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Re: Audit Requriement for Subrecipient Frye, Todd 07 Jun 2000 20:10 EST

There are no easy answers to your questions, but here are some important
points to consider:

1.  Since you use the term, "agreement", I will assume you mean that the
prime award to Tulsa is an assistance instrument of some type, such as a
cooperative agreement or grant, vs. a procurement contract.  This assumption
points us towards one likely solution path, vs. the one we would take under
a procurement contract.

2.  What do the DoE Prime award specific terms and conditions say about the
handling of subcontracts to commercial concerns?  Also, take a look at the
DoE General Assistance Terms and Conditions at
http://www.pr.doe.gov/gf3tc.html, specifically referencing contract and
subaward/subgrant flowdown provisions, with hypertext links to other
subparts and appendices that address the question of flowdowns more fully.
In short, they invoke Subpart C of 10 CFR 600, which states,

 "10 CFR 600.104 Subawards.
Unless sections of this subpart specifically exclude subrecipients from
coverage, all DOE recipients, including State, local and Indian tribal
governments, shall apply the provisions of this subpart to subrecipients
performing work under awards if such subrecipients are institutions of
higher education, hospitals, other non-profit organizations or commercial
organizations. Thus, this subpart is applicable to those types of
organizations regardless of the type of recipient receiving the primary
award. State and local government subrecipients are subject to the
provisions of 10 CFR part 600, subpart C, ``Uniform Administrative
Requirements for Grants and Cooperative Agreements to State and Local
Governments.''

3.  Also, you should take a look at 10 CFR 600.126, entitled, "Non-Federal
audits", which gives DoE Prime assistance recipients the specific authority
to seek audits of subs in order to protect the interests of the project, the
prime, and DoE

4.  You don't really say in the sub-award to the commercial concern is for a
shared part of the technical work, (i.e, a true "subrecipient" relationship)
or merely the procurment of related items required by the prime (i.e, vendor
relationship).  This distinction is critical for governing the appropriate
Federal flowdowns and audit issues.  More on this subject is found in the
discussion of subrecipients vs. vendors at OMB Circular A-133, at
http://www.whitehouse.gov/OMB/circulars/a133/a133.html#b .  Scroll down to
"�___.210 Subrecipient and vendor determinations."

5.  If the commercial concern sub has any intention of getting into
Federally funded research, even as a subcontractor, it would do well to
contact the DoE Small Business people, and get ramped up and get "all its
vacinations" to become a Federal recipient, subrecipient, or
contractor/subcontractor.  Good information about getting started with DoE
as a small business is found at
http://www.er.doe.gov/production/grants/grants.html#SBIR

6.  If, on the other hand, they are already in reciept of Federal awards or
functioning as a subcontractor, they may already have a cognizant Defense
Contract Audit Agency (DCAA) nearby that oversees their work.  DCAA has
agreements with other agencies to do audits for them, as well as normal DoD
Agencies.  In this case, they should "know better" than to expect that a $1M
subaward would carry no expectation of closeout audit of some type.

7.  Item the Last:  Partner early and often with your Prime DoE
Grants/Contracting Professionals, and seek guidance from them in writing for
open issues pertaining to all project obstacles, not just the subcontract
costs. Also, was the subcontract approved as part of the pre-award proposal
submitted to DoE by Tulsa?  If so, then the subaward can rightly be
considered a "government directed" subcontract or subaward, and more
programmatic and cost type oversight would be appropriate by the DoE at that
point.  That is in keeping with the nature of cooperative agreements, which
envision a more developed involvement of the issuing agency.

8.  Sorry to be so long winded. You ask for the time, I tell you how to
build a watch. . . .

Good Luck!

Todd

Todd A. Frye, Deputy Regional Director
ONR CHICAGO

312 886-5423, ext. 237
xxxxxx@onr.navy.mil

P.S. Researched and posted at 8:13 PM CST - Not on Government Time or Dime.

-----Original Message-----
From: Leah Bevan [mailto:xxxxxx@UTULSA.EDU]
Sent: Wednesday, June 07, 2000 4:41 PM
To: xxxxxx@HRINET.ORG
Subject: Audit Requriement for Subrecipient

I am working on a subcontract for a private company which will be issued
under a prime agreement with DOE.  I understand that all the requirements
of the prime flow down to any subrecipient.  We as the recipient of the
prime require subcontractors to provide us with annual audit reports.

Since the subcontractor is a private company and not subject to audit they
of course do not want to provide a copy.  Over the first budget period (two
years), their budget will be $1,118,890 which to me is substantial.

Can anyone shine a little light for me?  Is there policy/regulations or
anything in writing I can reference here dealing with small private
companies and audits?

Thanks for any help,
Leah Bevan
Coordinator of Grants and Contracts
The University of Tulsa
600 South College Avenue
Tulsa, Oklahoma 74104
(918) 631-2883
Fax: (918) 631-2073

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