diff --git a/controllers/operatorpolicy_controller.go b/controllers/operatorpolicy_controller.go
index 9a66f190..45bbd2c7 100644
--- a/controllers/operatorpolicy_controller.go
+++ b/controllers/operatorpolicy_controller.go
@@ -35,6 +35,7 @@ import (
 
 const (
 	OperatorControllerName string = "operator-policy-controller"
+	CatalogSourceReady     string = "READY"
 )
 
 var (
@@ -58,6 +59,11 @@ var (
 		Version: "v1",
 		Kind:    "Deployment",
 	}
+	catalogSrcGVK = schema.GroupVersionKind{
+		Group:   "operators.coreos.com",
+		Version: "v1alpha1",
+		Kind:    "CatalogSource",
+	}
 )
 
 // OperatorPolicyReconciler reconciles a OperatorPolicy object
@@ -165,9 +171,83 @@ func (r *OperatorPolicyReconciler) Reconcile(ctx context.Context, req ctrl.Reque
 		return reconcile.Result{}, err
 	}
 
+	// handle catalogsource
+	if err := r.handleCatalogSource(ctx, policy, subscription); err != nil {
+		OpLog.Error(err, "Error handling CatalogSource")
+
+		return reconcile.Result{}, err
+	}
+
 	return reconcile.Result{}, nil
 }
 
+func (r *OperatorPolicyReconciler) handleCatalogSource(
+	ctx context.Context,
+	policy *policyv1beta1.OperatorPolicy,
+	subscription *operatorv1alpha1.Subscription,
+) error {
+	watcher := opPolIdentifier(policy.Namespace, policy.Name)
+
+	var catalogName string
+	var catalogNS string
+
+	if subscription == nil {
+		sub, err := buildSubscription(policy)
+		if err != nil {
+			return fmt.Errorf("error building Subscription: %w", err)
+		}
+
+		catalogName = sub.Spec.CatalogSource
+		catalogNS = sub.Spec.CatalogSourceNamespace
+	} else {
+		catalogName = subscription.Spec.CatalogSource
+		catalogNS = subscription.Spec.CatalogSourceNamespace
+	}
+
+	// Check if CatalogSource exists
+	foundCatalogSrc, err := r.DynamicWatcher.Get(watcher, catalogSrcGVK,
+		catalogNS, catalogName)
+	if err != nil {
+		return fmt.Errorf("error getting CatalogSource: %w", err)
+	}
+
+	isMissing := foundCatalogSrc == nil
+	isUnhealthy := isMissing
+
+	if !isMissing {
+		// CatalogSource is found, initiate health check
+		catalogSrcUnstruct := foundCatalogSrc.DeepCopy()
+		catalogSrc := new(operatorv1alpha1.CatalogSource)
+
+		err := runtime.DefaultUnstructuredConverter.
+			FromUnstructured(catalogSrcUnstruct.Object, catalogSrc)
+		if err != nil {
+			return fmt.Errorf("error converting the retrieved CatalogSource to the Go type: %w", err)
+		}
+
+		if catalogSrc.Status.GRPCConnectionState == nil {
+			// Unknown State
+			err := r.updateStatus(ctx, policy, catalogSourceUnknownCond, catalogSrcUnknownObj(catalogName, catalogNS))
+			if err != nil {
+				return fmt.Errorf("error retrieving the status for a CatalogSource: %w", err)
+			}
+
+			return nil
+		}
+
+		CatalogSrcState := catalogSrc.Status.GRPCConnectionState.LastObservedState
+		isUnhealthy = (CatalogSrcState != CatalogSourceReady)
+	}
+
+	err = r.updateStatus(ctx, policy, catalogSourceFindCond(isUnhealthy, isMissing),
+		catalogSourceObj(catalogName, catalogNS, isUnhealthy, isMissing))
+	if err != nil {
+		return fmt.Errorf("error updating the status for a CatalogSource: %w", err)
+	}
+
+	return nil
+}
+
 func (r *OperatorPolicyReconciler) handleOpGroup(ctx context.Context, policy *policyv1beta1.OperatorPolicy) error {
 	watcher := opPolIdentifier(policy.Namespace, policy.Name)
 
