Subawards

Subawards transfer a portion of the programmatic work under a USC prime award to another institution or organization, a subrecipient. To qualify as a subaward, the subrecipient must have responsibility for programmatic decision making and measurable performance requirements related directly to the USC prime award. A subaward is written under the authority of the USC prime award and is consistent with the USC prime award’s terms and conditions (a grant, contract or cooperative agreement).

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 and usually at the subrecipient’s site.

The subrecipient is responsible for adhering to the terms and conditions of the subaward, including those flowed down from the prime award.  By doing so, the subrecipient is assuming creative and intellectual responsibility and leadership as well as financial management for performing and fulfilling its SOW within their approved budget.

A subrecipient is a non-USC entity that expends awards received from USC to carry out a portion of USC’s programmatic effort under a sponsored project. 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.  Generally, USC does not issue subawards to individuals.  A subrecipient can also be referred to as a subcontractor or subawardee.

Before entering into a relationship with another entity under a sponsored award in which the other entity will provide goods or services or substantive, programmatic work to USC, a determination must be made as to the nature of the legal relationship between USC and other entity, which in turn will determine the type of agreement required to document the relationship.  This is a significant decision because it determines the allocation of responsibilities and influences the appropriate application of indirect cost rates.

In the case of a subaward, it is incumbent upon USC to ensure that a subrecipient conducts its portion of the programmatic work in compliance with all applicable terms and conditions of the sponsored award and project costs incurred by a subrecipient are reasonable and allowable.   A subaward is likely appropriate under the following circumstances:

• The entity performing the statement of work will use their own facilities, employees and resources;
• The entity performing the statement of work will contribute substantively to the scholarly and scientific conduct of the project and will have responsibility for programmatic decision making;
• Performance is measured against whether the objectives of the sponsored program are met (e.g. technical progress or final reports);
• The entity performing the statement of work will provide unique knowledge and expertise to the project and conduct their work independent of USC’s direct supervision or control with only general technical direction and coordination from USC; and
• The entity does not provide the same goods and services as identified in the statement of work to others as part of its normal business operations.

In the case of a vendor contract, USC will be purchasing goods or services.  Typically, vendors are not bound to the full set of sponsor terms and conditions, and are subject to competitive bidding procurement practices, to assure that funds paid to vendors do not exceed fair market value.  A vendor contract is likely appropriate under the following circumstances:

• The entity is providing the same goods or services to USC as it provides to others as part of its normal business operations;
• The entity provides similar goods or services to many different customers;
• The entity operates in a competitive environment to provide the types of the goods or services to be procured;
• The goods or services being provided are ancillary to the operation of the sponsored program; and
• The entity is not subject to the compliance of the sponsored program terms and conditions

Once USC receives a fully executed prime award, the departmental administrator or Principal Investigator can request a new subaward by initiating a Subaward in Workday. Workday can be accessed through the link on the home of Workday web site.  The following information will be required to complete the Workday Subaward requisition:

Basic Information:

• Contract Specialist (person creating Subaward in Workday)
• Contract Name/Project Title
• Supplier Contract Number Reference ID (Original Internal number assigned to subaward)
• Subrecipient/Supplier Name
• Subrecipient Investigator Name
• Amount funded this Action (Extended Amount)
• Total Amount of Funds Obligated to Date (Total Contract Amount)
• Subrecipient Contact Email
• Subaward Budget Period Start Date
• Subaward Budget Period End Date
• Estimated Total Project Period Start Date
• Estimated Total Project Period End Date
• Any special requests (e.g. prime award confidentiality, limited rights data, confidentiality requirements)

Required Documents:

• Subrecipient Statement of Work
• Subrecipient Budget
• Subrecipient Budget Justification

Once the subaward requisition is complete in USC Workday, a DCG Subaward Officer will be assigned to your requisition to serve as your main point of contact for all subaward-related matters. Please note a complete and approved requisition, including the required documents, is needed in order to initiate a subaward.

No.  A subaward will not be issued prior to USC’s acceptance of an award from the prime sponsor. The University may not authorize a subrecipient to begin working without a fully executed subaward in place.  Proposed subrecipients who commence work without a fully executed subaward do so at their own risk and have no assurance of payment from USC.

