Ah, the subrecipient. As a grant management professional, you know there are a lot more compliance requirements concerning spending grant funds with a subrecipient compared to a vendor.
Here are just a few:
• Funding agency pre-approval requirements
• Additional subrecipient monitoring
• A-133 audit (find out 3 little known factors that can affect your A-133 audit)
Now it may be easy to tell the difference between a vendor and a subrecipient when you are contemplating buying a box of pencils vs. enlisting a University’s help to complete part of the program research covered in the federal grant. But what about when things are a less clear?
Sometimes you need a little extra clarity…
Here are the top 6 ways to distinguish between a vendor and subrecipient relationship.
#1 Look at the Award Terms and Conditions
• The starting place in determining the type of relationship is an understanding of the terms and conditions of your federal award. If the agreement explicitly states there are will not be subrecipients, subgrantees, or subawardees on this award, you should not be contemplating using a subrecipient.
#2 Determine what they are providing
• When the relationship is to provide goods and services in the normal course of business operations, you are probably working with a vendor. This is especially true if the vendor routinely provides similar goods and services to other customers
#3 Decide who makes the decisions for the program
• A subrecipient will usually be responsible for some of the programmatic decision-making under the award. For example, a subrecipient may decide who is eligible to receive the benefits of the federal program, or determine the best way to perform scientific research.
(In other words, the decisions being made about the program are of a level that they would have been made by the prime recipient if the subrecipient wasn’t hired.)
#4 Judge if it’s a competitive environment
• Vendors typically operate in competitive environments providing the type of goods and services funded by the federal award. If multiple companies exist that could-or would do the work, it is more likely to be a vendor relationship instead of a subrecipient.
#5 Agree on how their performance is measured
• A subrecipient’s performance is usually measured by their results in carrying out some portion of the federal program. For example, do they have to complete specific program goals in order to receive payment?
#6 Unearth additional compliance requirements
• Though many of the provisions in the grant management regulations are common to both vendors and subrecipients, such as suspension/debarment and lobbying disclosures, there are additional compliance requirements for subrecipients. For example, subrecipients may need to have annual A-133 audits, or could be limited in using grant funds for specific activities or categories of spending.
Good judgment is still the universal requirement
It is still important to realize that ultimately the use of human judgment will be needed to determine which type of relationship best fits the facts and circumstances of achieving results for the federal grant. It also never hurts to have this discussion with your program officer prior to letting out the work.
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Lucy Morgan CPA, MBA
CEO, Compliance Warrior