Subaward

A subaward is an award of financial assistance made by a prime grant recipient (the pass-through entity) to a subrecipient organization to carry out a portion of a federally-funded program, with the subrecipient subject to the same federal compliance requirements as the prime grantee.

What is a Subaward?

Under 2 CFR Part 200, a subaward is the mechanism through which a prime grant recipient passes federal funds to another organization to perform a portion of the program. The key distinguishing characteristic is that a subrecipient shares responsibility for achieving the program objectives, it is not merely a vendor providing goods or services in exchange for payment.

The distinction between a subaward and a procurement contract matters significantly. When a grantee hires a consultant to provide specific services, transcription, printing, equipment repair, that is a contractor relationship governed by commercial procurement rules. When a grantee passes funds to a university to conduct a portion of the research, or to a community organization to implement a portion of the program, that is a subaward relationship subject to 2 CFR Part 200.

Prime recipients that make subawards are called pass-through entities and have specific responsibilities: establishing subaward agreements that flow down required federal terms and conditions; monitoring subrecipient performance and financial management; reviewing subrecipient audit results; and ensuring subrecipients comply with applicable federal requirements. The prime recipient remains accountable to the federal agency for all funds, including those passed through to subrecipients.

Subawards to universities and research partners are common in SBIR/STTR programs, where the STTR program requires a minimum 30% subaward to a qualifying research institution.

Why Subawards matter for government contractors

Organizations that receive federal grants and need to partner with other entities, universities, other nonprofits, or specialized firms, must structure those relationships as subawards when the partners will share in achieving program objectives. Treating a subrecipient as a mere vendor and managing it without proper subaward monitoring is a common compliance failure identified in Single Audits.

Example

A nonprofit that wins a $3 million HHS community health grant needs to partner with three local health clinics that will implement patient services in their respective neighborhoods. The nonprofit issues subawards of $600,000 each to the three clinics, which are subrecipients sharing in the program's objectives. The nonprofit, as pass-through entity, must execute subaward agreements, monitor each clinic's performance and expenditures, and ensure each clinic's compliance with 2 CFR Part 200 requirements.

Frequently Asked Questions

How do I determine whether a partner should receive a subaward or a procurement contract?

The determinative question is whether the partner will use the funds to carry out a portion of the federal program (subaward/subrecipient relationship) or provide goods or services for the grantee's own operational needs (vendor/contractor relationship). The nature of the work and the partner's level of responsibility for program outcomes drives the classification, not the name given to the arrangement.

Are subrecipients subject to Single Audit requirements?

Yes, if they expend $1 million or more in federal financial assistance during a fiscal year. The subrecipient's own Single Audit (or lack thereof) affects the pass-through entity's monitoring obligations and risk assessment.

Does a subrecipient need to be registered in SAM.gov?

Yes. Non-federal entities receiving subawards of $30,000 or more must have an active SAM.gov registration with a valid Unique Entity Identifier (UEI). Pass-through entities must verify subrecipient SAM.gov registration and exclusion status before issuing subawards.

Can a for-profit company be a subrecipient under a federal grant subaward?

Yes. For-profit businesses can be subrecipients of federal grants, though this is less common than nonprofit or university subrecipients. For-profit subrecipients are subject to their own cost principles (FAR Part 31) rather than the 2 CFR Part 200 nonprofit cost principles.