If a Principal Investigator would like change subcontractors or add subcontractors that were not originally anticipated as part of a proposal, USC will generally need to obtain prior approval from its sponsor.  To initiate the request, the departmental administrator or Principal Investigator should contact the DCG Officer assigned to their unit and provide:

• Statement of work
• Budget
• Budget justification
• Subrecipient letter of commitment

The DCG Officer will use the above documentation to seek prior approval to issue the subaward from the sponsor.  Upon receipt of the sponsor’s approval, a formal requisition should be entered in Workday.  Upon receiving the requisition in Workday, the assigned DCG Subaward Officer will initiate their review and agreement with the subrecipient, consistent with University policies and procedures.

1. The subaward requisition will be assigned to a DCG Subaward Officer who will review the requisition and issue the subaward to the proposed subrecipient.
2. DCG will send a Subrecipient Certification Form to the proposed subrecipient. The subrecipient will need to return the completed Subrecipient Certification Form, before DCG can draft and issue the subcontract.
3. DCG will perform a subrecipient risk analysis based on the subrecipient’s responses in the Subrecipient Certification Form, and associated attachments. If a subrecipient is determined to be medium or high risk, departmental approval will be required to proceed with the subaward.  DCG will also suggest special subaward terms to help mitigate potential risk.
4. DCG will also ensure the following are in place:

•  Subrecipient Certification Form
• Applicable compliance approvals (e.g., IRB, IACUC)
• Applicable rate agreements
• Other applicable documentations to comply with USC Prime Award requirements

5. DCG will prepare and send the draft subaward agreement to the subrecipient for review and signature.
6. Upon receiving the partially executed subaward agreement, DCG will sign the agreement, return a fully executed copy to the subrecipient, approve the requisition, and enter the final subcontract into USC’s records.

USC strives to maintain transparency and clear communication with its customers on campus.  In order to facilitate this communication, DCG will notify the departmental administrator and Principal Investigator upon completion of the following milestones:

• Draft subaward agreement sent to subrecipient
• Status request sent to subrecipient
• Negotiation requests requiring department approval
• Final subaward is fully executed

Except if the awarding federal program is subject to a reduced F&A rate (e.g., statutory or regulatory F&A reduction or exception granted by the federal agency head), USC will honor the subrecipient’s approved indirect cost rate negotiated between the subrecipient and the federal government.  If no such rate exists, USC will approve indirect costs at the de minimis rate of 10% Modified Total Direct Costs.

A subrecipient can voluntarily opt to forego F&A, but will need to document that they are choosing to forego their de minimus 10% F&A voluntarily. 

USC is responsible for monitoring the programmatic and financial activities of its subrecipients in order to ensure proper stewardship of sponsor funds.  OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR §200) (“Uniform Guidance”), specifically sections §200.330 and §200.331, requires prime recipients of federal funds to monitor subawards and to ensure subrecipients meet the audit requirements and use funds in accordance with applicable laws, regulations and terms of the award.

This applies to all subawards issued under sponsored research awards without regard to the primary source of funding.

Principal Investigators have the primary responsibility for monitoring subrecipients’ technical and financial progress and ensuring compliance with Federal regulations and both prime and subrecipient award terms and conditions.  This includes:

• Monitoring scientific progress and subrecipient’s adherence to terms
• Verifying that cost sharing commitments are met
• Verifying compliance approvals are current for subrecipient’s portion of statement of work (human subjects, animal subjects, biosafety)
• Approving invoices for payment

Departmental Administrators assist Principal Investigators in their monitoring responsibilities, reviewing subrecipient invoices, identifying and following up on questionable expenditures and, if necessary, maintaining documentation of monitoring efforts.

Department of Contracts and Grants performs a risk analysis of the subrecipient prior to issuing a subaward.  If a subrecipient is found to be medium-high risk based on their Single Audit or information submitted via their Subrecipient Certification form, the subaward may include additional terms such as:

• Corrective Action Plan
• On-site monitoring
• More detailed invoicing
• Receipt of technical progress reports tied to payments
• More stringent termination language for failure to comply with requirements

The frequency and scope of monitoring procedures should be consistent with the terms of the subaward.  The PI and departmental administrators should use the following subrecipient monitoring procedures when appropriate:

1. The PI should review technical performance reports or other specified deliverables on a timely basis.  Any unforeseen issues should be documented, investigated, and resolved.

