When a recipient provides a subaward to a subrecipient to carry out part of a federal award, it acts as a pass-through entity for that subaward. Merely buying goods or services with award funds does not create a subaward.

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
Has responsibility for programmatic decision-making and adherence to applicable federal program requirements	Provides similar goods or services to many purchasers, normally operates competitively, and is not subject to federal program compliance requirements as a result of the agreement
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:

Under the current MTDC definition, up to the first $50,000 of each subaward is included, regardless of period of performance; contracts are not subject to this exclusion
The pass-through entity must determine whether each subrecipient was subject to the Single Audit requirements and verify required audits through the Federal Audit Clearinghouse
More extensive monitoring required
Different reporting requirements

Pass-Through Entity Responsibilities

Federal Requirements (2 CFR 200)

As a pass-through entity, you must:

Classify — Make and document a case-by-case determination using the substance of the relationship under 2 CFR 200.331; labels alone do not control
Screen and inform — Verify the prospective subrecipient is not excluded or disqualified, then provide the required federal award information
Assess risk — Evaluate each subrecipient's fraud risk and risk of noncompliance
Monitor — Actively oversee subrecipient performance
Verify — Ensure subrecipient compliance
Enforce — Take action on issues identified

Required Subaward Information

Your subaward agreement must include:

Federal award identification required by 2 CFR 200.332(a), including Assistance Listing title and number, federal award identification number, dates, amounts, agency, and whether the award is research and development
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

Evaluate each subrecipient's risk of noncompliance to determine appropriate monitoring. The rule requires an evaluation, but does not mandate this article's scoring matrix, annual cadence, or site visits. Reassessing when a subaward is renewed or facts materially change is prudent practice.

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

Optional Internal Risk-Scoring Example

An organization may create a scoring system, but Part 200 does not prescribe weights, score ranges, or labels. Define and approve the method internally, document the evidence behind each score, and ensure the resulting monitoring actually responds to the identified risks. For example, factors could be recorded as follows without treating the sample values as federal standards:

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

Do not use a numeric total mechanically: fraud indicators, exclusion status, a material unresolved finding, or inability to perform may warrant action regardless of the aggregate score.

Monitoring Approaches

Monitoring by Risk Level

The following are examples of risk-responsive practices, not mandated frequencies:

Lower Risk examples:

Review required financial and performance reports
Sample invoice or supporting-cost review when useful
Routine communication on the schedule established in the subaward

Moderate Risk examples:

More detailed or more frequent report review
Targeted desk review
Targeted virtual or on-site review

Higher Risk examples:

Enhanced reporting or reimbursement conditions through properly imposed specific conditions
More intensive desk, virtual, or on-site review
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
   - Assistance Listing number and title
   - 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

Identify the issue
Communicate in writing
Request corrective action plan
Set deadline for response
Review proposed actions
Monitor implementation
Verify correction
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 (for fiscal years beginning on or after October 1, 2024).

Your Responsibilities

As pass-through entity:

Verify through the Federal Audit Clearinghouse that a required audit was completed; the pass-through entity need not collect a copy when it is available there
Follow up on findings specifically pertaining to the subaward
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	Cannot determine from this subaward alone; assess the entity's total federal awards expended	3/15/2026	None	Complete
Partner B	$400,000	Cannot determine from this subaward alone	N/A	N/A	Verify total federal awards expended
Partner C	$1.2M	Yes if this amount was expended in the applicable fiscal year	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:

Set check-ins based on risk, milestones, and the reporting schedule
Meet when needed to assess progress or resolve emerging issues
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

How GrantLink supports this today

GrantLink helps by organizing QBO-backed allocations, budget lines, fund receipts, funding shares, documents, report outputs, and activity history. It supports audit preparation, but it does not replace funder guidance, accounting policy, or professional review.

Authoritative references: 2 CFR 200.331 and 2 CFR 200.332.