Subrecipient Monitoring Handbook

Last Updated July 1, 2022

Purpose

As direct recipients of State Fiscal Recovery Funds (SFRF) under the American Rescue Plan Act (ARPA), the State of North Carolina (State) and its Administering Agencies are required to provide evidence of exercising due diligence in assessing the qualifications of subrecipients and the processes that they employ to meet the requirements of managing, administering and accounting for SFRF funds in accordance with regulations. This Subrecipient Monitoring Handbook is intended to give Administering Agencies guidance needed to meet their obligations for monitoring subrecipients.

An Administering Agency is a State agency or department that received SFRF appropriations through the State’s legislative process. The North Carolina Pandemic Recovery Office (NCPRO) will serve both as the State’s Coordinating Agency with responsibilities for overseeing and coordinating the State’s SFRF program, and as an Administering Agency when it receives SFRF as a pass-through entity. A subrecipient is a non-State entity that receives a subaward of SFRF funds for the purpose of carrying out projects that have been authorized though the legislative process.

NCPRO will provide oversight and technical assistance to Administering Agencies on an as-needed basis. NCPRO will provide this assistance to help Administering Agencies improve their operations and compliance with State and federal requirements for subrecipient monitoring. NCPRO can only act in an advisory role, as it does not have the authority to direct Administering Agencies to take specific actions. Please refer to the Standard Operating Procedures for Administering Agency and the Standard Operating Procedure for Subrecipients for further information.

If an Administering Agency already has an adequate Subrecipient Monitoring Policy in place, they may use their own policy rather than this sample policy provided by NCPRO. However, any policies and procedures used must, at a minimum, meet the criteria established in this document.

1. Subrecipient Monitoring Policy

Section 200.332 of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), requires pass-through entities (the Administering Agencies) to:

• Evaluate each subrecipient's risk of noncompliance to determine the appropriate level of monitoring to apply to each subrecipient.
• Monitor the activities of subrecipient organizations to help ensure that sub-awards follow applicable federal regulations and terms of the sub-award.
• Verify that subrecipients are audited as required by 2 CFR 200, Subpart F of the Uniform Guidance.

SFRF recipients that are pass-through entities as defined under 2 CFR 200.1 (Administering Agencies) are required to manage and monitor their subrecipients to assess their compliance with the SFRF requirements for pass-through entities (2 CFR 200.332).

2. Roles and Responsibilities of the Administering Agency

2.1 Pre-Award

Prior to making a subaward the Administering Agency must:

• Determine whether the transfer of SFRF to another entity is a sub-award to a subrecipient as defined under the Standard Operating Procedures.
• Verify that the subrecipient has applied for, received and provided a U.S. Federal UEI (Unique Identifier Entity Number) number (this number was historically referred to as the DUNS number). 
  • In the event that UEI numbers cannot be obtained through SAM.gov in a timely manner, the grantee Taxpayer Identification Number (TIN) will be accepted in the interim.
• Perform a search on SAM.gov to determine if the subrecipient has been debarred or suspended from doing business with the federal government. A subrecipient must have an active System for Award Management (SAM) registration.
• Perform a search on the State suspension and debarment list.
• Obtain a proposed budget from the subrecipient.
• Obtain an outline of the subrecipient’s organizational structure, with the names of its officers, and officer titleholder.
• Obtain a copy of the subrecipient’s policies and procedures.

2.2 Post-Award

After the Administering Agency has reviewed and approved a subaward, it must:

• Participate in a subrecipient monitoring workshop or webinar, if required by NCPRO.
• Review and approve the subrecipient’s budget, with a listing of all expenditures.
• Review and approve the subrecipient's application narrative, goals of the subaward, performance statement and the subrecipient's grant budget.
• Execute a Memorandum of Understanding (MOU) between the Administering Agency and the subrecipient.
• Monitor and approve quarterly financial and performance statement reports received from the subrecipient.
• Assess the subrecipient’s ability to meet performance requirements under the subaward.
• Ensure it has and maintains the following federal award information for the subrecipient:
  • SAMs and UEI (previously DUNS) numbers and name of federal grant
  • Federal award date
  • Sub-award period of performance start and end date
  • Amount of federal funds obligated to the subrecipient
  • Federal award project description
  • Name of federal awarding agency, prime grant recipient, contact information of the awarding official
  • All requirements imposed by the prime grantee on the subrecipient so that the federal award is used in accordance with federal and/or State statutes, regulations, and the terms and conditions of the grant award (refer to Exhibit B)
• Ensure it has access to the subrecipient's financial records to meet the requirements of 2 CFR 200 (refer to Exhibit B).
• Document appropriate terms and conditions concerning closeout of the subaward.
• Review and approve subrecipient justification and request for funding.
• Obtain financial and performance reporting data from the subrecipient. Consolidate and report it as required to NCPRO.
• Complete the post-award subrecipient risk assessment (Exhibit A), and assign a risk rating based on criteria defined in Exhibit A.
• Perform annual monitoring of subrecipient (refer to Section 3 for further details).
• Review its subrecipient monitoring processes and procedures and revise as needed.

