Department of Health and Human Services 
 

OFFICE OF 
 

INSPECTOR GENERAL 
 

PROTOCOL FOR ASSESSING 
 

STATES’ MONITORING OF 
 

SUBGRANTEES


 Inspector General 

December 2004 

OEI-05-03-00062 
Office of Inspector General 
 http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors 

in carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the department. 

Office of Evaluation and Inspections 

The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management 

and program evaluations (called inspections) that focus on issues of concern to the 

department, the Congress, and the public. The findings and recommendations contained 

in the inspections reports generate rapid, accurate, and up-to-date information on the 

efficiency, vulnerability, and effectiveness of departmental programs. The OEI also 

oversees state Medicaid fraud control units, which investigate and prosecute fraud and 

patient abuse in the Medicaid program. 

Office of Investiga ions t 

The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 

and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 

convictions, administrative sanctions, or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. The OCIG imposes program exclusions and 

civil monetary penalties on health care providers and litigates those actions within the 

department. The OCIG also represents OIG in the global settlement of cases arising 

under the Civil False Claims Act, develops and monitors corporate integrity agreements, 

develops compliance program guidances, renders advisory opinions on OIG sanctions to 

the health care community, and issues fraud alerts and other industry guidance. 
∆ ABSTRACT 
 

Many Federal programs are administered through Federal grants to 

States and other entities. Increasingly, States are passing through 

these Federal funds to subgrantees to carry out core program services. 

According to Federal requirements, States must monitor their 

subgrantees. However, these requirements are general, lacking the 

specificity needed to evaluate States’ monitoring practices. 

Federal stakeholders, including the Office of Management and Budget 

(OMB) and Congress, have expressed concern that States are not 

adequately monitoring their subgrantees, and that this may reflect a 

lack of Federal agency oversight. Based on this concern, OMB created 

an interdepartmental Task Force on Subrecipient Monitoring in 2002. 

The Office of Inspector General has focused a number of its inspections 

and audits on subgrantee monitoring as part of a broader effort to 

review the management of grant programs under the Department of 

Health and Human Services. 

To assess States’ monitoring of subgrantees in a recent inspection, 

“Oversight of States’ Subgrantee Monitoring in the Foster Care 

Program” (OEI-05-03-00060), we developed measurable criteria based 

on Federal grants management requirements. We anticipate that our 

criteria will be useful to other oversight entities attempting to assess 

States’ subgrantee monitoring. Toward that aim, this document 

outlines the content of our criteria, the process we undertook to develop 

these criteria, and the methodology we used to apply our criteria to 

States’ monitoring of subgrantees in the foster care program. 

 O E I - 0 5 - 0 3 - 0 0 0 6 2 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES i 
∆ T A B L E O F C O N T E N T S 


A B S T R A C T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i 
 

INTRODUCTION ................................................ 1 
 

C R I T E R I A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 
 

Development of Criteria .................................. 4

 Criteria ............................................... 5 
 

Using Criteria to Assess States’ Subgrantee Monitoring ........ 6 
 

A C K N O W L E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 
 

END NOTES .................................................... 14

 OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES ii 
∆ I N T R O D U C T I O N 

OBJECTIVE 

To present a set of measurable criteria based on Federal grants 

management requirements that can be used to assess States’ 

monitoring of subgrantees. 

BACKGROUND 

To assess States’ monitoring of subgrantees in a recent inspection, 

“Oversight of States’ Subgrantee Monitoring in the Foster Care 

Program” (OEI-05-03-00060), we developed measurable criteria based 

on Federal grants management requirements. We anticipate that our 

criteria will be useful to other oversight entities attempting to assess 

States’ subgrantee monitoring. Toward that aim, this document 

outlines the content of our criteria, the process we undertook to develop 

these criteria, and the methodology we used to apply our criteria to 

States’ monitoring of subgrantees in the foster care program. 

Recent Federal Interest in Subgrantee Monitoring 

In 2001, the Secretary of the Department of Health and Human 

Services (HHS) created an initiative to improve the management of 

HHS grant programs. The Assistant Secretary for Administration and 

Management (ASAM) is taking a lead role in this effort. The Office of 

Inspector General (OIG) has also undertaken a broad effort to study the 

control, effectiveness, and value of HHS grant programs. 

