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(5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons.

Anchor330(c)330(c)(c) Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases, and the pass-through entity must use judgment in classifying each agreement as a subaward or a procurement contract.

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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 (§ 200.330(c) above).  

Why is it important to properly distinguish between a subrecipient

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and a contractor?

Federal regulations differ between subrecipients and contractors.  One of the biggest reasonings reasoning is that subrecipients are required to comply with applicable Federal compliance requirements (these get passed down from the pass-through entity to the subrecipient), while 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 § 200.331(a)(1-6) in the agreement form between the pass-thru-entity and the subrecipient. 

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