A subaward is a formal written agreement between Stanford and another party, to perform a portion of the statement of work under a Stanford sponsored project.
Scope of Work
A subaward must include a clearly defined, intellectually significant Statement of Work (SOW) to be performed by the subrecipient. The subrecipient's SOW is performed by its personnel, using its own facilities and resources. Work is usually performed at the subrecipient's site.
Identifying a Subaward
The agreement is likely a subaward if you can answer “yes” to any of the following questions:
- Does the entity’s statement of work represent an intellectually significant portion of the programmatic effort of the overall project?
- Could the entity’s work result in intellectual property development or publishable results (including co-authorship)?
- Will the entity need animal and/or human subjects approvals for its portion of the work?
- Will the entity complete its portion of the work at its own facilities, using its own personnel?
- Is your agreement another type of procurement?
The agreement is likely a vendor agreement or other type of procurement action when:
- Procuring commercially available supplies or expendable materials.
- Consulting with a firm or an individual contributor.
- Procuring non-Stanford labor or services. Fabricating equipment, based on Stanford’s specifications, which will be delivered to and used by Stanford’s sponsor or other entity designated by the sponsor.
Selecting a Subrecipient
The PI must select a subrecipient based upon his/her assessment of the potential subrecipient's ability to perform the research work successfully. This includes an analysis of the subrecipient's past performance, technical resources, and financial viability, as well an assessment of the reasonableness of the subrecipient's proposed costs in light of the work to be performed.
To meet audit requirements, Stanford is required to retain documentation of this assessment. Therefore PIs are responsible for documenting their assessment of a subrecipient's proposal by completing and submitting OSR forms. The subrecipient may be another educational institution, an independent laboratory, a foundation, a for-profit corporation, a non-profit corporation, or other organization, and may be a domestic or foreign entity. However, there must be an arms-length relationship between Stanford and its subrecipients.
Stanford requires PIs to submit specific documents to their institutional representative in order for a named subrecipient to be included as part of a proposal. The institutional representative will not endorse a proposal until these elements are on file.
Subrecipient proposal elements are expected to conform to the sponsor’s requirements for Stanford's prime proposal. PIs are responsible for obtaining all materials from their subrecipient in the correct format.
Required Elements to Include in a Subaward Proposal
- Subrecipient's SOW, including a clear description of the work to be performed, the proposed timelines, and deliverables.
- Subrecipient's budget and budget justification, including the subrecipient's direct and indirect costs, calculated using the subrecipient's approved F&A and fringe benefit rates, and verifying any committed cost sharing.
- An OSR Subrecipient Commitment Form (OSR Form 33), completed and signed by the subrecipient's institutional official.
- A fair and reasonable cost analysis - only for subawards issued under federal contracts (OSR Form 45), as applicable, signed by Stanford's PI. The PI's signature on this form certifies that he/she has selected the subrecipient in accordance with this policy, and determined that their costs are reasonable with respect to the proposed SOW. In addition, the PI certifies that s/he has reviewed the subrecipient's proposed budget to ensure that all proposed costs are allowable under the sponsor's anticipated terms and conditions.
- PIs are responsible for working with their subrecipients to make any necessary modifications in proposed budgets that may be required to bring them into conformance.
- Any additional elements that may be required by Stanford's sponsor (e.g., Certificate of Current Cost or Pricing data, Sole Source Justification, biosketches of subrecipient key personnel, etc.)
Submitting a Requisition for a Subaward
A Stanford PI or designee may not authorize a subrecipient to begin working without a fully executed subaward agreement in place.
After the prime award has been accepted by Stanford the PI or his/her authorized administrator submits a requisition in Oracle Financials identifying the proposed subrecipient.