Federal stakeholders, including the Office of Management and Budget 

(OMB) and Congress, have expressed concern that States are not 

adequately monitoring their subgrantees, and that this may reflect a 

lack of Federal agency oversight. Based on this concern, OMB created 

an interdepartmental Task Force on Subrecipient Monitoring in 2002. 

This task force is reviewing regulations and policies to identify whether 

Federal guidance and oversight of subgrantee monitoring is adequate.1 

Congress has also shown its concern by requesting reviews of 

subgrantee monitoring in specific HHS programs.2 

Recent Work by the Office of Inspector General 

The OIG has reviewed subgrantee monitoring in several HHS programs. 

The OIG recently examined monitoring of subgrantees in the Public 

Health Preparedness and Response to Bioterrorism program and in the 

Ryan White CARE Act program.3 In 2004, OIG examined States’ 

monitoring of subgrantees in the foster care program. This inspection 

found that three of the six States reviewed lacked an adequate fiscal or 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 1 
INTRODUCTION 

program monitoring mechanism, and that the Administration for 

Children and Families pays minimal attention to States’ systems for 

monitoring subgrantees. To assess States’ monitoring, we developed the 

criteria that are presented in this technical report. 

Grants Management Requirements 

In HHS, responsibilities for State administration of Federal funds are 

delineated by two sets of Federal requirements: 

o 	 the Uniform Administrative Requirements (45 CFR Part 74 or 

45 CFR Part 92),4 and 

o 	 the Single Audit Act (implemented by OMB Circular A-133). 

Specifically, the Uniform Administrative Requirements contain HHS 

grants management regulations and incorporate OMB Circular A-133 

by reference. Together, the regulations and circular set forth major 

HHS grants management requirements, including a subset of 

requirements that are specifically related to the administration of 

subawards. 

In accordance with these requirements, States have several different 

responsibilities that are part of managing Federal grants passed 

through to subgrantees. First, States must communicate basic grants 

information to subgrantees.5 

Second, States must monitor their subgrantees’ performance. According 

to Federal grants management requirements6, States must: 

o 	 Ensure that subgrantees are complying with program 

requirements and achieving performance goals. 

o 	 Ensure subgrantees are complying with fiscal requirements, such 

as having appropriate fiscal controls in place, and are using 

awards for authorized purposes. 

States can ensure that subgrantees are meeting these requirements 

through a variety of monitoring mechanisms, including progress 

reports, site visits, financial reports, independent (third party) financial 

audits, and/or internal (State-conducted) financial audits. 

Finally, States must ensure that all subgrantees designated as 

“subrecipients,” according to OMB Circular A-133, that meet the audit 

threshold specified in the circular, receive a Single Audit.7 Single 

Audits include a traditional financial audit of subgrantees’ basic 

financial statements, as well as an auditor’s report on subgrantees’ 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 	 2 
INTRODUCTION 

internal controls, and an opinion on subgrantees’ compliance with 

requirements of major Federal programs. 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 3 
∆ CRITERIA 

CRITERIA DEVELOPMENT 

Grants management requirements for States monitoring of subgrantees 

are general. States are required to “monitor the activities of 

subrecipients as necessary to ensure that Federal awards are used for 

authorized purposes in compliance with laws, regulations, and the 

provisions of contracts or grant agreements and that performance goals 

are achieved.”8 HHS has issued no further guidance or delineation on 

what kind or level of monitoring is considered “necessary.” Thus, to 

assess whether States are monitoring their subgrantees “as necessary,” 

it is essential to define measurable criteria. 

To develop criteria based on the general grants management 

requirements, we consulted various grants management sources. 

Specifically, we reviewed: 

o 	 Federal requirements, including 45 CFR Part 74, 

45 CFR Part 92, and OMB Circular A-133; 

o 	 OMB Circular A-133 compliance supplements; 

o 	 applicable HHS grants management guidance; 

o 	 subgrantee monitoring guidance produced for other HHS programs; 

o 	 guidance for other Federal departments; 

o 	 industry guidance from Management Concepts and Thompson 

Publishing Group; 

o 	 grants management reports from the Government Accountability 

Office (GAO), OIG, ASAM, and Assistant Secretary for Planning and 

Evaluation; and 

o 	 Single Audit reports containing subrecipient monitoring findings for 

States’ foster care programs. 

