FINRA's BrokerCheck

Subrecipient or Vendor?

An entity may receive federal funds as a recipient, a subrecipient and/or a vendor. Federal awards expended as a recipient or a subrecipient are generally subject to the single audit act, while payments received for goods or services provided as a vendor are generally not considered Federal awards. Unfortunately, the distinction between subrecipients and vendors isn't always clear. Ultimately, the decision comes down to the substance of the relationship rather than the form of the agreement, as evidenced by one or more of the following characteristics.

Characteristics indicative of a Federal award received by a subrecipient

The recipient:

  • Determines who is eligible to receive what Federal financial assistance
  • Has its performance measured against whether the objective of the Federal program are met
  • Has responsibility for programmatic decisions
  • Has responsibility for adherence to applicable Federal program compliance requirements
  • Uses the Federal funds to carry out a program of the organization as compared to providing goods or services for a program of the pass-through entity

Characteristics indicative of payment for goods and services to a vendor

The entity:

  • Provides the goods and services within normal business operations
  • Provides similar goods or services to many different purchasers
  • Operates in a competitive environment
  • Provides goods or services that are ancillary to the operation of the Federal program
  • Is not subject to compliance requirements of the Federal program

Not all of the above characteristics will be present in every case and judgment should be used in determining whether an entity is a subrecipient or vendor.

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