In our last blog, we talked about how to avoid Uniform Guidance Audit (UGA) findings in your FFR or SF-425 reporting. In this blog, we’ll talk about another area of frequent findings, failure to monitor a direct subcontractor.
A direct subcontractor could be a university, a lab or a researcher who is essential to your project. In fact, their role is so vital that they are specifically named in your award. The government considers them co-investigators.
When it comes to government awards, many direct subcontractors—especially universities—know the rules and they know their responsibilities. However, it’s important to recognize that this individual or organization is part of your grant. As such, you are responsible for their compliance.
The auditor will ask to see the Subcontractor Agreement. This document should be specific and include important details such as:
The Subcontractor Agreement must also detail the Federal Acquisition Regulation (FAR) provisions that flow from your company to the direct subcontractor, such as FAR 52.216-7 The Allowable Cost clause, which may force the subcontractor to have their own Uniform Guidance Audit.
You will need to produce invoices from your direct subcontractor and your auditor will check to make sure they are in agreement with the overall direct subcontractor agreement.
Getting a major research university or in-demand researcher to work with you can be intimidating. But you must understand:
A Direct Subcontractor is a pivotal part of YOUR award. You are responsible for their compliance and adherence to the rules of your grant.
No matter how big or prestigious your direct subcontractor, you must monitor and manage their performance. Your UGA auditor will expect to see evidence of this, and you may have to answer and demonstrate the following:
It is very common for universities to have poor billing practices, so you may need to accrue their costs into your books.
The three most common findings that we see during a Unified Guidance Audit of direct subcontractors are:
Managing subcontractors and running your business, while maintaining a FAR-compliant accounting system and surviving a UGA audit can be overwhelming. We can help you maximize your funds and decrease your risk, so you can spend less time worrying and more time innovating.
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This is the sixth of our seven-part series about the Uniform Guidance Audit:
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