Subrecipient monitoring under Uniform Guidance: risk, reviews, records

Reference article · 7 min read

When your agency passes federal money to a nonprofit, a smaller jurisdiction, a university, or a regional council, the compliance obligation does not travel with the check. Under the Uniform Guidance in 2 CFR part 200, the entity that makes the subaward, called the pass-through entity, remains accountable to the federal awarding agency for how those funds are used. Your own single auditor will test that accountability, and findings on subrecipient monitoring are among the more common ones in state and local audits.

The work itself is routine: classify the relationship correctly, put the required identification data in the subaward, assess risk before money moves, monitor during the period of performance, follow up on audit findings, and keep records showing that you did all of it. The failure mode is rarely a rule nobody knew about. It is a monitoring file assembled the month the auditor arrives, describing work that may well have happened but was never written down.

Subrecipient or contractor: make the determination first

The Uniform Guidance distinguishes a subrecipient, which carries out part of the federal program and is subject to program compliance requirements, from a contractor, which provides goods or services within its normal business operations to many purchasers. Substance governs, not the label on the agreement. If the organization determines client eligibility, exercises programmatic judgment, or has its performance measured against the program's objectives, it is likely a subrecipient even if you procured it competitively.

Make the determination in writing, sign and date it, and keep it in the file. Auditors often start here, because misclassifying a subrecipient as a contractor removes every downstream monitoring step at once.

What the subaward document must carry

The Uniform Guidance requires pass-through entities to include specific federal award identification information in each subaward, and to update it when it changes. Build a standard subaward cover sheet so nothing depends on memory:

• Identity. Subrecipient legal name as registered, and its Unique Entity Identifier.
• Federal award identification. Federal Award Identification Number, federal award date, Assistance Listing number and title, and the federal awarding agency name.
• Pass-through identification. Your agency's name and a named contact for the subaward.
• Periods and amounts. Subaward period of performance and budget period, amount obligated by this action, total obligated to the subrecipient to date, and the total amount of the federal award.
• Terms. Award description, whether the work is research and development, the approved indirect cost rate for the subaward, all applicable federal requirements, and any additional conditions you are imposing.
• Access. Rights of your agency, the federal agency, and the Comptroller General to records, plus the subrecipient's audit obligations.

Indirect cost treatment, including the de minimis rate available to entities without a negotiated rate, has been revised by OMB in recent rulemakings. Confirm the current rate and eligibility conditions against the regulation text before you write it into a template.

Risk assessment before the money moves

You are required to evaluate each subrecipient's risk of noncompliance in order to set the appropriate level of monitoring. The regulation points to factors including prior experience with the same or similar subawards, the results of previous audits, whether the subrecipient has new personnel or new or substantially changed systems, and the extent of monitoring by the federal awarding agency.

Turn that into a short, repeatable instrument: a one-page form with defined factors, a documented score or tier, and a monitoring plan that follows from the tier. Add practical checks at the same time, including exclusion status in the federal system for award management and confirmation that the entity is registered and in good standing. Where risk warrants, the Uniform Guidance allows you to impose specific conditions, such as reimbursement-only payment, more frequent reporting, or prior approval for certain costs. Write the conditions and the reason for them into the subaward.

Monitoring during the period of performance

Monitoring means reviewing financial and performance reports, following up on deficiencies, and verifying that required audits happen. Sampling invoices is where most of the real testing occurs:

• Tie the request to the budget. Costs charged should map to approved budget lines and to the period covered.
• Test support, do not just accept totals. For a defined sample, request payroll records, time certifications, invoices, and proof of payment.
• Watch allowability and allocability. Unallowable categories, costs outside the period of performance, and unsupported allocations are frequent findings.
• Check match and program income. If the award requires cost sharing, verify the documentation rather than the assertion.
• Record the review. A dated reviewer initial, a note of what was sampled, and a disposition are the evidence that the review happened.

Supplement desk review with site visits, training and technical assistance, and, where useful, agreed-upon procedures engagements. Log every contact, including phone calls that resolve a question.

Single audit follow-up and management decisions

Subrecipients that expend federal funds above the threshold set in Subpart F must obtain a single or program-specific audit. That threshold has been revised by OMB, so confirm the current amount and effective date rather than relying on a figure in an old template. Verify that the audit was completed and submitted to the Federal Audit Clearinghouse, and obtain the reporting package.

For findings that relate to the funds you passed through, you must issue a written management decision, generally within six months after the clearinghouse accepts the report. The decision states whether the finding is sustained, what corrective action is required, and the timeline. Track corrective action to completion and adjust your own records and risk rating accordingly. If a subrecipient is not required to have an audit, your own monitoring has to carry more weight.

The file an auditor will ask to see

Keep one folder per subrecipient per award year, organized so that a reviewer can follow it without narration:

1. Subrecipient versus contractor determination, signed and dated.
2. Risk assessment instrument, score, and resulting monitoring plan.
3. Executed subaward with the required identification data and any specific conditions.
4. Exclusion and registration checks with dates.
5. Invoice review worksheets with sampling notes and dispositions.
6. Performance reports and your review comments.
7. Site visit or desk review reports and any corrective action correspondence.
8. Audit reporting package, management decisions, and closeout documentation.

How to start, and what to ask about systems

Start with an inventory: every active subaward, the federal award behind it, the amount, and the last documented monitoring contact. Fill gaps in the current year before redesigning anything. Then standardize the four documents that carry most of the weight: determination, risk assessment, subaward template, and invoice review worksheet.

If you are evaluating grant management software or asking your internal team to configure what you already own, ask specific questions:

• Can the system store the full set of required subaward identification data as structured fields, not attachments?
• Can it record a risk score and generate the monitoring calendar that follows from it?
• Does invoice review support a documented sample, reviewer identity, and disposition on each line?
• Can it track audit findings, management decision due dates, and corrective action status?
• Can it produce a complete, exportable file for one subrecipient and one award year without manual assembly?
• Who owns the records if you change systems, and in what format do they leave?

Requirements in this area change through OMB rulemaking, so confirm thresholds, rates, and deadlines against the current regulation text and your federal awarding agency's guidance, and involve counsel where a determination is close.

HQT builds and integrates software systems for state and local government agencies, including case, grant, and records workflows that need defensible audit trails.

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