Subrecipient Monitoring

What is subrecipient monitoring?

Subrecipient monitoring is the oversight a pass-through entity must perform over organizations it gives federal funds to. If your nonprofit receives a federal award and passes part of it to a partner organization to carry out program work, you are responsible for their compliance as well as your own. The obligation is yours and does not transfer with the money.

Subrecipient or contractor, and why it matters

A subrecipient carries out part of the program and is subject to federal compliance requirements. A contractor provides goods or services on commercial terms and is not. The distinction turns on substance, not on what the agreement is titled: whether the entity has programmatic decision-making, is measured on program objectives, and is subject to award conditions. Misclassifying a subrecipient as a contractor is a common and significant audit finding.

What monitoring actually requires

Perform a risk assessment before the award, issue a subaward agreement identifying the federal award and its terms, review financial and performance reports, and follow up on findings. Higher-risk subrecipients need site visits or desk reviews of supporting documentation. Verify that subrecipients requiring their own single audit obtained one, and resolve any findings that affect your award. Keep the monitoring file contemporaneous; an auditor will ask to see it.