The Government Accounting Office (GAO) issued a Report, Recent Guidance Could Enhance Subaward Oversight to the Senate dated March 26, 2025 (GAO-25-107315), on its review of subaward oversight based on requirements in 2 CFR 200 Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Grants. While prime recipients have responsibility over subawards, federal agencies are required to ensure recipients carry out oversight responsibilities.
GAO identified the following responsibilities of a prime recipient:
- Confirm subrecipients are not suspended or debarred;
- Evaluate subrecipients risk of committing fraud;
- Reporting subaward information in Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS);
- Ensure subrecipients undergo single audits if required and address findings from those audits; and
- Monitor subrecipients.
What Did GAO Find?
GAO reviewed 3,680 single audit findings from 2022-2024 from financial assistance programs from three agencies with the largest amounts of funding: Department of Energy (DOE), the Department of Transportation (DOT), and the Environmental Protection Agency (EPA).
GAO noted that the overall reason for the noncompliance was a result of deficient internal controls. 2 CFR 200.303 Internal Controls states: “The recipient and subrecipient must … [e]stablish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” We have previously addressed internal controls and requirements when recipients receive their first grant, in our article, How to Submit Your First Grant Proposal and Meet 2 Code of Federal Regulations (CFR) 200 Requirements.
GAO reported findings in three areas that represented 36 percent of the noncompliances.
1 - Incomplete Subaward Reporting
GAO found that data on subawards were not reported in the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS), was not reported timely, or incorrectly reported. The majority of the noncompliances resulted from the recipient having deficient internal controls to comply with their requirements, not understanding the federal requirements, or mistakes.
The requirements for subaward reporting in the FSRS (now part of SAM.gov) are included in Appendix A to Part 170 Award Term (2)(i).
2 - Deficiencies in Subrecipient Monitoring Activities
Recipients were not:
- Monitoring the activities of subrecipients,
- Conducting a risk assessment on subrecipients,
- Ensuring subrecipients underwent a single audit, and
- Reviewing single audit reports of the subrecipients and following up on the findings.
Recipients have a lot of responsibilities with regard to subawards. They are required to perform a risk assessment, preferably before award, determine the level of risk, and develop a monitoring plan. Recipients are required to review financial reports, ensure the subrecipient has obtained a single audit if they meet the criteria, obtain a copy of the report, and follow-up on any findings. The requirements for recipients are included in 2 CFR 200.332 Requirements for pass-through entities, read more in our article, Subrecipient Risk Assessment 2 Code of Federal Requirements (CFR) 200.
3 - Lack of Verification or Justification of Eligibility Decisions
Recipients were not conducting required suspension and debarment checks prior to award. The majority of the noncompliances resulted from the recipient having deficient internal controls to comply with subrecipient monitoring, not understanding the federal requirements, and lacked evidence supporting the check was performed.
The Requirements for verifying a subrecipient is not suspended or debarred is included in 2 CFR 200.332 Requirements for pass-through entities. This includes checking SAM.gov for exclusions before awarding the subaward.
GAO Plans to Continue Monitoring Subaward Oversight
In 2024 the Office of Management and Budget (OMB) amended the Code of Federal Regulations to direct agencies to review single audit findings including subrecipients, to provide adequate descriptions of subawards as well as report subawards in the FSRS system (reported in SAM.gov effective March 2025). While the updates to the regulations focus on agencies, the expectation is going to be that these expectations are reinforced with any recipients and subrecipients. GAO will continue to monitor subaward oversights as the amendments to the regulations are implemented.
Takeaways
When recipients receive grants, the award documents merely state the recipient must comply with the regulations in 2 CFR 200 Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Grants, along with a reference to supplemental agency regulations. Recipients must ensure the subrecipient is not debarred and understand 2 CFR 200 to decipher which additional requirements to flow down to a subaward. Recipients are required to prepare a risk assessment before award of the subaward and document the type of monitoring to perform based on risk as well as document the monitoring to be performed. Recipients must ensure that the subrecipient is obtaining a single audit. Remember the audit threshold is based on the total of expenditures for all awards and subawards the subrecipient has in the fiscal year, not just your subaward. Each higher-tier recipient must follow-up on and determine the impact of any audit findings.
How Can Redstone Help
Redstone GCI assists organizations in ensuring compliance with 2 CFR 200 both prior to and after the award of a federal grant. Our support includes drafting or reviewing accounting and procurement policies and procedures, preparing or reviewing quarterly financial reports to the government, and providing templates for contractor/subrecipient determinations. We offer tools such as checklists for subrecipient risk assessments and monitoring documentation, and we can also act as a third-party to support subrecipient monitoring and assist with resolving audit findings. Additionally, Redstone GCI provides monthly accounting support, guidance in setting up accounting structures, and help with developing equipment and property policies. We also offer webinars and live training sessions on specific areas of 2 CFR 200. Serving contractors both across the U.S. and internationally, Redstone GCI brings expert guidance in meeting the government’s expectations under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.
