1. Subrecipient Monitoring
Tools to comply under the new Federal Regulations
Prepared For: Raising the Bar Conference 2017
Jennifer Arminger, CPA
Nonprofit Audit Partner
Jim Larson, CPA

2. Our Team Meet your instructors Jennifer Arminger, CPA Jim Larson, CPA
Nonprofit Audit Partner
Jim Larson, CPA
Nonprofit Audit Partner
Ms. Arminger has spent her career specializing in the financial management, accounting and auditing for tax-exempt organizations, with a concentrated expertise in compliance with Uniform Guidance. She is responsible for managing all phases of nonprofit audit and consulting engagements in accordance with generally accepted auditing standards and government auditing standards.
Mr. Larson has worked in accounting since 1986, including 20 years exclusively providing audit and financial management solutions to nonprofit entities. His experience in the private sector provided him with hands-on experience implementing accounting and internal control procedures, preparing budgets and financial forecasts, and consulting on investment decisions.

3. Table of Contents 1 | Uniform Guidance 2 | Determination
General background on the new Federal Regulations
The importance of determining a subrecipient relationship
3 | Requirements
4 | Monitoring
What are the requirements under Uniform Guidance
How to effectively monitor your subrecipients
5 | Audit Program
6 | Policy
Review the audit program for subrecipient test work
Take a look at an example monitoring policy

4. Uniform Guidance General Background on the New Federal Regulations
Title 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles and Audit
Requirements for Federal Awards (Uniform Guidance)
Effective for fiscal periods beginning after December 26, 2014 (i.e. December 31, 2015)
Agency implementation in respective award agreements
Multi-year grants may fall under old regulations, until a modification makes the change

5. The importance of determining a subrecipient relationship
Determination
The importance of determining a subrecipient relationship
Judgment in the Determination
The non-federal entity may concurrently receive federal awards as a recipient, a subrecipient and a contractor depending on the substance of it’s agreements. Therefore, the entity must make a case-by-case determination as to the nature of the relationship. The substance of the relationship is more important than the form of the agreement, and accordingly, the entity must use judgment and document the classification of each agreement as a subaward or a procurement contract.

6. Determination
The importance of determining a subrecipient relationship
Contractor (Vendor)
Subrecipient
Provides the goods and services as normal business operations to many different purchasers
Has responsibility for programmatic decision making
Provides goods or services that are ancillary to the operation of the Federal program
Has its performance measured in relation to whether objective of the program were met
Normally operates in a competitive environment
Determines who is eligible to receive what federal assistance

7. What are the requirements under the new guidance 200.331
Policies
The first, and possibly one of the most important actions an organization must take to ensure compliance, is adopting new policies.
Your internal policies should be formally updated to comply with the new regulations and modified to fit your organization’s unique practices. Not only is it a requirement under Uniform Guidance (to establish policies and procedures) it is the document that auditors use to determine compliance.

8. What are the requirements under the new guidance 200.331
Pre-award Risk Assessment
What commonly used to be an informal best practice, is now a formal requirement under Uniform Guidance. Before awarding federal funds an entity must evaluate each subrecipients risk of non-compliance, which could include:
Knowledge based on prior experience
Results of subrecipients audits
New personnel or change in systems
Extent and results of Federal agency monitoring

9. What are the requirements under the new guidance 200.331
Federal identification
The award must identify funds are federal, provide the CFDA number, as well as several other specific requirements (see )
Requirements
All requirements in which the granting entity is subject, to include the federal statutes, regulations and terms of the original award
Additional requirements
Any additional requirements that the pass- through entity imposes on the subrecipient (i.e. performance reporting)
Indirect rate
An approved federally recognized indirect cost rate or (if not rate exists) a specific negotiated rate, or a de minimis indirect rate
Access to records
A requirement that the subrecipient permit the pass-through entity and auditors to have access to the records & financials
Closeout
Detail out the appropriate terms and conditions concerning the closeout of the subaward

10. How to effectively monitor your subrecipients
Monitoring
How to effectively monitor your subrecipients
Must
The regulations put forth the following requirements as “musts” when monitoring subrecipients:
Review financial and performance reports required by the pass-through entity.
Follow up for timely action on all deficiencies (pertaining to Federal award) as a result of audits, and on-site reviews
Issue a management decision for audit findings
Verify the entity is audited in accordance with Uniform Guidance (if applicable)
Document any findings, and the applicable action to mitigate

11. How to effectively monitor your subrecipients
Monitoring
How to effectively monitor your subrecipients
Recommended
The regulations put forth the following requirements as “recommended” best practices when monitoring subrecipients:
Provide training and technical assistance
Perform on-site reviews
Arrange for agreed-upon procedures engagements
For poor performers, consider enhancing own documentation
For poor performers, consider taking enforcement action for non-compliance (i.e. stop funding)

12. Subrecipient Monitoring Audit Program
Handout
Subrecipient Monitoring Audit Program

13. Example Risk Assessment Policy
Handout
Example Risk Assessment Policy

14. Get In Touch Jennifer Arminger, CPA Jim Larson, CPA
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Jim Larson, CPA