Subrecipient monitoring and pass-through entity responsibilities

In this lesson you will

Distinguish a subrecipient from a contractor using 2 CFR 200.331
List the pass-through entity requirements in 200.332
Design audit procedures for the subrecipient monitoring compliance requirement
Evaluate findings that arise from weak subrecipient monitoring

Subrecipient or contractor first

A pass-through entity is a recipient or subrecipient that provides a subaward to a subrecipient to carry out part of a federal program (2 CFR 200.1). The 200.332 duties apply only to subawards, so the classification under 200.331 comes first. A subrecipient determines eligibility, has its performance measured against program objectives, makes programmatic decisions, must comply with federal program requirements and uses the funds to carry out a program for a public purpose. A contractor provides goods and services within normal business operations, to many purchasers, in a competitive environment, with no program compliance requirements. Substance governs, not the label on the agreement. See subrecipient vs contractor determination.

What 200.332 requires

A pass-through entity must:

Verify eligibility. Confirm the subrecipient is not excluded or disqualified under 2 CFR 180.300, for example by checking SAM.gov (200.332(a)).
Identify the subaward and include required information. Every subaward must be identified as a subaward and include the federal award identification data in 200.332(b)(1), such as the subrecipient's name and unique entity identifier, the FAIN, federal award date, period of performance, amounts obligated, the Assistance Listing title and number, whether the award is research and development, and the indirect cost rate. It must also include all award requirements, any additional pass-through requirements, the indirect cost rate terms, a records access clause for the pass-through entity and auditors, and closeout terms.
Evaluate risk. Assess each subrecipient's fraud risk and risk of noncompliance to set the level of monitoring, considering prior experience with similar subawards, prior audit results (including whether it gets a single audit), new personnel or systems, and federal agency monitoring (200.332(c)).
Consider specific conditions under 200.208 where appropriate (200.332(d)).
Monitor. Review financial and performance reports; ensure the subrecipient takes corrective action on significant developments, including single audit findings related to the subaward; issue management decisions on findings pertaining only to the pass-through entity's award; and resolve audit findings specifically related to the subaward (200.332(e)).
Use monitoring tools based on risk, such as training and technical assistance, site visits and agreed-upon procedures engagements (200.332(f)).
Verify the subrecipient is audited as required by Subpart F (200.332(g)).
Consider adjustments to its own records from subrecipient audits and monitoring (200.332(h)), and consider enforcement action against noncompliant subrecipients under 200.339 (200.332(i)).

Testing compliance requirement M

Subrecipient monitoring is type M in the Compliance Supplement. For each major program that passes funds through:

Agree the SEFA's amount provided to subrecipients to subaward disbursement records.
Select subawards and inspect them for the 200.332(b) information and the subaward identification.
Inspect the risk assessment for each selected subrecipient and check that the monitoring performed matches the assessed risk.
Inspect evidence of report reviews, site visits and follow-up on issues.
For subrecipients that needed a single audit, confirm the pass-through entity verified it, reviewed findings related to its subaward and issued management decisions within six months of FAC acceptance where required.
Inspect exclusion checks performed before the subaward was made.

Weak subrecipient monitoring also raises program risk under 200.519(b)(1)(ii) when significant parts of a program are passed through.

Common file mistakes

Subawards missing required data elements, often the FAIN or indirect cost rate.
A risk assessment template completed once at onboarding and never updated.
Pass-through entity "verifies" audits by noting that one exists, without reviewing findings.
Monitoring tested at the pass-through entity's policy level only, with no sample of actual subrecipients.

Use the subrecipient monitoring checklist and the pass-through testing guide.

Worked example

Coastal Workforce Board: testing four subawards

Coastal Workforce Board passes $3,600,000 of a $5,000,000 major program to 9 subrecipients. The team selects 4 subawards.

Subrecipient	Subaward	Risk rated	Monitoring done	Exceptions
A	$1,200,000	High	Quarterly desk reviews, one site visit	None
B	$800,000	High	Quarterly desk reviews only	Site visit required by board policy for high risk not performed
C	$400,000	Low	Annual report review	Subaward omits the FAIN
D	$300,000	Medium	Semiannual review	None

Audit verification: A and B each expended more than $1,000,000 of total federal awards and had single audits. The board downloaded both from the FAC. B's audit had a finding on allowable costs related to the board's subaward, and the board issued a management decision 4 months after FAC acceptance, inside the six-month window.

Evaluation: two exceptions in four items, affecting $1,200,000 of the $2,700,000 tested (B's $800,000 and C's $400,000), or 44 percent. No costs are questioned, because the exceptions are monitoring and documentation failures, not unallowable spending. The team reports a significant deficiency and noncompliance with 200.332(b)(1) and with the risk-based monitoring required by 200.332(e), states the perspective (4 of 9 subawards tested, 2 exceptions) and recommends a subaward template check and a monitoring calendar tied to risk ratings.

Self-check

Answer each question before you open the answer.

What must a pass-through entity do before issuing a subaward to confirm eligibility?
Show answer
Verify the subrecipient is not excluded or disqualified under 2 CFR 180.300, for example by confirming in SAM.gov that it is not suspended or debarred (200.332(a)).
Name three factors 200.332(c) says to consider when evaluating subrecipient risk.
Show answer
Prior experience with the same or similar subawards, prior audit results including whether it receives a single audit, new personnel or new or substantially changed systems, and the extent and results of federal agency monitoring.
Is a pass-through entity responsible for resolving cross-cutting findings in a subrecipient’s single audit?
Show answer
No. 200.332(e)(4) limits its responsibility to findings specifically related to its subaward, and it may rely on the subrecipient’s cognizant or oversight agency for cross-cutting findings while still monitoring findings tied to its subaward.

Sources

Back to the syllabus

Standards are paraphrased from the primary sources listed above; read the source before relying on a requirement. This lesson is training material, not professional advice. Report an error