This article summarizes considerations for evaluating whether a Broadband Equity, Access, and Deployment (BEAD) Program grant agreement may be treated as a fixed amount subaward and how that treatment may affect compliance responsibilities, documentation expectations, and audit considerations. The specific grant agreement, state broadband office requirements, National Telecommunications and Information Administration (NTIA) guidance, and applicable federal requirements should be evaluated before reaching a conclusion for any individual award.
Executive Summary
- A BEAD award should not be treated as a fixed amount subaward solely because payments are made after milestones, units, or project completion. The strongest support is an explicit fixed amount subaward designation in the grant agreement or written approval from NTIA or the applicable pass-through entity.
- Fixed amount subaward treatment generally depends on whether the award relates to a qualifying broadband infrastructure project, includes measurable performance objectives, and was established using reasonable cost, historical, unit pricing, or other supportable pricing information.
- If fixed amount treatment is supported, certain compliance procedures may differ from a traditional cost-reimbursement award; however, the award remains subject to applicable grant agreement terms, state broadband office requirements, NTIA guidance, and relevant federal requirements.
- The most significant compliance effects relate to allowable costs and procurement. Other areas, including activities allowed or unallowed, matching, reporting, equipment, and suspension and debarment, generally continue to require documentation and compliance oversight. However, regulations prohibiting grantees from charging a profit on grant expenditures remain in place.
- Each BEAD grant agreement should be evaluated separately because state broadband offices may structure awards differently, and the specific award terms govern if they differ from general NTIA guidance.
Relevant Guidance
The starting point for evaluating fixed amount subawards is 2 CFR 200.333, which permits a pass-through entity to provide fixed amount subawards with prior written approval from the federal agency, provided the requirements of 2 CFR 200.201 are met. Section 200.201 indicates that fixed amount awards are appropriate “if the project scope has measurable goals and objectives and if accurate cost, historical, or unit pricing data is available to establish a fixed budget based on a reasonable estimate of actual costs.” Accountability is based primarily on performance and results, rather than routine monitoring of actual costs incurred; however, record retention and audit access requirements continue to apply.
For BEAD, NTIA guidance permits fixed amount subawards only for subgrants in which the major purpose is a broadband infrastructure project. NTIA guidance describes a fixed amount subaward as an arrangement in which payment is based on performance and results rather than actual allowable costs incurred. Common structures include payment upon completion of objectives, payment based on units built, or payment when the total project is complete.
The applicable grant agreement remains critical. Some agreements expressly state that the award is a fixed amount subaward and may also require the subrecipient to submit evidence of actual costs, meet performance milestones, provide periodic expense or cost-category reporting, comply with state-specific conditions, or satisfy other requirements before payment is released.
Determining Whether the Grant Qualifies as a Fixed Amount Subaward
The grantee should evaluate the substance of the award agreement, approved budget, payment terms, and related BEAD program documentation. The label used in the agreement is relevant but should not be the sole basis for the conclusion. The analysis should be documented using the framework below:
- Determine whether the grantee is a subrecipient or contractor. Evaluate whether the grantee is carrying out a portion of a federal program as a subrecipient or is instead providing goods or services as a contractor. This should be outlined in the agreement. If it is unclear, the grantee should go back to the grantor and ask for clarification.
- Confirm the program and project type. Determine whether the major purpose of the subgrant is broadband infrastructure deployment.
- Review the payment structure. Determine whether payments are based on agreed-upon milestones, units built, or total project completion rather than actual allowable costs incurred.
- Assess whether performance criteria are measurable. Identify the specific objectives, milestones, units, locations, or completion requirements that must be satisfied before payment.
- Evaluate the basis for the fixed amount. Determine whether the amount was established using reasonable cost, historical, unit pricing, or other supportable pricing information.
- Review the grant agreement for qualification. Determine whether the grant agreement specifically states that the grant has been designated as a fixed amount subaward.
- Verify approval and award terms. Review the award agreement, state broadband office guidance, NTIA terms and conditions, and related correspondence to determine whether fixed amount treatment was permitted and incorporated into the subaward.
For audit purposes, it will be extremely difficult to conclude that the grantee has received a fixed amount subaward without written documentation in the grant agreement and/or from NTIA.
