Chapter 6: Subagreements

The University may receive funding directly from a sponsor and then award a portion of that funding to another entity to carry out part of the project. The agreement between the sponsor and the University is known as the prime award or prime contract, and the agreement between the University and another entity is called a subagreement. A subagreement may be either a subaward (when the prime agreement is an award) or a subcontract (when the prime award is a contract).

The University is considered a pass-through entity (PTE) when it makes a subagreement, and the entity receiving the subagreement is known as a subrecipient. As a PTE, the University assumes the role and responsibilities of both a recipient and a sponsor. The University must administer and manage the award in adherence to the terms and conditions of the prime award while ensuring the subrecipient complies with the subagreement. The University is responsible for monitoring both the financial and programmatic performance of subrecipients to ensure compliance.

Federal Offices of Inspectors General (OIG) have frequently identified subrecipient monitoring as a weakness in grants management. In recent years, federal auditors and awarding agencies have increased their reviews and scrutiny of subrecipient monitoring policies and procedures. As a result, the University has seen an increase in sponsor desk reviews and audits focused on subrecipient monitoring.

The University is at risk of noncompliance when PIs and administrative units fail to adequately monitor subrecipients and document monitoring activities. A PI must demonstrate to an auditor that they have “reasonable assurance” that their subrecipients comply with award terms and conditions. Noncompliance with subrecipient monitoring requirements can result in sanctions against the University, including the disallowance of the entire cost of a subagreement. All cost disallowances, fines, and penalties assessed against an award for noncompliance are the responsibility of the PI and administrative unit.

2 CFR 200.331-333 identifies the responsibilities for pass-through entities (PTEs) in federal awards. For each federal subagreement, the Uniform Guidance requires the University to:

• Identify the Award and Applicable Requirements: The University must include specific data elements in the subagreement.
• Evaluate Risk: The University must complete a risk assessment for each subrecipient.
• Monitor: The University must monitor each subrecipient for compliance with the subagreement’s terms and conditions. The University must document the following activities:
• Regular communication with the subrecipient
• Review of financial and programmatic reports
• Review of each subrecipient’s annual Single Audit
• Remedies for audit findings associated with a University subagreement
• Ensure Accountability of For-Profit Subrecipients: The University must take specific actions to ensure a for-profit subrecipient is in compliance with award terms and conditions.

 The OMB Compliance Supplement identifies the suggested auditor procedures to verify PTE compliance with subrecipient monitoring requirements. Auditors may:

• Review the PTE’s subrecipient monitoring policies and procedures
• Review subagreement documents
• Review the PTE’s documentation of monitoring the subagreement and evaluate if the monitoring provided reasonable assurance that the subrecipient is in compliance with award terms and conditions
• Ascertain if the PTE verified that subrecipients have complied with audit requirements under 2 CFR 200

 For non-federal subagreements, the University and the PI must comply with prime award terms and conditions regarding subrecipient monitoring.

The responsibilities for subrecipient monitoring and award management are shared between OGC, Fiscal Compliance, and PIs and their respective administrative units.

• PIs and Administrative Units: The PI is responsible for ensuring that each subrecipient is making adequate progress on the subagreement and complies with the financial and administrative requirements. The PI must maintain regular communication with the subrecipient and ensure an informal progress update at least quarterly. This update can be in the form of an email, phone call, video conference, or other meeting. Monitoring activities must be documented. Administrative units assist PIs in requesting subagreements, reviewing and approving invoices, ensuring deliverables are received on time, providing guidance on addressing subrecipient non-compliance, and documenting monitoring activities.
• Multiple OGC Units Involved in Subagreements:
• OGC Subcontracts: The primary office within OGC responsible for subagreements. OGC Subcontracts handles the initial compliance review, drafts and negotiates subagreements, executes subagreements, and amends any subrecipient agreements.
• OGC Pre-Award: Reviews proposals during the routing process to ensure the subrecipient budget conforms to sponsor requirements.
• OGC Post-Award: Submits financial reports to sponsors containing financial information from the University’s subrecipients and reviews and approves Marketplace submissions related to subagreements.
• Fiscal Compliance: Reviews the University’s subrecipients’ single audits and issues management decisions for audit findings.

The following table identifies the requirements for federal subagreements under 2 CFR 200.331-200.333 and the roles and responsibilities for each requirement.  

 

OGC Subcontracts is responsible for drafting, reviewing, negotiating, and executing subagreements for both federal and non-federal awards. PIs and their administrative units are prohibited from executing subagreements.

One key consideration when requesting a subagreement is determining the period of performance for the subrecipient. Whenever possible, it is advisable to set the subrecipient's period of performance to end one or two months before the end of the period of performance for the prime award. This practice helps mitigate potential issues during the closeout process.

Additional information for requesting a subagreement is available on the OGC website.

