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NFP Experts discuss Subrecipients vs vendors

October 22, 2021


We get a lot of questions from our not-for-profit (NFP) clients, and we thought it would be valuable to publish our answers. Reach out to us if you would like to see a question in a future newsletter.


How do I determine whether federally funded grant expenditures need to be included on my organization’s Schedule of Expenditures of Federal Awards? Issues that have brought up this question include: how we can determine whether the grant represents a subrecipient or vendor/contractor relationship? Will the grant trigger a federal single audit requirement at my organization?


As certain grants can trigger a single audit requirement, it’s vital to determine early on whether a federally funded grant is under a subrecipient or vendor/contractor relationship. Subrecipient organizations who expend federal awards above $750,000 during their fiscal year are required to have a single audit and report these expenditures to the federal government on a Schedule of Expenditures of Federal Awards. On the other hand, vendor/contractor organizations are not required to report these expenditures and are not subject to a single audit. The Code of Federal Regulations discusses the following points (2 CFR §200.331):

Characteristics of a subrecipient arrangement:

  • Determines who is eligible to receive federal assistance;
  • Has its performance measured in relation to whether objectives of a federal program were met;
  • Has responsibility for programmatic decision-making;
  • Is responsible for adherence to applicable federal program requirements specified in the federal award; and
  • In accordance with its agreement, uses the federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to provided goods or services for the benefit of the pass-through entity.

Characteristics of a vendor/contractor arrangement:

  • Provides the goods and services within normal business operations;
  • Provides similar goods or services to many different purchasers;
  • Normally operates in a competitive environment;
  • Provides goods or services that are ancillary to the operation of the federal program; and
  • Is not subject to compliance requirements of the federal program as a result of the agreement, though similar requirements may apply for other reasons.

Taking these into account, if your organization determines who is eligible to receive services funded by the grant and is responsible for other program requirements specified within the grant (i.e., submitting financial reports, programmatic performance reports, matching federal funds with contributions raised, etc.), it’s likely your organization is considered a subrecipient. However, some grants may leave room for questions as to the relationship. Fortunately, the funder is required to report federal awards passed through to subrecipients. If you’re still uncertain, contact the funder to confirm the relationship.

It’s also important to note that due to the COVID-19 pandemic and federal stimulus packages passed, many grants that were previously funded by state or local governments could now be funded federally. We recommend taking a closer look at all your organization’s government grants this year to properly capture all federal expenditures. If not explicitly stated in the grant document, your funder will be able to confirm whether federal monies were passed through to your organization. Just be sure to get it in writing!

For further assistance, please reach out to Joe Tiemeier, CPA.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.


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