@@ -453,7 +533,7 @@ func (r *OperatorPolicyReconciler) handleSubscription(
 		// For now, just mark it as compliant
 		err := r.updateStatus(ctx, policy, matchesCond("Subscription"), matchedObj(foundSub))
 		if err != nil {
-			return nil, fmt.Errorf("error updating the status for an OperatorGroup that matches: %w", err)
+			return nil, fmt.Errorf("error updating the status for a Subscription that matches: %w", err)
 		}
 
 		return mergedSub, nil
diff --git a/controllers/operatorpolicy_status.go b/controllers/operatorpolicy_status.go
index 4afc25b8..03fada5e 100644
--- a/controllers/operatorpolicy_status.go
+++ b/controllers/operatorpolicy_status.go
@@ -226,6 +226,17 @@ func calculateComplianceCondition(policy *policyv1beta1.OperatorPolicy) metav1.C
 	}
 
 	// FUTURE: check additional conditions
+	idx, cond = policy.Status.GetCondition(catalogSrcConditionType)
+	if idx == -1 {
+		messages = append(messages, "the status of the CatalogSource is unknown")
+		foundNonCompliant = true
+	} else {
+		messages = append(messages, cond.Message)
+
+		if cond.Status != metav1.ConditionFalse {
+			foundNonCompliant = true
+		}
+	}
 
 	if foundNonCompliant {
 		return metav1.Condition{
@@ -305,6 +316,7 @@ const (
 	subConditionType        = "SubscriptionCompliant"
 	csvConditionType        = "ClusterServiceVersionCompliant"
 	deploymentConditionType = "DeploymentCompliant"
+	catalogSrcConditionType = "CatalogSourcesUnhealthy"
 )
 
 func condType(kind string) string {
@@ -468,6 +480,88 @@ var noDeploymentsCond = metav1.Condition{
 	Message: "The ClusterServiceVersion is missing, thus meaning there are no relevant deployments",
 }
 
