Subrecipient vs Contractor Agreement
Subrecipient vs Contractor Agreement
Policies & Instructions
Under the OMB Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, which went into effect on 12/16/2014, the term “vendor” was replaced with “contractor.” The terms vendor and contractor substantially have the same meaning and may be used interchangeably in other guidance. For consistency purposes, when UNH provides funds from a federal award to a non-federal entity, the non-federal entity receiving these funds is classified as a subrecipient or a contractor based on the nature of the agreement and the criteria in 2 CFR §200.330.
Under the Uniform Guidance (2 C.F.R. §200), an organization is considered a subrecipient of a federal award when it:
- Determines who is eligible to receive what financial assistance;
- Has its performance measured against whether the objectives of the federal program are met;
- Has responsibility for programmatic decision-making;
- Has responsibility for adherence to applicable federal program compliance responsibilities; and
- Uses the federal funds to carry out a program of the organization as compared to providing goods and services for a program of the pass-through entity.
Under the Uniform Guidance (2 C.F.R. §200), an organization is considered a contractor (vendor) when it:
- Provides goods and services within normal business operations;
- Provides similar goods and services to many different purchasers;
- Operates in a competitive environment;
- Provides goods or services that are ancillary to the operation of the Federal program; and
- Is not subject to compliance requirements of the Federal program.
Not all of these characteristics will be present in every case. According to the Uniform Guidance, judgment should be used in each individual case in determining whether an entity is a subrecipient or a contractor.
To comply with the requirements in Uniform Guidance 2 CFR §200.330, UNH must determine whether services provided to further the purposes of an award (grant or contract) should be paid as a contractor (vendor) agreement or subrecipient of the award. The checklist, Subrecipient and Contractor Determination Checklist for Sponsored Programs, should be used to determine which of these agreements best applies to your sponsored program.
Why it's important
The nature of the relationship determines whether or not an entity is a subrecipient or a contractor (vendor). Neither the dollar amount of the engagement nor the associated overhead is a determining factor. Careful review of the nature of services to be provided and an appropriate determination as part of the proposal budget review process eliminates post-award problems such as:
- Obtaining sponsor prior approval for unbudgeted subcontracts.
- Delays in processing subcontracts.
- Meeting audit and compliance requirements with for-profit organizations where a contractor (vendor) relationship should exist.
- Appropriate classification as subrecipient or contractor (vendor) also is important to the external entity, since significant audit and compliance requirements are attached to a subrecipient.
How to comply
The checklist is intended to assist in establishing whether an external entity is a subrecipient, which should be engaged by the Sponsored Programs Administration (SPA) office, or a contractor (vendor), which should be engaged by USNH Purchasing and Contract Services.
There may be unusual circumstances or exceptions to the listed characteristics. In determining whether a subrecipient or contractor (vendor) relationship exists, the substance of the relationship is more important than the form of the agreement. It is not expected that all characteristics of either relationship will be present. Classification can be complex and requires the exercise of informed judgment; SPA and USNH Purchasing Staff are available to assist in the interpretation and determination of how an award should be administered. Final decisions are at the discretion of the Directors of Purchasing and SPA.
PI Essentials: Guidance Document #4
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