Are there best practices for effective monitoring of fund usage?

While each program has its specific requirements, certain general guidelines for monitoring fund usage can be considered across programs. The Office of Management and Budget (“OMB”) implementation guidance for the Infrastructure Investment and Jobs Act (“IIJA”), directs agencies to build “on effective practices from the Administration’s implementation of the American Rescue Plan (“ARP”), as well as existing financial management and reporting requirements set forth in the statute and in prior OMB guidance.”[1] OMB will provide new guidance as needed for topics that require further direction.

The Uniform Guidance for Federal Awards, 2 CFR Part 200, contains requirements for administering all federal awards, including federal grant programs under the IIJA,[2] and sets out the responsibilities and requirements for Subrecipient Monitoring and Management of federal awards.[3]  

Section 200.332 (d-h) of the Uniform Guidance also contains further details on subrecipient monitoring requirements. Specifically, the Uniform Guidance at 2 CFR § 200.332(d) outlines the following requirements for subrecipient monitoring:

Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include:

(1) Reviewing financial and performance reports required by the pass-through entity.

(2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward.

(3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521.[4]

Further, Section §200.329 of the Uniform Guidance outlines the following responsibilities regarding monitoring and reporting program performance:

Monitoring by the non-Federal entity. The non-Federal entity is responsible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring by the non-Federal entity must cover each program, function or activity. See also § 200.332.[5]

The Federal Highway Administration (“FHWA”) previously released a Project Funds Management Guide for State Grants.[6] While it is important to refer to the funding agency’s specific guidelines regarding new IIJA projects, general lessons can be drawn from previous guidelines.

These FHWA guidelines integrate monitoring and project performance schedules to allow for ongoing monitoring of compliance with grant program requirements as well as the prevention of waste, fraud, and abuse.

FWHA guidelines also recommend that project performance “monitoring” include the following:

• Understanding a project’s performance schedule to ensure the project is progressing appropriately;
• Regularly billing on a project to expend obligations;
• Consistently updating project agreements to align with the current cost estimate; and
• Periodic reviews by the State Department of Transportation to adjust or modify the project agreement to reasonably reflect the current cost estimate.[7]

The IIJA, like the ARP, prioritizes reducing administrative burdens. Recipients can work with OMB to establish effective practices for reducing such burdens.

On this point, OMB guidance explains: 

In instances where agencies are administering more than one closely related program, agencies can work with OMB to determine if an implementation plan should be developed for the program group rather than for each separate program, to facilitate concurrent consideration of program design and implementation plans.[8]

In all situations, it is recommended to work directly with the granting agency to ensure all requirements are met.[9]

Last Updated: March 1, 2023