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Overview
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A recipient of a Federal financial assistance award must determine the proper role of organizations they partner with to carry out the work under the prime Federal award. Depending on the role established, the partnering organization may be either a subrecipient or contractor. This determination is important in that each award instrument type (subaward or contract) has differing Federal regulations related to administrative practices and documentation, allowability of costs, and other Federal Federal compliance requirements. The incorrect determination by the pass-through entity could result in audit findings, such as the repayment of improper costs, or even affect their future Federal funding opportunities.
Authorities
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2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
§200.1 Subrecipient and Subaward.
Subrecipient means an entity that receives a subaward from a pass-through entity to carry out part of a Federal award. The term subrecipient does not include a beneficiary or participant. A subrecipient may also be a recipient of other Federal awards directly from a Federal agency. Subaward means an award provided by a pass-through entity to a subrecipient for the subrecipient to contribute to the goals and objectives of the project by carrying out part of a Federal award received by the pass-through entity. It does not include payments to a contractor, beneficiary, or participant. A subaward may be provided through any form of legal agreement consistent with criteria in with § 200.331, including an agreement the pass-through entity considers a contract.
§200.1 Contractor and Contract.
Contractor means an entity that receives a contract. Contract means, for the purpose of Federal financial assistance, a legal instrument by which a recipient or subrecipient conducts procurement transactions under a Federal award. For additional information on subrecipient and contractor determinations, see § 200.331. See also the definition of subaward in this section.
Click to open paragraph toolsmeans, for the purpose of Federal financial assistance, a legal instrument by which a recipient or subrecipient conducts procurement transactions under a Federal award. For additional information on subrecipient and contractor determinations, see § 200.331. See also the definition of subaward in this section.
[78 FR 78608, Dec. 26, 2013]
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§200.331 Subrecipient and contractor determinations.
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An entity may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor. The pass-through entity is responsible for making case-by-case determinations to determine whether the entity receiving Federal funds is a subrecipient or a contractor. The Federal agency may require the pass-through entity to comply with additional guidance to make these determinations, provided such guidance does not conflict with this section. The Federal agency does not have a direct legal relationship with subrecipients or contractors of any tier; however, the Federal agency is responsible for monitoring the pass-through entity's oversight of first-tier subrecipients. All of the characteristics listed below may not be present in all cases, and some characteristics from both categories may be present at the same time. No single factor or any combination of factors is necessarily determinative. The pass-through entity must use judgment in classifying each agreement as a subaward or a procurement contract. In making this determination, the substance of the relationship is more important than the form of the agreement.
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(5) Is not subject to compliance requirements of a Federal program as a result of the agreement. However, similar requirements may apply for other reasons.
Frequently Asked Questions
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Whose responsibility is it to make the subrecipient vs contractor determination?
It is the responsibility of the pass-through entity to make the correct determination between subrecipient or contractor determination. This determination is to be made on a case-by-case basis depending on the unique relationship of each individual situation. Entities should focus on the substance of the relationship, not the form of the agreement, when making this determination. Entities MUST use judgement in determining whether each agreement is a subaward or a procurement contract (§ 200.331 above).
Why is it important to properly distinguish between a subrecipient and a contractor?
Federal regulations differ between subrecipients and contractors. One of the biggest reasons is that subrecipients are required to comply with applicable Federal compliance requirements, which are passed down from the pass-through entity to the subrecipient. Contractors are not subject to the same compliance requirements of the Federal program. It is the responsibility of the pass-through entity to identify the subaward to the subrecipient and include the information listed in § 200.332(b)(1) in the associated agreement document.
Our organization uses a "contract" as the legal instrument to enter into agreements with both subrecipients and contractors. Therefore we consider all of our relationships as contractors. Is this acceptable?
No. Many recipients, particularly State agencies, call all of their legal instruments "contracts". A non-Federal entity may concurrently receive Federal awards as a recipient, subrecipient, and a contractor, depending on the substance of its agreement with the Federal agency and pass-through entities. Therefore, a pass-through entity must make a case-by-case determination whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. Pass-through entities need to reflect upon the nature of each agreement's relationship to determine if the relationship is that of a subrecipient or a contractor.
What guidance can you provide in order to help distinguish between a subrecipient or contractor?
§ 200.331(a) provides characteristics which generally support the classification of a non-Federal entity as a subrecipient. Characteristics generally supportive of a contractor are listed in 2 CFR 200.331(b).
What are some of the characteristics indicative of a subrecipient relationship?
Characteristics that support the classification of the entity as a subrecipient include, but are not limited to, when the entity:
(1) Determines who is eligible to receive what Federal assistance;
(2) Has its performance measured in relation to whether the objectives of a Federal program were met;
(3) Has responsibility for programmatic decision-making;
(4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and
(5) Implements a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.
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(5) publications may be created or co-authored at the entity; and (6) the entity provides cost sharing or matching funds for which it is not reimbursed by pass-through entity.
What are some of the characteristics indicative of a contractor relationship?
Characteristics that support a procurement relationship between the recipient or subrecipient and a contractor include, but are not limited to, when the contractor:
(1) Provides the goods and services within normal business operations;
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(4) the work will not result in any potential patentable or copyrightable products.
Can you provide an example of a scenario where a pass-through entity enters into a relationship with a subrecipient?
Scenario #1:
A state fish and wildlife agency receives a Sport Fish Restoration grant to study the effects of stocking white crappie into a large flood control reservoir in terms of bolstering the population in order to improve abundance for recreational fishing. The state fish and wildlife agency in turn enters into a relationship with a local university to conduct the research as approved in the grant application. Under this scenario, the state fish and wildlife agency acts as the pass-through entity and the university becomes the subrecipient. A subrecipient determination would be adequate in this scenario because the university
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(4) uses the Federal funds to carry out a program of the organization as compared to simply providing goods or services.
Can you provide an example of a scenario where a pass-through entity enters into a relationship with a contractor?
Scenario #1:
A state fish and wildlife agency receives a Wildlife Restoration grant for annual operations and maintenance of its wildlife management areas and facilities located at the areas. The state fish and wildlife agency determines that a new roof is needed on one of its regional wildlife offices located at one of the wildlife management areas. The state agency in turn enters into a relationship with a local business to remove the existing roof and replace with a new roof. Under this scenario, the state fish and wildlife agency acts as the non-Federal entity and the local roofing business becomes the contractor. A contractor determination would be adequate in this scenario because the local roofing business
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(4) not subject to compliance.
Learning Aids
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Related Pages
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Risk Assessment Requirements for Pass-Through Entities
Resources
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References
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