A subaward is the part of a US federal grant that the main recipient passes on to another organisation so that it carries out a share of the project. The key point is telling a subrecipient from a contractor correctly, because that decides whose monitoring and audit obligations arise.
- Key question
- Subrecipient or contractor
- Test
- Substance, not the contract title
- Reporting from
- $30,000
- Single audit from
- $1,000,000
A subaward is where an organisation holding a federal grant passes part of the funds to another so that it contributes to the project's objectives. The one passing them on is the pass-through entity.
Subrecipient or contractor – the question that decides everything
Your obligations follow from the classification, and getting it wrong is dangerous both ways.
Subrecipient: determines who is eligible for assistance; its performance is measured against programme objectives; makes programmatic decisions; is responsible for programme compliance; carries out the programme for a public purpose.
Contractor: provides goods or services within its normal business operations; provides them to many purchasers; operates in a competitive environment; its goods or services are ancillary to the programme; and it is not subject to programme compliance requirements.
The governing rule is substance over form. The name of the agreement decides nothing, and no single factor is determinative. Calling a subrecipient a "contractor" to avoid monitoring is a classic error with consequences in disallowed costs and clawback.
What the pass-through entity must do
Pass down a mandatory data set in the subaward document: the subrecipient's name as registered, its UEI, the federal award identification number, dates, amounts, project description, awarding agency and – separately – the indirect cost rate.
Assess each subrecipient's risk: prior experience, audit results, changes in personnel and systems, whether it has been under federal monitoring.
Monitor performance, review reports and issue management decisions on audit findings.
One rule subrecipients often do not know: a pass-through entity may not require the de minimis rate from a subrecipient that holds its own federally negotiated indirect cost rate.
Three thresholds
$30,000 – the point at which subaward reporting is required, due by the end of the month following the month of obligation, and since March 2025 through SAM.gov rather than the retired FSRS system.
$500,000 – the ceiling for a fixed amount subaward with prior written agency approval.
$1,000,000 – the single audit threshold, raised from $750,000 for fiscal years beginning on or after 1 October 2024.
What may change
The proposed reform of federal rules published in May 2026 would, among other things, abolish fixed amount subawards entirely and codify SAM.gov reporting. As of late July 2026 there is no final rule, so the 2024 edition stands – but this is worth watching.
Frequently asked questions
We signed a services contract. Does that make it procurement?
The name is not what decides. If the organisation makes programmatic decisions, determines who is eligible for assistance and is responsible for meeting the programme's objectives, it is a subrecipient, even if the agreement is called something else. The rule expressly requires you to look at the substance of the relationship.
The prime organisation is imposing a 15% rate on us. We have our own.
Then the requirement is unlawful: a pass-through entity may not require the de minimis rate from a subrecipient that has its own federally negotiated indirect cost rate.
From what amount is a single audit required?
From one million dollars of federal funds in a fiscal year. The threshold was raised from $750,000 for years beginning on or after 1 October 2024, so older materials quote a lower figure.
Official materials
Sources
- 2 CFR 200.331 ecfr.gov · checked 27.07.2026
- 2 CFR 200.332 ecfr.gov · checked 27.07.2026
Data current as of 27.07.2026. Verify the terms with the donor’s official portal before applying.
Updated 27.07.2026 · Reviewed by: GetGrant editorial team
