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The requirement placed on non-Federal entities to determine relationships with other non-Federal entities they work with on Federal awards is an important one: failure of the nonthe initiating non-Federal entity to establish the correct award instrument as either a subaward or a contract could mean subsequent audit findings that require repayment of improper costs (in the case of a subaward treated as a contract), or unnecessary audits that cost both time and money to the non-Federal entity and its partner in the relationship (in the case of a contract treated as a subaward). Non-Federal entities should consult 2 CFR 200 for guidance on making the correct determination.

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