We presented our criteria to staff from ASAM in its draft form.9 The 

ASAM staff found our criteria to be reasonable and consistent with 

Federal requirements. 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 4 
CRITERIA 
 

CRITERIA 

We developed these criteria as a set of minimum standards based on 

Federal grants management requirements. Our goal was to develop 

criteria specific enough to be measurable, yet general enough to allow 

for variation in how States execute their monitoring of subgrantees. 

Our criteria set forth the following framework for assessing whether or 

not States were monitoring “as necessary:” States must have at least 

one fiscal monitoring mechanism and one program monitoring 

mechanism in place. In addition to assessing States’ program and fiscal 

monitoring systems, we also examined their adherence to requirements 

related to communicating required grants management information. 

FEDERAL REQUIREMENTS 

States must: 

--“

.”

)(3)] 

--“

” 

--“

” 

--

CRITERIA 

Program and Fiscal Monitoring 

monitor the activities of subrecipients as 

necessary to ensure that Federal awards are 

used for authorized purposes in compliance with 

laws, regulations, and the provisions of contracts 

or grant agreements and that performance goals 

are achieved [OMB Circular A-133, 

§__.400(d

manage and monitor each project, program, 

subaward, function or activity supported by the 

award. [45 CFR § 74.51(a)] 

monitor grant and subgrant supported activities 

to assure compliance with applicable Federal 

requirements and that performance goals are 

being achieved. [45 CFR § 92.40(a)] 

States must have at least: 

one fiscal monitoring mechanism, and 

--one program monitoring mechanism 

Communication of Required Information 

States must provide subgrantees with the “best States must at least inform subgrantees that the information available to describe the Federal grant includes Federal funds. award.” [OMB Circular A-133, §__.400(d)(1)] 

States must advise subgrantees of requirements States must inform subgrantees of Federal imposed on them by Federal laws and 

regulations. [OMB Circular A-133, §__.400(d)(2)] grants management requirements. 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 5 
CRITERIA 
 

USING CRITERIA TO ASSESS STATES’ MONITORING OF 

SUBGRANTEES: DATA COLLECTION AND ANALYSIS 

This section demonstrates how we applied our criteria to assess States’ 

monitoring of subgrantees in the foster care program. First, we present 

our methodology for collecting data from States, including three key 

data collection instruments from our inspection. Each instrument is 

presented in a half-page format and is followed by brief definitions and 

instructions for use. Then, we turn to our analysis, which consisted of 

comparing the data we collected with our criteria. 

Data Collection 

We examined States’ subgrantee monitoring through interviews with 

staff and a review of States’ subgrantee files. 

Interviews with monitoring staff. To understand the complexities of State 

monitoring systems, we began by interviewing staff members 

responsible for monitoring subgrantees. Typically, this included 

interviews with fiscal, program, and licensing staff. We also reviewed 

policies, protocols, and guidance related to subgrantee monitoring. 

We used structured interviews aimed at gaining a full understanding of 

the complex design of States’ systems for monitoring subgrantees. We 

asked staff to describe each of their monitoring mechanisms, including 

how frequently mechanisms were used to collect information, how the 

information was reviewed, and how the State followed up on problems 

that were identified during this process. 

The following Monitoring System Summary table summarizes the 

design of a State’s monitoring system, based on information gathered in 

interviews and by reviewing monitoring protocols. After completing the 

Monitoring System Summary, we used it as a guide when conducting 

subgrantee file reviews. The summary provides information about 

which monitoring mechanisms each subgrantee should have received 

and indicates what documentation to expect in the file. The summary is 

also useful at the analysis stage, when assessing whether the design of 

a States’ monitoring system meets our criteria. 

O E I - 0 5 - 0 3 - 0 0 0 6 2 CR I T E R I A F O R AS S E S S I N G S T A T E S ’ MO N I T O R I N G O F S U B G R A N T E E S 6 
CRITERIA 
 

Monitoring System Summary 

State: 

Monitoring Mechanism Frequency Review Follow-up 

FISCAL MONITORING 

PROGRAM MONITORING 

Monitoring Mechanism: 

List the name of the monitoring mechanism. This could include progress reports, site 

visits, financial reports, independent audits, State-performed audits, or other such 

approaches. Single Audits should be included under fiscal monitoring. If the 

mechanism does not apply to all subgrantees, indicate the subset for which the 

mechanism applies. Example: Monthly Progress Reports for group homes. 

