One of the (many) things I found very confusing when I started working in the world of federal grant management was the way the terms subrecipient, subawardee, contractor, subcontractor and vendor were bandied about-seemingly interchangeably.
It didn’t’ matter if I was talking with my colleagues or the federal agency personnel, there always seemed to be lots of confusion around these terms.
And I knew making the distinction was important, because there were way different grant compliance and monitoring requirements depending on which group they were classified with.
So let’s take a quick review and shed some light on the on this confusing topic:
How Do You Tell? 5 Tips to Spot a Subrecipient
Remember, the determining factor has to do with level of involvement the organization has in achieving the program objectives.
Here are 5 things to look for in a subrecipient relationship:
1) Are they eligible to receive Federal Financial Assistance-i.e. not an individual?
2) Is their performance measured against program objectives?
3) Do they have responsibility for programmatic decision making?
4) Are they required to comply with the applicable Federal program requirements for subawardees?
5) Do they use federal funds to carry out a program vs. providing goods or services?
Let’s get into a bit more detail.
Subawardees and Subrecipients
“Subawardees” and “subrecipients” describe the same thing in the world of grants.
Both terms talk about organizations, that (similar to a recipient) are receiving federal assistance in the form of either money or property in lieu of money.
Either the original grantee or an eligible subrecipient makes this award to a subordinate recipient.
The key distinction between subrecipient vs. subcontractors is that the term “subrecipient” does not include vendors of goods and services.
For example, if a university purchases services for maintaining a copier, the maintenance company would not be a subrecipient because those services fall under federal procurement laws.
If the university, however, gives money to another local organization to educate local businesses on ways to reduce pollution, then the partner organization would likely be a subrecipient and fall under the federal grant regulations for subrecipients.
Contractors, Subcontractors and Vendors
The term “contract” can be also tricky because this term can be used both in the “award” world and the “procurement” world.
(Same with contractor, subcontractor and vendor!)
What’s key for grant management is figuring out which set of regulations you need to apply to the relationship.
Think of it this way: a procurement contract is generally for the purchase of goods and services, such as a box of pens, or servicing the office copier.
An award, which may occasionally be called a “contract,” must be used for a public purpose, such as researching the effects of pollution or reducing the number of DUI drivers on the road.
Services are Tricky
When materials and supplies are purchased, it’s pretty straightforward.
It gets messier with services.
For example, an organization doing research services or software development could be either a subcontractor or a subrecipient depending on the objectives of the sponsored agreement or federal program.
No wonder we get confused!
The Facts Matter
The facts and circumstances around what the subrecipient or subcontractors are doing for the federal award will matter more than the “name” you call them.
Some organizations think that by calling everyone a “subcontractor” and having a “contract” instead of a “subaward agreement” they get out of the subrecipient monitoring requirements.
(And don’t forget that subawards must have the prior approval of the funding agency.)
Not a good strategy!
Substance over Form
Agencies can still hold the organization responsible based on the actual function of the work spelled out in the agreement-regardless of what title you put on the agreement.
The federal grant regulations specifically say that the term “subaward” “includes financial assistance when provided by any legal agreement, even if the agreement is called a contract, but does not include procurement of goods and services…”
The OMB’s Audit guidelines contained in Circular A-133 state “In making determination of whether a subrecipient or vendor relationship exists, the substance of the relationship is more important than the form of the agreement.”
Still not sure?
This is a time when a discussion with your program officer may be in order.
Get on the same page from the start on the requirements and avoid unpleasant situations in the future.
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
P.S. If you’d like to find out more about how to avoid grant management problems and pitfalls?
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