Effect on Compliance Requirements
If fixed amount subaward treatment is supported, compliance procedures may be affected, but the award is not exempt from compliance requirements. Some changes for compliance requirements are outlined below. It is crucial to note that while these exceptions are in place, it is still considered best practice to follow federal guidelines, when feasible. For example, while recipients of fixed amount subawards are excepted from most procurement standards, it is still considered best practice to follow bidding procedures and maintain applicable policies and documentation.
| Compliance Requirement Area | Traditional Cost-Reimbursement | Fixed Amount Subaward |
|---|---|---|
| Activities allowed or unallowed | Ensure federal funds were used only for activities authorized by the award terms, applicable BEAD requirements, and the underlying federal program objectives, including whether funded activities align with the approved project scope and period of performance. Review expenditures to ensure no profit has been added to expended amounts charged to grant funds. | No changes for fixed amount subawards. |
| Allowable costs | Ensure actual costs charged to the award are allowable, allocable, reasonable, supported, and incurred during the period of performance. | Costs should still be evaluated for allowability; however, other cost principles are exempt, including cost reasonableness, consistent cost treatment, and cost documentation. |
| Matching | Ensure match contributions are allowable, properly valued, coming from an allowed source, documented, and accurately calculated. | No changes for fixed amount subawards. |
| Procurement | Ensure covered purchases complied with applicable federal procurement standards, award terms, and entity procurement policies, including competition, cost or price analysis, and documentation requirements. | Majority of procurement is exempt for fixed amount subawards. Areas still applicable are limited to contracting with small business, BABA, and procurement of recovered materials. |
| Reporting | Ensure required financial, performance, and special reports are accurate, complete, supported, submitted timely, and prepared in accordance with the award terms. | No changes for fixed amount subawards. |
| Equipment | Ensure equipment acquired with federal funds was used for authorized purposes, properly safeguarded, recorded in required property records, physically inventoried, and disposed of in accordance with applicable requirements. | Requirements are substantially the same. Primary change is federal interest in the assets is for 10 years after the year in which the project is completed, instead of for the life of the assets. |
| Suspension & debarment | Ensure the entity verified that covered contractors, subrecipients, or other parties were not suspended, debarred, or otherwise excluded before entering into covered transactions. | No changes for fixed amount subawards. |
Other Considerations
- It is imperative that each grantee reviews their grant agreement to determine that award’s requirements. These changes are not a substitute for the terms and conditions of specific awards. If the items noted here and in the NTIA’s policy memo differ from the terms and conditions in a grant agreement, the terms and conditions of the specific BEAD award govern.
- Determination of awarding fixed amount subawards lies with the states. NTIA has issued this policy notice as guidance for those who receive fixed amount subawards. However, each state is able to determine if they want to award their grants as such. This could cause some additional complexities for grantees who received awards in multiple states. If a grantee received awards in multiple states, and they differ in fixed amount subaward status, compliance requirements should be evaluated separately.
- If a grantee spends less than the amount awarded, they may still only get reimbursed for the amount expended. Under usual fixed amount subawards, the grantee receives the amount awarded, regardless of whether they spent more or less than the amount awarded. Under this notice, NTIA includes a provision stating that pass-through entities can request support for actual costs and can limit the grantee’s award payment to actual costs.
Recommended Actions
- Review each BEAD grant agreement separately to identify whether it expressly designates the arrangement as a fixed amount subaward.
- Retain the grant agreement, award notice, state broadband office guidance, NTIA guidance, and any correspondence supporting fixed amount treatment.
- Prepare a short internal analysis documenting the basis for fixed amount treatment, including the payment basis, measurable objectives, pricing support, and applicable state-specific conditions.
- Develop a compliance matrix that identifies which requirements continue to apply, which requirements are modified, and what documentation will be retained for each requirement.
Additional Resources
The following items, in addition to 2 CFR 200, were the primary resources used when providing the information above. They are publicly available documents for grantees to review.
- NTIA Policy Notice: Tailoring the Application of the Uniform Guidance to the BEAD Program
- NTIA Fixed Amount Subaward Overview: PowerPoint Presentation
How Forvis Mazars Can Help
Our professionals work with a wide variety of communications companies, including telephone, wireless, broadband, and other communication systems. Our Telecommunications team can assist clients with:
- BEAD pre-audit readiness assessments
- Internal control evaluation and documentation
- Procurement and compliance policy development
- Schedule of Expenditures of Federal Awards (SEFA) preparation and reporting support
- Single Audit, program‑specific, and Generally Accepted Government Auditing Standards (GAGAS) audits
We provide practical, hands‑on guidance to help you stay ahead of compliance requirements and maintain federal funding eligibility. If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.