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Guide for Monitoring Subrecipients

(Updated April 2025)

Note: Although this guidance provides monitoring guidance for federally funded grant programs, the information provided may also be utilized to monitor grants provided by other funding sources, including state and private/foundation funding.

Introduction

Background

OMB Uniform Guidance or 2 C.F.R. Part 200 (Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards) is the primary regulation governing federal financial assistance including grants and cooperative agreements. The OSC developed the “Colorado Office of the State Controller Guide for State Agency Compliance with the OMB Uniform Guidance” (OSC Guide) that details responsibilities of primary recipients (i.e. State Agencies) of federal financial assistance (including grants and cooperative agreements), State Agencies often administer funding received from the federal government by subawarding funds to non-federal entities to carry out part of a Federal program. State Agencies are typically known as a pass-through entity (PTE) that subawards federal grant funds to non-federal entities known as subrecipients. Subrecipients are typically units of local government (i.e. city and county agencies) but also include other entities such as Indian tribes, institutions of higher education, special districts and nonprofit organization, including State Agencies This guide provides information to assist State Agencies in understanding the federal requirements imposed on PTEs and to provide guidance to assist in meeting the requirements of the Uniform Guidance related to subrecipient monitoring. In summary, PTEs will be responsible for:

  • Informing subrecipients about information related to their federal subaward(s), as well as the applicable compliance requirements related to the subaward;
  • Monitoring subrecipient activity;
  • Verifying that all subrecipients meet the audit requirements; and
  • Issuing management decisions about relevant subrecipient audit findings.

Monitoring Process

There are a variety of methods PTEs can use to oversee subrecipient compliance and performance. An entity meeting the subrecipient criteria will be subject to subrecipient monitoring activities, including but not limited to State and local governments, Federally recognized tribes, special districts, institutions of higher education, or non-profit organizations.

Purpose and Applicability

The purpose of the information presented in this Guide is to serve as basic guidance in monitoring federally-funded programs awarded to subrecipients. It is intended to identify important requirements that State Agencies, serving in the role of a PTE, are responsible for meeting when administering federal grant funds. It is critical that PTEs sufficiently monitor and provide assurance that subrecipients are in compliance with applicable requirements as described in 2 C.F.R. Part 200.

The OSC Guide provides a basic framework for consistency in monitoring activities across the State to ensure that core activities are performed by PTEs. The core activities are defined as subrecipient designation; notification of federal funds (pre and post work); performing a risk assessment; developing a monitoring plan; conducting subrecipient monitoring and Single Audit monitoring; issuing management decisions; and following up in a timely manner.

Monitoring Activities

Monitoring is an integral part of ensuring that a subrecipient is in compliance with the requirements of the federal government, State Agency Program Divisions, adhering to applicable laws and regulations, and progress is being measured on stated results and outcomes. Monitoring can include an assessment of documentation and data maintained by the subrecipient, information obtained in interviews, and obtained through observation. Monitoring efforts should determine the subrecipient’s level of compliance with federal and state requirements and identify operational changes that may impact programs funded through the PTE. Monitoring also helps to determine if the subrecipient financial management and accounting systems are adequate to account for funds in accordance with federal and state requirements.

One of the most important elements of the award/subaward process is to stay informed through maintaining effective communications with subrecipients. PTEs and their subrecipients can use communication tools such as customer satisfaction surveys, face-to-face and telephone interviews, and emails to stay abreast of activities and changes to programs and policies relevant to subrecipient programs funded through PTEs. Examples of methods that may be used for monitoring subrecipient activities are as follows:

  • Review financial and Single Audit reports;
  • Perform desk reviews and closeout audits;
  • Arrange for internal audits;
  • Schedule site visits and onsite monitoring;
  • Perform post-award reviews;
  • Review subrecipient reports (including programmatic, performance, and financial);
  • Require prior approval for certain activities;
  • Provide technical assistance and training;
  • Make telephone calls and use other means of communications;
  • Follow subrecipient news coverage;
  • Measure customer satisfaction;
  • Collaboration between State Agencies;
  • Monitor proposed and adopted legislation; and
  • Participate on different boards and associations related to subrecipient programs monitored

Subrecipient Determination: 2 C.F.R. § 200.331

State Agencies must determine whether an awardee is a subrecipient or a contractor. A Subrecipient is an entity that receives a subaward from a PTE to carry out part of a federal award. A subrecipient is not a contractor because program compliance requirements do not pass through to contractors. There may be unusual circumstances or exceptions to the characteristics of subrecipients and contractors. In making the determination of whether a subrecipient or contractor relationship exists, the substance of the relationship is more important than the form of the agreement. It is not expected that all of the characteristics will be present for every subrecipient. Judgment may need to be used in determining whether an entity is a subrecipient or contractor. Further, an entity may concurrently receive federal awards as a direct recipient, subrecipient, and contractor, depending on the substance of the agreements.

