on RC accounts. The DVs will automatically route to CGA in MSU's system, based on the use of the subaward object codes. CGA will review the subaward payment requests for allowability and compliance with the subaward requirements, including but not limited to the following information, when appropriate.

• Information required by the subaward, such as the invoice and current expenses by budget line.
• Compliance with subaward terms and conditions, such as equipment or travel restrictions.
• Accuracy of the financial object code(s):
  • Object code 6593 for the first $25,000 of the subaward (subject to F&A), or
  • Object code 6594 for payments greater than $25,000, or for all payments on subawards which have no F&A calculated.
• The inclusion of supporting documentation for elevated risk subrecipients on cost reimbursable subawards. CGA will not review the individual support documents on all payment requests but will verify that they are attached to the DV.
• Current risk assessment and debarment check:
  • CGA will update the information if either is expired prior to authorizing payment or will note the exception.

CGA will enter payment details, advance reconciliation, and/or cost share information into Account Explorer, add a note to the DV that the contract is on file in CGA, and if appropriate, electronically approve the payment. 

Subrecipient Government Owned Property

MSU subrecipients with government owned equipment funded by the subaward are subject to additional responsibilities and reporting requirements, which will be noted in the subaward. When applicable, CGA will note that the subaward includes government owned property in the Account Explorer system.