Subrecipient Monitoring – Uniform Guidance Requirements

As mentioned in our last blog post, the Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”) introduced a new requirement for entities that pass federal funds (“pass-through entities”) to non-profit entities or other governments, to monitor those subrecipients.

​We provided a list of terms and definitions related to subrecipient monitoring in part one of our subrecipient monitoring mini blog series.

Below, we go over what the Uniform Guidance’s requirement entails, and how to structure your subrecipient monitoring accordingly.

The Uniform Guidance’s requirements became effective in December 2014. Monitoring is required to ensure that subrecipients spend the funds on their designated uses and in accordance with applicable laws and regulations.
​If federal funds are passed to individuals or for-profit entities, these are not defined as subrecipients and need not be monitored.

​​The Uniform Guidance requires pass-through entities to provide significant information about each federal grant to its subrecipients to allow them to understand and comply with applicable grant provisions, laws and regulations.
It requires pass-through entities to conduct an assessment of each subrecipient in order to “[e]valuate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring […]” (Code of Federal Regulations for Grants and Agreements).

Monitoring to be done for each subrecipient must be determined based on the results of this assessment.

The minimum required amount of subrecipient monitoring is:

• Reviewing financial and performance reports required by the pass-through entity;
• following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means; and
• issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity.

 

​More elaborate monitoring of risky subrecipients may include training and technical assistance, desk reviews, on-site visits and agreed-upon procedures engagements by a certified public accountant. 
 
Although the Uniform Guidance applies only to subrecipients of federal funds, any entity that passes State or local money to subgrantees, or passes federal funds to for-profit entities, would be wise to consider applying the same monitoring as a best practice.

Overview of the Subrecipient Monitoring Process:

The Uniform Guidance requirements listed above mean that a pass-through agency needs to:

1. List subrecipients and contractors – Prepare a list of all entities to which federal funds were paid and the amount paid during the fiscal year.
2. Identify subrecipients – Determine whether each entity, to which federal funds were paid, is a subrecipient or a contractor. Subrecipients need to be monitored but not contractors.
3. Provide subgrant information – For each identified subrecipient, provide required information about the federal program. If not already done, the pass-through entity will need to rewrite its standard subgrant language.
4. Assess risk for each subrecipient - Assess the risk of each subrecipient failing to comply with federal requirements.
5. Match monitoring to risk assessment results - Determine appropriate monitoring to be performed for each subrecipient based on the results of the risk assessment.
6. Monitor subrecipients - Monitor subrecipients’ use of federal awards using some combination of reviews of required reports, desk reviews, on-site visits, training and technical assistance, and agreed-upon procedure engagements.
7. Review required reports - Review annual financial reports, assure single audit report is submitted if required, and issue management decision on findings and assure findings are resolved timely. Review required programmatic reports and assure findings are resolved timely.
8. Write policy and procedures - Write subrecipient monitioring policy and procedures, and train employees regarding their role. This policy should include guidelines for the use of escalating sanctions when a subrecipient does not perform the required corrective actions.
9. Develop data collection system – Determine how information about the grants, subrecipents and monitoring will be maintained and shared. Data includes but is not limited to documentation of: grants received, subgrants awarded, subrecipient vs. contractor determination, subrecipient risk assessment, monitoring performed, required reports reviewed, findings identified, corrective actions requested, periodic status of corrective action.

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Other Blog Posts Related to Subrecipient Monitoring:
 
We have previously provided guidance on subrecipient monitoring in these blog posts (this list will get more extensive as new posts are added on):
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• Subrecipient Monitoring Procedures – Basic Terms & Definitions​

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

• How to Distinguish Subrecipients from Contractors
• Risk Assessment for Subrecipients
• Determining Appropriate Level of Monitoring
• Reviewing Financial and Programmatic Reports
• Data Collection

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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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