Is our organization a subrecipient or a contractor?

In short: The pass-through entity decides case by case, and the substance of the relationship matters more than the form of the agreement (2 CFR 200.331). A subrecipient carries out part of a federal program; a contractor supplies goods or services for the buyer's own use. Contractor payments do not count toward the single audit threshold (200.501(g)).

What makes an organization a subrecipient?

A subrecipient receives a subaward from a pass-through entity to carry out part of a federal award (2 CFR 200.1). The rule lists five characteristics that support that classification, and says the list is not exhaustive (2 CFR 200.331(a)).

A subrecipient can also receive other federal awards directly from a federal agency, and the term does not cover a beneficiary or a participant of the program.

Source: 2 CFR 200.331 · 2 CFR 200.1 · Last verified: 2026-11-15

What makes an organization a contractor?

A contract is a legal instrument by which a recipient or subrecipient buys goods or services under a federal award, and the seller is a contractor (2 CFR 200.1). The rule again gives five characteristics that support a procurement relationship (2 CFR 200.331(b)).

The rule adds that similar requirements may still apply to a contractor for other reasons. Characteristics from both lists can be present at the same time.

Source: 2 CFR 200.331 · 2 CFR 200.1 · Last verified: 2026-11-15

Does the label in the agreement decide it?

No. The rule tells the pass-through entity to use judgment in classifying each agreement as a subaward or a procurement contract, and says the substance of the relationship is more important than the form of the agreement (2 CFR 200.331).

• No single factor, and no combination of factors, is necessarily determinative.
• The pass-through entity makes the determination case by case. The federal agency may require it to follow additional guidance, as long as that guidance does not conflict with the section.
• A subaward can take any legal form, including an agreement the pass-through entity considers a contract (2 CFR 200.1, definition of subaward).
• One entity can be a recipient, a subrecipient and a contractor at the same time, each for a different agreement.

If your agreement is titled a contract but you run the program and the federal rules flow down to you, ask the pass-through entity in writing how it classified the agreement, and keep the answer with your audit file. This guide is not legal advice.

Source: 2 CFR 200.331 · 2 CFR 200.1 · Last verified: 2026-11-15

Why does it matter for the single audit threshold?

Because the single audit threshold counts only some money. Federal awards expended as a recipient or a subrecipient are subject to audit, and payments received for goods or services as a contractor are not (2 CFR 200.501(g)).

An entity that expends $1,000,000 or more in federal awards in its fiscal year needs a single or program-specific audit; below that it is exempt from the federal audit requirement, though its records must stay available for review (2 CFR 200.501(a) and (e)). The guide to what counts toward the threshold walks through the adding up, and the schedule of expenditures is where the classification shows (see common SEFA mistakes).

For a contractor the auditee's compliance duty is mostly to make sure the buying, receiving and paying comply with the federal rules and the award terms; the award's requirements do not normally flow down to the contractor (2 CFR 200.501(h)). The same section says the audit requirements of subpart F do not apply to a for-profit subrecipient (200.501(i)).

Source: 2 CFR 200.501 · 2 CFR 200.331 · Last verified: 2026-11-15

What must a pass-through entity do?

A pass-through entity has a set of duties toward each subrecipient (2 CFR 200.332). The ones that touch the subrecipient most directly are:

• Verify the subrecipient is not excluded or disqualified, for example by checking SAM.gov.
• Identify every subaward clearly as a subaward and give the required information, including the subrecipient's name and unique entity identifier, the federal award identification number, the period of performance, the amounts obligated, the Assistance Listings title and number, and the indirect cost rate.
• Evaluate the subrecipient's fraud risk and risk of noncompliance, considering prior experience, previous audit results, new personnel or systems and any federal monitoring.
• Monitor the subrecipient, including reviewing financial and performance reports and making sure corrective action follows significant developments such as single audit findings.
• Issue a management decision on audit findings that relate to its own subaward.
• Verify that the subrecipient is audited as subpart F requires.
• Consider enforcement action against a noncompliant subrecipient under 2 CFR 200.339.

If you are a subrecipient, expect to receive that subaward information and expect to be asked for your audit results. If your agreement lacks it, ask how the pass-through entity classified you.

Source: 2 CFR 200.332 · 2 CFR 200.339 · Last verified: 2026-11-15

Questions and answers

This is public-record information, not accounting or legal advice.