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Imposing special requirements on high/medium/low risk subrecipients is an effective way for the pass-through entity to mitigate potential risk and ensure that Federal funds are used effectively and reduce the potential for waste, fraud, and misuse.  The purpose of the risk assessment is to allow pass-through entities maximum flexibility to do business with various types (low/medium/high) of risk entities.  In each case, special conditions can be developed to mitigate for various levels of risk.

Pass-through entities should remember that in the unfortunate case where Federal funds may be used inappropriately or waste, fraud, or abuse has occurred, the Federal awarding agency may seek remedies or legal action against the prime recipient.  They will not seek legal action against the subrecipient, this would be the responsibility of the pass-through entity.

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