This request documents the amount authorized by the PI for the subaward and delineates the desired period of performance. OSR is not authorized to issue a subaward until an approved requisition and specific documents are on file, including:
- Copies of the subrecipient's F&A and fringe benefit rate agreements
- Copies of the subrecipient's human subjects approval and approval to use animals
- If applicable, a copy of the subrecipient's most recent A-133 audit or link to its record on the federal audit clearinghouse, or completion of the audit certification and Financial Status Questionnaire (OSR Form 47), if not provided at the time of proposal
- Any applicable requested information (subrecipient commitment form, updated Certificate of Cost or Pricing Data, small/small disadvantaged business plan, audit information,) Sole Source Justification, etc., if required
- Any special requirements the PI wishes to impose (prior approval requirements, report formats or due dates, etc.)
- See Fingate for more information about how to create a subaward requisition in iProcurement.
Requesting Modifications to Existing Subaward
Modifications to a subaward are issued by OSR in response to requisitions submitted through Oracle by a PI or his/her designee. This includes modifications to the SOW, incremental funding, rebudgeting, extending, or reducing the time for performance, and other changes in the terms of a subaward. In rare instances, OSR may initiate action on a subaward without a corresponding requisition; typically these changes involve urgent action on a subaward that is initiated by the University.
PIs may not reduce obligated funding or prematurely terminate an approved subaward unless they submit a corresponding requisition through Oracle to request a formal change in their subaward. In such cases, Stanford is required to honor the terms of the subaward, which typically require an advance notice period.
Applying Facilities and Administration Rates
There are two types of Facilities and Administration rates on subawards: those earned by the subrecipient, and those earned by Stanford.
A subrecipient is expected to apply its own federally-negotiated F&A rates and bases when preparing its subaward budget, unless a lower rate or base has been agreed to by the subrecipient's institutional official.
Stanford will recover F&A on the first $25,000 of each subaward on a project. This recovery is calculated on the life of the subaward. If one subaward supports multiple tasks on a single sponsored project, the $25,000 threshold will be divided among the project accounts in proportion to their support of the subaward. Stanford's "life-of-the-award" policy applies to subawards under a research project. That means that the terms of the subrecipient's F&A rate agreement in effect when the subaward is issued will govern F&A charges throughout the performance of the subaward. The period of performance on a subaward will not exceed Stanford's competitive segment on its award.
When a renewal subaward is issued under a Stanford award that uses a modified total direct cost (MTDC) base for calculating F&A, Stanford will recover its F&A on the first $25,000 of the renewal subaward. Any exceptions that impact Stanford's recovery of F&A must be approved through the indirect cost waiver process.
Monitoring a Subaward
Stanford is responsible for ensuring that sponsor funds, including those provided by Stanford to other entities, are spent in accordance with all applicable laws and regulations. The University is required to monitor its subrecipients as if it were the sponsor. This monitoring requirement places Stanford in much the same position as if it were a federal agency dealing with its own primary recipient.
It is the PI’s responsibility to monitor subrecipients so there is reasonable assurance that the subrecipient uses the award for authorized purposes, complies with laws, regulation, and the provisions of the grant or contract agreement, and achieves its performance goals.
Principal Investigator Review and Signature
The PI must review the subrecipient’s invoices and indicate approval by personally signing each one if he/she determines that the invoices are submitted on time, the costs are adequately detailed, the costs are reasonable, allowable, and allocable based on technical progress.
The PI must verify that the costs incurred are in accordance with the approved budget or permissible rebudgeting; were incurred within the approved period of performance and overall cost limitations, are aligned in terms of cost and type of expense with the scientific progress reported to date; and that the costs are allowable, allocable, and reasonable
In the event the level of detail included on an invoice is not sufficient to fully understand the costs, or if it appears that some costs may be excessive or understated, the PI is responsible for questioning the subrecipient's expenditures or requesting further documentation or explanation prior to approving an invoice. Copies of all such documentation and the ultimate outcome of the investigation should be retained in the project file. Such inquiries must be done in a timely manner (e.g., within thirty days after receipt of an invoice) so that the subrecipient can be promptly paid for approved costs.
The PI must be in contact with the subrecipient regularly to discuss technical progress, receive and review required reports, and verify that the subrecipient maintains current human and animal subjects approval when applicable. The subaward monitoring and compliance obligations of the PI may be shared with department administrators or other Stanford employees; however, in no event may such monitoring and compliance obligations be delegated to a non-Stanford employee.