OSC Subrecipient vs Contractor Determination Tool

Notification of Compliance to Federal Regulations: 2 C.F.R. § 200.332

Those entities that are determined to be a subrecipient must be notified, in writing, of the obligation to comply with federal regulations. 

State Agencies serving as a PTE must notify subrecipients in writing using OSC approved grant agreement templates of the following information:

  • Subrecipient name (must match the name associated with its unique entity identifier);
  • Subrecipient’s unique entity identifier;
  • Federal award identification number (FAIN);
  • Federal award date;
  • Subaward period of performance start and end date;
  • Subaward budget period start and end date;
  • Amount of federal funds obligated in the subaward;
  • Total amount of federal funds obligated to the Subrecipient by the PTE, including the current financial obligation;
  • Total amount of the federal award committed to the subrecipient by the PTE;
  • Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA);
  • Name of the federal awarding agency, PTE, and contact information of the awarding official of the PTE;
  • Assistance Listings title and number;
  • Identification of whether the award is for research and development; and
  • Indirect cost rate for the federal award (including if the de minimis rate is used in accordance with §200.414.

Risk Assessment: 2 C.F.R. § 200. 332(c)The Uniform Guidance requires PTEs to perform a risk assessment of each subrecipient to determine each subrecipient’s fraud and non-compliance risk. State Agencies. When evaluating a subrecipient’s risk, a PTE should consider the following:

  • The subrecipient’s prior experience with the same or similar subawards;
  • The results of previous audits. This includes considering whether or not the subrecipient receives a Single Audit in accordance with subpart F and the extent to which the same or similar subawards have been audited as a major program;
  • Whether the subrecipient has new personnel or new or substantially changed systems; and
  • The extent and results of any Federal agency monitoring.

State agencies must use a risk assessment tool or a similar method designed to measure associated risks. The sample risk assessment tool below incorporates risk factors identified in 2 C.F.R. § 200.332(c). In circumstances where the federal awarding agency mandates a specific risk assessment tool, the OSC risk assessment tool, or another similar state agency-developed tool may also be used in conjunction with the federally-mandated tool, as an additional method for determining risk.

OSC Risk Assessment Tool

Monitoring Planning: 2 C.F.R. § 200.332(e), (f), (g), (h)

State agencies should develop a subrecipient monitoring plan that is based on the level of risk determined through performing a risk assessment. Uniform Guidance, 2 C.F.R. § 200.332(f), recommends that the following monitoring tools may be used depending on the level of risk: 

  • Providing Subrecipients with training and technical assistance on program-related matters;
  • Performing on-site reviews of the subrecipient’s program operations; and

Arranging for agreed-upon procedures engagements as described in 2 C.F.R. § 200.425, PTEs must verify that every subrecipient that expends more than $1,000,000 in federal awards is audited in accordance with 2 C.F.R. § 200, Subpart F. Further, PTEs must consider whether the results of any audits of subrecipients, onsite reviews, or other monitoring indicate that adjustments need to be made to the PTE’s own records. When issues related to noncompliance with the Uniform Guidance are identified PTEs must consider taking enforcement actions as described in 2 C.F.R. § 200.339, “Remedies for Noncompliance.” Enforcement actions should be taken if determined to be appropriate.

Listed below are some subrecipient monitoring methods and techniques used by PTEs to help ensure that federal awards are used appropriately, performance goals are achieved, and subrecipients are in compliance with applicable federal and state requirements.

Independent and Quality Assurance Reviews

State Agency grant staff may perform various independent and quality assurance reviews of subrecipient management of programs funded through PTE subawards. Generally, such reviews are accomplished by grant staff that possess specialized expertise in the program areas and objectives that are being monitored.