Frequency: The number of times the mechanism should be used in your sample timeframe (we 

used 1 year). Example: for Monthly Progress Reports, Frequency = 12. 

Review: Enter Y if State staff indicate that they review submitted information, or enter N if they 

indicate that they do not review. For monitoring that the State conducts directly, such 

as site visits, review should be coded N/A. Check the shaded box within the column if 

staff indicate that their review is documented. 

Follow up: Enter Y if State staff indicate that they follow up with subgrantees, or enter N if they 

indicate that they do not follow up. Check the shaded box within the column if staff 

indicate that their follow up is documented. 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 7 
CRITERIA 

Review of States’ subgrantee monitoring files: After gaining an 

understanding of how States intended to monitor their subgrantees, 

we used structured data collection instruments in our review of 

subgrantee files. To verify whether States’ monitoring systems were 

functioning as the State described, we reviewed documentation of 

monitoring in a sample of subgrantee case files. For example, if a 

State requires monthly fiscal reports, we reviewed each file for 

evidence of 12 fiscal reports. Next, we reviewed the file for evidence 

that the 12 reports had the type of review and follow up described by 

the State. 

We also assessed whether States met Single Audit requirements in 

those States that required their subgrantees to have a Single Audit. 

Namely, we assessed whether States followed up on all subrecipient 

audit findings within the 6-month time period. 

In cases where States were unable to provide us with documentation of 

their monitoring activities onsite, we allowed them additional time to 

locate and send us the documentation. In cases where documents were 

unavailable, States were not given credit for carrying out monitoring for 

these particular subgrantees. 

We used the following Subgrantee Monitoring File Review worksheet to 

record information from an individual subgrantee file. First, the 

analyst enters the monitoring mechanisms and documentation 

expected, using information in the Monitoring System Summary table 

and from interviews. Then the analyst reviews the subgrantee 

monitoring file and records what documentation is actually found in the 

file. After completing a file review for each selected subgrantee, these 

worksheets can be aggregated and used when analyzing whether States’ 

monitoring mechanisms are functioning as States described. 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 8 
_____________________ 

CRITERIA 
 

Expect Actual Expect Expect Actual 

FISCAL MONITORING 

PROGRAM MONITORING 

Subgrantee Monitoring File Review 

Subgrantee ID# State ________________ 

Monitoring Mechanism Frequency Review Follow up 

Actual 

Monitoring Mechanism: List the name of the monitoring mechanism. Example: Monthly 

Progress Reports. 

Frequency (expect): The number of times the mechanism should be used annually. 

Example: for Monthly Progress Reports, Frequency (expect) = 12. 

Frequency (actual): The number of times the mechanism was actually used for the sample 

year according to documentation in the monitoring file. Example: for 

a file that reflects 10 Monthly Progress Reports for the year, Frequency 

(actual) = 10. 

Review (expect): The number of times evidence of review is expected annually. If State 

staff indicate that they do not document their review, this number 

should be zero. 

Review (actual): The number of times review was documented (e.g., check marks or 

other notations indicating review) for the sample year. 

Follow up (expect): The number of times evidence of follow up is expected annually, or 

‘U’ for unknown (e.g., if the State only follows up in cases where a 

problem is identified). 

Follow up (actual): The number of times evidence of follow up was found. Example: for 

a file that includes documented follow up for 8 of 12 Monthly Progress 

Reports, Follow up (actual) = 8, even if the file contains evidence of 

multiple follow up actions for individual reports. 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 9 
CRITERIA 

Review of States’ subgrantee contracts and other communication: To assess 

whether States had communicated required grants management 

information to subgrantees, we reviewed State contracts, and other 

forms of up-front communication to subgrantees. Specifically, we 

reviewed documents for language informing subgrantees that they were 

receiving Federal foster care funds and language informing subgrantees 

of Federal grants management requirements. 

