Policy No. 517 - Memorandum of Understanding

To establish a policy and to guide project directors and others in the use of Independent Contractors who are to be paid in an amount less than $5,000 on projects and accounts administered by the Research Foundation.

An Independent Contractor is an individual or firm providing specific, personal services free from the direction and control of performance including the means and methods used to accomplish the work. The general test is one of control i.e., that an individual is an Independent Contractor if the entity for which the services are performed has the right to direct only the result of the work and not control the means or method of accomplishing that result.

This policy applies to all projects and Research Foundation accounts that will engage the services of an Independent Contractor to be paid in an amount less than $5,000.

Grants and contracts are awarded to the Research Foundation with the assumption that there is the staff and technical expertise to carry out the project without extensive outside assistance. Occasionally, Independent Contractors supplement a project's technical needs and provide specific services to the Research Foundation.

Independent Contractors fall into two categories:

• A company or firm providing service to the public or to a broad clientele. This includes organizations supplying temporary office services.
• Individuals who are clearly in business for themselves and offer their services to the general public, and as such are self-employed (e.g., accountants, lawyers, physicians, photographers, artists, and other professionals) as well as those in an independent trade or business. This includes one-time professional lecturers. As a rule, if the determination is unclear, the prospective individual/consultant should be classified as an employee.

The IRS employs a number of factors to appropriately classify Independent Contractors. Determinations are made on a case by case basis. Some of the IRS factors are listed herein, but for further guidance the project director may access the IRS website (refer to Publication No. 1799). Note: the final determination regarding the appropriate classification of the Independent Contractor will be made by the Research Foundation.

Factors supporting employee classification:

• The work to be performed is substantially similar to the work of other employees.
• The services to be provided are generally performed by or incorporated into the operations of the college or the Research Foundation.
• The individual will require ongoing training and direction regarding the completion of the task or will receive more than simple general directions and statement of objectives.
• The individual will report to a Research Foundation or CUNY employee who has the right (even if such right is not exercised) to direct how, when, and where the individual performs the work.
• Space, equipment, or supplies will be provided.
• Work is to be done on a regular schedule (i.e., from 9:00 a.m. to 5:00 p.m.).
• The time period for payment is on a weekly or monthly basis.
• The individual, similar to an employee, may terminate his services without creating a liability.
• There is a continuing relationship or prior relationship between the individual and the Research Foundation or the college either as an employee or independent contractor.

Factors supporting an Independent Contractor classification:

• Independent Contractor maintains a separate business with its own premises, materials and equipment.
• Independent Contractor offers its services to the general public and can provide documentation of other clients.
• Independent Contractor has obtained or has applied for a federal employer identification number (EIN). Independent Contractor's often have employees working for them.
• Independent Contractor agrees to specific work for a specific amount of money (i.e., a fixed fee, hourly/daily rate) and controls the means of performing the work.
• Independent Contractor may realize a profit or suffer a loss in connection with performing the work or services. Independent Contractors may suffer a liability for failure to complete the scope of work.
• Independent Contractor has right to control how, when, and where the services are to be performed.
• Independent Contractor is NOT an employee of CUNY or the Research Foundation.
• Independent Contractor does not have a continuing relationship with the college or the Research Foundation.

• Project directors must be aware of the requirements for Independent Contractors and indicate their proposed use in grant applications or contract proposals.
• Unless the budget is flexible, a specific budget category with sufficient funds must exist before engaging any Independent Contractor. Even in awards with flexible budgets, using consultants may be prohibited by the sponsoring agency if they are not specified in the project proposal. Approval of the individual (or firm) by the funding agency may be required by the terms of the award or agency regulations. Please carefully review your award documents.
• A written agreement establishes the basis for payment to an Independent Contractor. The services to be provided, (Scope of Work), period of performance and amount to be paid must be specified in the MOU.
• Except in unique circumstances, the Foundation will not advance payment to Independent Contractors for personal services.
• Use of both outside and intra-university consultants is subject to government regulations in addition to Research Foundation, CUNY, and sponsor restrictions.

Before engaging an Independent Contractor, the project director should determine that the expense is allowable under funding agency and Foundation policies and that funds are available. Any prior approvals required by award or agency regulations must be obtained.

• The Project Director should complete a Memorandum of Understanding (RF Form 804). RF Form 804 must be submitted with the appropriate accompanying documents: the Independent Contractor's List of Clients, Scope of Work, Original Invoice, Payment Request and a J-1 Visa and I-94, if applicable. It is to be signed by the Project Director and by the Independent Contractor and the appropriate supporting documentation must be attached.
• The MOU is to be signed by both the Project Director and the Independent Contractor and sent to the Department of Procurement and Payables at the Research Foundation accompanied by the Independent Contractor's invoice and a signed Payment Request.
• Invoices should include billing rate, amount due, dates and type of service, and certification that deliverables have been received, if applicable.

The provisions of this policy are effective January 1, 2007.