Subaward Management and Monitoring for Nonprofits

When you give part of a federal award to another organization to carry out part of the program, you make a subaward and act as a pass-through entity. Buying goods or services with award funds does not create a subaward.

The sections below explain the federal requirements for subawards and some common ways to meet them.

Understanding subawards

What a subaward is

A subaward passes federal award funds to another organization so it can carry out part of your award's scope of work. In a subaward, the subrecipient carries out part of the program and makes program decisions. You remain responsible to the federal agency or your own pass-through entity.

Subaward compared with contract

Under 2 CFR 200.331, the difference between a subrecipient and a contractor affects which rules apply.

Subrecipient	Contractor
Carries out part of the federal program	Provides goods or services for your use
Has responsibility for program decisions	Provides the goods or services within normal business operations
Is responsible for following the federal program requirements	Is not subject to the federal program's compliance requirements because of the agreement
Has its performance measured against the program's objectives	Provides similar goods or services to many buyers and normally operates in a competitive market
Is subject to the federal award terms that flow down	Is subject to the contract terms
Requires subrecipient monitoring	Requires procurement and contract management

For example, a partner nonprofit that runs youth programs under your federal grant is usually a subrecipient. A consultant who develops training materials for you is usually a contractor.

Why the difference matters

For federal awards, the difference has these effects:

• MTDC includes up to the first $50,000 of each subaward and excludes the rest. Contracts are not subject to the $50,000 limit.
• You must verify that each subrecipient had any Single Audit it needed.
• You must monitor subrecipients, but you manage contractors through procurement and contract terms.
• Subawards of $30,000 or more have federal reporting requirements under 2 CFR Part 170.

Pass-through entity responsibilities

Federal requirements

Under 2 CFR 200.331 and 2 CFR 200.332, a pass-through entity must:

1. Decide case by case whether each organization is a subrecipient or a contractor, based on the substance of the relationship. The label in the agreement does not decide it.
2. Verify in SAM.gov that the subrecipient is not suspended, debarred, or otherwise excluded.
3. Identify each subaward as a subaward and give the subrecipient the required award information.
4. Evaluate each subrecipient's fraud risk and risk of noncompliance.
5. Monitor the subrecipient, review its financial and performance reports, and make sure it corrects significant problems.
6. Verify that the subrecipient had any required Single Audit, and issue management decisions on audit findings about your subaward.
7. Consider enforcement action when a subrecipient does not comply.

Required subaward information

Under 2 CFR 200.332(b), each subaward must include:

• The federal award identification listed in 2 CFR 200.332(b)(1). The list includes the subrecipient's name and unique entity identifier, the Federal Award Identification Number (FAIN), the federal award date, and the subaward period of performance and budget period. It also includes the federal funds obligated, the project description, the federal agency and pass-through entity, the Assistance Listing title and number, whether the award is for research and development, and the indirect cost rate.
• All requirements of the subaward, including those from federal statutes, regulations, and the terms of the federal award
• Any additional requirements you impose so you can meet your own obligations, including reporting requirements
• The indirect cost rate that applies
• A requirement that the subrecipient let you and the auditors access its records and financial statements
• Terms for closing out the subaward

Subrecipient risk assessment

When to assess risk

You must evaluate each subrecipient's risk to decide how to monitor it. The rule requires an evaluation, but it does not require a scoring matrix, an annual schedule, or site visits. It is good practice to reassess risk when you renew a subaward or when the facts change.

Risk factors

Under 2 CFR 200.332(c), you should consider the subrecipient's prior experience with similar subawards, its prior audit results, new staff or changed systems, and the results of any federal agency monitoring. Many organizations also consider the factors in this table.

Factor	Lower risk	Higher risk
Prior experience	Many federal awards	First federal subaward
Audit history	No findings	Findings or material weaknesses
Financial condition	Strong financial position	Cash flow problems
Staff	Experienced staff	High turnover
Systems	Established controls	Limited systems
Award size	Small compared with its operations	Large compared with its operations

Optional risk scoring example

You may create a scoring system, but Part 200 does not set weights, score ranges, or labels. Define and approve your method, document the evidence for each score, and make sure your monitoring responds to the risks you find. The sample values below are not federal standards.

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

Do not rely on the total score alone. Signs of fraud, an exclusion, a serious unresolved finding, or an inability to do the work can call for action regardless of the total.

Monitoring approaches

Monitoring by risk level

You must review financial and performance reports for every subrecipient. Under 2 CFR 200.332(f), you can add other tools based on risk, e.g., training and technical assistance, site visits, and agreed-upon procedures engagements. The examples below are not required schedules.

• For lower risk subrecipients, review the required reports, review a sample of invoices or cost support when useful, and keep in touch on the schedule in the subaward.
• For moderate risk subrecipients, review reports in more detail or more often, and add targeted desk reviews or virtual or on-site reviews.
• For higher risk subrecipients, consider specific conditions under 2 CFR 200.208, e.g., more frequent reporting or payment by reimbursement. You can also add more intensive reviews, detailed invoice review, and technical assistance. Notify the federal agency if you impose specific conditions.

Monitoring activities

Financial monitoring compares invoices to the budget and spending to progress, and it checks match contributions and whether costs are allowable.

