State and local governments continue to navigate a tidal wave of federal grants via the CARES Act, ARPA and the Infrastructure Investment and Jobs Act. To operationalize these grants, governments are making subawards to subrecipients.

There is a lot at stake: billions of dollars affecting millions of citizens, a host of compliance requirements and expectations that the money will support meaningful improvements in communities.

In an earlier post, we offered two leading practices for managing grant subrecipients and subawards. In this post, we outline the third leading practice.

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Even though the subrecipient has accepted responsibility for operations under the subaward, the prime recipient still has overall accountability for compliance with federal regulations.

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Making a subaward

Once you confirm that an entity is a subrecipient (not a contractor) and complete a subrecipient risk assessment, you can make a subaward.

Each time you grant a subaward to a subrecipient, you need to document it through a grant agreement or other form of documentation. The documentation includes information required by federal regulations, such as 35 CFR 35 and Uniform Guidance in 2 CFR Part 200.

In addition, you need to follow specific requirements, such as performance measures. By signing the subaward documentation, the subrecipient acknowledges their subrecipient status and the related requirements.

Keep in mind that even though the subrecipient accepts responsibility for operations under the subaward, you as the prime recipient remain accountable for overall compliance with federal regulations.

That’s why you need to periodically provide training to and test the controls in place at the subrecipient. And that brings us to the third leading practice.

Leading practice #3: Monitor subrecipients

For prime recipients, one of the most common audit findings is insufficient or inadequate subrecipient monitoring. The consequences of such a finding apply to the prime recipients.

When building a subrecipient monitoring plan, you need to incorporate the findings of the risk assessment, mentioned earlier. Additionally, here are a few other things to keep in mind:

  1. Provide subrecipients with training and technical assistance. For example, you can answer questions about leading practices; offer to help with program implementation; and provide training on fiscal or program reporting, policy development, and RFP and contract development.
  2. Perform off-site reviews of the subrecipient’s program operations by asking for and sampling documentation in a desk review process.
  3. Perform on-site reviews of the subrecipient’s program operations to verify subrecipient activity and address any issues raised during the desk review. Note: During situations like COVID-19, you may hold on-site reviews virtually through video conferencing.
  4. Arrange for audits as described in the federal Uniform Guidance 2 CFR Part 200.425. Once you are done with the monitoring process, prepare a written report. The report should summarize the results of the review, including a management statement with observations of the subrecipient’s internal controls and compliance. It should also outline corrective action, as needed.

In case you missed it, read our earlier blog on the two more leading practices. As you work through your jurisdiction’s management approach, reach out to Bill if you have questions.

Read more blogs:

This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors. This document refers to marks owned by third parties. All such third-party marks are the property of their respective owners. No sponsorship, endorsement or approval of this content by the owners of such marks is intended, expressed or implied.

Ryan Oakes

Global H&PS Industry Practices Chair

Bill Kilmartin

Former Comptroller – Commonwealth of Massachusetts

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