Would using ARP funds to pay a nonprofit to process County Emergency Rental Assistance ("ERA") applications be considered a contractor providing service or a subrecipient?

The American Rescue Plan Act of 2021’s (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) and the U.S. Department of the Treasury’s (“Treasury”) CSLFRF Final Rule distinguishes between subrecipients and contractors.[1] Under the Uniform Guidance, a recipient should analyze the substance of its relationship with the individual or entity to which it is providing CSLFRF funding to determine whether the entity is a subrecipient or contractor.[2] For example, if the recipient provides CSLFRF funding to a nonprofit to carry out part of a federal program, the nonprofit may be a subrecipient. If, however, the nonprofit is providing goods or services that are within the normal business operations and ancillary to the operation of the federal program, the nonprofit may be a contractor. 

Definition of a Subrecipient, Contractor, or Beneficiary

Subrecipient: A subrecipient is an entity, typically a non-federal entity, that receives a subaward from a recipient to carry out part of a federal award, and is subject to subrecipient monitoring and reporting requirements.[3] A subrecipient may have one or more of the following characteristics:

1. Determines who may be eligible to receive federal assistance under the program guidelines.
2. Has performance measured on the basis of whether it achieves the objectives of a federal program.
3. Applies its judgment, discretion, or expertise to develop or improve a program.
4. Uses federal funds to carry out a program for a public purpose as opposed to providing goods or services for the benefit of the recipient. 
5. Is responsible for adhering to applicable federal program requirements specified in the federal award.[4]

Contractor: A contractor is an entity or individual that receives funding to provide goods or services in furtherance of an eligible activity. Contractors use vendor agreements or contracts as part of the procurement process. Unlike subrecipients, contractors are not subject to the administrative compliance requirements of the federal program (though similar requirements may apply for other reasons).[5] A contractor may have one or more of the following characteristics:

1. Provides goods and services within normal business operations.
2. Provides similar goods and services to many different purchasers.
3. Provides goods and services in a competitive environment.
4. Provides goods or services that are ancillary to the operation of a federal program, for example: office equipment, supplies, software licenses, chemical reagents, cell phones, body-worn cameras, body armor, website hosting, copying/printing, and/or lodging.[6]

Beneficiary: A beneficiary is an entity or individual that derives an actual benefit from the program or project. Beneficiaries receive CSLFRF funds as end users responding to the negative economic impacts of the COVID-19 public health emergency. Beneficiaries are not subject to the requirements of subrecipient monitoring and reporting.[7]

Last Updated: April 13, 2022