16.4 Subrecipient Monitoring
Explains principles of accounting as they apply to subawards.
1. Purchased or Fabricated Equipment on Subawards
Stanford's Property Management (PMO) office reviews the property terms and conditions for all subawards issued under contracts, and on those grants where acquisition of capital equipment or fabrication by a subrecipient is contemplated. PIs and their departmental administrators are responsible for assisting PMO to ensure that property acquired or fabricated by a Subrecipient is managed in accordance with the reporting and delivery requirements of Stanford's prime agreement.
2. Subrecipient Audit Requirements
A. Subrecipients Subject to OMB Uniform Guidance
Proposed Subrecipients must complete and sign the OSR Subrecipient Commitment Form (OSR Form 33) at the time of proposal. Prior to issuance of a subaward, the subrecipient must provide a complete copy of their most recent independent audit used to meet their OMB Uniform Guidance requirement, or a link to their record on the Federal Audit Clearinghouse. OSR’s Subrecipient Monitoring Officer will review the report to verify that there are no findings that may impact Stanford's subaward. In the event there are such findings, OSR’s Subrecipient Monitoring Officer will issue a Management Decision Letter and will monitor the subrecipient taking appropriate and timely corrective action if necessary
B. Subrecipients Not Subject to OMB Uniform Guidance
All subrecipients will be requested to complete the Audit Certification and Financial Status Questionnaire (OSR Form 47) and provide any requested information (including audited/unaudited financial statements) before a subaward can be issued. OSR’s Subrecipient Monitoring Officer will review the financial questionnaire as part of its entity-level risk analysis and will contact PIs with any questions or to discuss the audit status or the proposed fitness of a particular Subrecipient.
C. Annual Audit Review
As prescribed in OMB Uniform Guidance, Section 200.331, a Subrecipient's audit status will be reviewed annually. OSR’s Subrecipient Monitoring Officer’s annual review will determine whether there are reportable conditions relating to the Subrecipient's internal controls, noncompliance by the Subrecipient with laws and regulations, questioned costs in the Subrecipient's financial statements, or other reportable audit findings which might affect a Stanford program.
3. Risk Analysis
A. Risk Analysis
Stanford is required to perform a risk analysis to evaluate the likelihood that a Subrecipient will fail to comply with the requirements of the subaward (OMB Uniform Guidance, Section 200-331 and 200-519). Project-related risk analysis is handled by OSR Contract & Grant Officers during the subaward issuance process, and is monitored during the life of the subaward. Entity-level risk analysis is conducted as part of the Annual Audit Review process. The criteria used in evaluating risk includes, but is not limited to, the Subrecipient's audit experience, the prior oversight and monitoring the Subrecipient has received, the nature and complexity of the proposed research project, and fiscal maturity of the Subrecipient.
B. Definition of High and Low Risk Auditees
Low-risk Subrecipients (the vast majority of Stanford's Subrecipients) include entities with current annual single audits containing "unqualified" opinions on their financial statements, and which have no reported material weaknesses in their internal controls. High-risk Subrecipients are entities which have not completed annual single audits, or whose audit results have demonstrated weaknesses in administering Federal funding, a history of failing to adhere to applicable provisions of contracts and grant agreements, or weak internal control structures. High-risk subrecipients can also include start-up entities with limited resources or prior experience in performing research.
C. Special Actions with High-Risk Subrecipients
When OSR has categorized a Subrecipient as "high-risk," OSR will work with the PI to ascertain whether or not a subaward should be issued, what special terms and conditions should be included in the subaward, as well as what additional oversight requirements will be necessary to adequately monitor the subaward. Some of these additional monitoring requirements (e.g, more frequent reporting, shorter periods of performance or smaller, more frequent funding allocations, more detailed invoices or backup documentation) may become the responsibility of the PI and his or her administrators. Written agreements may be used to outline the responsibilities of the parties. OSR is responsible for ensuring that adequate arrangements are in place to mitigate the additional risk to Stanford before issuing or continuing subawards with high-risk Subrecipients.
D. Subrecipient Site Visits and Site Audits
OSR (and PIs) may elect to engage in a site visit to a Subrecipient to verify their programmatic, financial, and technical fitness.
4. Corrective Action Plans and Sanctions
In the event there are audit findings which relate to the funding provided by Stanford under any Subawards, OSR will require compliance by the Subrecipient with a Corrective Action Plan as required by OMB Guidance, Section 200.331. OSR will exercise its management authority and decision-making to determine whether to approve a Corrective Action Plan proposed by the Subrecipient or to modify that plan to incorporate additional requirements. PIs will be informed if their Subrecipient is subject to a Corrective Action Plan, and may be asked to help monitor the Subrecipient's compliance.
