CGMS 100%

Domains: Program Management and Grant Award

Lesson 6: Subrecipient monitoring

Directly relevant to GCHS, which may pass federal funds on to others · 14 practice questions

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Reading

An organization that receives federal grant funds and passes some of them on to another organization to carry out part of the work becomes a pass-through entity, and its own money recipient becomes a subrecipient. GCHS is a realistic candidate for this role, on CDBG and HOME work especially, where a city or county may pass federal funds through GCHS, or GCHS itself may subgrant to a smaller partner organization to deliver part of a program. Getting the subrecipient relationship wrong, misclassifying it, under-monitoring it, or failing to document risk assessment, is a direct and personal liability for whoever is running the grants program, since a pass-through entity is responsible for monitoring its subrecipients' compliance and performance, and the federal agency in turn reviews how well it did that (2 CFR 200.331 and 200.332).

Subrecipient or contractor? The distinction that decides which rules apply

2 CFR 200.331 requires a pass-through entity to determine, for every relationship where it passes federal funds to another entity, whether that entity is a subrecipient or a contractor (sometimes called a vendor), because the two are governed by entirely different sets of rules. A subrecipient carries out a substantive portion of the federal program's scope of work under its own direction, has some programmatic decision-making authority (it may determine who is eligible to receive services, for instance), and its performance is measured against whether the program's objectives were met. It is a programmatic partner, it is responsible for following the federal program's requirements, and the pass-through entity's duties under 200.332 apply to it. A contractor, by contrast, provides goods or services needed to carry out the project as part of its normal business, for a fee, in a competitive market relationship, does not make eligibility determinations, and its performance is measured against contract deliverables and specifications, not program objectives. A contractor is subject to procurement standards (200.317 through 200.327, covered in lesson 5), not subrecipient monitoring. This determination is substance over form, made case by case, and no single factor decides it alone, including the dollar amount involved.

What every subaward agreement has to communicate

Before making a subaward, the pass-through entity must verify that the subrecipient is not excluded or disqualified, which 2 CFR 200.332(a) ties to 2 CFR 180.300 and which can be done by checking SAM.gov. Once an entity is cleared and determined to be a subrecipient, 200.332(b) requires the pass-through entity to identify every subaward clearly as a subaward and to include specific information: the federal award identification (the subrecipient's name and unique entity identifier, the federal award identification number, the award date, the subaward period of performance and budget period, the federal funds obligated, the assistance listing number, and the indirect cost rate, among other data elements), all requirements imposed by federal statutes, regulations, and the award's terms and conditions, any additional requirements the pass-through entity imposes, the indirect cost rate to be used, a requirement that the subrecipient give the pass-through entity and auditors access to its records and financial statements, and appropriate closeout terms. If some of this information is not yet available, the pass-through entity gives the best information it has and supplies the rest when it is obtained. A subaward agreement that is silent on these elements leaves both the subrecipient and the pass-through entity exposed, since the subrecipient cannot be expected to comply with requirements it was never told about.

Risk-assessing a subrecipient

2 CFR 200.332(c) requires a pass-through entity to evaluate each subrecipient's fraud risk and risk of noncompliance in order to decide how intensively to monitor it. The rule says the pass-through entity should consider four things: the subrecipient's prior experience with the same or similar subawards; the results of its previous audits (including whether it receives a Single Audit and how far similar subawards have been audited as a major program); whether it has new personnel or new or substantially changed systems; and the extent and results of any federal agency monitoring, for example if it also receives awards directly from the federal agency. Many organizations add their own judgment factors, such as the size and complexity of the award, but those four are the ones the rule names. If appropriate, the pass-through entity can also attach specific conditions to the subaward (200.208) and notify the federal agency. This is meant to be a genuine, individualized assessment, not a checkbox exercise applied identically to every subrecipient regardless of its track record.

