Subaward Management and Monitoring for Nonprofits

When you receive a grant and pass funds to other organizations, you become a "pass-through entity" with significant oversight responsibilities.

This guide explains subaward management requirements and best practices.

Understanding Subawards

What is a Subaward?

A subaward is when you pass grant funds to another organization to carry out part of your grant's scope of work.

Key characteristics:

• Subrecipient performs substantive portion of grant
• Subrecipient makes decisions about scope
• Subrecipient is responsible for outcomes
• You remain responsible to your funder

Subaward vs. Contract

This distinction matters for compliance:

Subaward (Subrecipient)	Contract (Vendor/Contractor)
Implements part of your program	Provides goods/services
Makes programmatic decisions	Follows your specifications
Takes responsibility for outcomes	Delivers a product
Subject to grant terms	Subject to contract terms
Requires monitoring	Requires vendor management

Examples:

• Subaward: Partner nonprofit running youth programs under your federal grant
• Contract: Consultant developing training materials

Why the Distinction Matters

For federal grants:

• Subawards count differently for MTDC calculations (first $25k only)
• Subrecipients need audit verification
• More extensive monitoring required
• Different reporting requirements

Pass-Through Entity Responsibilities

Federal Requirements (2 CFR 200)

As a pass-through entity, you must:

1. Identify — Clearly designate subawards vs. contracts
2. Inform — Provide federal award information to subrecipients
3. Assess risk — Evaluate each subrecipient's risk
4. Monitor — Actively oversee subrecipient performance
5. Verify — Ensure subrecipient compliance
6. Enforce — Take action on issues identified

Required Subaward Information

Your subaward agreement must include:

• Federal award identification (CFDA, award number)
• All requirements from your award
• Indirect cost rate (if applicable)
• Period of performance
• Total amount obligated
• Audit requirements
• Access to records

Subrecipient Risk Assessment

When to Assess

Perform risk assessment:

• Before making a subaward
• Annually for ongoing subawards
• When significant changes occur

Risk Factors to Consider

Factor	Lower Risk	Higher Risk
Prior experience	Extensive federal grants	First federal subaward
Audit history	Clean audits	Findings, material weaknesses
Financial stability	Strong financials	Cash flow issues
Staff capacity	Experienced staff	High turnover
Systems	Established controls	Limited systems
Award size	Small relative to operations	Large relative to operations

Risk Assessment Matrix

Create a simple scoring system:

Factor	Weight	Score (1-5)	Weighted Score
Prior experience	20%	4	0.80
Audit history	25%	3	0.75
Financial stability	20%	4	0.80
Internal controls	25%	2	0.50
Size/complexity	10%	3	0.30
Total	100%		3.15

Risk level based on score:

• 4.0-5.0: Low risk
• 3.0-3.9: Medium risk
• Below 3.0: High risk

Monitoring Approaches

Monitoring by Risk Level

Low Risk:

• Annual financial report review
• Desk review of invoices
• Annual communication

Medium Risk:

• Quarterly financial review
• Mid-year desk audit
• Annual on-site visit

High Risk:

• Monthly financial review
• Quarterly on-site visits
• Detailed invoice review
• Technical assistance

Monitoring Activities

Financial Monitoring:

• Review invoices against budget
• Compare spending to progress
• Verify match contributions
• Check cost allowability

Programmatic Monitoring:

• Review progress reports
• Compare outputs to plan
• Assess quality of work
• Verify participant data

Compliance Monitoring:

• Verify Single Audit completion
• Review audit findings
• Check required certifications
• Confirm insurance coverage

Required Documentation

Subaward Agreement

Your agreement should include:

1. PARTIES AND PURPOSE
   - Names of organizations
   - Grant being passed through
   - Scope of subaward

2. FEDERAL AWARD INFORMATION
   - CFDA number
   - Federal award number
   - Federal agency
   - Pass-through entity
   - Total amount obligated
   - Period of performance

3. BUDGET AND PAYMENTS
   - Approved budget
   - Payment schedule
   - Invoice requirements
   - Indirect cost rate

4. COMPLIANCE REQUIREMENTS
   - 2 CFR 200 incorporation
   - Audit requirements
   - Record retention
   - Access to records

5. MONITORING AND REPORTING
   - Report requirements
   - Site visit provisions
   - Corrective action process

6. TERMS AND CONDITIONS
   - All flow-down terms from federal award

Risk Assessment Documentation

Keep on file:

• Completed risk assessment form
• Supporting documentation reviewed
• Risk level determination
• Monitoring plan based on risk

Monitoring Documentation

Maintain records of:

• Invoice reviews (with notes)
• Progress report reviews
• Site visit reports
• Correspondence
• Issues identified and resolved
• Corrective action taken

Managing the Subaward Lifecycle

Phase 1: Selection

• Issue RFP or select partner
• Conduct risk assessment
• Negotiate terms
• Execute subaward agreement

Phase 2: Implementation

• Conduct kickoff meeting
• Establish reporting schedule
• Review invoices and reports
• Provide technical assistance
• Conduct monitoring visits

Phase 3: Closeout

• Final report review
• Final invoice review
• Verify all terms met
• Resolve any issues
• Close out documentation

Handling Problems

Common Issues

Late reports:

• Send reminder before due date
• Follow up immediately when late
• Document pattern of lateness

Invoice problems:

• Request corrections
• Delay payment until resolved
• Provide training if needed

Audit findings:

• Require corrective action plan
• Verify implementation
• Consider increased monitoring

Corrective Action Process

1. Identify the issue
2. Communicate in writing
3. Request corrective action plan
4. Set deadline for response
5. Review proposed actions
6. Monitor implementation
7. Verify correction
8. Document resolution

Escalation

For serious or persistent issues:

• Increase monitoring intensity
• Withhold payment if warranted
• Consider subaward termination
• Report to federal awarding agency if required

Single Audit Requirements

When Subrecipients Need Audit

Subrecipients who spend $1,000,000+ in federal funds in a year must have a Single Audit.

Your Responsibilities

As pass-through entity:

• Verify subrecipient has audit if required
• Obtain and review audit reports
• Issue management decision on findings that affect your award
• Track corrective action

Tracking Subrecipient Audits

Subrecipient	Federal $$	Audit Required	Audit Received	Findings	Status
Partner A	$850,000	Yes	3/15/2026	None	Complete
Partner B	$400,000	No	N/A	N/A	N/A
Partner C	$1.2M	Yes	Pending	TBD	Follow up

Best Practices

1. Build Capacity

Help subrecipients succeed:

• Provide orientation to requirements
• Share templates and tools
• Offer technical assistance
• Connect to training resources

2. Communicate Regularly

Don't wait for reports:

• Monthly check-in calls
• Quarterly progress meetings
• Address issues promptly

3. Document Everything

Create a subaward file with:

• Agreement and amendments
• Risk assessments
• Invoices and approvals
• Progress reports
• Monitoring reports
• Correspondence
• Audit documentation

4. Stay Current

Keep up with:

• Changes to federal requirements
• Updates to your award terms
• Subrecipient status changes

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GrantLink helps track subaward spending and monitor subrecipient progress alongside your direct grant activities. See how it works.