If the Subrecipient fails to have an audit performed in accordance with Stanford's requirements, does not exhibit reasonable diligence in adhering to subaward terms and conditions, including reporting and invoicing requirements, or does not fulfill its Corrective Action Plan, OSR may impose sanctions upon the Subrecipient, including withholding of payment, disallowing overhead costs, suspending the Subaward until such time as an adequate audit, or other.
5. Principal Investigator Monitoring Responsibilities (Assisted by their Departmental Administrators)
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. TheUniform Guidance requires Stanford, as the pass-through entity, to monitor its subrecipients. This monitoring requirement places Stanford in much the same position as if it were a Federal agency dealing with its own primary recipient.
Stanford has designated the PI as the individual primarily responsible for monitoring the programmatic and financial performance and progress of a subaward. Except as noted below, the subaward monitoring and compliance obligations of the PI may be shared with departmental administrators or other Stanford University employees; however, in no event may such monitoring and compliance obligations be delegated to a non-Stanford employee.
As part of Stanford's monitoring responsibilities, the duties of the PI during the life of the subaward are as follows:
To understand the terms and conditions of the prime award, including those flowed down to the Subrecipient and those that may have been imposed by Stanford, and to regularly monitor the Subrecipient's adherence to the subaward's terms and conditions. Such monitoring may take place through phone calls, emails, site visits, meetings, or other regular contact.
To insure that Subrecipient's invoices are prepared in accordance with subaward requirements; to verify that the costs incurred are in accordance with the approved budget or permissible rebudgeting; that costs were incurred within the approved period of performance and overall cost limitations, and 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 as they relate to the terms and conditions imposed by the sponsor and the subaward issued by Stanford. In the event the level of detail included on an invoice is not sufficient to understand the direct 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 should be done in a timely manner (within thirty days after receipt of an invoice) so that the Subrecipient can be promptly paid for approved costs. OSR staff are available to assist PIs and their departmental staff in resolving issues that may arise.
To personally approve acceptable Subrecipient invoices for payment and to review expenditure statements or otherwise ensure that payments to Subrecipients are made in a timely manner, consistent with the terms of the subaward and approved invoices. The Stanford PI’s signature on the invoice is required to certify that he/she approves payment of the invoice, attests that the charges appear reasonable and that progress to date on the subaward is satisfactory and in keeping with the statement of work. Effective September 1, 2015, Subaward invoices require the following statement to accompany the PI’s signature: “In signing below I approve payment of this invoice and attest that the charges appear reasonable, and progress to date on this project is satisfactory and in keeping with the statement of work.”
To monitor the Subrecipient's scientific progress in terms of the Statement of Work and any required milestones. If scientific progress is not satisfactory, or if technical reports required of the Subrecipient are not prepared timely, the PI is responsible for contacting the Subrecipient to address these issues. If continued performance is not satisfactory, PIs should contact OSR to discuss appropriate remedial actions or termination of the subaward.
On a quarterly basis, to review and certify the research project expenses (must be done personally by the PI). When a PI executes a Quarterly Certification, he/she is certifying 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.
To verify that any human subject, animal subject, biosafety or other compliance approvals applicable to the Subrecipient's Statement of Work are kept current throughout the performance of the subaward, both from the Stanford Research Compliance Office and from the Subrecipient's parallel boards or committees. In the event of a lapse in approval, the PI is responsible for immediately notifying Stanford's applicable compliance committee and the OSR Contract and Grant Officer. Costs incurred by a Subrecipient during a period of lapse may not be charged to a subaward.
To be the primary point of contact for the Subrecipient during performance of the subaward. The PI may delegate those responsibilities on a day-to-day basis to another member of the research project, so long as such other member is a full-time, regular Stanford employee; however, such delegation may not be made to a contractor or temporary employee working at Stanford.
To ascertain whether the subaward Statement of Work or Budget, or both, require modification to add funding, time, or other considerations, and to notify OSR in a timely manner so an Amendment to the subaward agreement may be prepared. Most subaward modifications will also require the PI to submit a requisition to authorize the change.
To plan for efficient completion of performance and close-out of the Subaward. This includes requiring that the Subaward period of performance end no later than the end date of the prime award, and that the Subrecipient's final invoice, final technical report, and any required reports, including those on property, use of small businesses, or inventions, be submitted to Stanford as stated in the subaward terms and conditions.
To assist OSR, upon request, in obtaining or reviewing reports, advising OSR during risk analysis, complying with additional monitoring responsibilities for high-risk auditees, obtaining audit information or monitoring a Subrecipient's adherence to corrective action plans.