At quarterly review and certification, the PI certifies the allowability, allocability, reasonableness, and consistency of the subrecipient's expenditures and the related sufficiency of the subrecipient's technical progress under each subaward involved in the research project, as well as expenses incurred directly at Stanford.
To verify that the subrecipient is adequately meeting any cost-sharing commitments made for the subaward, and that the subrecipient's indirect costs as charged are in compliance with the "life-of-the-award" policy and indirect cost rate agreement specified in the subaward, OSR staff are available to assist PIs and their departmental staff in resolving issues that may arise.
The federal regulations that describe subrecipient monitoring are general, but contain the following core elements of compliance:
- Advising subrecipients of all applicable federal laws and regulations, and all appropriate flow-down provisions from the prime agreement
- The routine receipt and review of technical performance reports
- The routine review of expenses-to-budget
- The periodic performance of on-site visits, or regular contact, if necessary
- The option to perform "audits" if necessary, review of A-133 audit reports filed by subrecipients, and any audit findings review of corrective actions cited by subrecipients in response to their audit findings
- Consideration of sanctions on subrecipients in cases of continued inability or unwillingness to have required audits or to correct non-compliant actions
The above list is not exhaustive of all compliance requirements. In addition to the general elements of compliance noted above, there may be additional sponsor- or program-specific requirements that mandate collecting and documenting other assurances (e.g., on lab animals, human subjects, biohazards, etc.) during the course of a project.
Department Monitoring Procedures
Department grant administrators, with guidance or assistance from OSR staff, should consider the following subrecipient monitoring procedures when appropriate:
Review of technical performance reports should be done on a timely basis by the PI. In some cases, subaward terms may require specified deliverables in addition to, or in lieu of, technical reports.
Review of invoices and expenses-to-budget should be done for cost-reimbursement subawards. The subrecipient’s invoices showing both current period and cumulative expenses-to-budget are generally required. Department grant administrators should compare subrecipient’s invoices to established subaward budgets.
Evidence of the regular review of invoices by both the PI and the department administrator should be in place and apparent on the uploaded invoice in Oracle. "Evidence" must be in the form of the PI's signature on invoices.
Clarification of Invoiced Charges
Clarification of invoiced charges should be requested by department grant administrators for explanations of any unusual, miscellaneous, apparently excessive, or other charges invoiced by the subrecipient. If the explanations are not sufficient to render a prudent judgment on the allowability of the cost, and the terms of the subaward permit, department grant administrators may request detailed justifications from subrecipient. Department administrators may also periodically request, if the terms of the subcontract permit, particularly from high-risk subrecipients, detailed support for selected invoiced charges to verify their appropriateness and reasonableness.
Examples of detailed justifications that may be requested from subrecipients include: payroll records, copies of paid invoices showing the cost of items purchased, descriptions of services rendered by consultants, including hourly rates and time reports; details of incurred travel charges stating the purpose, airfare, meals, ground transportation, unallowable costs, etc.
When there is a concern about the allowability of cost, the administrators can contact the Office for Sponsored Research for coordination of subsequent actions with the appropriate school sponsored research office.
On-site visits can be conducted by the PI to evaluate both compliance with the scientific objectives of the project and the appropriateness of the subrecipient’s administrative systems, processes, and charges. The PI should document meeting notes, trip reports, etc. and retain them on file.
Audits of a subrecipient are an acceptable monitoring procedure under federal regulations, and all of the University's cost-reimbursement subaward agreements contain "right-to-audit" clauses.
Formal audits are performed infrequently, however, and departments should contact Stanford's Internal Audit Department before initiating discretionary audits.
