Contracting with Subawardees and Distributing Funds

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You now have a group of organizations that have been chosen to receive funds to carry out a particular project. It is important to create a formal agreement with each organization that specifies how the funds will be used, how they will be distributed, and any other requirements of your program. There are a number of ways to do this, but most involve a Memorandum of Agreement. However, your responsibilities as an intermediary do not end with formalizing the MOA. You must also monitor the funds to ensure the subaward remains in compliance.

Create a Memorandum of Agreement

A Memorandum of Agreement, or MOA, is a signed document that defines the agreement between you and the subawardee. It states the rights and obligations of each side. Before developing yours, check with your program officer to determine if there are any guidelines or restrictions about contracting with subawardees that you must follow for your particular grant. 

1. Decide how you will distribute funds. The Memorandum of Agreement should describe the way that you, as the organization sub-granting funds, will distribute funds to the subawardee.
Some of the ways that you might distribute funds include the following:

  • Distribute the award payment in installments based on the receipt of financial and progress reports from the subawardee. 
  • Provide the award payment in one installment at the beginning of the project period.
  • Distribute the award payment in two or more installments; for example, provide one payment at the beginning of the project period and another payment at the mid-point or at the end of the award period. Tie the second payment to your review and approval of expenditures to date.

Since in many cases you will be working with organizations that have received little or no public funding, it can be a very good idea to tie fund distribution to the receipt of complete and accurate reports. 

2. Define the subawardee’s obligations. The MOA should also define the proper use of funds, any required participation at training and technical assistance events, and any required participation in your evaluation. It should also spell out reporting requirements. The MOA should include a project budget, as well as expected activities, outcomes, and indicators for the grantee’s project.

3. Describe consequences for non-compliance. Be sure to spell out the actions you will take if a subawardee falls out of compliance with the agreement. What happens if a subawardee fails to send representatives to required meetings? Does an incomplete financial report trigger a site visit or an audit? Failure to submit timely and accurate reports is a serious problem, and could justify termination of the agreement. Think about which parts of the MOA you wish to enforce, and include language to describe enforcement. A sample MOA is included in the Appendix.

4. Describe what you will do for the subawardee. Here you might list the training and technical assistance available, quarterly networking gatherings, or other special opportunities you will offer the subawardees. Remember, they probably need more than just the grant, so carefully consider what else you will provide.

Use this sample memorandum of agreement as a reference when creating your own.

Download this sample memorandum of agreement to consult when creating your own.

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Monitoring subawardees.

As a sub-grantor of funds, you are responsible for ensuring that the organizations receiving those funds are in compliance with Federal requirements (or your other funders' requirements), as well as with the terms your Memorandum of Agreement.  To fulfill that responsibility, your organization should establish an oversight and monitoring plan for your subawardees. 

1. What to monitor. To ensure that subawardees comply with the requirements of your program, your organization will need to be sure of the following for each subawardee:

  • Project progress is consistent with the approved proposal and with the MOA.
  • Subaward funds are used for approved purposes only.
  • Subaward funds are not used for inherently religious purposes (if that is applicable to your project).
  • Subaward funds are accounted for appropriately.

2. Reporting requirements. For effective monitoring of grants and subawards, it is essential that subawardees should be monitored throughout the project period.   There are a variety of ways that your organization can provide regular and frequent monitoring for subawardees.  Reporting is one common way that intermediaries monitor the progress of subawardees.

Be sure to require regular programmatic and financial reports from subawardees.  Your organization should provide a standard reporting form or template for subaward organizations to complete and send to you on a scheduled basis.  Reconcile these reports with what is required by your funder, and ask your subawardees for information you’ll need to complete your own reports to your funder. Make sure that the reports arrive in enough time for you to incorporate them into your reporting schedule.  Some intermediary organizations require quarterly or even monthly reports from subawardees.  Remember, you are responsible for the appropriate use of the funds, so don’t be afraid to ask for what you need as often as you need it

As part of your regular reporting requirements, ask organizations to report on how the funds are spent, and be sure the expenses reported are in line with the budget included in the MOA. Consider asking for documentation, such as invoices and receipts. Subawardees should also report on their activities and on progress made toward the project outcomes listed in the MOA. It is a good idea to collect stories of the impact of your project, so ask for relevant stories from your subawardees. These stories of impact will not only help in your reports to your funder, but they can be shared to motivate and inspire other subawardees.

Remember that your subawardees are probably new to reporting requirements, so make the forms as simple as possible, and include clear and concise instructions. Make the reporting deadline clear, and be fair but firm about compliance.  You might hold an orientation meeting for all grantees where you preview reporting requirements and review the forms, answering any questions and explaining why regular reporting is necessary.

4. Other ways to monitor. In addition to reporting you might use these other methods of monitoring your subawardees:

  • Contact subawardees regularly by phone or through email to ask how their projects are going, and to offer your help and advice.  This can be done on monthly, bimonthly, or quarterly.
  • Hold regular meetings or training events for subawardees.  These provide an opportunity for skill building, for sharing of information among awardees, for monitoring progress, and may help you detect any issues or problems experienced by subawardees.
  • Assign a "mentor consultant" from your organization (or your training and technical assistance consultant pool, if you are using external consultants) to work with the subawardee and to provide scheduled reports on its progress.
  • Hold on-site visits throughout project period.  This may only be possible if awardees are located in a geographic area that is accessible to the grant-making organization.
  • Conduct a subaward program audit.  This requires that each subaward recipient provides access to its records and financial statements, as necessary.  You may want to consider periodic audits at the beginning of the project period to make sure that appropriate accounting procedures are in place, at a mid-point, and at the end of the project period.

Monitoring subawardees may be the least enjoyable, but the most important, part of your program. Doing it well can ensure a highly successful subaward program.

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