Categorizing the Recipient
When preparing a budget and submitting a proposal that includes pass-through funds—or when revising a budget to add pass-through funds—it is essential to accurately identify and budget for the nature of the work those funds will support.
Misidentifying the nature of pass-through funds can result in serious consequences, including audit findings, repayment obligations to the sponsor, reduced funds available for UM’s direct costs due to changes in F&A, and, in extreme cases, loss of award funding and other significant penalties.
Subrecipient vs. Vendor vs. Consultant
The Principal Investigator (PI) and the Department are responsible for determining whether an entity should be classified as a Subrecipient or a Vendor (referred to as a contractor in 2 CFR 200).
The key distinction lies in the nature of the work being performed. A vendor provides goods and services as part of their routine business operations, typically at set prices listed in a catalog or on their website, and these goods or services are generally available from multiple sources. In contrast, a subrecipient is a true collaborator on the project, contributing to the programmatic goals and having responsibility for programmatic decision-making.
A consultant, meanwhile, is usually an expert engaged in a primarily advisory capacity.
Subrecipient (Typical Characteristics):
An entity is generally considered a subrecipient if it:
- Determines who is eligible to receive what Federal assistance;
- Has its performance measured in relation to whether objectives of a Federal program were met;
- Has responsibility for programmatic decision making;
- Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and
- In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity
Vendor/contractor (Typical Characteristics):
An entity is typically considered a vendor if it:
- Provides the goods or services within normal business operations;
- Provides similar goods or services to many different purchasers;
- Operates in a competitive environment;
- Provides goods or services that are ancillary to the operation of the research project, and
- Is not subject to monitoring or reporting requirements of the prime award.
Consultant (Typical Characteristics):
A consultant is typically:
- A company or an individual who is clearly a bona fide consultant (expert advisor) who pursues this line of business for him/herself.
- Paid for their time at a daily or hourly fixed rate.
To assist in the correct categorization of a subrecipient vs vendor, you may utilize the Determination Checklist [currently linked here as both a PDF and Excel Document https://www.umt.edu/sponsored-programs/forms/default.php#subinit] and/or reach out to the UM Subawards Team for assistance.
Issuance of Subrecipient Agreements
All subrecipient agreements (subawards and subcontracts) are prepared and administered by the Office of Sponsored Programs and monitored in accordance with the terms and conditions of the award and the appropriate federal guidance.
Subrecipient agreements – Subaward vs. Subcontract
OSP will determine whether to issue a Subaward Agreement or a Subcontract Agreement – both are awarded to a subrecipient, rather than a vendor or consultant.
The primary difference between a subaward and subcontract is the award mechanism through which UM has received funding, i.e. a Grant or Cooperative Agreement (subaward) or Contract (subcontract) and whether the terms of the award indicate the award and subaward to be primarily subject to 2 CFR 200 (Grant/subaward) or the FAR/DFARS (Contract/subcontract).
Contracted Service/Vendor Agreements or Purchase Orders
These types of agreements are issued by Procurement staff in UM’s Business Services department.
For additional information please see Subrecipient & Contractor Determinations at the ecfr.gov website.
Consultant Agreements:
These types of agreements are also issued by Procurement staff in UM’s Business Services department.
For additional information regarding consultants see https://www.acquisition.gov/far/31.205-33