PIs and administrative units should carefully review a subrecipient’s statement of work. Once the subagreement is executed, the statement of work becomes legally binding on both parties. Acceptance of an inadequate statement of work places the University at risk for paying for unexpected costs, unsatisfactory performance, or incomplete work. An adequate statement of work should be specific and detailed by:

• Clearly identifying the scope of work of the subrecipient, including specific activities and their frequency, if applicable
• Identifying the subrecipient PI’s roles and responsibilities
• If applicable, providing a deliverable schedule for project milestones, including a description of each deliverable or task, identifying applicable dates and conditions for project tasks to begin and end, and due dates for deliverables
• Explaining requirements for all reports, data, and other deliverables. The PI should ensure this section meets all reporting and programmatic needs. For reports, the statement of work should explicitly describe what information will be reported, specific data formats, what data the subrecipient will collect, how the data will be shared with the University, and the frequency of reporting.

For federal subagreements, the University must comply with 2 CFR 200.101(b)(1), which states in part: “The terms and conditions of Federal awards flow down to subagreements to subrecipients unless a particular section of this part of the terms and conditions of the Federal award specifically indicate otherwise.” A PI and administrative units must comply with 2 CFR 200.208 in order to remove an award term and condition from flowing down to a subrecipient and subagreement.

The PI and administrative unit are responsible for ensuring that each subrecipient has obtained the necessary prior approval as required by the award terms and conditions. For most sponsors, the pass-through entity (PTE) has the authority to grant prior approval to subrecipients. However, for NIH awards, only NIH may provide prior approval to subrecipients, per Section 15.2.4 of the NIH GPS.

PIs and administrative units should develop and comply with a subrecipient monitoring plan for each subagreement. For most low-risk subrecipients, a standard monitoring plan may be adopted. For high-risk subrecipients, a tailored monitoring plan should specifically address identified risks from the risk assessment. Once a monitoring plan has been adopted for a subagreement, PIs and administrative units must follow the plan, document monitoring activities, and revise the plan as necessary. Auditors may request a subrecipient monitoring plan and verify University compliance with the monitoring plan.

PIs must maintain regular communication with the subrecipient PI. At least quarterly, the PI must have a status meeting or email with each subrecipient. The PI needs to determine if the subrecipient is making adequate programmatic progress and is adhering to the statement of work. Any problems or deficiencies must be identified, and a resolution must be developed for each issue.

Monitoring activities must be documented. PIs and administrative units may use the OGC Subcontract Monitoring Record  or another form to document monitoring activities. OGC, Fiscal Compliance, and auditors may request to review a subrecipient monitoring record at any time. PIs and administrative units that fail to comply with subrecipient monitoring requirements may lose the ability to request subagreements.

In certain circumstances, a PI may need to complete a site visit of a subrecipient. PIs and their administrative units must notify Fiscal Compliance before initiating a site visit to ensure the visit is adequately conducted.

2 CFR 200.208 Specific Conditions and 2 CFR 200.339 Remedies for Noncompliance identify actions a pass-through entity may take to rectify noncompliant subrecipients on federal grants and cooperative agreements. Specific conditions may be imposed on a subrecipient during the pre-award or post-award phase, and remedies for noncompliance may be imposed during the post-award phase. PIs and their administrative units must work with OGC Subcontracts to impose a specific condition or remedy for noncompliance when the nature of the agreement changes. Failure to obtain OGC Subcontracts approval will have no legal impact on the subrecipient.

 The following table identifies the actions available under 2 CFR 200.

Citation	Action	Responsible Party to Impose Action	Notes
2 CFR 200.208	Withholding authority to proceed to the next phase until receipt of evidence of acceptable performance	OGC Subcontracts through a formal amendment	May be used for high-risk subrecipients or to ensure the subrecipient is making adequate progress
2 CFR 200.208	Requiring additional or more detailed financial reports	OGC Subcontracts through a formal amendment	May be used to request detailed invoices from subrecipients
2 CFR 200.208	Requiring additional project monitoring	PI and administrative units	May be used to increase the frequency or nature of monitoring activities to ensure the subrecipient is making adequate progress
2 CFR 200.208	Establishing additional prior approvals	OGC Subcontracts through a formal amendment	May be used for high-risk subrecipients or to ensure the subrecipient is making adequate progress
2 CFR 200.339	Temporarily withhold payments until the subrecipient takes corrective action	OGC Subcontracts	May be used to temporarily stop payment when a subrecipient is in noncompliance with award terms and conditions
2 CFR 200.339	Disallow costs for all or part of the activity associated with the noncompliance of the subrecipient	PI and administrative units	PIs and administrative units may disallow a cost on an invoice when the cost does not conform with the award terms and conditions
2 CFR 200.339	Suspend or terminate the subagreement	OGC Subcontracts through a formal amendment	May be used when a subrecipient is in noncompliance with the subagreement terms and conditions. The University must comply with 2 CFR 200.340 when suspending or terminating a subagreement.