The Contract, Policy Manual, Other Communication checklist is used to 

review contracts and other forms of up-front communication between 

the State and its subgrantees. The analyst can use the checklist to 

record which requirements the State has communicated to its 

subgrantees. After completing a checklist for each selected subgrantee, 

these checklists can be aggregated and used when analyzing whether 

States communicated information as required. 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 10 
CRITERIA 
 

I. Identify Federal Awards: 

Check Yes if funds are identified to subgrantee as Federal. 

II. Advise subgrantees of: 
 

45 CFR Part 74 and OMB Circular A-133 requirements: 
 

Check: Explained if Federal requirements are delineated in any way, (e.g., in a Single Audit manual). 

Cited if Federal requirements are cited but not explained, (e.g., “45 CFR Part 74”). 

Implied if Federal requirements are implied, but not cited or explained, (e.g., ”Subgrantee is 

responsible for all applicable State and Federal requirements”). This is the minimum States had 

to communicate to meet our criteria. 

Pass through requirements: 

Check Yes if the subgrantee is specifically informed that it must pass through requirements to any 

subcontractors that the subgrantee hires. 

Access to records and financial statements: 

Check Yes if subgrantee is specifically informed that it must allow oversight entities this access. 

available to describe the Federal award. [ §_

Title IV-E foster care funds. 


 

[ §_

1. 

2. 

3. 


 


 

[ §_ §_ )]

Contract, Policy Manual, Other Communication Checklist 

Subgrantee ID# _____________________ State ________________ 

I. Identify Federal awards UPFRONT by informing each subgrantee of the best information 

OMB Circular A-133, _.400(d)(1)] 

1. Identify that the subgrantee’s award includes Federal funds, at least implying that funds are 

 ____ Yes ____ No 

II. Advise subgrantees of requirements imposed on them by Federal laws or regulations. 

OMB Circular A-133, _.400(d)(2)] 

45 CFR Part 74 or OMB Circular A-110, grants management requirements are: 

____ Explained ____ Cited ____ Implied ____ Not included 

OMB Circular A-133 Single Audit requirement (if applicable) are: 

____ Explained ____ Cited ____ Implied ____ Not included 

Subgrantees are required to pass through these requirements to any subcontractors. 

 ____ Yes ____ No 

4. Subgrantees are required to permit appropriate officials of the Federal agency and passthrough entity to have access to records and financial statements. 

OMB Circular A-133, _.400(d)(7) and _.200(d

 ____ Yes ____ No 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 11 
C RITERIA 

Analysis of States’ Monitoring of Subgrantees 

In analyzing the data we collected from States, we found it 

straightforward to assess States’ communication of required information 

to subgrantees using our criteria. However, to assess States’ program 

and fiscal monitoring mechanisms, we needed to further define our 

criteria. 

We broke down fiscal and program monitoring into three basic 

components: collecting information, reviewing the information 

collected, and following up on identified problems. We defined follow up 

to include communication back to the subgrantee regarding the results 

of the State’s monitoring. Here are two acceptable examples: (1) the 

State sends a letter of approval or corrective action to each subgrantee 

after the annual site visit; (2) the State follows up by letter or phone call 

only when a subgrantee’s progress report indicates a problem. 

In States where subgrantees are required to have a Single Audit, we 

defined follow up to include the specific Single Audit requirement that 

States follow up on all audit findings within 6 months. 

We operationalized our criteria to include standards for mechanisms’ 

design and functioning. Specifically, program and fiscal monitoring 

mechanisms must meet the following standards: 

o 	 Mechanism design is appropriate: The mechanism must be 

designed to include all three basic components: collecting 

information, reviewing the information collected, and following up 

on identified problems. Further, the mechanism must be designed 

to monitor all subgrantees. 

o 	 Mechanism is functioning: The mechanism must be functioning 

for all three basic components: collecting information, reviewing 

the information collected, and following up on identified problems. 

