Page History

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[78 FR 78608, Dec. 26, 2013]

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The purpose for pass-through entities having to complete a risk assessment on each of their subrecipients is to better help ensure that the Federal award is spent properly and that the subrecipient complies with all applicable Federal statutes, regulations, and terms/conditions of the Federal award.  This This is the same reason why each Federal awarding agencies must also complete a risk assessment for each of their prime recipients prior to issuing a Federal award.  The The risk assessment also provides the framework by which the pass-through entity can help to mitigate for any potential risk associated with each subrecipient.  

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§ 200.331(b) requires pass-through entities to conduct an assessment of risk of their subrecipients, but does not specify that such assessments must be done prior to issuing the subaward or the subsequent disbursement of funds to the subrecipient.  The Council on Financial Assistance Reform (COFAR) addressed this question in its FAQs (updated July 2017). Their response was:

"No.   While section § 200.331(b) requires risk assessments of subrecipients, there is no requirement for pass-through entities to perform these assessments before making subawards.  Under the Uniform Guidance, the purpose of these risk assessments is for pass-through entities to determine appropriate subrecipient monitoring.   Pass-through entities may use judgement regarding the most appropriate timing for these assessments.   Regardless of the timing chosen, the pass-through entity should document its procedures for assessing risk.  § 200.331(b)(1-4) includes factors that a pass-through entity may consider when assessing subrecipient risk.   While § 200.205 imposes requirements for a Federal awarding agency to review the risk posed by applicants prior to making a Federal award, there are no corresponding requirements for a pass-through entity; however, it is a best practice for pass-through entities to evaluate risk prior to making a subaward." 

My organization uses only "contracts" as the legal instrument to enter into agreements with both subrecipients and contractors.  Therefore Therefore we consider all of our relationships as contractors.   Do we still have to complete risk assessments? 

Maybe.   Many non-Federal entities, particularly State agencies, call all of their legal instruments "contracts".   According to 2 CFR 200.300, "A non-Federal entity may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor, depending on the substance of its agreement with the Federal awarding agency and pass-through entities.   Therefore, a pass-through entity must make a case-by-case determination whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor." Pass-through entities need to reflect upon the nature of the case-by-case relationship of the agreement in order to determine if the non-Federal entity is a subrecipient or a contractor (see 'Subrecipient vs Contractor Determination'). 

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What criteria or factors should a pass-through entity evaluate when conducting a risk assessment on a potential subrecipient?

§ 200.331(b)(1-4) provides some factors that pass-throughout entities may review when evaluating a subrecipient's potential risk of noncompliance.  These factors should not limit a pass-through entity from evaluating additional factors that are above and beyond those listed in § 200.331.  

The Service has developed its own official form for satisfying its requirements of evaluating their prime recipients potential risk of noncompliance.  May May we use their risk assessment form to evaluate the risk of our subrecipients?

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