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3.14 Subrecipient Monitoring

Subrecipient Monitoring

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Subrecipient Agreements
American Recovery and Reinvestment Act Requirements
Subaward Monitoring Procedures
Subrecipient Audits

The purpose of subrecipient monitoring is to ensure that federal program funds are being spent in accordance with the federal program and grant requirements, laws, and regulations. Subrecipient monitoring requirements apply equally to state, local and tribal governments as well as for-profit and non-profit organizations. The requirements for subrecipient monitoring can be found in:

Additional requirements can be found in the program legislation and the terms and conditions of your award.

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To effectively monitor your subrecipient, you need to ensure that Federal award information and compliance requirements are identified to the subrecipient at the time of the award and that subrecipient activities are monitored throughout the grant period.

As part of your organization’s subrecipient monitoring process, you need to develop systems, policies, and procedures to ensure that subrecipient reviews are conducted in accordance with Federal program and grant requirements, laws, and regulations.

Additionally, your organization should develop, implement, and perform procedures to ensure that the subrecipient obtains the required audits, and that audit findings identified in subrecipient audit reports are timely and effectively resolved and corrected.

Subrecipient Agreements

When you make an award to a subrecipient, you must ensure you identify the Federal award information and applicable compliance requirements, including applicable special conditions, are clearly designated in the subrecipient award agreement. The award or agreement must, at a minimum, include the following information:

  • Catalog of Federal Domestic Assistance (CFDA) title and number
  • Award name and number
  • Name of the Federal awarding agency
  • Activities to be performed
  • Period of Performance
  • Project policies
  • Original award flow-through requirements that are applicable to the subrecipient
  • Other policies and procedures to be followed
  • Dollar limitation of the agreement
  • Cost principles to be used in determining allowable costs

Additional elements to consider including in the agreement are listed in this chapter in the Best Practices section.

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American Recovery and Reinvestment Act Requirements

If your award was made under the American Recovery and Reinvestment Act of 2009 (Recovery Act), there are additional requirements in the original award that must be passed through in the subaward agreement. Your organization must ensure that subrecipients receiving Recovery Act funding have current SAM registrations, and you need to perform periodic checks to ensure that subrecipients are updating information, as necessary. In addition, you must require the subrecipient to perform the following:

  • Maintain records that adequately identify the sources and application of Recovery Act funds.
  • Separately identify to each subrecipient, and document at the time of the subawards and disbursement of funds, the Federal award number, CFDA number, the amount of the Recovery Act funds, and any related Recovery Act special conditions.
  • If the direct recipient did not delegate Section 1512(c) reporting responsibility to the subrecipient, the subrecipient must provide required 1512(c) information to the direct recipient to submit quarterly reports on subrecipient activity.

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Subrecipient Monitoring Procedures

As the award recipient, you are required during the program period to monitor the subrecipient’s use of Federal funds. The methods of monitoring may vary; some of the factors you may want to consider in determining the nature, timing, and extent of monitoring are as follows:

  • Programs with complex compliance requirements have a higher risk of non-compliance.
  • The larger the percentage of program awards passed through, the greater the need for subrecipient monitoring.
  • Larger dollar awards are of greater risk.
  • Subrecipients may be evaluated as higher risk or lower risk to determine the need for closer monitoring. Generally, new subrecipients may require closer monitoring. For existing subrecipients, based on results noted during monitoring and subrecipient audits, a subrecipient may warrant closer monitoring (e.g., the subrecipient has a history of non-compliance as either a recipient or subrecipient, new personnel, or new or substantially changed systems).

Some of the mechanisms you may use to monitor subrecipient activities throughout the year are the following:

  • Review monthly financial and performance reports submitted by the subrecipient.
  • Perform subrecipient site visits to examine financial and programmatic records and observe operations.
  • Review detailed financial and program data and information submitted by the subrecipient when no site visit is conducted. Documents to review might include timesheets, invoices, contracts, and ledgers that tie back to financial reports.
  • Regular communication with subrecipients and appropriate inquiries concerning program activities.

The purpose of these monitoring activities is to provide reasonable assurance that the subrecipient has administered the pass-through funding in compliance with the laws, regulations, and the provisions of the award and that the required performance goals are being achieved.

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You must have written subrecipient monitoring policies and procedures.

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Subrecipient Audits

Your organization needs to develop procedures to ensure that subrecipients expending $500,000 or more in Federal awards during the subrecipient’s fiscal year provide you with the required completed audit within 9 months after their year-end or one month after the issuance of their audit. Upon receipt of the subrecipient audit you need to:

  • Evaluate the impact of subrecipient activities on your organization’s ability to comply with applicable Federal regulations,
  • Issue  a management decision on audit findings within 6 months after receipt of the subrecipients’s audit report, and
  • Ensure that the subrecipient takes timely and appropriate corrective action on all audit findings.

In cases of continued inability or unwillingness of a subrecipient to have the required audits conducted, you, as the Federal awardee, shall take appropriate action using sanctions. It is important that you have policies and procedures in place to properly exercise your fiduciary responsibility in executing your own award requirements should a subrecipient not comply with requirements, laws, and regulations.

As prescribed in OMB Circular A-133, subrecipients are not required to submit a copy of the reporting package to you when there are “no audit findings,” i.e., when the schedule of findings and questioned costs does not disclose audit findings relating to the Federal award requirements that you provided in the agreement with your subrecipient, and the summary schedule of prior audit findings does not report the status of audit findings relating to Federal awards.

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You may use the information in the Federal Audit Clearinghouse (FAC) database as evidence to verify that the required audit was performed and the subrecipient had “no audit findings.” This verification is in lieu of reviewing submissions from the subrecipient when there are no audit findings. The FAC database is available online.

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