When a pass-through entity (PTE) issues a subaward under a federal grant or cooperative agreement, it takes on legal responsibility for evaluating risk, flowing down federal terms, monitoring both financial and programmatic performance, and verifying Single Audit compliance. Under 2 CFR 200.331 and 200.332, that oversight begins before the agreement is drafted.

Step 1: Subrecipient or Contractor Determination (2 CFR 200.331)

Before selecting an agreement template, the pass-through entity must make a case-by-case determination whether the agreement casts the party receiving the funds in the role of a subrecipient (creating a federal assistance relationship) or a contractor (creating a procurement relationship for goods or services).

Under 2 CFR 200.331(a)–(b):

  • Subrecipient characteristics (200.331(a)): Determines who is eligible to receive what federal assistance; has its performance measured in relation to whether the objectives of a federal program were met; has responsibility for programmatic decision-making; is responsible for adherence to applicable federal program requirements specified in the federal award; and uses the federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.
  • Contractor characteristics (200.331(b)): Provides the goods and services within normal business operations; provides similar goods or services to many different purchasers; normally operates in a competitive environment; provides goods or services that are ancillary to the operation of the federal program; and is not subject to compliance requirements of the federal program as a result of the agreement.

Under 2 CFR 200.331(c), the substance of the relationship is more important than the form of the agreement. Not all characteristics need to be present in every case, and there is no "default to subrecipient when in doubt" rule in the regulation—instead, the pass-through entity must exercise documented judgment weighing the characteristics of the actual work to be performed.

Step 2: Required Information in Every Subaward (2 CFR 200.332(b))

Under 2 CFR 200.332(b), a pass-through entity must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the required federal award identification data (and any subsequent changes):

  1. Subrecipient's name (which must match the name associated with its Unique Entity Identifier) and Subrecipient's Unique Entity Identifier (UEI);
  2. Federal Award Identification Number (FAIN) and Federal Award Date;
  3. Subaward Period of Performance Start and End Date and Subaward Budget Period Start and End Date;
  4. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient;
  5. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation;
  6. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity;
  7. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA);
  8. Name of the Federal agency, pass-through entity, and contact information for awarding official of the pass-through entity;
  9. Assistance Listings number and Title (the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement);
  10. Identification of whether the award is R&D; and
  11. Indirect cost rate for the Federal award (including if the de minimis rate is charged in accordance with 2 CFR 200.414).

In addition, the subaward must include all requirements imposed by the pass-through entity on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and terms, plus an approved indirect cost rate (200.332(b)(4)—either a federally negotiated indirect cost rate, a rate negotiated between the PTE and subrecipient, or the de minimis rate of up to 15% of MTDC under 200.414(f)), access-to-records terms, and closeout terms.

Note the SAM.gov / UEI distinction under 2 CFR Part 25: while prime applicants and recipients must maintain an active SAM.gov registration, first-tier subrecipients are required to obtain a Unique Entity Identifier (UEI) before receiving a subaward, not necessarily a full active SAM.gov entity registration.

Step 3: Risk Assessment and Ongoing Monitoring (2 CFR 200.332(d)–(f))

Under 2 CFR 200.332(d), the pass-through entity must evaluate each subrecipient's risk of noncompliance for purposes of determining the appropriate monitoring, which may include considering:

  • The subrecipient's prior experience with the same or similar subawards;
  • The results of previous audits, including whether the subrecipient receives a Single Audit in accordance with Subpart F, and the extent to which the same or similar subawards have been audited as a major program;
  • Whether the subrecipient has new personnel or new or substantially changed systems; and
  • The extent and results of federal agency monitoring, if the subrecipient also receives funds directly from a federal agency.

Based on that risk assessment, 2 CFR 200.332(e) requires the pass-through entity to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with applicable laws and terms, and achieves performance goals. Required monitoring activities under 200.332(e)(1)–(4) include:

  1. Reviewing financial and performance reports;
  2. Following up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award detected through audits, on-site reviews, and other means;
  3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient as required by 2 CFR 200.521; and
  4. Resolving audit findings specifically related to the subaward (note that the pass-through entity is not responsible for resolving cross-cutting audit findings that apply across multiple federal programs).

Under 2 CFR 200.332(f) and 200.501, the pass-through entity must verify that every subrecipient is audited as required by Subpart F when it is expected that the subrecipient's federal awards expended during the respective fiscal year equaled or exceeded $1,000,000 (raised from $750,000 in the 2024 Uniform Guidance revisions).

Step 4: Subaward Closeout and FFATA Reporting

  • Subrecipient closeout timeline (2 CFR 200.344(a)): A subrecipient must submit all required final financial, performance, and other reports to the pass-through entity no later than 90 calendar days after the conclusion of the subaward period of performance—or an earlier date as agreed upon by the pass-through entity and subrecipient (many pass-through entities specify 45 or 60 days in the subaward agreement so they can meet their own 120-day prime closeout deadline).
  • FFATA subaward reporting (2 CFR Part 170, Appendix A): For first-tier subawards of $30,000 or more in federal funds, the prime recipient must report each subaward action (and applicable executive compensation when thresholds are met) in the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS / SAM.gov reporting) no later than the end of the month following the month in which the subaward obligation was made. For example, if a $75,000 subaward is obligated on March 10, the FFATA report is due by April 30.