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Subrecipient Monitoring and Management

BPRM Information Table (layout)

Effective Date: 11/09/2020

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TO: ALL DEPARTMENT AND AGENCY HEADS

FROM: Robert F. Mujica Jr.

SUBJECT: Subrecipient Monitoring and Management

1. Purpose and Scope

This Budget Bulletin (Bulletin) establishes required policies all State agencies (including State departments and authorities) must follow when providing funds to subrecipients for State and Federal programs; prescribes the use of the Agency Subrecipient Monitoring Plan and Certification (Attachment 1); and introduces the Subrecipient Monitoring and Management Guide for State and Federal Awards (Attachment 2).

This guide includes policy and procedural guidelines State agencies must follow and details the key objectives and processes in the following stages of the subaward lifecycle: Award Notification, Risk Assessment, Monitoring, and Grant Closeout. State agencies must refer to this Bulletin, the Subrecipient Monitoring and Management Guide for State and Federal Awards¹, and stay up to date on guidance issued by the Federal government to maintain compliance with Federal and State regulations related to subrecipient monitoring of Federal awards, including awards provided in response to the Coronavirus Disease 2019 (COVID-19) public health crisis.

New York State is committed to enterprise-wide compliance with the terms and conditions of the funding to ensure the appropriate and efficient use of Federal resources. All State agencies that have incurred eligible expenses against the Coronavirus Relief Fund (CRF)² must adhere to the provisions of this Bulletin in order to comply with requirements established by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance)³, including the Compliance Supplement as added annually to 2 CFR 200, Appendix XI), guidance released by United States Department of Treasury (Treasury), and any guidance from awarding federal agencies.

2. Background

When a Federal agency issues funds to a New York State agency for a specific program or purpose, the State agency is ultimately responsible for the appropriate use and management of the funds. State agencies may serve as pass-through entities for Federal awards. A pass-through entity receives funds on behalf of the State government for a specific program or purpose and distributes those funds to an entity through the issuance of a subaward. Establishments that receive funds from pass-through entities are subrecipients. State agencies are accountable for monitoring the programmatic and financial activities of subrecipients to ensure funds are expended according to Federal, State, and individual grant requirements. Pass-through entities are accountable for monitoring the programmatic and financial activities of subrecipients to ensure funds are expended according to Federal, State, and individual grant requirements.

On March 27, 2020, the Federal government passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which provided additional targeted funding for many existing Federal programs, as well the CRF to provide aid to States and other entities to address necessary expenditures due to the COVID-19 public health emergency. The guidance in this Bulletin pertains to the monitoring of all Federal awards, including all those authorized under the CARES Act.

3. Federal Award Guidance

Federal funds issued for new grant awards made on or after December 26, 2014, are subject to the Uniform Guidance, as issued by the Office of Management and Budget (OMB) and by subsequent amendments.⁴ The Uniform Guidance establishes the Federal audit and monitoring requirements that must be completed when managing Federal grants, including the requirement that a non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal awards have a Single Audit. The Uniform Guidance outlines the audit procedures and required testing for the Single Audit, an annual independent audit of New York State’s Federal award expenditures (see Bulletin L-0300 Single Audit Requirements for additional details).

Under the Uniform Guidance, a State agency acts as a pass-through entity when it provides Federal funds to a non-Federal entity/subrecipient to carry out part of a Federal award or program. This subaward creates a Federal assistance relationship between the Federal agency, the pass-through entity and the subrecipient. State agencies may also use a Federal award to establish contractual agreements for the purpose of obtaining goods or services that the pass-through entity or subrecipient will use to support the delivery of the Federal award or program. These contractual agreements create a procurement relationship with the contractor and are not subawards.  When a procurement relationship is established, the contractor is not considered a subrecipient under the Uniform Guidance definitions and is not subject to subrecipient monitoring requirements. Procurement relationships are subject to the Procurement Standards prescribed in the Uniform Guidance.

In addition to the Uniform Guidance, the OMB releases the annual Compliance Supplement, which is referenced in 2 CFR 200, Appendix XI. The Compliance Supplement identifies compliance requirements for Federal awards. Federal awarding agencies and auditors use the Compliance Supplement in monitoring and auditing non‐federal entities to ensure recipient compliance. Pass through entities should also use the Compliance Supplement as guidance in monitoring activities, as well as other Federal and State resources as listed in Section 11 of this Bulletin.

4. Roles and Responsibilities

Division of the Budget

The New York State Division of the Budget (DOB) administers, and monitors expenditures authorized by the Enacted State Budget. DOB also manages the Single Audit⁵ and submits the State's annual Single Audit reporting package to the Federal Audit Clearinghouse (FAC)—the federal repository for single audit reporting packages.⁶ DOB ensures corrective actions adopted through the audit resolution process are fiscally and programmatically beneficial to the State and are reflected in State agency strategic plans and budget requests. DOB is notified of the status of State and Federal audit findings and the actions taken in response to the auditor's recommendations, to identify and address any fiscal or administrative implications. In addition, DOB is managing the centralized recovery and reimbursement of agency expenses incurred in response to COVID-19.

