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UNIVERSITY OF TENNESSEE SYSTEM POLICY
FISCAL

POLICY NO: FI0230 SUBJECT:  SUBCONTRACT MONITORING  
EFFECTIVE: 03/01/2005  

TOPICS:
Overview Close-Out Procedures
Origination Or Modification Other Monitoring
State Review Panel Related Policies
Subcontract Execution Procedures
Fiscal Monitoring

OBJECTIVE:

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This policy sets forth the responsibilities at various stages in the subcontracting process.


POLICY:

Overview[top]

  1. For the purposes of this policy, a subcontract is a legal document by which the university procures the services of another entity in support of a project for which the university has secured external funding. Throughout this policy, terms subcontract, subcontracting, and subcontractor are used in a general sense to refer to any possible type of contracting vehicle to a lower entity, including subcontracts, subgrants, cooperative agreements, and others. This policy does not apply to professional services contracts or other purchasing contracts where the university is buying goods and services from a vendor.

Origination or Modification[top]

  1. The university employee who has primary responsibility for a sponsored project or the principal investigator ("PI") must perform the following duties in originating or modifying a subcontract.


    1. Review proposed subcontractor's statement of work and budget to determine reasonableness.


    2. Request that the campus or unit research office issue a subcontract.


    3. Prepare a JUSTIFICATION FOR NON-COMPETITIVE PURCHASES AND CONTRACTS FORM found at http://treasurer.tennessee.edu/contracts/Justfication/default.htm.


    4. If required by the prime contracting agency, utilize small and small disadvantaged business concerns when possible.


    5. The subcontracting process is greatly facilitated by the PI's inclusion of the proposed subcontract in the university's proposal to sponsor, and sponsored program offices encourage PIs to identify proposed subcontracts or subcontractor at the proposal stage. Including a proposed subcontract in a proposal does not exempt the PI from completing all necessary paperwork but review at each approval level is less onerous.


    6. PIs from multiple universities and/or institutes sometimes generate proposals as teams, as this is often a preferred or required approach by the funding agencies. The proposals are then evaluated on the basis of the qualifications of the primary university and the proposed subcontracted universities. In these cases, and once the grant is awarded, the subcontract will be awarded to the universities or institutes as specified in the proposal. However, extenuating circumstances could occur and the university has the right not to subcontract with the entity in the proposal. Also, the university must follow the expanded review process along with completing the JUSTIFICATION FOR NON-COMPETITIVE PURCHASES AND CONTRACTS FORM.


  2. The campus or unit research office must perform the following duties:


    1. Ensure that the university has the authority, either by virtue of a clause in the prime contract or explicit approval from the contracting office, to subcontract.


    2. If federal funds are involved, ensure that the proposed subcontractor is not debarred from doing business with that agency of the federal government. If a proposed subcontract is listed on the government's Excluded Parties List System, the campus or unit research office should contact the agency that has placed the proposed subcontractor on the Excluded Parties List System to determine the eligibility of the proposed subcontractor under consideration.

      To comply with federal acquisitions regulations, the university requires campus or unit research offices to include the following certification on subcontracts (see FAR 52.209-6).

      The subcontractor certifies that he/she is not presently debarred, proposed for debarment, suspended, or declared ineligible for covered transactions by any federal agency or department. The subcontractor also certifies that within the past three years he/she has not been convicted of or had civil judgment rendered against them for a fraudulent contract or transaction, violation of federal or state antitrust laws, or the commission of embezzlement, theft, forgery, bribery, falsifying or destroying records, receiving stolen property, or making false statements.


    3. Ensure that the subcontract adheres to all applicable federal laws and incorporates any applicable flow-down provisions of the prime contract. Appropriate language should be included to enable the campus or unit research office to adequately monitor the subcontract for compliance with all terms of the prime contract.


    4. If required by the prime contracting agency, ensure that the university utilizes small and small disadvantaged business concerns when possible.


    5. In every case, obtain the subcontractor's federal identification number or in the case of a contract with an individual, the individual's social security number.



