Hi, all,

I need your (speedy) advice on a post-award question regarding the payment
of
graduate students working on a federally funded project currently underway.
 The
fiscal agent of the project is a non-profit regional hospital and not part
of
the educational institution the grad students are attending. (However, the
educational institution is a partner in the project, though there is
currently
no subgrant of funds to them.)

The graduate students have been employed by the hospital on the project and
handled as employees in the payment of their wages (i.e., FICA, Medicare
and
taxes are withheld from their paychecks). After one month of this
arrangement,
the project coordinator now wants to switch the mode of payment of graduate
students to a stipend, paid through the university. (In this case, the
hospital
would subgrant the funds to the university, which would then pay students a
monthly stipend and not withhold FICA.)

This change seems to me to be a risky move for the hospital, since we have
already treated the students as employees. The nature of their
"work/educational
experience" will remain the same, but their form of pay will be a stipend
rather
than wages. I am concerned that hospital risks an unfavorable visit from
the IRS
to now switch horses in midstream. The nature of the graduate student
participation in the project is arguably educational, but I believe that
since
the hospital did not initially pay the students with stipends through the
university that it is too late to switch.

(As you might guess, the reason for this suggested switch is that the
graduate
students are comparing their take-home pay with that of their fellow grad
students at the university. Yes, I realize that the university-paid
stipends are
still subject to income and self-employment taxes, but since the university
issues 1099's to the students, that issue becomes an individual one.)

-------
Molly Daniel                           voice: 217-258-2195
Grants Specialist                      fax:   217-258-2288
Sarah Bush Lincoln Health Center       email: xxxxxx@sblhs.org
1000 Health Center Drive               www.sarahbush.org
P.O. Box 372
Mattoon, IL  61938-0372