Subaward Special Financial Issues

Working capital advances

A working capital advance is an up-front payment to a Subrecipient that lacks the financial resources needed to carry out its scope of work on a UC Berkeley project before being reimbursed by UC Berkeley.

SPO usually issues working capital advances to Subrecipients that have a small number of employees and/ or have limited or restricted operating budgets. SPO does not issue working capital advances to major institutions of higher education, large non-profit institutions, or for-profit institutions.

Before issuing a working capital advance, SPO conducts a risk assessment of the Subrecipient. SPO may ask for documentation of a Subrecipient’s financial needs before issuing a working capital advance if the need for such an advance appears to be questionable. SPO will issue a working capital advance only when it is financially impossible for the Subrecipient to begin or sustain work without such an advance.

SPO also 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 or if multiple advances are necessary, the UC Berkeley PI must provide a written justification for SPO’s review and approval. In such cases, the PI and the PI’s department/unit also must provide SPO with an informed consent that they agree to:

Cover the cost of any unallowable use of advanced funds, and
Not issue any additional working capital advances until the Subrecipient has expended at least 75% of the funds from the previous advance.

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 the advance funds.

Requesting a working capital advance for a Subrecipient

The UC Berkeley PI 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. See Subaward Request Instructions for more information.

Note that the UC Berkeley PI may request a working capital advance for a Subrecipient, even if the Subrecipient did not indicate they would need one on the Subrecipient Commitment Form.

Monitoring a working capital advance

When a subaward includes a working capital advance, the UC Berkeley PI must monitor the Subrecipient to ensure they are performing the Statement of Work as expected and using the advanced 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 is responsible for covering any un-retrievable working capital advance funds.

Foreign-currency subawards

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.

Fixed-price subawards

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 subcontracts@berkeley.edu. If you have a suggestion on how we might improve SPO’s subaward services, please drop it in the Subaward Suggestion Box.