Internal Audits

State Agencies with assigned audit resources may engage such resources to perform audits as a part of its subrecipient monitoring plan. For example, State Agency internal auditors may review the controls associated with a subrecipient’s process or program and identify root cause for any issues found. This framework may allow PTEs to assess risk on a more proactive basis through meetings between the auditors and PTE personnel involved in subrecipient monitoring. Audit schedules may be reprioritized accordingly to address the areas of most concern throughout the year. Audit topics may be wide ranging and encompass various types of risks, including areas internal to the State Agency and its subrecipients. In addition, internal auditors may participate in various fiscal and policy meetings to stay apprised of upcoming initiatives and potential risks, and may use this information to identify additional areas of risk that could be applied to determine audit scope and incorporate into the audit schedule.

Monitoring vs Audit Guidance 

Fraud Investigations

If there is an allegation of fraud against an internal employee, subrecipient, and/or community partner that is determined to be credible, a formal investigation may be needed. Based on an objective examination of all facts, any misconduct or criminal non-compliance should be identified and reported to the appropriate internal or external (e.g., State law enforcement and the federal award agency) authorities for resolution. Furthermore, for those subrecipients who have internal fraud investigators (e.g., county or local government departments), State Agencies may rely, if appropriate, on those personnel to conduct and follow up on consumer allegations of fraud, waste, and abuse, in accordance with federal and State regulations, rules, and policies.

Technical Assistance

State Agencies should provide technical assistance to their subrecipients. The amount and method of technical assistance provided should be determined on a case-by-case basis. The technical assistance comes in a variety of forms, such as formal and informal trainings, webinars, briefings, telephone and email communications, and through other forms of communication that assist in ensuring subrecipients follow applicable federal and State guidance, meet objectives, and achieve program goals. 

Cross Program Collaboration 

Subrecipient monitoring, is an on-going process. In an effort to efficiently address any higher-risk attributes that are identified in the subrecipient risk assessments, State Agencies should encourage Program Divisions to collaborate with each other to provide the necessary monitoring activities to address the identified risks. For example, if a county government had a higher-risk attribute in properly documenting expenditures that was noted by one Program Division, other Program Divisions should be able to rely on the results of the work for their monitoring purposes. State Agencies should also collaborate, to the greatest extent possible, with other State Agencies that serve in PTE roles to gain insight into best practices.

Single Audit

The requirement for performance of Single Audits is covered in 2 C.F.R. Part 200, Subpart F, “Audit Requirements.” All subrecipients that receive federal awards either directly or through a PTE that exceed $1,000,000 in total awards must have a single or program-specific audit performed. The audit assesses the subrecipient’s compliance with the grant award terms. 

A follow up of prior year Single Audit findings is a required activity by the independent single auditor during the performance of the Single Audit of the subsequent year. This follow-up process may be used as a method to monitor a subrecipient’s timeliness in implementing their corrective action plan. PTEs are encouraged to follow up on the subrecipient’s Single Audit findings before the subsequent year’s Single Audit. The extent of follow up may vary depending on a variety of factors, including, but not limited to, the severity of the findings, timing of implementation of related recommendations, how well the corrective action process is managed by the subrecipient, and available resources. 

At the conclusion of a Single Audit the auditor prepares related audit findings and recommendations and includes them in the Single Audit report. PTEs are responsible for following up and ensuring that subrecipients take timely and appropriate actions to remediate all deficiencies found during the Single Audit.

Management Decisions: 2 C.F.R. § 200.521

PTEs must review and opine (sustain or disagree) on subrecipient findings appearing in the Single Audit report. This action is taken through the issuance of a management decision (§200.521(c)) letter, which is required to be sent to the subrecipient no later than six months after the audit report is received and accepted by the Federal Audit Clearinghouse (FAC).

PTEs are responsible for receiving subrecipients’ Single Audit reports from the FAC, coordinating the findings with appropriate PTE personnel to formulate an opinion, and sending out the management decision letter. Depending on the nature of the finding and the professional judgment of the responsible PTE personnel, audit firms may be asked to provide their supporting audit work papers related to the Single Audit. In those circumstances, the work papers may be reviewed by the State Agency audit staff or other appropriate PTE personnel for quality of work, accuracy, and conformance to auditing standards.

To assist PTEs in reviewing and concluding on subrecipient audit findings, subrecipients are responsible for preparing and submitting a corrective action plan that addresses each Single Audit finding. The corrective action plan should sufficiently address how each finding will be corrected, the date in which corresponding recommendations will be implemented, and the name of the subrecipient contact person(s) responsible for taking corrective action. If the subrecipient does not agree with any of the audit findings or believes that corrective action is not required, the corrective action plan must include an explanation and specific reasoning.