A. Purpose
Office of Management and Budget (OMB) Circular A-133 requires that recipients of Federal awards ensure that subrecipients who expend $500,000 or more per year comply with the audit requirements in Circular A-133. This policy complies with the requirements imposed on Universities by the Circular.

B. Revision History
Originally issued: August 2006

C. Persons Affected
Faculty and staff involved in establishing and administering research subcontracts.

D. Related Research Policy Documents
Subrecipient A-133 Audit Certification Letter [Downloadable Word file]

E. Policy
The University is responsible for entering into research subcontracts responsibly and for monitoring that subrecipients who expend $500,000 or more per year of federal awards comply with the audit requirements of OMB Circular A-133. There are specific financial and administrative regulations governing the management of federal grants and contracts. Where the University contracts with subrecipients to perform work on federal grants and contracts, these same regulations govern the subrecipients. Penalties for noncompliance include adverse audit findings, financial liabilities on current and past awards, and loss of eligibility to receive future awards.

The University will use the following procedures to monitor subrecipient compliance:

1. Award Initiation
When a proposed subcontract is approved under a federal award that has been accepted, the University shall obtain a copy of the proposed subcontractor’s most recent A-133 audit report, and any relevant management response and corrective action plan, if applicable and available. Subcontractors who do not have A-133 audits (such as for-profit entities) will be required to provide a copy of an audit or review performed by an independent certified public accountant, a Dunn & Bradstreet ID number, and a copy of their most recently negotiated facilities and administrative overhead rate with the Federal government, if available. The Office of Research Administration and Compliance (ORAC) will review submitted materials and obtain a Dunn & Bradstreet report for entities that do not have an A-133 audit. All subcontractors shall state that the information they are providing fairly presents the standing of the organization in all material aspects. Any issues identified by the ORAC review will be shared with the Comptroller before execution of the proposed subcontract.

At the time of award, ORAC is responsible for the development of the Subcontractor Agreement and for inclusion of all applicable OMB requirements, disclosures, and for obtaining the proper signatures on the subaward. The Subcontractor Agreement will provide the subrecipient organization with information about the specific federally-funded prime award and associated compliance requirements including: CFDA title and number; award name; name of federal agency, activities allowed or unallowed, allowable costs/cost principles, cash management, eligibility, matching, level of effort, reporting, etc.

2. During the Award Monitoring
Principal Investigators (PIs) are responsible for monitoring periodic progress reports to ensure that performance goals are achieved. PIs and ORAC are responsible for monitoring invoices to ensure that they are reflective of progress and, to the extent possible, that they are administering the Federal awards in compliance with laws, regulations, and the provisions of subcontract/grant agreements. Non-compliance with technical reporting requirements or dissatisfaction with level of subrecipient progress will be reported immediately to the Associate Vice President of Research.

3. Subrecipient Audits
On an annual basis, ORAC will request copies of the OMB A-133 audit report from each subrecipient.

Circular A-133 requires that annual audits be completed within nine months of the end of the subrecipient’s audit period. Certification letters to request information about the subrecipients’ most recent completed fiscal year will be prepared by ORAC and distributed annually to every subrecipient working on any externally sponsored award. The certification letters require the subrecipient organization to state that the information they are providing fairly presents the standing of the organization in all material aspects and that they state one of the following:

• They are not subject to the requirements of A-133 because the organization did not receive $500,000 or more in federal awards during the fiscal year, is a for profit corporation, or is a non-U.S. based entity.
• They are subject to the requirements of A-133, the audit has been completed and there were no material conditions of non-compliance with federal regulations.
• They are subject to the requirements of A-133, the audit has been completed, exceptions were noted and a copy of the audit report is provided.
• They are subject to the requirements of A-133 but the audit has not been completed.

Follow up requests will be made to ensure that subrecipients send reports:

• Should no response to the certification letter be received by ORAC within 45 days, a second certification letter will be sent. Should no response to the second letter be received by ORAC within 30 days, the subrecipient will be contacted by telephone.
• If reports are not received, the Federal Audit Clearinghouse (FAC) Internet data dissemination system will be used to retrieve audit report information from the FAC database. This information will be reviewed to determine if an organization has any reportable conditions and/or audit findings required to be reported under OMB Circular A-133, subpart E, section .510(a).
• Should attempts continue to be unsuccessful, the Associate Vice President of Research, in conjunction with ORAC, will consider sanctions against the subrecipient, including termination of the subcontract.

ORAC, in conjunction with the University Comptroller and management will e valuate subrecipient A-133 audit findings for completeness and for compliance with applicable laws and regulations, issue appropriate management directions to the subrecipient, and determine whether a plan of corrective action has been prepared and implemented.

If necessary, Northwestern management may request to review documentation (e.g., payroll registers, time and effort reports, fringe benefit and indirect cost rate charged) during the award period and/or post-award closeout process. M anagement may also request a site visit to review program performance. The site visit may include a review for compliance with financial and program records required by OMB Circular A-110 or could solely be an observance of daily operations.

The monitoring of subrecipients not subject to Circular A-133 will be based upon the judgment of management and will include such factors as the size of the award, percentage of the total program’s funds awarded to the subrecipient, budget adherence, any issues identified in the initial subrecipient review, and other matters as deemed necessary. Invoices from for-profit subcontractors must identify the names and titles of all persons for whom direct labor is charged.