State Agencies

State agencies (including State departments and authorities) are responsible to demonstrate that all Federal and State programs are administered in compliance with all applicable laws, regulations, and financial reporting requirements. This responsibility includes, but is not limited to, ensuring that all grant funds are expended in accordance with the Uniform Guidance, the Compliance Supplement and any specified award terms or authorizing legislation. In instances of noncompliance, Agencies must develop corrective action plans and ensure the implementation of any identified corrective actions.  Agencies are required to formally monitor subrecipients of grant funds and must submit an Agency Subrecipient Monitoring Plan to DOB that references all agency programs under which Federal funds are expended. Additionally, State agencies must establish internal control systems to document the receipt, disbursement and reconciliation of grant funds. Agencies should refer to Bulletin B-0350 for information on the State’s internal control requirements and the components of an effective internal control system.

Subrecipient

A non-Federal entity is considered a subrecipient when it receives a subaward from a pass-through entity establishing a Federal assistance relationship and is accountable for the use of the funds provided by the subaward. The subrecipient is responsible for expending funds in accordance with all State, Federal, and grant requirements. This includes maintaining documentation and adhering to audit requirements as determined by the pass-through entity.

5. Uniform Guidance Requirements for Pass Through Entities

The Subrecipient Monitoring and Management Guide in Attachment 2 provides detailed instructions for agencies on implementing an effective subrecipient monitoring plan and managing subrecipients to ensure compliance with the Uniform Guidance requirements.

The following table lists the subrecipient monitoring requirements and the corresponding section of the Uniform Guidance.

6. Determining Appropriate Monitoring Actions for Federal Awards

As described in Section 3, agencies must refer to the Uniform Guidance 2 CFR 200.330 to determine if a contractual agreement establishes either a Federal assistance relationship with a subrecipient or a procurement relationship with a contractor. The information below is provided to help inform agency determinations, as the requirements for each are different. State agencies should follow their normal process and consult with management to ensure the correct determination.

Contractor

•  Per 2 CFR 200.23, a contractor means an entity that receives a contract as defined in section 2 CFR 200.22, which is an instrument by which a non-federal entity purchases goods or services needed to carry out the project or program under a Federal award. These agreements fall under the procurement rules. For example, purchasing PPE for staff or cleaning services for the office. During the course of business, we often refer to “Contractors” as Vendors.

Subrecipient

•  Per 2 CFR 200.93, a subrecipient is a non-Federal entity that receives a subaward from a pass-through entity to carry out part of a Federal program; but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency. This is an entity that you contract with to perform part or all of the statement of work under the contract on your behalf. For example, contracting with the local nonprofit to provide food assistance or a local economic development entity to provide small business grants.
  
  

  Subrecipient and Contractor Determinations (Uniform Guidance 200.330)

  Subrecipient

  Contractor/Vendor

  Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity: Determines who is eligible to receive what Federal assistance; Has its performance measured in relation to whether 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 In accordance with its agreement, 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.

  Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the non-Federal entity receiving the Federal funds: 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, though similar requirements may apply for other reasons.

  
  
  
• If the State uses funds from a Federal Award to pass an in-kind asset or expenditure through to a subrecipient, the State has the responsibility to continue monitoring the subrecipient to ensure the funds are being used in accordance with the terms and conditions of the Federal award. In this case, the State is a pass-through entity. There is a subrecipient relationship between the State and the nonprofit.
• If the State purchases an asset from a vendor with funds from a Federal award and retains ownership of the asset and keeps possession of the asset, the State must ensure the use of the asset is in accordance with the terms and conditions of the Federal award. The State is the recipient. A subrecipient relationship does not exist because the asset is not being passed through to a third party, or subrecipient.

Examples:

• A State agency uses Federal Funds to enter into an agreement with a local nonprofit to deliver meals to the elderly.
  • The local nonprofit is a subrecipient.
• A State agency uses Federal funds to purchase ventilators from a medical supply company for emergency response.
  • The medical supply company is a contractor.
• A State agency uses Federal funds to purchase microscopes from a scientific supply company for use by an external research support team, also paid for with Federal funds. The State agency retains ownership of the microscopes.
  • The scientific supply company is a contractor.
  • The external research support team is a subrecipient.

Contractors/Vendors vs Subrecipient Responsibilities:

Scenario 1 - Contractor/Vendor

The State purchased a computer for contract tracing from the vendor A+ Computers using funds from the Cares Act. The State is going to own this asset and use this asset in a State agency or in the course of State operations.

Contractor/Vendor

Pre-Award	Agencies must follow procurement guidelines to ensure A+ Computers is an acceptable vendor and meets the requirements of the award. All required documentation must be obtained before the purchase and retained for audit purposes.
Monitoring	A+ Computers is a contractor per the Uniform Guidance 2 CFR 200.330, not a subrecipient. The State is retaining ownership and keeping possession of the asset. There is no subrecipient monitoring because the computer will not be passed to a third party, so there is no subrecipient. However, the State must ensure its use of the computer is in compliance with the terms and conditions of the award.

