Subaward Special Financial Issues
Working capital advances
A working capital advance is an up-front payment of cash that UC Berkeley makes to a Subrecipient, before the Subrecipient begins work on the project. This usually happens when the Subrecipient lacks sufficient capital to pay for project costs up-front, before invoicing UC Berkeley.
SPO usually issues working capital advances to Subrecipients that are small, or have limited or restricted operating budgets. SPO typically does not issue working capital advances to major institutions of higher education, large non-profit institutions, or for-profit institutions.
SPO expects to issue working capital advances only when it is financially impossible for the Subrecipient to begin or sustain work, without such an advance.
SPO limits the working capital advance amount to 90 days of the Subrecipient’s project costs. If a Subrecipient requires more than 90 days’ of advance funds, the UC Berkeley PI must provide a written justification, for SPO approval.
The Subrecipient must expend all funds from one working capital advance before SPO will issue another.
Planning for a subaward that includes a working capital advance
If, at the proposal stage, the Subrecipient believes it will need a working capital advance, the Subrecipient’s Authorized Official Representative (AOR) should indicate this on the Subrecipient Commitment Form.
The UC Berkeley PI should discuss the need for a working capital advance with the Subrecipient, to obtain a good understanding of why Subrecipient needs the advance and how they will use advance funds.
Requesting a working capital advance for a Subrecipient
You must indicate in the Subaward Request that the Subrecipient needs a working capital advance, and specify the advance amount. This amount should be no more than 90 days’ of the Subrecipient’s initial costs. See Subaward Request Instructions for more information.
Note that you may request a working capital advance for a Subrecipient, even if the Subrecipient did not indicate they would need one, on their Subrecipient Commitment Form.
Monitoring a working capital advance
When a subaward includes a working capital advance, the UC Berkeley PI must monitor Subrecipient to ensure they are performing the Statement of Work as expected and using the advance funds according to the approved budget.
The subaward will include specific terms addressing how the Subrecipient may use the advance funds, and how the Subrecipient should report working capital advance spending to UC Berkeley.
If a Subrecipient uses working capital advance funds in an unallowable way, the UC Berkeley PI’s Department must retrieve those funds from the Subrecipient. The UC Berkeley PI’s Department will become responsible for covering any un-retrievable working capital advance funds.
SPO prefers to issue subawards requiring Subrecipients to accept payments in U.S. Dollars. This helps minimize administrative burden on UC Berkeley’s financial services personnel and systems, and avoids uncertainty regarding exchange rates.
Occasionally, UC Berkeley may agree to issue a subaward allowing for Subrecipient payments in a foreign currency. When this happens, the SPO will ask the UC Berkeley PI, and their Chair and Dean to provide informed consent for their responsibilities under a foreign-currency subaward.
When requesting a foreign-currency subaward, be sure to:
- Indicate, in the Subaward Request comments field, that you want Subrecipient payments to be issued in a foreign currency.
- Specify the foreign currency type (e.g. Euros; GBPs)
- Specify the foreign currency award amounts.
- Include a budget and budget justification that shows costs in the foreign currency.
SPO may sometimes recommend issuing a subaward as a fixed-price subaward, rather than a cost-reimbursement subaward. This often happens for high-risk Subrecipients. Fixed-price subawards help minimize UC Berkeley’s financial risk and maximize the likelihood of receiving deliverables. SPO will consult with the UC Berkeley PI and their Research Administrator, before issuing a subaward as a fixed-price agreement.
A fixed-price subaward is only appropriate when:
- The subaward involves no cost-sharing;
- Payments can be tied to clear deliverables or products provided by the Subrecipient;
- The total amount of the fixed-price subaward does not exceed the simplified acquisition threshold in place at the time the subaward is issued; and
- The sponsor has approved, or has no policy against, the use of a fixed-price subaward.
Subawards resulting from UC Berkeley RFPs
Sometimes, a Prime Award will fund a competitive Request for Proposal (RFP) solicitation, issued by one of UC Berkeley’s departments. The successful applicants become Subrecipients to UC Berkeley.
To ensure that such subawards include all the required Prime Award terms and conditions, SPO processes subawards that result from RFPs funded by Prime Awards received through SPO.
When submitting a Subaward Request to SPO for a subaward that is being issued as a result of an RFP solicitation, be sure to include the following additional materials:
- A copy of the RFP that the Subrecipient responded to.
- A copy of the Award Letter, issued to the Subrecipient by the UC Berkeley Department.
- A copy of the Award Terms and Conditions.
If you have questions, please contact the Subaward Team at firstname.lastname@example.org. If you have a suggestion on how we might improve SPO’s subaward services, please drop it in the Subaward Suggestion Box.