TLDR
A pass-through entity is a non-federal entity that provides a sub-award to a subrecipient to carry out part of a federal program, per 2 CFR 200.1. Pass-through status triggers subrecipient monitoring under 2 CFR 200.332 — risk assessment, sub-award terms, monitoring, single-audit verification, and finding resolution — and SEFA reporting under 2 CFR 200.510 with separate presentation of pass-through amounts on the Federal Audit Clearinghouse filing.
A pass-through entity is a non-federal entity that provides a sub-award to a subrecipient to carry out part of a federal program, per 2 CFR 200.1. Pass-through status triggers subrecipient monitoring under 2 CFR 200.332 — risk assessment, sub-award terms, monitoring, single-audit verification, and finding resolution — and SEFA reporting under 2 CFR 200.510 with separate presentation of pass-through amounts on the Federal Audit Clearinghouse filing.
Plain-language definition
When a nonprofit, state agency, or university receives a federal grant and moves some of the money to another organization to help run the program, it becomes a pass-through entity for that money. The label is not optional. It carries specific federal duties: vetting the downstream organization, writing the sub-award correctly, watching how the money is spent, and accounting for it in the annual single audit.
Detailed definition
2 CFR 200.1 defines a pass-through entity as “a non-Federal entity that provides a sub-award to a subrecipient to carry out part of a Federal program.” Three points matter:
- Non-federal entity. Nonprofits, state and local governments, Indian tribes, and institutions of higher education can all be pass-through entities. Federal agencies cannot.
- Sub-award. The transfer must be a sub-award (program execution) rather than a contract (goods or services). The 2 CFR 200.331 five-part test distinguishes them.
- Part of a federal program. The subrecipient must carry out part of the federal program — not simply spend federal-origin funds on unrelated activities.
Once classified, the pass-through’s duties under 2 CFR 200.332 are concrete:
- Identify every required element on the sub-award agreement: subrecipient name, UEI, federal award ID, awarding agency, Assistance Listing number, sub-award period, budget, and all compliance requirements.
- Assess risk of each subrecipient before award using financial stability, prior experience with federal funds, results of prior audits, new-personnel status, and extent/results of prior monitoring.
- Monitor proportionate to risk. For high-risk subrecipients, more frequent financial reviews, site visits, and technical assistance. Monitoring must be documented.
- Verify single audits for subrecipients expending $750,000 or more in federal awards during their fiscal year. The pass-through reviews the audit report and any findings.
- Resolve findings affecting the pass-through’s sub-award within required timeframes, including issuing management decisions on audit findings.
- Enforce compliance by withholding payments, disallowing costs, suspending, or terminating the sub-award when warranted.
On the financial reporting side, 2 CFR 200.510 requires the recipient’s Schedule of Expenditures of Federal Awards (SEFA) to disclose sub-awards separately. Each line identifies the Assistance Listing number, the pass-through entity name (if the recipient itself received from another pass-through), total federal expenditures, and amounts passed through to subrecipients. The SEFA accompanies the single audit report submitted to the Federal Audit Clearinghouse.
How it works
A statewide housing nonprofit (recipient) holds a $3,000,000 HUD Continuum of Care award (Assistance Listing 14.267). It plans to:
- Operate $1,200,000 in programs directly.
- Sub-award $1,800,000 across four community-based organizations.
Pass-through duties for the $1,800,000:
- Classification. Apply 2 CFR 200.331. All four CBOs select eligible clients, deliver the HUD-funded services, report against HUD performance measures, and are responsible for HUD compliance terms. Classification: subrecipient (all four).
- Risk assessment. Pre-award review of each CBO’s audit history, financial statements, prior grant experience, staffing stability. Two CBOs rated low-risk; one medium-risk (new to federal funds); one high-risk (prior finding). Document in a risk memo.
- Sub-award issuance. Each agreement includes UEI, federal award ID, Assistance Listing 14.267, period, budget, and HUD compliance terms.
- Monitoring plan. Low-risk CBOs: quarterly desk review of reimbursement packages. Medium-risk: semi-annual site visits. High-risk: quarterly site visits plus monthly financial review.
- Single-audit verification. Two CBOs expend over $750,000 in federal awards; the pass-through collects and reviews both single audit reports from the Federal Audit Clearinghouse within six months of the subrecipients’ fiscal year end.
