Grants Update for Pass-Through Entities
As part of our in-depth analysis of the Uniform Guidance on our blog, we are diving deeper on some of the important provisions we’ve highlighted – especially those we’ve received questions on during our classes.
Today I’d like to talk about new responsibilities for a specific and sometimes overlooked group: Pass-Through Entities (or PTEs.) While the Uniform Guidance greatly increases the amount of accountability for PTEs, it also provides them with more detail than previous guidance in OMB Circular A-133.
Pass-through entity means a non-Federal entity that provides a subaward to a subrecipient to carry out part of a Federal program.” (2 CFR 200.74.)
For example, in the past, many PTEs have been confused about whether to classify a particular expenditure of Federal funds as a subaward or a contract. OMB addresses this gray area in 2 CFR 330, a specific provision regarding the difference between subrecipients and contractors. Simply put, a subaward is “for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient,” while a contract is “for the purpose of obtaining goods and services for the non-Federal entity’s own use and creates a procurement relationship with the contractor.” More information on this distinction is listed in 2 CFR 200.330.
More importantly, PTEs need to study 2 CFR 200.331, Requirements for Pass-Through Entities. OMB clearly lays out what PTEs must take on in this new era of grants management. In many ways, PTEs will behave like Federal awarding agencies by evaluating subrecipients, monitoring subawards, and taking action when noncompliance occurs. First and foremost, PTEs must “[e]nsure that every subaward is clearly identified to the subrecipient as a subaward,” and that each subaward includes all the necessary identifying information in its documents.
Within this list is probably the most important new responsibility for PTEs – the risk assessment. All PTEs must now perform a risk assessment on their subrecipients before expending award funds. The risk assessment mirrors what’s done by Federal agencies for their recipients and will help the PTE to develop an appropriate monitoring plan for the subaward. The Uniform Guidance includes a number of factors that PTEs should consider when assessing a subrecipient, which include, but is not limited to:
- Prior experience with similar subawards
- Results of any prior audits
- Whether the subrecipient has new personnel or “new or substantially changed systems”
- Relevant information from any previous federal agency monitoring
Once the subaward is made, the PTE must monitor the subrecipient’s progress and compliance with award terms and applicable regulations. PTEs will review periodic financial and performance reports, perform site visits when necessary, and make suggestions for corrective actions in the event of deficiencies or noncompliance. Like Federal awarding agencies, PTEs also have the authority to put specific conditions in place for subrecipients it deems high-risk. Such conditions may include payment by reimbursement or more frequent progress reports. PTEs must also ensure that qualifying subrecipients obtain a Single Audit, and should issue management decisions in the event of any audit findings. If necessary, PTEs should follow up on corrective action plans and adjust their own records as necessary to account for the actualities of the subaward’s progress.
Updated information on subawards with the Uniform Guidance is also available here.
What do you think about subaward information in the new Uniform Guidance? Tell us what you think about training to keep you up to date with the new requirements. Our Grants Professionals Survey is open now through March 18 – we want to hear from you!