Assuming the role of a Pass-Through Entity (PTE) brings significant compliance responsibilities when federal funds are subawarded to partner organizations. Federal regulations under 2 CFR 200 Sections 331 and 332 require PTEs to actively manage oversight, documentation, and accountability for their subrecipients’ use of federal funds.
Key Insights
- As a PTE, you must communicate all federal requirements to subrecipients, issue compliant subaward agreements, and conduct pre-award risk assessments to identify potential vulnerabilities.
- Ongoing monitoring includes verifying financial and performance data, ensuring expenditures are properly supported, and confirming compliance with procurement, payroll, and timekeeping requirements.
- Federal expectations require documented oversight actions, structured monitoring frameworks, and follow-up on audit findings to ensure compliance and protect against financial liability.
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When your organization receives federal funds and then passes a portion of those funds to a partner, you take on the role of a Pasture Entity, or PTE, and under 2 CFR 200 Section 331, the federal government places real authority and real accountability on your shoulders. As a PTE, you are not simply distributing money. You are sending federal oversight into another organization.
In fact, the federal government treats your subrecipient's actions as a reflection of your compliance posture. That's why these responsibilities matter. Your responsibilities include clearly communicating all federal requirements to your subrecipients, from allowability rules to reporting expectations.
You must issue subawards that include every required element under Section 332 and conduct a pre-award risk assessment to understand where vulnerabilities exist. Once the award is active, you must monitor both fiscal progress and programmatic performance, ensuring that reported results align with expenditures and the approved scope of work. What many organizations misunderstand is this.
Monitoring is not reviewing reports. Monitoring is verifying reports. As a Pasture Entity, you must confirm that performance data is accurate, the expenditures are properly supported, and that procurement, payroll, and timekeeping follow uniform guidance requirements.
And if you discover noncompliance, you must act, require corrective action, and pose specific conditions or escalate to enforcement when necessary. Your role is stewardship. You are ensuring that federal dollars are being used as intended, documented correctly, and producing measurable outcomes.
Strong Pasture Entities oversight protects your award, your organization, and the communities you serve. Let's continue with the practical side of PTE responsibilities, what they look like in day-to-day operations. A strong PTE oversight framework includes written policies detailing how monitoring will be controlled, a structured risk assessment tool used consistently for all subrecipients, a monitoring plan tailored to the risk profile, regular desk reviews comparing financial and performance data, periodic on-site reviews to validate internal controls and operations, follow-up and escalation protocols for deficiencies, and documentation logs capturing every oversight action taken.
These are not best practices. These are expectations under federal law. I often remind organizations that if it isn't documented, the federal government considers it not done.
I've audited PTEs who verbally described fantastic oversight programs, monthly meetings, field visits, and joint planning, but none of it was documented. The result? Findings were inadequate monitoring and, in some cases, repayment of federal funds. Another key responsibility is reviewing the subrecipients' single audit when applicable.
Under 2 CFR 200, Section 332F, the Pasture Entity must check whether there are findings related to federal work, issue a management decision when necessary, and ensure corrective actions are taken. Being a Pasture Entity means owning the downstream risk. The better your systems, documentation, and communication, the stronger your compliance posture will be.