What Your Organization Needs to Know Before Awarding Subrecipients Under Your Prime Award

How to protect your institution, your funding, and your reputation

Managing federal and private awards is complicated—but it becomes significantly more complex when your organization issues subawards to outside entities. Whether you are a hospital, university, nonprofit, or research consortium, the moment you pass funds to a subrecipient, you inherit additional oversight responsibilities under federal regulations.

Yet, this is where many organizations get tripped up.

Below is a clear breakdown of what you must understand before cutting that subaward.

1. Subrecipient vs. Contractor — Get This Right First

The single most common compliance mistake is misclassification.

Under 2 CFR 200.331–333 (and 2 CFR 300 for HHS), you must determine whether the entity is:

• A subrecipient (carrying out a portion of the program), or

• A contractor/vendor (providing goods/services).

Why it matters:

A misclassification can result in:

❌ Audit findings

❌ Repayment of funds

❌ De-obligation of your award

❌ Reputational damage with the sponsor

Quick rule of thumb:

If the entity is helping you deliver the science, programmatic goals, or research aims, they are a subrecipient.

2. Your Organization Must Conduct a Risk Assessment (Before Issuing Funds)

Uniform Guidance requires a pre-award risk assessment to ensure the subrecipient can manage federal dollars responsibly.

You must evaluate:

• Their financial stability

• Prior audit results (Single Audit / audited financials)

• Past performance

• Internal controls

• Experience with federal awards

• Foreign entity considerations

• For healthcare/research: compliance with IRB/IACUC, COI, data security, HIPAA, cybersecurity, etc.

Why this protects you:

If a subrecipient mismanages funds, your organization is responsible.

3. Your Subaward Agreement Must Contain Mandatory Federal Language

A subaward is not just a contract—it is a compliance instrument.

Required elements include:

• Prime award details (CFDA/Assistance Listing, grant number, FAIN, project title)

• Flow-down terms and conditions

• The federally required clause package

• Budget, scope of work, deliverables

• Reporting requirements

• FFATA reporting triggers

• Prior approvals, MTDC calculation, F&A restrictions

• Data rights, publication, IP

• Human subjects, animal welfare, data security controls

• Record retention and audit access

• Termination rights

Most institutions forget at least 3–5 required clauses—opening the door to findings.

4. Monitoring Is Not Optional—It Is Required

Once the subaward is executed, your responsibility does not end.

You must perform ongoing monitoring, which may include:

• Reviewing invoices and supporting documentation

• Verifying allowability and allocability

• Checking progress reports against the scope of work

• Conducting financial or programmatic spot checks

• Issuing management decisions on subrecipient audit findings

• Ensuring FFATA reports are timely

• Confirming deliverables are completed before final payment

Uniform Guidance expects a risk-based monitoring strategy (no “set it and forget it”).

5. Your Invoicing Process Must Be More Than an A/P Function

Subrecipient invoices must include:

• Line-item expenditures matching the approved budget

• Certification language

• Supporting documentation when appropriate

• Period of performance alignment

• F&A rates consistent with the agreement

Approvers should verify:

✔ The work occurred

✔ Costs are allowable

✔ Progress matches spending

✔ Nothing is missing or suspicious

Approval should come from programmatic and financial staff—not just Accounts Payable.

6. Subrecipient FFATA Reporting Is YOUR Responsibility

If your prime award is subject to FFATA, you must report all qualifying subawards of $30,000 or more within 30 days.

If you fail to report a subrecipient?

The federal agency will hold your organization accountable.

7. Closeout Is a Shared Responsibility—But You Own It

Closeout requires:

• Final financial invoice

• Final technical report

• Verification of cost allowability

• Confirmation that all deliverables were met

• Property and equipment disposition

• Final audit requirement checks

If the subrecipient does not meet deadlines, you are still on the hook to the sponsor.

8. Document Everything—If It Isn’t Documented, It Didn’t Happen

Auditors expect complete documentation of:

• Risk assessment

• Monitoring activities

• Communications

• Invoice reviews

• Corrective actions

• Subaward modifications

• Prior approvals

• Closeout steps

Documentation is your organization’s strongest defense.

Why This All Matters

Subrecipient oversight failures are one of the top reasons for federal audit findings.

When something goes wrong at the subrecipient level, your organization absorbs the liability, including:

• Repayment of funds

• Loss of future funding

• Negative audit findings or OIG scrutiny

• Reputational damage with sponsors

• Delays in research or program delivery

Having a well-designed subaward management system is not just best practice—it is a requirement, a safeguard, and a strategic advantage.

Final Thoughts

Awarding a subrecipient is more than issuing an agreement.

It is a full lifecycle compliance responsibility.

Organizations that get this right:

✔ Protect their funding

✔ Strengthen sponsor relationships

✔ Reduce audit exposure

✔ Improve program and research outcomes

✔ Build a culture of accountability and transparency