3. Subrecipient Monitoring Procedures

As part of its subrecipient monitoring processes and procedures, the Administering Agencies must:

• Review, if applicable, the subrecipient's Single Audit report, which can be found at the Federal Audit Clearinghouse website.
• Review past and current quarterly financial and performance reports and assess the subrecipient’s performance and compliance with requirements.
• Receive each month the subrecipients report on all expenditures of funds and report the information to NCPRO by the 15^th of each month. The Administering Agency should receive a report from the subrecipient even if subrecipient has no new activity to report during the month.
• Request subrecipients sign a document acknowledging the receipt of, and agreement to comply with, all federal, State, and/or program grant award special conditions.
• Provide the subrecipient a description of the requirements for subaward documentation that subrecipient to the Administering Agency during the grant periods (refer to Exhibit B).

The Administering Agencies shall continuously assess subrecipients’ performance by conducting the following activities:

• Determine whether there are sufficient internal controls per 2 CFR 200.303, and whether the subrecipient has complied with federal statutes, regulations, and the terms and conditions of the federal award. The subrecipients must:
  • Return to the Administering Agency a signed acknowledgment of the terms and conditions of the subaward.
  • Agree to evaluation and monitoring of their compliance with statutes, regulations, and terms and conditions of the subaward by allowing access to subrecipient records and financial statements, and the performance of on-site reviews of the subrecipient's program operations.
  • Take prompt action when instances of noncompliance are identified.
  • Take reasonable measures to safeguard sensitive information consistent with applicable federal, State, and local laws.
• Communicate with subrecipients on a regular basis, via Accountability Calls.
• Document and retain communications regarding project performance.
• Report any significant issues to NCPRO.
• Obtain documentation and perform the following review and assessment activities. The extent of these activities will be determined by the results of the risk assessment and ongoing observations.
  • Assess whether invoices are timely, accurate, and contain the appropriate backup documentation to support the expense. For any questionable expense(s), the Administering Agency should request additional backup from the subrecipient specific to the charge(s).
  • Request financial reports from the subrecipient that show the subaward amount, invoice(s) by subaward budget category, and remaining subaward amount after expenses.
  • Assess whether cumulative expenses exceed the total approved subaward amount and help ensure the rate of spend is consistent with the timeline of the project.
  • Review other financial or non-financial reports required by the subaward such as subrecipient list of supplies and equipment purchased with grant funds.
  • Review and approve any budget revision requested by the subrecipient.
  • Maintain documentation of the Administering Agency’s monitoring of the subrecipient, including, but not limited to email correspondence, invoices, deliverables such as relevant data for quarterly progress report(s) and other supporting documentation.
  • Follow up with subrecipient regarding findings during annual subrecipient site visit and request subrecipient's resolution of site visit findings.
  • Request additional supporting detail for all financial invoices and expenses in accordance with the subaward terms and conditions.
  • Document and retain communications regarding project performance.
  • Report any significant issues to NCPRO.
  • If appropriate, take further action (e.g. withholding payments, performing additional site visits, termination of the subaward).

4. Annual Reviews

Administering Agencies shall conduct Annual Reviews of subrecipients. Administering Agencies must complete an annual on-site review of every high-risk subrecipient. For medium and low risk subrecipients, Administering Agencies shall conduct desk audits/virtual reviews of a sample of selected transactions. Administering Agencies should determine the sample size of the transactions to be reviewed for medium and low risk subrecipients based on the results of its ongoing monitoring of these subrecipients. As part of the Annual Review, the Administering Agency must:

• Contact the subrecipient in writing to coordinate logistics and describe the Annual Review process.
• Send, on letterhead, details of the focus of the Annual Review will focus, including, the need to gather assurance that the subrecipient is compliant with federal statutes, regulations, and the terms and conditions of the federal award. This correspondence should also identify invoice(s) and a detailed list of expenditures made with grant funds that will be reviewed (refer to Exhibit D for example of pre-site visit letter).
• Begin the Annual Review with a meeting of key subrecipient staff to describe the reason for the site visit and matters to be discussed. Also, make the subrecipient aware of supplies and equipment purchased with grant funds that will need to be verified by physical observation.
• Use the Monitoring Checklist to assess whether the subrecipient satisfies the administrative and financial elements of the sub-award (refer to Exhibit C).
• End the Annual Review with a meeting that discusses the project, and how the subrecipient used the SFRF funds subawarded to it. The Administering Agencies must discuss with the subrecipient all issues identified during the Annual Review.

After the Annual Review, the Administering Agencies will send, on its letterhead, a description of:

• matters reviewed,
• conclusions reached regarding the adequacy of the subrecipient’s controls, policies and procedures; and
• all findings.

Refer to Exhibit E for example of a post-site visit letter.