Monitoring proportional to risk

The intensity of ongoing monitoring should scale with the assessed risk. The rule names monitoring tools that may be useful depending on that risk (200.332(f)): training and technical assistance, site visits, and agreed-upon-procedures engagements. It sets no fixed schedule, so the frequencies here are common practice, not requirements. A higher-risk subrecipient may warrant quarterly financial reviews, more frequent site visits, and closer testing of its internal controls. A lower-risk subrecipient, one with a strong track record and solid systems, can generally be monitored with an annual desk review and periodic check-ins rather than the same intensive schedule applied to every subrecipient regardless of risk. Whatever schedule is chosen, 200.332(e) requires the pass-through entity to review the subrecipient's financial and performance reports and to ensure it takes corrective action on significant developments (such as audit findings related to the subaward, site visit results, and written notice of adverse conditions). It must also verify that the subrecipient is audited as subpart F requires (200.332(g)) and resolve audit findings that relate specifically to the subaward. Keeping documentation of every monitoring activity is good practice, since "we monitored them" is only credible if there is a paper trail behind it.

Subrecipient vs. contractor, and the monitoring chain A comparison of two relationship types: subrecipient, governed by subrecipient monitoring rules, versus contractor, governed by procurement standards, followed by an illustrative risk-proportional monitoring ladder from low risk (annual desk review) to high risk (quarterly review and site visits). The rule sets no fixed frequencies. Subrecipient Programmatic partner Makes eligibility decisions, measured against program objectives Governed by 200.331-200.333 Contractor Market vendor No eligibility authority, measured against contract deliverables Governed by 200.317-200.327 Low risk Annual desk review, check-ins Moderate risk Semi-annual review High risk Quarterly review, site visits
The subrecipient/contractor determination decides which rulebook applies; risk assessment then decides how closely a subrecipient gets watched. The schedules shown are common practice; the rule sets no fixed frequencies.

Practice questions

1. What section of 2 CFR 200 requires a pass-through entity to determine whether an entity receiving funds is a subrecipient or a contractor?

  1. 200.331
  2. 200.403
  3. 200.501
  4. 200.112

2. Which characteristic marks an entity as a subrecipient rather than a contractor?

  1. It provides goods for a fee in a competitive market
  2. It carries out a substantive portion of the program's scope of work under its own direction, with performance measured against program objectives
  3. It never receives federal funds directly
  4. It is always a for-profit business

3. Which set of rules governs a contractor relationship, as opposed to a subrecipient relationship?

  1. 200.331 to 200.333, subrecipient monitoring rules
  2. 200.403 to 200.414, cost principles only
  3. 200.317 to 200.327, procurement standards
  4. 200.501, audit requirements only

4. Does the dollar amount of a subaward, by itself, determine whether the recipient is a subrecipient or a contractor?

  1. Yes, any award above $250,000 is automatically a subaward to a subrecipient, whatever the recipient actually does
  2. No; it is a case-by-case judgment of the relationship's substance, and no single factor decides it
  3. Yes, any award below the micro-purchase threshold is automatically a contract, whatever the recipient actually does
  4. Yes, the dollar amount is the only factor that the pass-through entity is allowed to weigh

5. Which section of 2 CFR 200 sets out requirements for pass-through entities, including what a subaward agreement must communicate?

  1. 200.318
  2. 200.305
  3. 200.344
  4. 200.332

6. Which of the following is required to be communicated in a subaward agreement under 200.332?

  1. Federal award identification including period of performance, all applicable requirements, access to the subrecipient's records for monitoring and audit, and closeout terms
  2. Only the subrecipient's tax ID number
  3. Only the total dollar amount, with no further detail required
  4. The subrecipient's staff salaries

7. What is one risk factor a pass-through entity should weigh when assessing a subrecipient under 200.332?

  1. The subrecipient's physical office location relative to the pass-through entity's headquarters, and whether site visits would be convenient
  2. Whether the subrecipient's staff prefer remote work over in-office schedules, which affects how monitoring is scheduled
  3. Whether the subrecipient has new personnel or new or substantially changed systems
  4. The subrecipient's number of social media followers and how often its leadership appears in local news

