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Re: Audit access to subcontractor records Herbert B. Chermside (06 Dec 2002 13:42 EST)

Re: Audit access to subcontractor records Herbert B. Chermside 06 Dec 2002 13:42 EST

Thank you for your explanation.  I have worked in research administration
lo these many years (over three decades, but who is counting!) and have not
run into this interestingly almost unique situation!    This is a nice
piece of education for those of us who haven't worked with you in the past!


At 08:02 PM 12/5/2002 -0800, you wrote:
>Having worked in research administration in universities for over 20 years
>and now as a representative of the offending nonprofit, SRI International,
>I feel that I need to respond.
>Let me first clarify that nonprofits are not subject to A-21, which are
>the cost principles for universities.  Most nonprofits are subject to
>A-122, however, SRI and others identified in Attachment C to A-122 are
>subject FAR 31.2, the cost principles for commercial entities.  This means
>that we have multiple rates (e.g., fringe benefits, indirect costs, G&A,
>support cost burden, etc.) that apply to different categories of
>cost.  It's really quite complicated ...and after two years I'm still not
>sure how to apply all of them.
>As a nonprofit, however, we are still subject to A-110 and,
>yes, we do have an annual A-133 audit. Additionally our cognizant federal
>audit agency, DCAA, has auditors located right on our campus and audit our
>contracts, as well as our time keeping, accounting and procurement systems
>very closely.  Indeed, we are subject to much more direct government audit
>oversight than most universities -- think Lockheed and not your
>university's systems.
>So, why do we not reveal our rates (salary and indirect cost rates) to any
>but the federal government?  As it turns out, SRI is concerned about its
>competitive advantage with similar type organizations with whom we
>complete, primarily for contract and non-government work.    If we were to
>allow non-government access to our proprietary information through
>subcontracting to other organizations our direct competitors could perhaps
>obtain this information.  So, we don't show our rates in proposals either.
>When we work with our competitors as our subcontractors, they act towards
>SRI in the same manner that you find so strange.  They will not provide
>their rate information to us for proposals, but instead offer it to us in
>sealed envelopes to pass on with our proposal to the feds or provide it
>directly to the government...and we do the same when working with them
>when we are the sub.  Actually, this is how the commercial world works.
>Personally having worked for several different universities, and being
>knowledgeable about the subrecipient monitoring requirements of A-133, I
>understand that what SRI is asking sounds quite unusual....if not
>inappropriate.  However, we are frequently in the prime grantee role, so
>we also are mindful of and try to accommodate the prime grantee's
>responsibility to monitor its subrecipents...we just have to be creative
>about it.   And, since we do a lot of subcontracting with universities, we
>have found creative ways to accommodate both parties, please,
>work with us.
>GSchmidt wrote:
>>Interesting problem here.  You have an obligation as a recipient of
>>federal funds to ensure that subawardees use their funds in accordance
>>to A-21 and 110.  You can't get out of that.  Neither can they.  How
>>would they do an audit if they were direct recipients?  Do they have to
>>do an annual A-133 audit (probably do)?  Couldn't you do a desk review
>>of that looking at the auditor comments?  That's pretty much what we do
>>with each other when we do subawards with another college.
>>You could also restructure the relationship so that it is a purchase of
>>service contract and not a subaward.
>>I am surprised, though, that a non-profit is acting like this.  Usually
>>if it's payroll info they want to protect, it isn't to prevent their
>>competitors from knowing, its an internal privacy issue.  They don't
>>want their own people knowing what  each other's salaries and benes are.
>>Good luck.
>>Greg Schmidt
>Patricia Byers
>Contracts Manager
>SRI International
>333 Ravenswood Avenue, BS-177
>Menlo Park, CA 94025
>PH:  650-859-3571
>FAX: 650-859-3387
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Herbert B. Chermside, CRA
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