- Findings follow-up. One CBO has a prior-year finding on sub-award accounting; pass-through issues a management decision and verifies corrective action.
SEFA presentation (pass-through perspective):
| Federal Grantor / Pass-Through | Assistance Listing | Total Expenditures | Passed to Subrecipients |
|---|---|---|---|
| HUD — Continuum of Care | 14.267 | $3,000,000 | $1,800,000 |
Related terms
- Subrecipient vs contractor — the 2 CFR 200.331 five-factor test that determines whether a pass-through relationship exists.
- Sub-award — the vehicle used by a pass-through to transfer a portion of a federal award.
- Subrecipient monitoring — the 2 CFR 200.332 duties that follow from pass-through status.
- Single Audit threshold — $750,000 in federal awards expended triggers the subrecipient’s single-audit obligation and the pass-through’s verification duty.
- Schedule of Expenditures of Federal Awards (SEFA) — the 2 CFR 200.510 disclosure presenting federal expenditures and pass-through amounts.
- Federal Audit Clearinghouse — the repository where the single audit and SEFA are submitted.
Common audit findings
- No documented risk assessment. Sub-awards issued without a written risk memo. 2 CFR 200.332(b) requires the assessment; absence is a standing finding pattern.
- Sub-award missing required elements. Agreements lacking UEI, Assistance Listing number, or federal compliance terms. Technical non-compliance even when program delivery is sound.
- Single audit not verified. Pass-through did not obtain or review a subrecipient’s single audit. The FAC is the lookup — absence of a FAC review note is often enough for a finding.
- No monitoring evidence. Monitoring occurred informally but was not documented. Auditors need artifacts: site visit reports, desk review checklists, correspondence files.
- SEFA pass-through amount mis-stated. Total pass-through amounts understated or presented without Assistance Listing separation. 2 CFR 200.510 requires the split; errors typically require SEFA amendment.
Free resource
Get the FASB ASC 958 Quick Reference
A plain-language guide to FASB ASC 958 for nonprofit Finance Directors and Development staff: net asset classification, restricted fund disclosures, contribution recognition rules, and the audit findings auditors flag most often. Delivered by email.
Source: Federal Audit Clearinghouse / U.S. Census Bureau historical data
Source: U.S. Government Accountability Office, Single Audit findings summaries
Source: AICPA, Audit and Accounting Guide: Government Auditing Standards and Single Audits
- Schedule of Expenditures of Federal Awards (SEFA)
- The schedule required by 2 CFR 200.510 listing all federal awards expended during the audit period, including sub-awards passed through to subrecipients, by Assistance Listing number.
DEFINITION
- Federal Audit Clearinghouse (FAC)
- The federal repository (currently operated by GSA) where nonprofits and governments submit single audit reports and SEFAs under 2 CFR 200.512.
DEFINITION
- Assistance Listing
- The replacement for the CFDA (Catalog of Federal Domestic Assistance) number; a unique identifier for each federal assistance program, maintained at SAM.gov.
DEFINITION
Q&A
What makes an organization a pass-through entity?
Issuing a sub-award to a subrecipient under a federal program. The moment a federal award recipient passes a portion of its award to another entity for program execution (not for goods or services), it becomes a pass-through entity for that sub-award under 2 CFR 200.1.
Q&A
What are the core pass-through responsibilities under 2 CFR 200.332?
Classify each downstream relationship per 2 CFR 200.331; conduct pre-award risk assessment; issue sub-awards with required federal terms; monitor subrecipient activities proportionate to risk; verify subrecipient single audits; review and resolve audit findings; take enforcement action when needed.
Q&A
How are pass-through amounts reported on the SEFA?
2 CFR 200.510 requires the SEFA to separately identify amounts passed through to subrecipients by Assistance Listing number, and to name the pass-through entity (if any) from which the recipient received the funds. The SEFA is the federal compliance side of the financial statements.
Q&A
Does the pass-through keep responsibility when a subrecipient fails?
Yes. The federal award's compliance responsibility rests with the prime recipient and cannot be delegated. If a subrecipient misuses funds or fails to meet compliance requirements, the pass-through entity may be required to return funds and remains liable for monitoring failure.
Frequently asked