+// catalogSourceFindCond is a conditionally compliant condition with reason
+// based on the `isUnhealthy` and `isMissing` parameters
+func catalogSourceFindCond(isUnhealthy bool, isMissing bool) metav1.Condition {
+	status := metav1.ConditionFalse
+	reason := "CatalogSourcesFound"
+	message := "CatalogSource was found"
+
+	if isUnhealthy {
+		status = metav1.ConditionTrue
+		reason = "CatalogSourcesFoundUnhealthy"
+		message = "CatalogSource was found but is unhealthy"
+	}
+
+	if isMissing {
+		status = metav1.ConditionTrue
+		reason = "CatalogSourcesNotFound"
+		message = "CatalogSource was not found"
+	}
+
+	return metav1.Condition{
+		Type:    "CatalogSourcesUnhealthy",
+		Status:  status,
+		Reason:  reason,
+		Message: message,
+	}
+}
+
+// catalogSourceUnknownCond is a NonCompliant condition
+var catalogSourceUnknownCond = metav1.Condition{
+	Type:    "CatalogSourcesUnknownState",
+	Status:  metav1.ConditionTrue,
+	Reason:  "LastObservedUnknown",
+	Message: "Could not determine last observed state of CatalogSource",
+}
+
+// catalogSourceObj returns a conditionally compliant RelatedObject with reason based on the
+// `isUnhealthy` and `isMissing` parameters
+func catalogSourceObj(catalogName string, catalogNS string, isUnhealthy bool, isMissing bool) policyv1.RelatedObject {
+	compliance := string(policyv1.Compliant)
+	reason := reasonWantFoundExists
+
+	if isUnhealthy {
+		compliance = string(policyv1.NonCompliant)
+		reason = reasonWantFoundExists + " but is unhealthy"
+	}
+
+	if isMissing {
+		compliance = string(policyv1.NonCompliant)
+		reason = reasonWantFoundDNE
+	}
+
+	return policyv1.RelatedObject{
+		Object: policyv1.ObjectResource{
+			Kind:       catalogSrcGVK.Kind,
+			APIVersion: catalogSrcGVK.GroupVersion().String(),
+			Metadata: policyv1.ObjectMetadata{
+				Name:      catalogName,
+				Namespace: catalogNS,
+			},
+		},
+		Compliant: compliance,
+		Reason:    reason,
+	}
+}
+
+// catalogSrcUnknownObj returns a NonCompliant RelatedObject with
+// reason = 'Resource found but current state is unknown'
+func catalogSrcUnknownObj(catalogName string, catalogNS string) policyv1.RelatedObject {
+	return policyv1.RelatedObject{
+		Object: policyv1.ObjectResource{
+			Kind:       catalogSrcGVK.Kind,
+			APIVersion: catalogSrcGVK.GroupVersion().String(),
+			Metadata: policyv1.ObjectMetadata{
+				Name:      catalogName,
+				Namespace: catalogNS,
+			},
+		},
+		Compliant: string(policyv1.NonCompliant),
+		Reason:    "Resource found but current state is unknown",
+	}
+}
+
 // missingWantedObj returns a NonCompliant RelatedObject with reason = 'Resource not found but should exist'
 func missingWantedObj(obj client.Object) policyv1.RelatedObject {
 	return policyv1.RelatedObject{
diff --git a/test/e2e/case38_install_operator_test.go b/test/e2e/case38_install_operator_test.go
index 0406679d..dd934436 100644
--- a/test/e2e/case38_install_operator_test.go
+++ b/test/e2e/case38_install_operator_test.go
@@ -496,7 +496,6 @@ var _ = Describe("Test installing an operator from OperatorPolicy", Ordered, fun
 			createObjWithParent(parentPolicyYAML, parentPolicyName,
 				opPolYAML, opPolTestNS, gvrPolicy, gvrOperatorPolicy)
 		})
-
 		It("Should initially notice the matching Subscription", func() {
 			check(
 				opPolName,
@@ -550,7 +549,6 @@ var _ = Describe("Test installing an operator from OperatorPolicy", Ordered, fun
 			)
 		})
 	})
-
 	Describe("Test health checks on OLM resources after OperatorPolicy operator installation", Ordered, func() {
 		const (
 			opPolYAML = "../resources/case38_operator_install/operator-policy-no-group-enforce.yaml"
@@ -610,7 +608,6 @@ var _ = Describe("Test installing an operator from OperatorPolicy", Ordered, fun
 			)
 		})
 	})
-
 	Describe("Test health checks on OLM resources on OperatorPolicy with failed CSV", Ordered, func() {
 		const (
 			opPolYAML = "../resources/case38_operator_install/operator-policy-no-group-csv-fail.yaml"
@@ -672,4 +669,148 @@ var _ = Describe("Test installing an operator from OperatorPolicy", Ordered, fun
 			)
 		})
 	})
+	Describe("Test status reporting for CatalogSource", Ordered, func() {
+		const (
+			OpPlcYAML  = "../resources/case38_operator_install/operator-policy-with-group.yaml"
+			OpPlcName  = "oppol-with-group"
+			subName    = "project-quay"