Program monitoring reviews progress reports, compares outputs to the plan, and checks the quality of the work and participant data.

Compliance monitoring confirms that required audits were done, reviews audit findings, and checks required certifications and insurance.

Required documentation

Subaward agreement

A subaward agreement often uses this structure:

1. PARTIES AND PURPOSE
   - Names of organizations
   - Federal award being passed through
   - Scope of the subaward

2. FEDERAL AWARD INFORMATION
   - Subrecipient name and unique entity identifier
   - Federal Award Identification Number (FAIN) and federal award date
   - Assistance Listing number and title
   - Federal agency and pass-through entity
   - Amount of federal funds obligated
   - Subaward period of performance and budget period
   - Research and development status

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

4. COMPLIANCE REQUIREMENTS
   - 2 CFR 200 requirements
   - 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 the federal award
   - Closeout terms

Risk assessment records

Keep the completed risk assessment, the documents you reviewed, the risk level you assigned, and the monitoring plan based on that risk.

Monitoring records

Keep records of invoice reviews with notes, progress report reviews, site visit reports, correspondence, problems found and resolved, and corrective actions.

Managing the subaward from start to finish

Selection

1. Issue a request for proposals or select a partner.
2. Assess the subrecipient's risk.
3. Negotiate the terms.
4. Sign the subaward agreement.

Implementation

1. Hold a kickoff meeting.
2. Set the reporting schedule.
3. Review invoices and reports.
4. Provide technical assistance.
5. Conduct monitoring visits if the risk calls for them.

Closeout

1. Review the final report and final invoice.
2. Confirm that all terms were met.
3. Resolve any open issues.
4. Close out the subaward and file the documentation.

Unless you set an earlier date in the subaward, a subrecipient must submit its final reports and liquidate its obligations within 90 calendar days after the subaward's period of performance ends, under 2 CFR 200.344.

Federal subaward reporting

Under the award term in Appendix A to 2 CFR Part 170, a recipient must report each first-tier subaward of $30,000 or more in federal funds, unless an exemption applies. You must report by the end of the month after the month you made the subaward. Subaward reporting moved from FSRS.gov to SAM.gov in March 2025.

Handling problems

Common issues

For late reports, send a reminder before the due date, follow up as soon as a report is late, and document a pattern of lateness.

For invoice problems, ask for corrections and provide training if needed. Hold payment of disputed costs until they are resolved only if the subaward terms allow it.

For audit findings, require a corrective action plan, verify that the subrecipient carries it out, and consider more monitoring.

Corrective action process

1. Identify the problem.
2. Describe it to the subrecipient in writing.
3. Ask for a corrective action plan.
4. Set a deadline for the response.
5. Review the proposed actions.
6. Monitor how the subrecipient carries them out.
7. Verify that the problem is corrected.
8. Document the resolution.

Escalation

For serious or repeated problems, you can increase monitoring, impose specific conditions, withhold payment when the rules allow it, or terminate the subaward. Follow the remedies in 2 CFR 200.339, and report to the federal agency when the award or the rules require it.

Single Audit requirements for subrecipients

When a subrecipient needs a Single Audit

A subrecipient that spends $1,000,000 or more in federal awards in a fiscal year that begins on or after October 1, 2024, must have a Single Audit. The amount includes all of its federal awards, not only your subaward.

Your responsibilities

As the pass-through entity, you must:

• Verify that the subrecipient had any required audit. Single Audit reports are available from the Federal Audit Clearinghouse, so you do not need to collect a copy from the subrecipient.
• Resolve audit findings that relate specifically to your subaward.
• Issue a management decision on findings about your subaward.
• Track corrective action.

Tracking subrecipient audits

Subrecipient	Your subaward	Single Audit required?	Audit received	Findings	Status
Partner A	$850,000	Depends on the partner's total federal awards spent	3/15/2026	None	Complete
Partner B	$400,000	Depends on the partner's total federal awards spent	Not applicable	Not applicable	Confirm total federal awards spent
Partner C	$1,200,000	Yes, if the partner spent this amount in the fiscal year	Pending	To be determined	Follow up

Good practices

Build subrecipient capacity

Help subrecipients succeed. Explain the requirements at the start, share templates and tools, offer technical assistance, and point them to training.

Communicate regularly

Do not wait for reports to learn about problems. Set check-ins based on risk, milestones, and the reporting schedule, meet when a problem comes up, and address issues promptly.

Keep a complete subaward file

Each subaward file should hold the agreement and amendments, risk assessments, invoices and approvals, progress reports, monitoring reports, correspondence, and audit records.

Stay current

Track changes to federal requirements, changes to your award terms, and changes in each subrecipient's status.

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How GrantLink supports this today

GrantLink keeps grant allocations based on QuickBooks Online transactions, along with budget lines, fund receipts, funding shares, documents, reports, and activity history. GrantLink does not have a subrecipient monitoring workflow, so keep your risk assessments and monitoring records in your own system. GrantLink does not replace funder guidance, your accounting policy, or review by your accountant or auditor.

Sources: 2 CFR 200.331, 2 CFR 200.332, and 2 CFR Part 170.