The Importance of Subrecipient Monitoring Steven Spillan, Esq. sspillan@bruman.com www.bruman.com

Key Definitions in 2 CFR Part 200 Pass-through entity (200.74) - non-federal entity that provides a subaward to a subrecipient to carry out part of a Federal program. Subrecipient (200.93) - a non-federal entity that receives a subaward from a pass-through entity to carry out part of a federal program. Contractor (200.23) – means an entity that receives a contract.

Subaward vs. Contract (200.330) It does not matter what the agreement is called…it matters what it DOES Subaward Contract Allowable activities based on applicable statute, local plan, State rules Management Rules: Applicable federal rules (Part 200, Program rules) State law/policies & procedures Allowable activities based on terms & conditions of the contract Terms of the contract State/local contract law

Subrecipients (200.330(a)) Determines who is eligible to participate in a federal program Has its performance measured against whether the objectives of the federal program are met Is responsible for programmatic decision-making & complying with federal program requirements Uses the federal funds to carry out a program as compared to providing goods or services for a program

Contractors (200.330(b)) Provides the goods and services within normal business operations Provides similar goods or services to many different purchasers Operates in a competitive environment Provides goods or services that are ancillary to the operation of the federal program Is not subject to compliance requirements of the federal program

Why Worry About Subrecipient Monitoring? 2 CFR § 200.331 & 34 CFR § 76.770 Both rules make one thing perfectly clear: The Pass-Through is responsible for ensuring grant funds are spent according to applicable laws & regulations

What are the minimum requirements? 34 CFR § 76.770 - State shall have procedures for: Reviewing and approving applications for subgrants and amendments to those applications; Providing technical assistance; Evaluating projects; and Performing other administrative responsibilities necessary to ensure compliance with applicable statutes and regulations

2 CFR § 200.331 Five areas of concern: Subaward requirements Risk assessment Specific Conditions Monitoring Enforcement

Subaward – Required Info Subrecipient name (must match name associated with unique entity identifier) Subrecipient unique entity identifier Federal Award Identification Number (FAIN) Federal Award Date Period of performance state and end date

Required Info (cont.) Amount of federal funds ‘obligated by this action’ By this specific subaward agreement Total amount of federal funds ‘obligated to the subrecipient’ Amount listed above + previous amounts under same award Total amount of the federal award Both amounts listed above + amount yet to be awarded

Required Info (cont.) Project description for FFATA purposes Name of federal awarding agency, pass-through entity, and contact official CFDA Number and Name must identify the dollar amount made available under each federal award and the CFDA number at time of disbursement Is the award for “R&D” The indirect cost rate for the award

Required Info (cont.) All requirements imposed by the pass-through ensuring award is used in accordance with all applicable requirements Any additional requirements that the pass-through entity imposes in order to meet its own responsibility to feds

Required info (cont.) Negotiated indirect cost rate Noting that the subrecipient permits the pass-through entity and auditors to have access to the subrecipient's records and financial statements Appropriate terms & conditions concerning closeout of the subaward

Risk Assessment The Pass-through must evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward

Risk Factors Subrecipient’s prior experience with the grant program Results of previous audits New personnel or substantially changed systems Results of federal monitoring

Specific Conditions If necessary (based on risk), conditions include (200.207): Require reimbursement Withhold funds More detailed reporting Additional monitoring Technical or management assistance Prior approvals

Monitoring Pass-through MUST monitor its subrecipients to assure compliance and performance: Review financial and programmatic reports Ensure corrective action Issue a “management decision” on audit findings (six month deadline under §200.521)

Monitoring Tools Providing subrecipients with training and technical assistance on program-related matters Performing on-site reviews of the subrecipient's program operations

Monitoring Schedule? Federal rules say nothing of timing Many states employ “risk matrix” to determine monitoring schedule Look at various risk factors, including when the last monitoring visit took place Schedule accordingly

Monitoring (Single Audits) Verify that every subrecipient is audited as required by Subpart F of Part 200 If a subrecipient does not meet the audit threshold, arrange for “agreed-upon procedures” on specific areas: activities allowed or unallowed allowable costs/cost principles eligibility reporting

Additional Monitoring Concerns Mandatory Written Policies/Procedures Cash Management (200.302(b)(6)) Allowability (200.302(b)(7)) Inventory Management (200.313(d)) Procurement (200.318(a)) Conflict of Interest/Gratuities (200.318(c)(1)) Travel (200.474(a)) Mandatory Disclosures Conflicts of Interest (200.112) Fraud (200.113) Procurement and Equipment Thresholds Methods of Procurement (200.320) Equipment definition and Disposition (200.313

Additional Monitoring Concerns (cont.) Time Distribution Records (200.430) Standards for Documentation (200.430(i)): Records must accurately reflect the work performed Prior Approvals (200.407) Use of grant agreements; Cost sharing or matching; Program income; Budget and plan revisions; Real property, Equipment, and Other Capital Expenditures; Fringe benefits; Pre-award costs; Travel costs.

Enforcement (200.338) Temporarily withhold cash payments pending correction Disallow all or part of the cost Wholly or partly suspend the award Recommend suspension/debarment Withhold further federal awards “Other remedies that may be legally available”

Termination (200.340 and 200.341) The pass-through may terminate the award “for cause,” notice and opportunity for hearing

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