2. The PI and departmental administrator(s) should perform an expense to budget comparison for cost-reimbursement subawards.

3. The PI and departmental administrator(s) should review invoices and financial reports.  When issuing payments on cost-reimbursement subawards, USC is expected to issue payment on allowable costs within 30 calendar days after receipt of the billing, unless USC reasonably believes the payment to be improper.

4. PIs are required to document their review and approval of invoices. Such documentation may include, for example: PI initials or authorizing signature on invoices, email communications, notes of meetings with the department/school administrator(s), etc.

5. Departmental administrators should request the subrecipient to provide clarification of invoiced charges that appear unusual, excessive, or otherwise questionable.  If the subaward terms permit, departmental administrators may request detailed justification to verify the allowability of the cost.  Examples of detailed justifications include:

• Payroll records
• Copies of paid invoices showing item cost if required
• Descriptions of services rendered by consultants including hourly rates and time reports
• Details of incurred travel charges stating the purpose of the travel
• Records identifying any unallowable costs

6. If the subaward terms permit, the PI and/or departmental administrators may conduct on-site visits and audits to evaluate compliance with the project’s scientific objectives, and the appropriateness of the subrecipient’ s administrative systems, processes and charges. PIs and departmental administrators should work with the Department of Contracts and Grants if on-site visits or audits are deemed necessary.

• Check that the invoice meets the invoicing requirements set forth in the subcontract. Requirements may address level of detail, frequency, formatting, certification and possibly additional requirements from the USC prime award.
• Invoices should not be approved if the cost claimed exceeds the amount of the subaward or the invoice dates are not consistent with the period of performance.
• If the subrecipient committed to cost share on the project, ensure that the invoice accounts for the cost sharing provided to-date and compare this amount to the subrecipients total cost sharing commitment.
• Invoices should be reviewed to ensure that invoiced costs are allowable, allocable and reasonable and are aligned with the programmatic work performed during the respective period.
• Question any costs that differ materially from the subrecipient’s approved budget or appear unusual or unallowable. Payment for the portion of the invoice that appears unusual or unallowable should be withheld until a satisfactory explanation is received and/or an appropriate review is performed to resolve the difference and/or the unallowable costs are removed or corrected.

Please note:  Payments to subrecipients, under cost-reimbursement subawards, must be made within 30 calendar days after the receipt of the billing, unless the request is improper (i.e., costs appear to be unusual or unallowable).

If you have any questions or concerns about subrecipient invoicing please promptly contact the DCG Officer assigned to your unit.

Payments to subrecipients, under cost-reimbursement subawards, must be made within 30 calendar days after the receipt of the billing, unless the request is improper (i.e., costs appear to be unusual or unallowable). Payments to subrecipients, under fixed-price subawards, should be made consistent with the terms of the subaward.

You should modify an existing Subaward when there are:

• Changes to Statement of Work
• Changes to the Awarded Budget (e.g. an increase or reduction)
• Budget reallocations that require a formal amendment to the subaward
• Modification of any terms and conditions, including the addition of special terms and conditions, reporting requirements, etc.
• Changes to the Period of Performance, including no cost time extensions
• Early termination (advance written notice of termination is typically required)

To initiate a subaward modification, the PI or departmental administrator must submit a change order request in Workday by taking the following steps:

1. Log into Workday and initiate a Change Order requisition.

2. Complete all required fields on the Change Order requisition and upload all appropriate documents. If there are changes to the Statement of Work, budget and/or budget justification, revised versions of the affected documents must be uploaded with the Change Order requisition.

3. Any special requirements or instructions should be noted in the comments field to ensure they will be addressed when DCG prepares the subaward modification.

4. Submit the complete Change Order requisition to DCG.

The University PI should contact the subrecipient 90 days prior to the end of the period of performance to confirm the status of the project.  To successfully close out the subaward, the University PI must:

• Follow up on late or missing reports or deliverables, including final technical, invention and/or property reports
• Obtain the final invoice – clearly marked “FINAL”
• Send a copy of the approved final invoice to Accounts Payable for processing

(Please Note: Any outstanding issues with the subrecipient should be resolved prior to approving the final invoice for processing.)

The DCG close-out process includes:

• Ensure processing of the approved final invoice for payment
• Conduct audit of the subaward (if necessary)