The guidance provided in this section for federal awards is generally applicable to non-federal awards.  

PIs and administrative units are responsible for reviewing and approving all subrecipient invoices. All charges made to a subagreement must comply with the cost principles and the award terms and conditions. Under PSC procedures, a partial invoice may not be processed. Therefore, any subrecipient invoice containing unallowable costs must be rejected, and the subrecipient must provide a new invoice.

It is the general practice of the University to only require a detailed invoice from high-risk subrecipients. For low-risk subrecipients, PIs and administrative units should randomly request a detailed invoice from each subrecipient once per year to demonstrate reasonable assurance that the subrecipient complies with award terms and conditions.

All costs charged by a subrecipient to the subagreement must comply with the subrecipient’s internal policies and procedures. Due to audit risk, the PI and administrative unit should specifically ensure that charges for equipment and travel costs comply with the subrecipient’s procurement and travel policies before approving an invoice. Additionally, PIs and their administrative units must ensure that no federal funds are provided to subrecipients to procure certain telecommunication equipment, as outlined by 2 CFR 200.216.

PIs and administrative units should use the OGC Subrecipient Invoice Checklist when reviewing and approving subrecipient invoices.

The PI and administrative units must ensure that subrecipient progress reports are received on time, as indicated in the subagreement terms and conditions. The PI, or their designee, is responsible for reviewing and approving subrecipient progress reports. Inadequate progress reports should be rejected.

A third-tier subagreement exists when a subrecipient makes a subagreement under the University’s subagreement. When a third-tier subagreement exists, PIs and administrative units are responsible for ensuring the University’s subrecipient complies with subrecipient monitoring requirements for third-tier subagreements.

PIs and administrative units are responsible for ensuring that subagreements are closed in compliance with award terms and conditions. For most awards, the University will provide subrecipients 60 days after the end of the subagreement period of performance to complete closeout requirements by submitting all required deliverables, including a final invoice, within the allotted time period.

The University retains the right to unilaterally close out a subagreement when the subrecipient’s noncompliance with the subagreement terms and conditions may result in the University’s noncompliance with its closeout requirements. Unilateral closeout of a subagreement may occur 90 days after the subagreement period of performance. During unilateral closeout, the University may reject an invoice submitted more than 90 calendar days after the end of the subagreement period of performance. PIs and their administrative units must inform OGC Subcontracts if a subrecipient has failed to comply with the subagreement terms and conditions. OGC Subcontracts reserves the right to deny a future subagreement to a subrecipient PI or institution for failure to comply with closeout responsibilities.

PIs and administrative units should scrutinize all final subrecipient invoices to ensure that all costs conform to the cost principles. Additionally, PIs and administrative units are responsible for ensuring the subrecipient has met all applicable cost-sharing requirements.

Any subrecipient closeout costs charged to the University must adhere to the subrecipient institution’s written policies and procedures and be allowable under the award terms and conditions.

All University subrecipients are required to comply with their own institutional record retention requirements. Costs associated with subrecipient record retention may not be directly charged to federal awards, as these costs are part of the institution’s indirect costs.

Fiscal Compliance will review the single audit for each subrecipient for three years after the subagreement period of performance, as per 2 CFR 200.

As of October 1, 2024, the University will not issue new fixed amount, or fixed price, subagreements under a federal grant. Fixed amount federal subagreements made before October 1, 2024, may continue until the end of the subagreement’s period of performance.

Under NIH policy, a clinical trial is not considered a fixed amount subaward.

The University requires the use of cost-reimbursable payment methods for most subagreements, except for clinical trials, where a fixed-rate payment method is used. A working capital advance may only be used with OGC Subcontracts approval and in compliance with 2 CFR 200.305(b)(4).

PIs and administrative units must give special consideration to foreign subrecipients, as foreign subagreements require heightened monitoring to protect against potential fraud, waste, and abuse of federal funds. Not all federal laws and regulations apply to foreign subrecipients, and PIs and administrative units are responsible for ensuring foreign subrecipients comply with applicable award terms and conditions.

Please note that since January 2025, some agencies, such as NIH, have been restricting or terminating foreign components. It is the responsibility of the PI and their administrative unit to comply with all sponsor requirements.

Subrecipients under federal awards must provide certification to the University whenever submitting a proposal, requesting payment, or submitting financial reports and invoices, certifying that all information is complete and accurate. The following language must be used in all certifications, as required by 2 CFR 200.415:

 “I certify to the best of my knowledge and belief that the information provided herein is true, complete, and accurate. I am aware that the provision of false, fictitious, or fraudulent information, or the omission of any material fact, may subject me to criminal, civil, or administrative consequences including, but not limited to violations of U.S. Code Title 18, Sections 2, 1001, 1343 and Title 31, Sections 3729-3730 and 3801-3812.”

 The University cannot accept or approve documents from subrecipients that fail to provide the certification statement or use the exact language required under 2 CFR 200.