Federal Assistance Manual Chapter 1-45

CHAPTER 1-45 USE OF CONSULTANTS

• 1-45-00 Purpose
• 1-45-10 Applicability
• 1-45-20 Definition of Consultant
• 1-45-30 Prior Approval by OSM
• 1-45-40 Consulting Payments to Federal Employees
• 1-45-50 Consulting Fees Paid by Recipients and Subrecipients to Their Own Employees
• 1-45-60 Reports by Consultants
• 1-45-70 Documentation Standards

1-45-00 PURPOSE

1. This chapter sets forth basic policies on the use of individual consultants under OSM grants and cooperative agreements, and establishes standards for documentation of consulting fees paid by recipient and subrecipient organizations to individuals.

2. Reasonableness and allocability of consultant costs is to be determined in accordance with the cost principles prescribed by OMB Circular A-21 and OMB Circular A-87.

1-45-10 APPLICABILITY

This chapter applies to all OSM programs that issue grants or cooperative agreements. It applies only to the use of individual consultants by recipient and subrecipient organizations and only when the consultant's fees are borne by an OSM grant or cooperative agreement used to satisfy a non-Federal share requirement ofan OSM grant. It does not apply to the use of consultants whose fees are treated as an indirect cost or to the procurement of consulting services from firms or organizations.

1-45-20 DEFINITION OF CONSULTANT

1. For purposes of this chapter, a consultant is a party engaged to give professional advice or services for a fee, but not as an employee of the party that engages him or her. The term includes paid guest lecturers (and other paid guest speakers) when not acting as employees of the party that engages them.

2. Under this definition, it might happen in unusual situations that a person is at the same time a consultant and an employee of the same party. That is, for certain work he or she is salaried as an employee, while for other work, not as an employee, he or she receives a consulting fee from the same party. (See 1-45-50.)

1-45-30 PRIOR APPROVAL BY OSM

For OSM grant or cooperative agreement funded programs, applicants should anticipate their need for consultants and indicate the proposed use of consultants in their applications. However, the use of consultants by a grantee under an OSM grant program does not require prior OSM approval unless the consultant arrangement constitutes a transfer of substantive programmatic work to a third party.

1-45-40 CONSULTING PAYMENTS TO FEDERAL EMPLOYEES

Consulting fees paid to a Federal employee may not be charged to an OSM grant or cooperative agreement or to a nonfederal share required by an OSM grant or cooperative agreement.

1-45-50 CONSULTING FEES PAID BY RECIPIENTS ANDSUBRECIPIENTS TO THEIR OWN EMPLOYEES

1. Faculty Members of Colleges and Universities

   Charges representing extra compensation (above base salary) paid by an educational institution to a salaried member of its faculty for consulting work are allowable only in unusual cases, and only if both of the following conditions exist:

   1. The consultation is across departmental lines or involves a separate or remote operation; and

   2. The work performed by the consultant is in addition to his regular departmental load.

2. All Other Cases

   In all other cases, consulting fees paid in addition to salary by recipients or subrecipients to people who are also their employees may be charged to OSM grants or cooperative agreements (or to a nonfederal share required by an OSM grant), only in unusual cases, and only if all of the following three conditions exist:

   1. The policies of the recipient or subrecipient permit such consulting fee payments to its own employees regardless of whether Federal grant funds are involved;

   2. The work involved is clearly outside the scope of the person's salaried employment; and

   3. It would be inappropriate to compensate for the additional work paying additional salary to the employee.

3. Approval Requirements

   Consulting fees that are subject to Paragraphs A and B of this section must be specifically authorized in writing, on a case by case basis, by the head of the recipient or subrecipient organization or his designated representative. If the designated representative is personally involved in the project or program under consideration, the authorization may be given only by the head of the recipient or subrecipient agency or organization. The authorization must include a determination that the applicable required conditions are present.

1-45-60 REPORTS BY CONSULTANTS

1. The variety of possible consulting arrangements is too great to permit definitive rules on submission of written reports by consultants. In some cases, such as guest lecturers, a written report might serve little or no useful purpose. In other cases, the very reason for hiring the consultant might be to obtain his report.

2. In general, recipients and subrecipients should be encouraged to obtain written reports from the consultants except when, in their judgment, a report is not feasible or would probably not be useful. However, under an OSM grant, if the consultation constitutes a transfer of project activities, the Federal assistance unit may require the recipient to obtain a written report from the consultant as a condition of its approval.

1-45-70 DOCUMENTATION STANDARDS

1. Charges for consulting payments must be supported in the recipient's or subrecipient's records by an invoice from the consultant and a copy of the written report, if any, received from the consultant.

2. Any of the following information that is not shown by the invoice and/or report from the consultant must be shown in a memorandum or other document prepared by the recipient or subrecipient for its files, or noted in handwriting on the invoice by the recipient or subrecipient. The memorandum, other document, or handwritten notation must be signed by an official of the recipient or subrecipient organization.
   1. The name of the consultant;

   2. The nature of the services rendered (such as statistical analysis of data or participation on project advisory committee);

   3. The relevance of the services to the grant-assisted project or program, if not apparent from the nature of the services; and

   4. Whichever of the following is applicable:
      1. If the fee was based on a rate per day or hours worked, the rate and the actual dates and/or hours worked;

      2. If the fee was based on a rate per unit of service rendered, the rate, the number of units of service rendered, and the beginning and ending dates of the overall period of service; or

      3. If the fee was determined on some other basis, the basis for determining the fee and the beginning and ending dates of the period in which services were rendered.

FEDERAL ASSISTANCE MANUAL
January 2, 1998