+			catSrcName = "operatorhubio-catalog"
+		)
+
+		BeforeAll(func() {
+			By("Applying creating a ns and the test policy")
+			utils.Kubectl("create", "ns", opPolTestNS)
+			DeferCleanup(func() {
+				utils.Kubectl("delete", "ns", opPolTestNS)
+			})
+
+			createObjWithParent(parentPolicyYAML, parentPolicyName,
+				OpPlcYAML, opPolTestNS, gvrPolicy, gvrOperatorPolicy)
+		})
+
+		It("Should initially show the CatalogSource is compliant", func() {
+			By("Checking the condition fields")
+			check(
+				OpPlcName,
+				false,
+				[]policyv1.RelatedObject{{
+					Object: policyv1.ObjectResource{
+						Kind:       "CatalogSource",
+						APIVersion: "operators.coreos.com/v1alpha1",
+						Metadata: policyv1.ObjectMetadata{
+							Name:      catSrcName,
+							Namespace: opPolTestNS,
+						},
+					},
+					Compliant: "Compliant",
+					Reason:    "Resource found as expected",
+				}},
+				metav1.Condition{
+					Type:    "CatalogSourcesUnhealthy",
+					Status:  metav1.ConditionFalse,
+					Reason:  "CatalogSourcesFound",
+					Message: "CatalogSource was found",
+				},
+				"CatalogSource was found",
+			)
+		})
+		It("Should remain compliant when policy is enforced", func() {
+			By("Enforcing the policy")
+			utils.Kubectl("patch", "operatorpolicy", OpPlcName, "-n", opPolTestNS, "--type=json", "-p",
+				`[{"op": "replace", "path": "/spec/remediationAction", "value": "enforce"}]`)
+
+			By("Checking the condition fields")
+			check(
+				OpPlcName,
+				false,
+				[]policyv1.RelatedObject{{
+					Object: policyv1.ObjectResource{
+						Kind:       "CatalogSource",
+						APIVersion: "operators.coreos.com/v1alpha1",
+						Metadata: policyv1.ObjectMetadata{
+							Name:      catSrcName,
+							Namespace: opPolTestNS,
+						},
+					},
+					Compliant: "Compliant",
+					Reason:    "Resource found as expected",
+				}},
+				metav1.Condition{
+					Type:    "CatalogSourcesUnhealthy",
+					Status:  metav1.ConditionFalse,
+					Reason:  "CatalogSourcesFound",
+					Message: "CatalogSource was found",
+				},
+				"CatalogSource was found",
+			)
+		})
+		It("Should become NonCompliant when CatalogSource DNE", func() {
+			By("Patching the policy to reference a CatalogSource that DNE to emulate failure")
+			utils.Kubectl("patch", "operatorpolicy", OpPlcName, "-n", opPolTestNS, "--type=json", "-p",
+				`[{"op": "replace", "path": "/spec/subscription/source", "value": "fakeName"}]`)
+
+			By("Checking the conditions and relatedObj in the policy")
+			check(
+				OpPlcName,
+				true,
+				[]policyv1.RelatedObject{{
+					Object: policyv1.ObjectResource{
+						Kind:       "CatalogSource",
+						APIVersion: "operators.coreos.com/v1alpha1",
+						Metadata: policyv1.ObjectMetadata{
+							Name:      "fakeName",
+							Namespace: opPolTestNS,
+						},
+					},
+					Compliant: "NonCompliant",
+					Reason:    "Resource not found but should exist",
+				}},
+				metav1.Condition{
+					Type:    "CatalogSourcesUnhealthy",
+					Status:  metav1.ConditionTrue,
+					Reason:  "CatalogSourcesNotFound",
+					Message: "CatalogSource was not found",
+				},
+				"CatalogSource was not found",
+			)
+
+			By("Patching the policy to point to an existing CatalogSource for next test")
+			utils.Kubectl("patch", "operatorpolicy", OpPlcName, "-n", opPolTestNS, "--type=json", "-p",
+				`[{"op": "replace", "path": "/spec/subscription/source", "value": "operatorhubio-catalog"}]`)
+		})
+		It("Should remain NonCompliant when CatalogSource fails", func() {
+			By("Patching the CatalogSource to reference a broken image link")
+			utils.Kubectl("patch", "catalogsource", catSrcName, "-n", "olm", "--type=json", "-p",
+				`[{"op": "replace", "path": "/spec/image", "value": "quay.io/operatorhubio/fakecatalog:latest"}]`)
+
+			By("Checking the conditions and relatedObj in the policy")
+			check(
+				OpPlcName,
+				true,
+				[]policyv1.RelatedObject{{
+					Object: policyv1.ObjectResource{
+						Kind:       "CatalogSource",
+						APIVersion: "operators.coreos.com/v1alpha1",
+						Metadata: policyv1.ObjectMetadata{
+							Name:      catSrcName,
+							Namespace: opPolTestNS,
+						},
+					},
+					Compliant: "NonCompliant",
+					Reason:    "Resource found as expected but is unhealthy",
+				}},
+				metav1.Condition{
+					Type:    "CatalogSourcesUnhealthy",
