North Carolina Administrative Code › Title 10A - HEALTH AND HUMAN SERVICES › Chapter 01 - DEPARTMENTAL RULES › Subchapter A - PROCEDURE › Section .1000 - AUDITING PROCEDURES › Section 01A .1003 - PURCHASE OF SERVICE VS. FINANCIAL ASSISTANCE

Current through Register Vol. 39, No. 2, July 15, 2024
(a)
				  Non-profit and for profit agencies that receive State or Federal financial
				  assistance either directly from DHHS as a recipient or indirectly as a
				  subrecipient through contractual agreements with local agencies funded by DHHS
				  shall have a compliance audit performed in accordance with OMB Circular A-133;
				  however, Circular A-133 does not apply to purchases of goods/services
				  (vendors).
(b) A
				  recipient/subrecipient is distinguished from a vendor (purchase of service
				  agreement) by the degree of responsibility assumed to meet the requirements of
				  the program.
(c) In a financial
				  assistance arrangement, the recipient/subrecipient receives the funding to
				  carry out or administer a program. A recipient/subrecipient may be responsible
				  for determining who is eligible for participation in a program by applying
				  pre-determined eligibility requirements. A vendor who reserves the right to
				  reject a participant based on a criteria other than eligibility, does not
				  become a recipient by exercising that right. A recipient/subrecipient is
				  responsible for making programmatic decisions and its performance is measured
				  against meeting the program's objectives. Normally, but not always, there is an
				  interest in how program funds are expended. Although recipient/subrecipient
				  generally have cost reimbursement grants/contracts it is possible for them to
				  have a fee/rate per unit of service arrangement.
(d) A vendor (purchase of services/goods) is
				  measured against the terms of a contract. Goods must meet certain
				  specifications and services are measured against certain quality standards. A
				  vendor normally operates in a competitive environment and once a pre-determined
				  unit price has been established in a contract, usually there is no interest in
				  how the vendor expends funds in meeting the vendor's obligation under the terms
				  of the contract.
(e) In
				  distinguishing between a purchase of service and financial assistance
				  arrangement, the substance of the relationship is more important than the form
				  of the agreement.
(f) Reviewing a
				  recipient/subrecipient's contractual requirements and answering the following
				  questions shall give an indication of the type arrangement represented by the
				  contract.
Indication of
Financial Purchase/
Assistance Service
Yes No
1. Does
				  the contract provider determine client eligibility?
2. Does the contract provider authorize
				  services on a client specific basis?
3. Does the contract provider determine the
				  appropriateness of the services to be provided?
4. Does the contract provider provide
				  administrative functions, such as:
a. Program
				  evaluation?
b. Program
				  planning?
c. Monitoring?
d. Develop program standards, procedures, and
				  rules?
5. Does the
				  contract provider have responsibility for program compliance?
6. Does the contract provider have to submit
				  a cost report to satisfy a cost reimbursement arrangement?
7. Does the contract provider have any
				  obligation to the funding authority other than the delivery of the specified
				  goods/services?
No Yes
8. Does the contract provider operate in a
				  competitive environment?
9. Does
				  the contract provider provide similar goods or services to many different
				  purchasers?
10. Does the contract
				  provider provide the goods or services within normal business operations?
The list in this Rule is not intended to be all inclusive;
					 however, the answers to the questions shall offer guidance in distinguishing
					 between a purchase of service or financial assistance arrangement. There may be
					 other factors that would influence the decision on whether a contract is
					 classified as either financial assistance or purchase of service and the
					 decision shall only be made after weighing all factors relative to the
					 contract. All factors will not carry the same weight. As an illustration, if
					 any of the answers to questions 1 through 5 are yes, the contract shall almost
					 always be a financial assistance arrangement. However, regardless of the
					 answers to the questions, they shall not contradict a
					 determination/classification that has been/or may be made by the funding
					 Federal authority.
The funding DHHS Division shall be available to assist, on
					 a timely basis, its local counterparts in making the distinction in unique
					 situations.