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What is a subrecipient risk assessment?
A risk assessment is a way to evaluate the potential financial and compliance risk of a subrecipient or subawardee on a project. Several factors are considered when determining the level of risk associated with a subrecipient.
The federal Uniform Guidance (2 CFR 200.331b) requires IU to “evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring.”
To comply with this requirement, IU’s Office of Research Administration performs a risk assessment on federal and federal pass-through projects with a cost reimbursable subaward or subaward amendment with additional funding.
High-risk subrecipients require additional monitoring
According to federal regulations, IU must “monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.”
When IU determines that a subrecipient should be considered high-risk, the subaward agreement will include additional terms and conditions, including specific invoicing instructions. An example of additional invoicing instructions can be found in the Billing Requirements Attachment.
Departments will perform a complete review of the required supporting documentation received with every invoice prior to invoice approval. If any information is missing, incorrect, or appears to be unallowable, the fiscal officer must hold or cancel the payment request and contact the subrecipient for resolution.
High risk = audit risk
Subrecipient monitoring reduces the risk of doing business with an external entity. It is highly recommended that departments use the Subrecipient Invoice Checklist to document their subrecipient invoice review and approval. As part of Indiana University’s annual Single Audit, auditors will test the university’s compliance with federal laws that require monitoring subrecipients.