Review A-133 Audit Reports
Administrative staff should review A-133 reports filed by subawards that expend $500,000 or more of federal funds during the fiscal year and are subject to A-133. Staff may view the subrecipient’s A-133 report in the Federal Audit Clearinghouse (FAC) database (http://harvester.census.gov/sac). This website provides evidence to verify that the subrecipient has completed an A-133 audit and to assess the presence of audit findings. This FAC verification would be done in lieu of reviewing A-133 reports submitted by the subrecipient to Stanford. When subawards have A-133 audit findings – OSR may consider issuing a management decision on audit findings, when appropriate, and evaluate subrecipient corrective actions cited in response to audit findings. Corrective actions cited by the subrecipient should be verified to ensure subrecipient compliance and may necessitate on-site monitoring. OSR may also consider whether subrecipient audit findings necessitate adjustment of their own records.
Subawards Not Subject to A-133
Because A-133 does not apply to foreign or for-profit subawards, Stanford may establish its own requirements, as necessary, to ensure compliance by such subawards. Contracts with foreign or for-profit subawards should describe applicable compliance requirements and responsibilities. Methods to assess compliance with federal subawards made to foreign or for-profit subawards may include pre-award audits, on-site or audits.
A subaward is closed out when its period of performance comes to an end, regardless of whether Stanford's research project is ending or continuing.
When feasible, it is advisable for a subaward period of performance to be slightly shorter than Stanford's, in order to allow sufficient time for collection and review of the subrecipient's final reports, verification of subrecipient data, and incorporation of the subrecipient's research results into Stanford's final technical report to the sponsor.
Final Technical Reports
PIs are responsible for obtaining final technical reports from their subrecipients and retaining a copy in their project file. PIs are encouraged to remind subrecipients of this need well in advance of the due date for such reports.
Other Closeout Reports
Other final reports, including property reports, patent reports, small/small disadvantaged business reports, and assignment and release documents may be required. PIs and departments may be asked to assist OSR in obtaining the necessary closeout reports in a timely manner from the subrecipient.
Final Financial Reports
In order for Stanford to comply with its financial report requirements, subrecipients are required to submit a final invoice, clearly marked final, to Stanford no later than 60 days after the end of the subrecipient's period of performance, or such other date as may be specified in the subaward.
In the event no invoice is received 60 days after the end of a subaward, Stanford may treat the subrecipient's last invoice as the final invoice. Payment for subrecipient invoices submitted to Stanford later than 60 days after the end of the subaward may not be paid.
PIs and departments are responsible for assisting OSR in obtaining final closeout information, including invoices, from their subrecipients The PI ensures that the subrecipient has submitted all reports and deliverables. The PI assists in obtaining an invoice marked final from the subrecipient within 60 days of the end of the subaward.
OSR Form 31 - Subaward checklist
OSR Form 31CT - Subaward document checklist/clinical trials. Use this for subawards on clinical trials.
OSR Form 33 - Subrecipient commitment form. This form should be submitted by all subrecipients during their proposal process to Stanford. It provides a checklist of documents and certifications required by sponsors, as well as an area for the authorized official to sign.
OSR Form 33CT - Subaward document checklist/clinical trials. Use this for subawards on clinical trials.
OSR Form 34 - Sample invoice
OSR Form 45 - Sole Source Justification and Cost/Price Analysis required for subawards under federal and state contracts to be completed by Stanford PI in addition to OSR Form 45, the PI must send potential subrecipients on federal and state contracts one of the following:
OSR Form 45 A - Explanation of cost/price required for subawards under federal and state contracts to be completed by US University or non-profit subrecipients
OSR Form 45 B - Explanation of cost/price required for subawards under federal and state contracts to be completed by commercial or international subrecipients
OSR Form 47 - Audit letter sent to subrecipients, audit certification and financial status questionnaire
OSR Form 51 - Subaward Processing Guide. This is a step-by-step guide outlining all the major steps in the subaward process, and responsible party for each. It is recommended you keep this posted in a visible area to refer to frequently as you work on subawards
The ORA-1122 class, Subawards: Recognizing, Processing, Managing is required for those who manage a subaward. There are many unique nuances to working with subawards. This class gives you the tools and information to distinguish between a subaward and another procurement action. You will also learn how to process and monitor a subaward from proposal through closeout.