Grant Subrecipients and Your Responsibilities

Local government agencies and non-profit entities receive grant funding either directly or indirectly from federal agencies and may pass some of the funding or all of it to subrecipients to carry out the programs. Subrecipients can be another local government agency, a non-profit entity, or a private sector entity.

Contractor vs Subrecipient

When the grant funding is provided to a third party, you must first determine if the party receiving the grant money is a contractor or a subrecipient. A contractor will provide goods and services within its normal business operations and is not subject to compliance requirements with the grant program. On the other hand, a subrecipient is responsible for program decision making and for adherence to the requirements specified in the grant award. The subrecipient will determine who is eligible to receive grant assistance and the subrecipient performance will be measured in relation to whether objectives of the program are met.

Subaward Agreement

Your responsibility to subrecipients is to communicate the elements and requirements of the program to ensure compliance with the grant program. At the time of the subaward to the subrecipient, a subaward contract should the provided to the subrecipient and must include at least the following information:

Name of the Federal awarding agency
Name pass-through entity awarding the subaward and DUNS number
Subrecipient name and DUNS number
Contact information for the pass-through entity awarding the subgrant
Federal Award Identification Number
Assistance Listings number and title
Federal award date to the pass-through entity
Federal award project description
Total federal dollar amount made available to the subrecipient under the subaward and the period of performance (start and end date)
Identification of whether the subaward is R&D
Indirect cost rate for the Federal award (including if the de minimis rate is charged)

When some of the above information is not available, the pass-through entity must provide the best information available to describe the federal subaward and its requirements. Any changes to the above, such as period of performance, must be communicate timely to the subrecipient.

Risk Assessments

Then, you need to evaluate the subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for the purposes of determining the appropriate subrecipient monitoring. You should consider the following:

The subrecipient’s prior experience with same or similar subawards
The results of previous audits including, whether or not, the subrecipient received a Single Audit and the extent to which the same or similar subaward has been audited as a major program
Whether the subrecipient has new personnel or new or substantially changed systems
The extent of Federal awarding agency monitoring

Consider imposing specific subaward conditions upon a subrecipient if you deem necessary.

Communication Between Pass-Through Entities and Subrecipients

To meet your own responsibility to the Federal awarding agency, you may impose additional requirements to the subrecipient to ensure the subrecipient meet all requirements imposed by the program so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award. These can include the following:

Identification of any required financial and performance reports
Approved federally recognized indirect cost rate negotiated or if no approved rate exists, the pass-through entity must determine the appropriate rate in collaboration with the subrecipient, which is either:
The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior negotiated rate between a different pass-through entity and the same subrecipient
The de minimis indirect cost rate
The pass-through entity must not require the use of a de minimis indirect cost rate if the subrecipient has a Federally approved rate
A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient’s records and financial statements as necessary for the pass-through entity to meet the grant requirements
Appropriate terms and conditions concerning closeout of the subaward.

Monitoring Activities

Most importantly, you need to 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. Pass-through entity monitoring of the subrecipient should include:

On site reviews and audits as necessary to ensure compliance. When deficiencies or non-compliances are noted, have the subrecipient develop a written corrective action plan to remedy the situation and ensure future compliance with the program
Follow-up to ensure that the subrecipient takes timely and appropriate actions to address all deficiencies pertaining to the Federal award provided
The pass-through entity is responsible for resolving audit findings specifically related to the subaward
Review of financial and performance reports required by the pass-through entity
Keep written documentation of your monitoring activities of the subrecipient as well as written corrective action plans of the subrecipient

Depending on your assessment of the risk posed by the subrecipient, the following may be performed to ensure proper accountability and compliance with program requirements and achievement of performance goals:

Subrecipients training and technical assistance on program-related matters
Site reviews of the subrecipient’s program operations
Agreed-upon-procedures engagements

If your subrecipient is subject to a single audit, you should obtain a copy of its single audit report, review any findings, evaluate how they may affect your subaward and consider taking action against noncompliant subrecipients.

Federal Funding Accountability and Transparency Act (FFATA) Requirement

As a prime recipient under the Federal Funding Accountability and Transparency Act (FFATA), you are required to report subawards where the obligations are equal to or greater than $30,000 in federal funds no later than the end of the month following the month in which the obligation was made. If a subaward is initially funded at less than $30,000, the prime recipient does not have to report the subaward in the Federal Funding Accountability and Transparency Subaward Reporting System (FSRS). However, if the prime recipient subsequently provides additional funding to increase the subaward amount to $30,000 or more, the subaward must be reported in the FSRS.

Remember to keep records of your monitoring activities and risk assessment of your subrecipient. You will need to show and document how you are monitoring your subrecipient as part of your agencies single audit.

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Grant Subrecipients and Your Responsibilities