November 16, 2018

By Laura Malcom, CPA | Audit Manager

The schedule of expenditures of federal awards (SEFA) is the “meat” of any Uniform Guidance audit. Often it is one of the first pieces of information that a CPA firm will request when designing and planning the audit. The total expenditures reported in the SEFA is the determination factor for whether an entity is required to undergo an audit in accordance with Uniform Guidance (if total expenditures equal or exceed $750,000 in the given fiscal year). It is also the basis for identification of Type A and Type B programs, and ultimately which program(s) are to be tested as major.

Preparation of the SEFA is the responsibility of the auditee, and receipt of a complete and accurate SEFA is the foundation for a smooth audit. If the SEFA includes errors or omissions, it will surely result in inefficiencies, duplicate audit effort by auditors if major programs must be re-selected, the potential for audit restatement, and/or additional audit costs. The best insurance policy for any auditee receiving federal funds is to follow a thorough SEFA preparation process.

Common SEFA Mistakes

Below are common mistakes within the SEFA:

  • Misidentification of pass-through awards.
  • Inclusion of items not defined as a federal award. (A federal award under Uniform Guidance is either a federal financial assistance award, or a cost-reimbursement contract under the Federal Acquisition Regulations (FAR), received directly from a federal awarding agency or indirectly from a pass-through entity.)
  • Missing or incorrect Catalogue of Federal Domestic Assistance (CFDA) numbers.
  • Grants not properly labeled as research and development (R&D) awards. (R&D awards, regardless of CFDA number, must be grouped as one program in the SEFA.)
  • Incorrect reporting of expenditure amounts.
  • Subrecipient expenditures not properly reported on the face of the SEFA.

Recent Complexities Discovered within the SEFA

The auditee should be aware that the CFDA numbers in its grant agreements could change as grants are amended or extended. While this is rare and not an anticipated change in most cases, it could go undetected by the auditee. Auditees should also watch for multiple CFDA numbers in one grant agreement. This can occur when the program is being funded by more than one federal source, and this could also change with subsequent grant modifications. The auditee should be mindful of this possibility and carefully track their expenditures by CFDA number to ensure the expenditures are properly captured in the SEFA.

Best Practices for a More Efficient and Effective SEFA Preparation Process

Among the best practices CPAs offer to aid clients in the preparation of a complete and accurate SEFA, the most common recommendation is to prepare and update the SEFA on a regular basis, not just for the annual audit. At a minimum, organizations should consider incorporating the SEFA preparation within their checklist for the monthly closeout process. Those that follow this best practice find it is easier to catch mistakes, omissions, inaccuracies, and any changes in grant agreements when reviewing activity of one month’s time versus an entire fiscal year. Furthermore, it is crucial that communication between the finance department and the grants department remain strong throughout the year so that any significant changes in grant agreements are addressed in a timely manner.

Finally, any auditee who undergoes a Uniform Guidance audit should read the Uniform Guidance, or other Single Audit guidance, and be sure its internal SEFA includes all required data elements (federal granting agency and program title, pass-through entity, pass-through identification number, CFDA number, amounts passed through to sub-recipients, and total federal expenditures). Similarly, also consider including additional information that may be helpful to the auditors. These additions may include, but are not limited to:

  • Total award amount
  • Date of award, and dates of subsequent modifications
  • Period of performance
  • Prime grant number for each federal award
  • Total cost share required, cost share met during the fiscal year, and cumulative cost share met

Organizations receiving federal funding should consider the tips offered here and implement an effective SEFA preparation process.  For additional guidance, contact a CPA with nonprofit and Uniform Guidance audit experience. For questions about SEFA and your organization’s audit process, contact Nonprofit Audit Partner and Director Terri M. McKnight, CPA at