+					Status:  metav1.ConditionTrue,
+					Reason:  "CatalogSourcesFoundUnhealthy",
+					Message: "CatalogSource was found but is unhealthy",
+				},
+				"CatalogSource was found but is unhealthy",
+			)
+
+			By("Patching the CatalogSource to reference its original valid image link")
+			utils.Kubectl("patch", "catalogsource", catSrcName, "-n", "olm", "--type=json", "-p",
+				`[{"op": "replace", "path": "/spec/image", "value": "quay.io/operatorhubio/catalog:latest"}]`)
+		})
+	})
 })
diff --git a/test/resources/case38_operator_install/case38_OpPlc.yaml b/test/resources/case38_operator_install/case38_OpPlc.yaml
deleted file mode 100644
index 4a643b12..00000000
--- a/test/resources/case38_operator_install/case38_OpPlc.yaml
+++ /dev/null
@@ -1,34 +0,0 @@
-apiVersion: policy.open-cluster-management.io/v1beta1
-kind: OperatorPolicy
-metadata:
-  name: test-operator-policy
-spec:
-  remediationAction: enforce # or inform
-  severity: medium
-  complianceType: musthave # or mustnothave
-  operatorGroup: # optional
-    name: og-single
-    namespace: op-1
-    target:
-      namespaces:
-        - op-1
-  subscription:
-    channel: stable-3.8
-    name: project-quay
-    namespace: op-1
-    installPlanApproval: Automatic # may be overridden to Manual by other settings
-    source: operatorhubio-catalog
-    sourceNamespace: olm
-    startingCSV: quay-operator.v3.8.1
-  removalBehavior:
-    operatorGroups: DeleteIfUnused
-    subscriptions: Delete
-    clusterServiceVersions: Delete
-    installPlans: Keep
-    customResourceDefinitions: Keep
-    apiServiceDefinitions: Keep
-  statusConfig:
-    catalogSourceUnhealthy: StatusMessageOnly
-    deploymentsUnavailable: NonCompliant
-    upgradesAvailable: StatusMessageOnly
-    upgradesProgressing: NonCompliant
\ No newline at end of file
diff --git a/test/resources/case38_operator_install/case38_OpPlc_default_og.yaml b/test/resources/case38_operator_install/case38_OpPlc_default_og.yaml
deleted file mode 100644
index cd57496d..00000000
--- a/test/resources/case38_operator_install/case38_OpPlc_default_og.yaml
+++ /dev/null
@@ -1,28 +0,0 @@
-apiVersion: policy.open-cluster-management.io/v1beta1
-kind: OperatorPolicy
-metadata:
-  name: test-operator-policy-no-og
-spec:
-  remediationAction: enforce # or inform
-  severity: medium
-  complianceType: musthave # or mustnothave
-  subscription:
-    channel: stable-3.8
-    name: project-quay
-    namespace: op-2
-    installPlanApproval: Automatic # may be overridden to Manual by other settings
-    source: operatorhubio-catalog
-    sourceNamespace: olm
-    startingCSV: quay-operator.v3.8.1
-  removalBehavior:
-    operatorGroups: DeleteIfUnused
-    subscriptions: Delete
-    clusterServiceVersions: Delete
-    installPlans: Keep
-    customResourceDefinitions: Keep
-    apiServiceDefinitions: Keep
-  statusConfig:
-    catalogSourceUnhealthy: StatusMessageOnly
-    deploymentsUnavailable: NonCompliant
-    upgradesAvailable: StatusMessageOnly
-    upgradesProgressing: NonCompliant
\ No newline at end of file
diff --git a/test/resources/operatorpolicy.yaml b/test/resources/operatorpolicy.yaml
deleted file mode 100644
index eb6209ce..00000000
--- a/test/resources/operatorpolicy.yaml
+++ /dev/null
@@ -1,34 +0,0 @@
-apiVersion: policy.open-cluster-management.io/v1beta1
-kind: OperatorPolicy
-metadata:
-  name: test-operator-policy
-spec:
-  remediationAction: enforce # or inform
-  severity: medium
-  complianceType: musthave # or mustnothave
-  operatorGroup: # optional
-    name: og-single
-    namespace: default
-    target:
-      namespaces:
-        - default
-  subscription:
-    channel: stable-3.8
-    name: project-quay
-    namespace: default
-    installPlanApproval: Automatic # may be overridden to Manual by other settings
-    source: operatorhubio-catalog
-    sourceNamespace: olm
-    startingCSV: quay-operator.v3.8.1
-  removalBehavior:
-    operatorGroups: DeleteIfUnused
-    subscriptions: Delete
-    clusterServiceVersions: Delete
-    installPlans: Keep
-    customResourceDefinitions: Keep
-    apiServiceDefinitions: Keep
-  statusConfig:
-    catalogSourceUnhealthy: StatusMessageOnly
-    deploymentsUnavailable: NonCompliant
-    upgradesAvailable: StatusMessageOnly
-    upgradesProgressing: NonCompliant