The federal government allows grant recipients to act as pass-through entities in order to provide funding to other recipients. The pass-through entity receives federal funds which it “passes on” or “passes through it” to other recipients.
The entity that receives funds from a pass-through entity is considered a subrecipient. This usually occurs when a federal program lacks the organizational capabilities to provide assistance directly to the final recipients and requires support from other entities to do so. For example, federal crime-prevention programs may be assigned to a State Attorney General’s Office. That office may decide to assign part of its federal grant through sub-grants (or sub-awards) to cities and counties within the state for crime-prevention activities such as neighborhood watch programs or supplying new equipment to police forces. The original recipient has become a pass-through entity and the cities and counties have become subrecipients in order to address the federal program’s purpose of preventing crime.
Subrecipients may, in turn, pass on the funds to one or more subrecipients to serve the federal program’s purpose. For example, the cities mentioned above pass on part of their funding to nonprofits that patrol neighborhoods at night. Therefore, a recipient may be considered a pass-through entity and a subrecipient at the same time.
Federal Pass-Through Grants
Pass-through grants typically involve grants to states but can involve local governments too. After receiving a federal grant that allows or requires pass-throughs, the awardee then passes the federal monies on to applicants. Whether this occurs through direct or pass-through grants, federal monies are always classified as either competitive or formula: Formula grants are disbursed by a state, county, or city agency to a grant applicant based on some kind of a preset standard or formula.
Applying for pass-through grant funds to governmental entities that have received or will receive a federal award has two advantages:
- You compete against only other grant applicants in your jurisdiction. You encounter considerably less competition than at the federal, direct grant-seeking level.
- It is easier to drive to your state capital or county seat to make a personal appearance before agency/program staff than to visit the Feds. You should be able to develop a relationship that will allow you to understand how things will work under a pass-through. You should ask for a list of grants funded previously, including both grant recipients and award amounts.
The major disadvantage to applying for pass-through grants is that your grant award will be much smaller than if you applied directly for a federal grant and received an award. Direct grants involve larger pots of money, but the heavy competition reduces the odds of your getting those big awards.
The General Accountability Office (GAO) cautions grantees that when pass-through grant funds flow to sub-recipients, they are subject to government-wide and program-specific policies. These include the Cash Management Improvement Act, which governs the exchange of funds between the federal government and the states and addresses the timeliness of the grant disbursement process. The Office of Management and Budget's (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, provides general guidance on the roles and responsibilities of the federal awarding agencies and primary recipients of government funds regarding audit requirements of grantees. Specific program policies can provide additional requirements for individual grant programs related to disbursement of funds. To ensure that states comply with federal requirements and agency regulations for disbursing federal grant funds, federal agencies monitor aspects of pass-through grants related to administrative costs that states withhold and the timeliness of reimbursement.
Want to learn more about pass-through grants, sub-awards and subrecipients? See all posts.
- "Administration of federal assistance in the United States." In Wikipedia, http://en.wikipedia.org/wiki/Administration_of_federal_assistance_in_the_United_States
- "How to Figure Out Differences among Types of Federal Grants." In For Dummies, http://www.dummies.com/how-to/content/how-to-figure-out-differences-among-types-of-feder.html
- U.S. Government Accountability Office. "Grants Management: Oversight of Selected States' Disbursement of Federal Funds Addresses Timeliness and Administrative Allowances." http://www.gao.gov/products/GAO-13-392