Subrecipients, Consultants, and Contractors
To determine whether NC State should issue an entity a subaward to a “subrecipient” or a procurement contract to a “contractor”, follow the governing regulation Uniform Guidance (UG), §200.331, Subrecipient and Contractor determinations. In order to remain consistent, NC State has adopted this guidance to determine the status of a subrecipient versus a contractor for all sponsored projects, no matter the funding type (federal, state, non-profit, or industry funding).
Subrecipients
Subrecipients are entities that contribute to the programmatic portion of the project. Their performance is measured against whether the objectives of the project are being met. Subrecipients are subject to project compliance. As such, subrecipients must adhere to the prime award’s terms and conditions applicable to subawards. Moreover, subrecipients should provide a detailed budget similar to NC State’s budgeted categories (i.e., salary, fringe benefits, travel, equipment, materials and supplies, consultants, indirect costs, etc.). Please note — if there is a sponsor restriction on indirect costs then NC State’s subcontractors must also adhere to said restriction in their budgets.
The Uniform Guidance (§200.331 and §200.414) requires subrecipients to use their federally negotiated indirect costs (also known as Facility & Administrative rates and/or F&A) rate on federally funded projects unless the federal program has a published indirect costs rate cap. Any federal cap would be applied to both the pass-through entity and the subrecipient. If there is no federal cap and the subrecipient does not have an officially federally negotiated indirect costs rate agreement, the UG allows subrecipients to apply a de minimis indirect cost rate of 10% on a Modified Total Direct Cost (MTDC) basis on any federally funded project. Essentially, the de minimis rate is a modest amount that the federal government will agree to pay subrecipients to cover their organization’s indirect costs without the organization having to negotiate a formal rate with the government.
NC State’s business practice is not to negotiate separate indirect cost rates with subrecipients who do not have a federally negotiated rate agreement. Therefore, any organization without a federally approved indirect costs rate agreement must apply the 10% MTDC de minimis rate on any federally funded subaward.
Determining if an entity should be included as a subrecipient:
Under the Uniform Guidance, §200.331 (a), characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity:
- Determines who is eligible to receive what federal assistance;
- Has its performance measured against whether the objectives of the program were met;
- Has responsibility for programmatic decision making;
- Is responsible for adherence to applicable program compliance requirements specified in the award; and
- Uses the funds to carry out a program for a public purpose as compared to providing goods or services for the benefit of the pass-through entity.
Other indications that an organization should be deemed a subrecipient include when:
- The organization is contributing to the scholarly/scientific conduct of the project as described in a statement of work for the organization (programmatic involvement);
- The conduct of the organization’s portion of the project requires use of the discretion and unique expertise of the organization;
- The subrecipient’s principal investigator may be a co-author on publications or may seek patent protection for inventions; and
- Title to intellectual property created by subrecipient is normally retained by the subrecipient.
Contractors and Consultants
Consultants are classified as contractors. Contractors on a sponsored project are individuals or entities that provide services within normal business operations to many different customers. These services are secondary to the operation of the project. For example, a project may need to hire an evaluator in order to receive an unbiased analysis of the project’s results. Contractors will be budgeted as “Contracted Services.” When budgeting for a contractor, it is important to incorporate all of the individual’s or their company’s charges. Therefore, NC State should include the contractor’s hourly rate, number of hours estimated, travel costs, and materials and supplies costs, etc. in this cost category. Federal agencies often have limitations on a contractor’s daily rate. Please note that contractors are not subject to project compliance. Therefore, the university’s awarded terms and conditions will not flow down to the individual or company.
Determining if an entity should be included as a Contractor or Consultant:
The characteristics of a “contractor” under the Uniform Guidance, §200.331 (b), include:
- Provides goods and services within normal business operations;
- Provides similar goods and services to many different purchasers;
- Operates in a competitive environment;
- Provides goods or services that are ancillary (secondary) to the operation of the program; and
- Is not subject to compliance requirements of the Federal program.
The Uniform Guidance, §200.331 (c), instructs proposers to use judgment in making a determination.
A contract is used for obtaining goods and services for these contracted services which creates a procurement relationship with the contractor. Please visit NC State Procurement & Business Services for additional information regarding the selection of and accounting for contractors.