Securing and Paying for Consultant and Independent Contractor Services

Effective Date: January 1, 1995

Foreword

Vanderbilt is subject to increasingly intense regulatory scrutiny from various branches of the federal government in the areas of consulting, independent contracting, and employee-employer relationships. These policies and procedures were developed to meet regulatory requirements while minimizing administrative burdens as much as possible.

The policies and procedures are to be used in determining employee/employer relationships and in procuring and paying for consulting services. While the stricter policies may seem burdensome, Vanderbilt has much to lose if found not to be in compliance with the policies. The IRS has made clear its heightened level of attention to consulting arrangements. If someone has been paid as a consultant who in fact should have been classified as an employee, Vanderbilt will be liable for FICA and federal withholding taxes on the applicable payments, in addition to any interest and penalties which may apply.

Vanderbilt also stands to lose substantial funds from federal contracts and grants if we do not have documented policies or if we are found to be in non-compliance with the federal requirement. The A-133 audit required by federal regulations and submitted to the federal government in July, 1993, pointed out a deficiency in that Vanderbilt did not have written policies for procuring and paying for consulting services. Our external audit firm is required to report any instances in which the University has failed to implement recommendations from the previous audit. The ultimate penalty for non-compliance with recommendations could be disallowed costs or withholding of research funds.

These policies and procedures have been developed collaboratively among the various divisions of the University.