Use of the mechanism must be documented for 75 percent of the 

subgrantee monitoring files reviewed. While we would expect the 

monitoring to be documented in all files, we wanted to allow for a 

small amount of error in States’ documentation of their 

monitoring. 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 	 12 
∆ ACKNOWLEDGMENTS 
 

This report was prepared under the direction of William C. Moran, 

Regional Inspector General for Evaluation and Inspections in the 

Chicago regional office. Other principal Office of Evaluation and 

Inspections staff who contributed include: 

Susan Otter, Te ade am Le r 

Ann Maxwell, Team Leader 

Mara Siler-Price, Lead Analyst 

Sara Zuiderveen, Intern 

Linda Hall, Program Specialist 

Elise Stein, Director, Public Health and Human Services Branch 

Technical Assistance 

Barbara Tedesco, Mathematical Statistician 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 13 
∆ END NOTES 
 

1	 Task Force members include staff from: the Office of Management and 

Budget (OMB); the Departments of Health and Human Services (HHS), 

Transportation, Agriculture, Education, Justice, Labor, and Navy; the 

Federal Emergency Management Agency; the National Science 

Foundation; and the States of Louisiana and Texas. 

2 A 2002 Government Accountability Office (GAO) study, “Welfare 

Reform: Federal Oversight of State and Local Contracting can be 

Strengthened,” GAO-02-661, 2002, examined State and local agency 

monitoring of subgrantees receiving Temporary Assistance for Needy 

Families funds, and found that ACF staff were not aware of monitoring 

problems identified in States’ Single Audit reports. These audit reports 

cited weaknesses in States’ monitoring, including inadequate fiscal and 

program monitoring of local contracting entities. 

Congress has also expressed concern that the Health Resources and 

Services Administration (HRSA) does not adequately monitor grantees’ 

oversight of their subgrantees. Consequently, in 2001, the Senate 

Finance Committee requested that the Office of Inspector General 

(OIG) review HRSA’s oversight of Ryan White CARE Act Title I and 

Title II grantees and grantees’ oversight of their subgrantees. 

3	 The OIG issued 15 audit reports in 2003 on State and city monitoring of 

subgrantees receiving Public Health Preparedness and Response to 

Bioterrorism funds, citing that some States and major cities lacked 

appropriate monitoring mechanisms. In addition, OIG responded to a 

request by the Senate Finance Committee (see previous endnote), and 

examined HRSA’s oversight of Ryan White CARE Act Title I and Title 

II grantees and grantees’ oversight of their subgrantees. 

4	 There are two sets of HHS regulations that provide Uniform 

Administrative Requirements: 45 CFR Part 74, which typically applies 

to awards to non-governmental entities and is based on OMB Circular 

A-110, and 45 CFR Part 92, which typically applies to awards to 

governmental entities and is based on OMB Circular A-102. 

5	 OMB Circular A-133, §__.400(d)(1) and §__.400(d)(2). 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 14 
6	 OMB Circular A-133, §__.400(d) states that “. . . a pass-through entity 

shall perform the following for the Federal awards it makes: 

. . . (3) Monitor the activities of subrecipients as necessary to ensure 

that Federal awards are used for authorized purposes in compliance 

with laws, regulations, and the provisions of contracts or grant 

agreements and that performance goals are achieved.” 

7	 Under OMB Circular A-133, certain subgrantees must have a specific 

type of independent audit, called a Single Audit. Subgrantees exempt 

from the Single Audit include all for-profit subgrantees, and those nonprofit subgrantees receiving less than $500,000 in total Federal awards. 

Subgrantees considered to be “vendors” are also not subject to the 

Single Audit. States use Federal guidelines delineated in OMB 

Circular A-133, §__.210 to determine whether subgrantees are 

“subrecipients” and thus subject to Single Audit requirements, or 

“vendors” and not subject to a Single Audit. These guidelines 

characterize “subrecipients” as subgrantees who carry out the program: 

they may determine eligibility, make programmatic decisions, have 

their performance judged against the program objectives, and they 

must comply with program requirements. “Vendors” are characterized 

as subgrantees who provide goods and services that are ancillary to the 

operation of the program: they provide goods and services within 

normal business hours to many different purchasers, operate in a 

competitive environment, and are not subject to program requirements. 

The guidelines direct States to use their judgment in making this 

determination. We found that some States considered foster care 

subgrantees to be “subrecipients,” and other States considered 

subgrantees providing the same core services to be “vendors.” 

8	 OMB Circular A-133, §__.400(d)(3). 

9	 Staff from the Office of the Assistant Secretary for Administration and 

Management were presented with and approved our draft criteria. We 

did not present them with the methodology we used to operationalize 

the criteria. 

OEI-05-03-00062 CRITERIA FOR ASSESSING S TATES ’ MONITORING OF S UBGRANTEES 	 15