Subrecipient characteristics, contractor characteristics, subrecipient agreements
Hillsborough County routinely seeks the expertise and capacity of outside agencies to perform a variety of tasks on its federal and state grants. When this occurs, a portion of the County's awarded grant funds are "passed-through" to those organizations in the form of either a subaward or a subcontract.
When the County enters into such agreements, certain compliance requirements detailed in the Office of Management and Budget (OMB) Circular A-133 Compliance Supplement attach to these organizations. Among these is a requirement to manage and monitor those entities to whom grant funds may be awarded through a subaward or subcontract. These entities are commonly referred to as a subrecipient.
A subrecipient is defined by the federal government as "a non-federal entity that receives a subaward from a pass-through entity to carry out part of a federal program (but does not include an individual that is a beneficiary of the federal program). A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency." (2 CFR Part 200, §200.93). Subrecipient monitoring is the process of evaluating the compliance of a subrecipient with the compliance requirements applicable to the subaward being monitored.
Subrecipient or Contractor?
The first thing that must be determined is whether the entity to receive pass-through funds is a subrecipient or a contractor. The following characteristics define the relationship. However, not all of them may be present in all cases. As well, the "substance of the relationship" between the County and the entity, (it's structural, dynamic and organizational nature) is more important than the "form" of the agreement. i.e. if it looks like and walks and talks like a subrecipient relationship, then it is presumed to be a subrecipient relationship.
Therefore, the County must make a case-by-case determination as to whether the funding recipient should be a subrecipient or a contractor (formerly known as vendor), and use its best judgment in all cases. This determination must be documented by completion of the County's
Federal Subrecipient vs. Contractor Checklist (2 CFR Part 200, §200.330)
Characteristics which support the classification of a non-federal entity as a subrecipient include the following, when the entity:
(1) Determines participant eligibility regarding receipt of federal assistance (under the grant);
(2) Performance is measured relative to whether objectives of a federal program are met;
(3) Can make programmatic decisions;
(4) Is responsible for compliance with applicable federal program requirements specified in the federal award; and
(5) In accordance with the agreement between it and the County, uses the federal funds to carry out a program for a public purpose specified in an authorizing statute rather than simply providing goods or services for the benefit of the County as an organization.
A contract is for the purpose of obtaining goods and services for the County's own use and creates a procurement relationship with the contractor. Characteristics which indicate a procurement relationship and support the classification of a non-federal entity as a Contractor include the following:
(1) Goods and services are provided as a part of normal, everyday business operations;
(2) Similar goods or services are provided to many different purchasers;
(3) Normally operates in a competitive environment;
(4) Provides goods or services that are ancillary to the operation of the Federal program; and
(5) The entity is not subject to compliance requirements of the federal program as a result of the agreement (though similar requirements may apply for other reasons).
The effective date of the Uniform Guidance is December 26, 2014; therefore, this applies to all subawards that are made from federal awards awarded to the county on or after December 26, 2014.
The requirements for a subaward flow from the requirements of the original federal award. Please reference your Master Agreements to ensure that the correct regulations are cited in the subaward agreements
In most cases, a program's compliance requirements do not pass through to contractors, and our compliance responsibility is limited to ensuring that the procurement, receipt and payment for goods and services complied with laws, regulations and the provisions of contracts or grant agreements.
Conversely, funds passed-through to a subrecipient are subject to a variety of requirements. Hillsborough County has developed two important agreement exhibits to further standardize its federal subaward agreements to provide the federally minimum required information in all federal subaward agreements in accordance to 2 C.F.R. Part 200.331. The following documents MUST be all subaward agreements.
Exhibit 1: 2 C.F.R. Section 200.331(a)(1) requires all subawards to contain certain federal award identification information.
Exhibit 2: 2 C.F.R. PART 200.331(a) requires all subawards to contain certain flow down provisions from the federal award funding the subaward.
Please contact us if you desire one-on-one support/consultation from the GMO regarding the management and monitoring of subrecipients in accordance to the Uniform Guidance.
Subrecipients and indirect costs
When the County is the direct recipient of a federal award, federal agencies are obligated to pay our federally-negotiated indirect cost rate, also known as Facilities and Administration (F&A) rate. Exceptions to this are when a different rate is announced for a class of federal awards, when a federal statute or regulation requires a different rate, or when a deviation is approved by the federal awarding agency head.
When the County executes a subaward from a federal award to a subrecipient, barring that no exception described above applies, the County:
1. MUST pay the subrecipient its full federally-negotiated indirect cost rate on the entire amount of the subaward
2. If the subrecipient has no negotiated rate, 10% of the subaward’s modified total direct cost (MTDC) MUST be paid as the indirect cost rate - unless the subrecipient is able to direct charge 100% of their costs and has no indirect costs.
When the County is a subrecipient of a federal subaward, barring that no exception described above applies, the pass-through entity MUST pay our full federally-negotiated rate on the entire amount of the subaward.