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2.3 Standards for Financial Management Systems

Recipient and Subrecipient Accounting Responsibilities

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Reviewing Financial Operations
Recording Financial Activities
Budgeting and Budget Review
Accounting for Non-Federal Contributions
Ensuring that Subrecipients Meet Audit Requirements
Reporting Irregularities
Avoiding Business with Debarred and Suspended Organizations
Bonding

Direct recipients must have established, written policies on subrecipient monitoring (2 C.F.R. § 200.331). Please refer to Chapter 3.14 for additional information about subrecipient monitoring.

Reviewing Financial Operations

  • Direct recipients should be familiar with, and periodically monitor, their subrecipients’ financial operations, records, systems, and procedures.
  • Recipients should direct particular attention to the subrecipient’s maintenance of current financial data.

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Recording Financial Activities

  • The recipient should record in its financial records in summary form the subrecipient’s award or contract obligation, as well as cash advances and other financial activities.
  • The recipient should record in its records the expenditures of its subrecipients. Alternatively the subrecipient may file report forms for tracking of its financial activities.
  • Non-Federal contributions applied to programs or projects by subrecipients should likewise be recorded, as should any program income resulting from program operations.

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Budgeting and Budget Review

  • The recipient should ensure that each subrecipient prepares an adequate budget on which its award commitment will be based.
  • The detail of each project budget should be kept on file by the recipient.

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Accounting for Non-Federal Contributions

  • Non-Federal contributions may include in-kind services (donated services such as volunteered time) or cash.
  • Recipients should ensure that the requirements, limitations, and regulations pertinent to non-Federal contributions are applied.

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Ensuring Subrecipients Meet All Grant Requirements

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Where the conduct of a program or one of its components is delegated to a subrecipient, the direct recipient is responsible for all aspects of the program including proper accounting and financial recordkeeping by the subrecipient. The recipient is responsible for the accounting of receipts and expenditures, cash management, maintenance of adequate financial records, and refunding of expenditures disallowed by audits.

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Reporting Irregularities

  • Recipients and their subrecipients are responsible for promptly notifying the awarding agency and the Federal cognizant audit agency of any illegal acts, irregularities, and/or proposed or actual actions.
  • Illegal acts and irregularities include conflicts of interest, falsification of records or reports, and misappropriation of funds or other assets.
  • Please notify the appropriate DOJ awarding agency of any irregularities that occur.

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Avoiding Business with Debarred and Suspended Organizations

  • Recipients and subrecipients must not award or permit any award at any level to any party which is debarred or suspended from participation in Federal assistance programs.

For details regarding debarment procedures, see the government-wide guidelines for debarment and suspension codified in 2 C.F.R. Part 180, and 2 C.F.R. Part 2867  , which adopts the OMB guidance in subparts A through I of Title 2 CFR Part 180, as supplemented by Title 2 Part 2867, as the DOJ policies and procedures for non-procurement debarment and suspension.

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Bonding

  • The awarding agency may require adequate fidelity bond coverage where a recipient lacks sufficient coverage to protect the Federal Government interest (see 2 C.F.R. § 200.304 ). 

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