22 CFR §218.39

1. (a)When an agency withholds funds from a recipient under these regulations, the agency head may disburse the withheld funds directly to an alternate recipient, any public or non-profit private organization or agency, or State or political subdivision of the State.
2. (b)The agency head will require any alternate recipient to demonstrate:
   1. (1)The ability to comply with these regulations; and
   2. (2)The ability to achieve the goals of the Federal statute authorizing the Federal financial assistance.