The Key Difference Between Vendors and Subrecipients

If your nonprofit is like many in Washington, DC and northern Virginia, your nonprofit may grant money to other nonprofit organizations in order to further your intersecting goals on federally endowed programs. If your nonprofit organization usually functions partially or completely as a philanthropic avenue to support smaller nonprofit organizations, and if some of the money that your nonprofit awards to other organizations was originally given to you through a federally funded program or other government agent, then you will need to properly account for how you allocate your funds in accordance with Internal Revenue Service (IRS) and Office of Management and Budget (OMB) standards. If you are unsure of whether your nonprofit organization has been properly documenting its financial transactions, or if your organization needs assistance with nonprofit accounting in the Washington, DC area, contact Gurman & Company P.C. to schedule a consultation so that we may help you determine how to address your nonprofit accounting concerns.

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How Should I Account for Groups that My Nonprofit Organization Funds?

OMB recently updated OMB Circular A-133, which details the different steps that nonprofit organizations receiving federal funds must take to properly document their expenditures for federal audit purposes. Because the federal government consistently stipulates audit guidelines for nonprofit organizations receiving federal funds, being in proper accordance with guidelines determined by the IRS and OMB is incredibly important. If you are afraid that you or your nonprofit organization are not in accordance with federal accounting procedures, contact a qualified nonprofit accountant in northern Virginia as soon as possible.

Vendor or Subrecipient?

Section §__.210 of OMB Circular A-133 details the differences between a vendor and a subrecipient when it comes to accounting for allocated federal funds. According to the subsection subrecipients and vendors play different roles in supporting the federal program and the function of the nonprofit funding the secondary organization.

Subrecipients:

  • Can determine if someone is eligible to receive federal financial assistance
  • Must adhere to relevant Federal program compliance requirements
  • Responsible for “programmatic decision making”
  • Should have performance measured by their ability to effectively fulfill purpose of federal program which served as basis for funding
  • Use federal funds to carry out funds of pass-through entities

Vendors:

  • Not subject to federal program compliance requirements
  • Provide goods and services as part of standard business operation
  • Provide comparable goods to multiple, different consumers
  • Provide a good or service which supports federal program in an ancillary fashion
  • Operate in a competitive environment

Key Differences between a Subrecipient and a Vendor Organization

The crucial difference between a subrecipient and a vendor is that a subrecipient organization is that a vendor provides the services related to your program, while a subrecipient is a crucial part of determining how your program successfully complies with federal stipulations. Despite this clarification, you may be unclear as to whether the nonprofit organization that your nonprofit funds should be classified for accounting purposes as a subrecipient or a vendor. Perhaps the funded group possesses qualities that qualify it as a subrecipient and/or a vendor. If you are confused about whether the organization working with your nonprofit on a federally funded program should be classified as a subrecipient or a vendor, speak to a qualified nonprofit accountant in Northern Virginia today.