Scenario 2 – Contractor/Vendor and Subrecipient

The State purchased a vehicle from a vendor using Federal funds. The State is going to give the vehicle to a nonprofit to perform the activities outlined in the Federal award. The State will not retain ownership of the vehicle.

Contractor/Vendor and Subrecipient

Pre-Award	Agencies must follow procurement guidelines to ensure the vendor is an acceptable vendor and meets the requirements of the award. All required documentation must be obtained by the time of purchase and retained for audit purposes.
Monitoring	The vendor is a contractor not a subrecipient per the Uniform Guidance 2 CFR 200.330. The subrecipient relationship exists between the State and the nonprofit. Because the vehicle is being passed through by the State to a third party, the State must perform ongoing monitoring of the nonprofit (subrecipient) to ensure the vehicle is being used in accordance with the award terms and conditions.

Scenario 3 - Subrecipient

The State enters into a contract with an entity to perform ongoing services outlined in the Federal award.

Subrecipient

Pre-Award	Agencies must follow procurement guidelines to ensure the entity is acceptable and meets the requirements of the award. All required documentation must be obtained by the time of purchase and retained for audit purposes.
Monitoring	The entity is a subrecipient per the Uniform Guidance 2 CFR 200.330. The State must perform ongoing monitoring of the entity (subrecipient) to ensure the funds are used for their intended purpose and being  spent in accordance with the award terms and conditions.

7. State Agency Deliverables

To demonstrate compliance with the requirements outlined in this Bulletin, agencies must submit the Subrecipient Monitoring Plan in Attachment 1 to DOB. The Subrecipient Monitoring Plan is the agency acknowledgment of Federal subrecipient monitoring requirements, along with the agency’s comprehensive strategy for ensuring that requirements are met agency wide. The plan also requires agencies to submit the Agency Subrecipient Monitoring Certification, which must be accompanied by a list of all agency programs where the agency acts as a pass-through entity. The plan and certification must be submitted by close of business on Monday, November 23, 2020 to the DOB mailbox dob.sm.federalsingleaudit.

8. Point of Contact

Please submit any questions related to this Bulletin and the required submissions, to NYSDOB@budget.ny.gov. If you need immediate assistance, please contact Kiyannah Joyner at (518) 474- 0311.

9. Resources

OMB Memoranda

• OMB M-20-11, Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19), March 9, 2020
• OMB M-20-17, Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations, March 19, 2020
• OMB M-20-20, Repurposing Existing Federal Financial Assistance Programs and Awards to Support the Emergency Response to the Novel Coronavirus (COVID- 19), April 9, 2020
• OMB M-20-26, Extension of Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations, June 18, 2020.

Treasury Guidance

• United States Treasury, Coronavirus Relief Fund Guidance for State, Territorial, Local, and Tribal Governments, Updated September 21, 2020
• United States Treasury, Coronavirus Relief Fund Frequently Asked Questions Updated as of September 2, 2020

NYS Guidance

10. Attachments

1. Attachment 1: Agency Subrecipient Monitoring Plan and Certification (DOC)
2. Attachment 2: Subrecipient Monitoring and Management Guide for State and Federal Awards (PDF)

Footnotes

¹ New York State enterprise-wide policy for subrecipient monitoring

² H.R. 748 — 116th Congress: Coronavirus Aid, Relief, and Economic Security Act.” https://www.congress.gov/bill/116th-congress/house-bill/748

³2 C.F.R. pt. 200, 78 Fed. Reg. 78,590 (Dec. 26, 2013). The Office of Management and Budget’s Uniform Guidance consolidated eight grants management circulars, including A–21, Cost Principles for Educational Institutions; A–87, Cost Principles for State, Local and Indian Tribal Governments; A–110, Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations; A– 122, Cost Principles for Non-Profit Organizations; A–89, Federal Domestic Assistance Program Information; A–102, Grants and Cooperative Agreements with State and Local Governments; A–133, Audits of States, Local Governments and Non-Profit Organizations; and A–50, Audit Follow-up. The new Uniform Guidance went into effect for grantees on December 26, 2014.

⁴The Uniform Guidance followed from a Notice of Proposed Guidance issued February 1, 2013 (available at 78 Fed. Reg. 7282) and an Advanced Notice of Proposed Guidance issued February 28, 2012 (available at 77 Fed. Reg. 11778). 9 Fed. Reg. 75,871 (Dec. 19, 2014).

⁵A single audit is an audit of the award recipient’s expenditure of federal awards and of its financial statements and can identify deficiencies in the award recipient’s compliance with the provisions of laws, regulations, contracts, or grant agreements and in its financial management and internal control systems.

⁶The FAC is the entity designated by OMB to serve as the repository for single audit reporting packages. Each recipient is required to submit a reporting package to the FAC that includes its financial statements, schedule of expenditures of federal awards, corrective action plan, and auditor’s reports. 31 U.S.C. § 7502(h).

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