If your not-for-profit organization receives Federal awards, you will need to determine whether your entity is a recipient, a subrecipient or a vendor.   By following the guidelines established by the Office of Management and Budget (OMB) in Circular A-133 below, you should be able to make the determination.

Recipient or Subrecipient Guidelines

A Federal payment is considered a Federal award (organization is a recipient or subrecipient) when the organization receiving the payment:

• Determines who is eligible to receive what Federal financial assistance;
• Has its performance measured against whether or not the objectives of the Federal program are met;
• Has responsibility for programmatic decision making;
• Has responsibility to adhere to applicable Federal compliance requirements;
• Uses the Federal funds to carry out a program of the organization as opposed to providing goods or services for a program of the entity from who the organization received the funds.

Vendor Guidelines

A Federal payment is considered a payment for goods and services (organization is a vendor) when the organization receiving the payment:

• Provides goods and services within normal business operations;
• Provides similar goods or services to many different purchasers(including those paying with non-federal funds);
• 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 from which the funds were received.

If it is determined that you are a vendor, the responsibility for compliance on those funds is that of the entity providing the funds, unless an agreement is structured such that the vendor is responsible for program compliance.

Exceptions to the Guidelines

In regard to the above characteristics, it is important to note that unusual circumstances or exceptions can and do exist.  It is more important to look at the substance of the relationship between the entity providing the Federal funds and the organization receiving them than it is to look at the form of the agreement.  Just because a document is called a grant or a contract does not simply make it so.  It is also important to note that these characteristics and rules do not apply to for-profit subrecipients.

According to §.210 of Circular A-133, an entity may be a recipient, a subrecipient, and a vendor, all at the same time. However, only Federal awards expended as a recipient or a subrecipient are subject to audit under Circular A-133. Payments received for goods or services provided as a vendor would not be considered Federal awards for purposes of a single audit.  To determine if a Federal payment is a Federal award or a payment for goods and services, you would have to look at the characteristics and circumstances surrounding the payment.   If your entity receives more than $500,000 in Federal awards, it is subject to a single audit.

If you have any questions or need further clarification on issues involving Federal funds it is important that you consult your CPA or Federal funding agency as soon as the question or issues arise to avoid any delay in receipt of Federal funding or any possible penalties.