Compliance is Not Optional: Uniform Guidance Requirements

Is your organization, as a pass-through agency for Federal funds, responsible for your subrecipients’ compliance with Federal and programmatic requirements? If your subrecipients did not comply, could you face harsh penalties?

The answer to both questions is a resounding “yes.”

The Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards at 2 CFR Part 200, or “Uniform Guidance,” makes clear that pass-through entities are responsible for their subrecipients’ compliance with Federal and programmatic requirements [2 CFR §200.332(e)] and that both entities are subject to severe consequences for non-compliance.

Under the Uniform Guidance, if a pass-through entity or subrecipient is non-compliant, the Federal awarding entity or pass-through entity (in short, the next-highest entity up the funding stream) may:

·         Withhold payments.

·         Disallow costs.

·         Suspend or terminate the award.

·         Initiate suspension or debarment proceedings.

·         Seek additional remedies.

Moreover, the Uniform Guidance requires both pass-through entities and subrecipients to ensure satisfactory performance from contractors. In Appendix II, “Contract Provisions for Non-Federal Entity Contracts Under Federal Awards," the Uniform Guidance delineates mandatory provisions for contracts awarded by non-federal entities, using Federal funds (2 CFR § 200.327).

In clause (A), when the value of a contract currently exceeds $250,000 (the Simplified Acquisition Threshold), the contract must address administrative, contractual or legal remedies that would be imposed if the contractor violates or breaches contract terms, including penalties or liquidated damages.

In clause (B), the Uniform Guidance requires that contracts exceeding $10,000 address termination for cause and for convenience that stipulates why and how these would take effect and the means for the settlement of contract dollars.  Therefore, whether the cause is contractor non-performance, or other program considerations, the non-Federal entity has defined the process for terminating  the  contract.

The Vander Weele Group has emphasized the necessity of strict compliance with Federal dictates, particularly under the current Administration, but accountability has long been a hallmark of the Uniform Guidance. If your organization is a non-Federal entity receiving federal funds, you cannot execute contracts using Federal dollars without a contingency plan for non-compliance. If your organization fails to hold either subrecipients or contractors accountable, your own Federal funding could be at risk.

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