Maximizing Subrecipient Monitoring: Best Practices and Uniform Guidance

Subrecipient management is a vital aspect of managing grants and contracts effectively. As governments, local organizations, and institutions increasingly rely on subawards to achieve their mission, ensuring proper oversight of subrecipients becomes paramount. If your organization receives state or federal funds, you are probably aware that there are specific subrecipient monitoring requirements.  

What is subrecipient monitoring?  

Subrecipient monitoring refers to the process and procedures implemented by grantors and prime awardees to oversee the activities and compliance of subrecipients who receive funds to carry out specific project objectives. Proper monitoring mitigates risks, enhances accountability, and safeguards the integrity of the funding process. Subrecipient monitoring is also a requirement outlined in the federal regulations, specifically in Uniform Guidance 2 CFR 200. This guidance requires grantees to monitor Federally funded activities for compliance with all applicable requirements regardless of who carries out the activity. 

Why is subrecipient monitoring important? 

The easy answer is that it is federally required as codified in 2 CFR Part 200, which establishes the framework for federal grant management, including subrecipient monitoring requirements. Key provisions of the Uniform Guidance (and proposed revisions to Uniform Guidance as of October. 2023) related to subrecipient monitoring include: 

• Subrecipient determination: Clearly defining subrecipient, beneficiary, and contractor relationships and maintaining proper classification for monitoring purposes. 
• Flow-down requirements: Communicating applicable terms and conditions to subrecipients and confirming that they understand their obligations. 
• Subrecipient monitoring: Establishing procedures for risk assessment, subrecipient selection, and monitoring consistent with the requirements of Uniform Guidance. 
• Reporting and documentation: Maintaining accurate records of subrecipient monitoring activities and compliance with reporting requirements outlined in the Uniform Guidance. 
• Using plain language principles: Consistently using “recipient” or “subrecipient” in place of “non-federal entity” or “subgrantee.” 

However, subrecipient monitoring is important for a variety of additional reasons. By providing insight into how funds are being used and whether goals are being met, monitoring enhances accountability and serves as an effective program and project management tool.  

Risk mitigation 

Subrecipients may not have the same level of oversight and accountability as prime awardees, making them susceptible to mismanagement or non-compliance. 

Compliance assurance 

Subrecipients’ adherence to the terms and conditions of the award and compliance with relevant regulations and policies is essential to maintaining the integrity of the funding process. 

Program effectiveness 

Effective monitoring helps confirm that subrecipients achieve programmatic objectives and deliver desired outcomes. 

Financial stewardship 

Monitoring subrecipient expenditures and appropriate use of funds helps safeguard against fraud, waste, and abuse. 

Best practices in subrecipient monitoring 

To help maximize the effectiveness of subrecipient monitoring, consider implementing the following best practices: 

Subrecipient selection and due diligence 

Implement robust processes for selecting subrecipients, including assessing organizational capacity, financial stability, and past performance. 

Risk assessments 

Conduct risk assessments to identify potential areas of non-compliance or financial risk associated with subrecipient activities. Because of capacity constraints, a grantee is unlikely to monitor every subrecipient with the same frequency or using the same method. By applying criteria designed to identify the highest-risk subrecipients, the risk assessment helps the grantee determine who should be monitored and how. An auditor can refer to the risk assessment to confirm whether a grantee’s monitoring strategy is reasonable.   

Subaward agreements 

Formalize the relationship with a detailed subaward agreement that clearly outlines the scope of work, performance expectations, reporting requirements, and terms and conditions.  

Ongoing monitoring and reporting 

To be effective and compliant, monitoring should be ongoing. This includes implementing regular monitoring activities to assess subrecipient performance and compliance, including site visits, desk, reviews, and financial reconciliations. This also includes documenting activities, including corrective action plans. Per the proposed changes to the Uniform Guidance, grantees must now act when a deficiency is identified.  

Training and capacity building 

Technical assistance provides an opportunity to work with the subrecipient to build capacity and align goals. Providing training and technical assistance to subrecipients also enhances their capacity to manage grant funds effectively and comply with regulatory requirements.  

Subrecipient monitoring is a multifaceted process that requires diligence, collaboration, and a commitment to accountability. By implementing best practices in subrecipient monitoring, organizations can mitigate risks, promote transparency, and better align with the desired outcomes of the grant-funded program.  

Our grants management professionals have decades of experience navigating complex federal guidance and assisting clients with program management activities. Contact us below to discuss subrecipient monitoring requirements and how to leverage these practices.