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Overview
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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 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 determinationA recipient of a Federal financial assistance award must determine the role of organizations they partner with to carry out the work under the prime Federal award. Depending on the relationship established, this 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 for the Federal award could result in audit findings, such as the repayment of improper costs, or 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
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