Subrecipient Monitoring – Terms & Definitions

The Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”) made it a requirement for any entity that passes federal funds (the “pass-through entity”) to non-profit entities or other governments to monitor those subrecipients.
 
 
In this blog post below, we explain and define major terms regarding subrecipient monitoring and its related procedures.

Refer to this list when reading other blog posts in our subrecipient monitoring series, in which will cover topics such as the Uniform Guidance requirements, distinguishing subrecipients from contractors, risk assessment for subrecipients, and several others.

DEFINITIONS

​Below are definitions of key terms related to monitoring subrecipients:

• Annual financial report - An annual publication of an entity showing its assets, liabilities, revenues, expenses and net position. This financial report is usually audited and contains one or more auditors’ reports. If the entity spends significant federal funds, the annual financial report will be expanded to cover the federal compliance requirements of the Uniform Guidance; this expanded annual financial report is called a single audit report.
• Award – Grant Award letter, grant agreement – Documents provided by grantor to grantee.
• Contract - A legal instrument by which a non-Federal entity purchases property or services needed to carry out the project or program under a Federal award.
• Contractor – An entity that receives a contract from a pass-through entity to purchase property or services needed to carry out a federal program. A contractor is distinguished from a subrecipient based on the extent of its involvement in carrying out program objectives.
• Corrective action plan – Written plan describing how subgrantee will remedy a finding.  The corrective action plan needs to include:

               (a) Tasks that will be taken that are sufficient to remedy the finding;
               (b) Who is responsible for completing each task; and
               (c) The date by which each task will be completed.
          It can include a demonstration that a finding is either invalid or does not
          warrant auditee action.

• Federal funds – The Federal financial assistance that a non-Federal entity receives directly from a Federal awarding agency or indirectly from a pass-through entity.
• Findings – Instances of noncompliance with laws, regulations or grant agreements, or instances of inadequate internal controls
• Generally Accepted Auditing Standards (GAAS) are the guidelines published by the American Institute of Certified Public Accountants that auditors follow when conducting audits of annual financial reports.
• Government Auditing Standards (GAGAS), often referred to as the Yellow Book, is the publication that presents generally accepted government auditing standards promulgated by the comptroller general of the United States. Auditors are required to follow these standards when conducting a Single Audit of federal grants.
• Grantor/Grantee – an organization conveying/receiving an award.
• Grant agreement - A legal instrument of financial assistance between a Federal awarding agency or pass-through entity and a non-Federal entity that is used to enter into a relationship the principal purpose of which is to transfer anything of value from the Federal awarding agency or pass-through entity to the non-Federal entity to carry out a public purpose authorized by a law of the United States.
• Internal controls - A process, implemented by a non-Federal entity, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

               (a) Effectiveness and efficiency of operations;
               (b) Reliability of reporting for internal and external use; and
               (c) Compliance with applicable laws and regulations

• Management decision - The evaluation by the Federal awarding agency or pass-through entity of the audit findings and corrective action plan and the issuance of a written decision to the auditee as to what corrective action is necessary.
• Non-Federal entity - A state, local government, Indian tribe, institution of higher education, or nonprofit organization that carries out a Federal award as a recipient or subrecipient.
• Pass-through entity - A non-Federal entity that receives federal funds and passes them along to another agency or non-profit organization. It essentially provides a subgrant to a subrecipient to carry out part of a Federal program.
• Risk assessment – A systematic process to analyze what can go wrong, how likely it is to happen, what the potential consequences are, and how tolerable the identified risk is.  Risks related to subrecipient monitoring can be categorized between the subrecipient’s financial risks and their non-financial/programmatic risks.
• Sub-award, subcontract, subgrant – A legal agreement from the pass-through entity to provide an award to a subrecipient to carry out part of a pass-through entity program.
• Subrecipient  - A non-Federal entity (excludes for-profit entities and individuals) that receives a subgrant from the pass-through entity to carry out part of a Federal program. A subrecipient may simultaneously be a recipient of other Federal awards directly from a Federal awarding agency.

 

Watch for upcoming blog posts about Subrecipient Monitoring, such as:

• The Uniform Guidance Requirements
• How to Distinguish Subrecipients from Contractors
• Risk Assessment for Subrecipients
• Determining Appropriate Level of Monitoring
• Reviewing Financial and Programmatic Reports

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If you have questions or would like advice on how to implement the recommendations in this blog post in your organization, Kevin is available to answer questions via phone or email at no cost to you:

Kevin Harper, CPA
[email protected] 
(510) 593-503

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