    6. Obtain a copy of the subcontractor's most recent OMB Circular A-133 Audit report and a completed Title VI survey before the university executes a subcontract.


    7. Document that is it has reviewed the subcontractor's budget and statement of work and found the costs to be reasonable.


    8. Ensure that the proposed subcontract is non-biddable in accordance with university FISCAL POLICY FI0420 and is supported by the PI's or department's JUSTIFICATION FOR NON-COMPETITIVE PURCHASES AND CONTRACTS.


  3. The campus purchasing department must perform the following duties.


    1. Maintain a current list of eligible small and small disadvantaged business concerns that serve as vendors to the university.


    2. Review and approve, as applicable, each JUSTIFICATION FOR NON-COMPETITIVE PURCHASES AND CONTRACTS in the amount of $2,000 or more.


  4. The campus business officer must review and approve, as applicable, each JUSTIFICATION FOR NON-COMPETITIVE PURCHASES AND CONTRACTS for subcontracts in the amount of $2,000 or more.

State Review Panel[top]

  1. Review each JUSTIFICATION FOR NON-COMPETITIVE PURCHASES AND CONTRACTS that exceeds $250,000 either singly or cumulatively.

Subcontract Execution[top]

  1. Only authorized officials may legally bind the university.


  2. Subcontracts must be entered in the university's contract tracking system.

Fiscal Monitoring[top]

  1. Fiscal activities related to the subcontract must be handled in the following manner.


    1. The principal investigator, departmental accountant, and/or department head must review all invoices submitted by subcontractor, and the department head or designee must approve by signing all invoices. Such review should compare invoice with project activities. Any unallowable charge must be deducted from the invoice before it is forwarded to the campus business office or Treasurer's Office for payment; and the principal investigator, departmental accountant, and/or department head must inform the subcontractor that the university has disallowed certain charges.


    2. The Treasurer's Office shall remit payments to subcontractor.


    3. All subcontracts should be charged using general ledger code 481000 for the first $25,000 of any single subcontract for the life of the award and 482000 for that amount of any single subcontract for the life of the award that exceeds $25,000. Professional services contracts should be charged using general ledger account 437500.


    4. Final payment to the subcontractor will not be made until subcontractor has completely fulfilled its obligations under the subcontract. A campus or unit business office may require written verification to that effect before final payment can be made.


    5. The campus or unit research office must ensure that the subcontract includes financial terms that will allow the university to comply with its financial reporting requirements under the prime contract.

Close-Out Procedures[top]

  1. Close-out procedures are performed in the following way.


    1. Subcontractor invoices and other close-out reports must be processed within the reporting period as allowed by the prime contract.


    2. Subcontractor must submit its final invoice no later than 30 days before the university must submit its final invoice to the prime contractor or 60 days after the end of the subcontract performance period, whichever is earlier.


    3. The principal investigator must verify that all deliverables and technical reports have been received before final payment is made.

Other Monitoring[top]

  1. Once each year, each subcontractor that was paid in a given fiscal year and that is a governmental unit, college, or university or not-for-profit agency (not required of contractors who are individuals) will be required to complete a Title VI survey. The original completed survey documents will be maintained for inspection in the Controller's Office.


  2. Once each year, each subcontractor that receives $500,000 or more in federal funds that fiscal year and that is a governmental unit, college, or university or not-for-profit agency, will be required to submit an audit certification letter as required under OMB Circular A-133. The original letters will be maintained for inspection in the Controller's Office. Failure to submit either of these documents could result in suspension of work for the subcontractor.

RELATED POLICIES
:
[top]
 
PROCEDURES
:
[top]
 
Knoxville:  http://web.utk.edu/~dfinance/fiscal-policy.shtml
Health Science Center:  http://www.uthsc.edu/policies/w932_document_list.php?app=FSC
Space Institute:   
Chattanooga:   
Martin:  http://www.utm.edu/departments/finadmin/procedures.php