8. Should every subrecipient be monitored with the same intensity, regardless of assessed risk?

  1. Yes, uniform monitoring at the same intensity is required so that every subrecipient is treated identically
  2. No, monitoring should scale with assessed risk, with higher-risk subrecipients watched more closely
  3. Only subrecipients above $1,000,000 need any monitoring at all; smaller awards are exempt from monitoring
  4. Monitoring is optional once a subaward agreement is signed and the first payment has been made

9. What must a pass-through entity verify about a subrecipient before making a subaward?

  1. That the subrecipient is not excluded or disqualified, for example by checking SAM.gov
  2. That the subrecipient holds CGMS certification through NGMA, since staff credentials are a condition of every subaward
  3. That the subrecipient is an NGMA member in good standing with a current annual membership on file
  4. That the subrecipient already has a federally negotiated indirect cost rate agreement before any subaward is made

10. GCHS subgrants CDBG funds to a small partner nonprofit that will independently decide which households qualify for services and will be evaluated on whether program outcomes were achieved. Is this partner a subrecipient or a contractor?

  1. Contractor, because it is a nonprofit organization and nonprofits only ever provide services for a fee
  2. Subrecipient, because it makes eligibility determinations and is measured against program outcomes
  3. Neither designation applies to nonprofits, which are governed only by their own bylaws and state law
  4. Contractor, because the award amount is small and small awards are always treated as procurement

11. If a subrecipient's prior audit turned up findings and its corrective actions were never verified as completed, what should that do to GCHS's risk assessment of it?

  1. Nothing; past audit findings are not a relevant risk factor
  2. It should be automatically terminated as a subrecipient
  3. It should be reclassified as a contractor to avoid the issue
  4. It should raise the assessed risk, since the results of previous audits are a factor 200.332(c) names and unresolved findings point to a higher chance of noncompliance

12. Why is documentation of monitoring activity important, even when a pass-through entity genuinely did monitor its subrecipients?

  1. Because monitoring is only credible to an auditor or funder if a paper trail shows what was done
  2. Documentation is not important; only the outcome of the program matters to an auditor or funder
  3. Documentation is only required for high-risk subrecipients; low-risk ones can be monitored informally
  4. Documentation replaces the need to actually monitor, since a complete file satisfies the rule on its own

13. Why does subrecipient monitoring matter directly to GCHS, more than to an organization that only ever receives funds and never passes them on?

  1. It does not matter more; every organization has identical exposure to subrecipient rules whether or not it passes funds on
  2. Because GCHS is a for-profit organization, and for-profit entities face stricter subaward rules than nonprofits
  3. Because GCHS may act as a pass-through entity on CDBG/HOME work, and that role carries the duty to monitor subrecipients
  4. Because NGMA requires subrecipient monitoring as a condition of membership and of CGMS renewal for all holders

14. According to NGMA's exam blueprint, which CGMS domain lists complying with subrecipient monitoring among its tasks?

  1. Program Management, though Grant Award also lists subrecipient risk assessment and monitoring protocols
  2. Grant Guidance only, since monitoring is a pre-award activity that is finished before any subaward is signed or funded
  3. Fiscal Management only, since it consists of reviewing subrecipient invoices and drawdown requests
  4. None of the four domains address subrecipient work, which the exam leaves to the funder to test

Glossary

Pass-through entity
A non-federal entity that receives a federal award and passes part of it to another organization to carry out program work.
Subrecipient
An entity that carries out a substantive portion of a federal program's scope of work under its own direction, measured against program objectives; addressed in 200.331-200.333, with the pass-through entity's duties in 200.332.
Contractor (vendor)
An entity providing goods or services for a fee in a competitive market relationship, measured against contract deliverables; governed by procurement standards.
2 CFR 200.332
The Uniform Guidance section on pass-through entity requirements: verifying the subrecipient is not excluded, subaward content, risk evaluation, and subrecipient monitoring.
Suspension and debarment
Federal exclusion from receiving awards; a pass-through entity must verify a subrecipient is not excluded or disqualified (200.332(a), 2 CFR 180.300), for example through SAM.gov.
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