The Administering Agency should help ensure that the subrecipient has documented all actions it has taken or will take to resolve any issues identified during the Annual Review. The subrecipient should document this by completing the Subrecipient Annual Review Evaluation Report (refer to Attachment 2) and the Post-Annual Review letter (refer to Exhibit E). This report should be sent to the subrecipient within one week of the Annual Review. The findings will be discussed during an exit conference. The subrecipient should respond to the Administering Agency with an acceptable plan to resolve issues/findings within 30 days after completion of the Annual Review. The Administering Agency will review and approve the subrecipient’s written report, or require additional information, if needed. All findings and resolutions will be included in the subrecipient’s file.

4.1 Types of Monitoring Based on Risk Ratings

This section discusses the steps that Administering Agencies should take in conducting:

• Accountability Calls (low risk)
• Accountability Calls and Desk/Virtual Reviews (medium or low risk)
• Accountability Calls and On-Site Reviews (high risk)

Exhibit C contains a checklist that Administering Agencies should use for each Accountability Call, Desk/Virtual Review or On-Site Review.

Low Risk Subrecipients: Grant Accountability Calls

The Administering Agencies should perform Accountability Calls with all subrecipients on a periodic basis. The Administering Agencies should establish the frequency of Accountability Calls based upon its assessment whether the subrecipient is considered low, medium, or high risk. The Accountability Calls will address:

• progress toward their project goals,
• expenditures charged to the grant,
• update on monitoring plans, and
• budgets, and future forecast needs.

These calls will also provide opportunities to provide address needed technical assistance in areas that the subrecipients may find challenging. During the calls, Administering Agencies will review submitted reports and confirm whether reporting is current and inclusive of all required information. If a subrecipient needs additional support, the frequency of Accountability Calls may increase, or the subrecipients may receive additional monitoring (i.e. desk review or on-site/virtual monitoring). For suggested questions related to Accountability Calls please refer to Exhibit C.

Medium Risk Subrecipients: Grant Accountability Calls and Desk/Virtual Reviews

Administering Agencies will conduct desk reviews to monitor subrecipients who have medium risk. Desk reviews are acceptable as a form of monitoring that can help ensure compliance with grant goals and requirements. While the requirements of desk reviews are less, the scope and degree of the review activities can be increased to the extent deemed necessary. Desk reviews can include, but are not limited to reviewing:

• Correspondence with subrecipients (emails, Accountability Call notes, etc.).
• Monthly or quarterly reports (financial, programmatic/narrative, etc.) and supporting documentation.
• Expenditures and appropriate documentation (invoices, signed timesheets, purchase orders, travel authorizations, etc.).
• Subrecipients’ progress toward project goals.

In addition, these reviews may include technical assistance if a subrecipient needs additional support. Desk review documentation can be is submitted via email for review by the Administering Agencies. Administering Agencies should submit a desk review monitoring report to the subrecipient no later than 90 days after the desk review is completed.

Risk Rating High Risk: Accountability Calls and On-Site Reviews

Administering Agencies will conduct an on-site monitoring Annual Review for all high-risk subrecipients. These site visits will be conducted in a manner similar to desk reviews, with the difference being that the Administering Agency conduct at least the first review in person or virtually. The Administering Agency can use its best judgment to determine whether follow-up meetings should be conducted in person or through video conferencing.

If a subrecipient needs additional support, they may receive further monitoring (i.e. on-site/virtual monitoring). Administering Agencies should submit an on-site/virtual review monitoring report to the subrecipient 90 days after the on-site review is completed.

Refer to Exhibit C for a sample Subrecipient On-Site Review Monitoring Report that should be completed during the visit.

5. Process for Closing Out Subawards

In accordance with federal regulations, SFRF eligible expenditures must be incurred or obligated by December 31, 2024 and expended by December 31, 2026. To close out any subaward of the SFRF, Administering Agencies shall:

• Send written notification to subrecipients six months prior to the grant ending date, and a follow-up reminder three months later to ensure that they are fully aware of the award closing and closeout requirements.
• Obtain the following documents from the subrecipient: final invoice(s), final financial report, final expenditure report.
• Perform a final review of invoices, financial reports, and performance measurement; and, if necessary, request additional supporting documentation.

Appendix

Use the links below to open and download Microsoft Word Document versions of Exhibits A through E and Attachments 1 and 2. These documents are templates you can use for monitoring subrecipients.

• Exhibit A: Post-Award Risk Assessment for SFRF Subrecipient Checklist
• Exhibit B: Requirements for Subaward Documentation to be Submitted by SFRF Subrecipient to the Administering Agency
• Exhibit C: Checklist for Monitoring Reviews
• Exhibit D: Pre-Monitoring Letter
• Exhibit E: Post-Monitoring Letter
• Attachment 1: SFRF Subrecipient Monitoring Handbook Acknowledgment 
• Attachment 2: Subrecipient Annual Review Evaluation Report