Mastering SEFA Preparation for Single Audits
Navigating the Schedule of Expenditures of Federal Awards (SEFA) Preparation for Uniform Guidance Compliance and Successful Single Audits
Preparing the Schedule of Expenditures of Federal Awards (SEFA) is one of the most critical and complex components of a Single Audit, yet it is often the source of audit findings. To accurately prepare the SEFA, organizations must meticulously identify and list all federal programs, understand and apply the specific requirements for reporting award information, ensure a complete reconciliation with underlying financial records, address common errors proactively, and leverage technology for efficient compilation. This comprehensive approach ensures compliance with the Uniform Guidance and facilitates a smooth Single Audit process. The SEFA, essentially a detailed summary of all federal expenditures during the fiscal period, provides auditors with the foundational data necessary to plan and execute compliance testing, making its accuracy paramount for a successful audit outcome.
Key Takeaways
What are the most important steps to prepare the SEFA schedule accurately?
The most important steps are identifying all federal programs, understanding reporting requirements, reconciling the SEFA with financial records, and addressing common preparation errors.
Why is the Assistance Listing Number important for a Single Audit?
The Assistance Listing Number (ALN) is essential because it correctly identifies each federal program, allowing the auditor to select the appropriate programs for compliance testing.
How can technology help with SEFA compilation?
Technology helps with SEFA compilation by tracking expenditures by ALN, automatically generating program summaries, and facilitating direct reconciliation with the general ledger, reducing manual errors.
Accurately Identifying and Listing All Federal Programs
The first and arguably most crucial step in SEFA preparation is the comprehensive identification and listing of all federal programs from which the organization received funding. This involves a thorough review of all sources of federal assistance, including direct awards from federal agencies and pass-through awards received from state or local governments. Organizations must not only capture the federal funds expended but also distinguish between the different types of federal assistance, such as grants, loans, and other non-cash assistance. A common pitfall is overlooking non-cash awards, such as donated property or food commodities, which must be reported at their fair market value or an assigned valuation. This initial inventory should be cross-referenced with general ledger accounts and grant agreements to ensure no federal funding source is missed.
Understanding the Requirements for Reporting Award Information
Once programs are identified, preparers must understand the specific requirements for reporting award information as prescribed by the Office of Management and Budget (OMB) in the Uniform Guidance. For each federal program, the SEFA must disclose key details, including the Assistance Listing Number (ALN) (formerly known as the Catalog of Federal Domestic Assistance or CFDA number), the name of the federal agency, the name of the pass-through entity (if applicable), and the total amount of federal awards expended for the period.
Furthermore, separate identification is often required for different types of federal awards, such as Research and Development (R&D) and Student Financial Assistance (SFA). The proper designation of the type of compliance requirement (e.g., major program) is also essential for the auditor’s risk assessment and selection of programs for testing. Accurately matching expenditures to the correct ALN is vital, particularly when a single grant award covers multiple ALNs. Preparers should refer to the compliance supplement for detailed guidance on how to treat specific award characteristics.
“To accurately prepare the SEFA, organizations must meticulously identify and list all federal programs, understand and apply specific reporting requirements, and ensure a complete reconciliation with underlying financial records.”
Ensuring the SEFA Reconciles with Financial Records
A mandatory step that often proves challenging is ensuring the SEFA reconciles with financial records. The total expenditures reported on the SEFA must agree with the total federal expenditures recognized in the organization’s general ledger and financial statements. This reconciliation confirms the completeness and accuracy of the SEFA data. Discrepancies often arise from timing differences, improper coding of grant expenditures, or differences in the entity’s definition of “expenditure” versus the federal definition.
Effective reconciliation requires a detailed audit trail linking general ledger transactions back to specific federal awards and ultimately to the reported SEFA amounts. This process isn’t a one-time check; it should be integrated into the monthly financial close process to identify and correct issues early. Strong internal controls around federal expenditure tracking are foundational to a successful reconciliation.
Addressing Common SEFA Preparation Errors
Proactive efforts to address common SEFA preparation errors can significantly streamline the Single Audit. The most frequent errors involve:
- Incorrect or missing ALN numbers: This is often due to reliance on outdated information or errors by the pass-through entity.
- Incomplete listing of programs: Failing to include non-cash awards or small awards that collectively exceed the threshold for a Single Audit. The threshold for a Single Audit is $750,000 for fiscal years beginning on or before September 30, 2024. Effective October 1, 2024, the Single Audit threshold was increased to $1,000,000.
- Misclassification of expenditures: Mistakenly including non-federal expenditures or classifying program costs under the wrong ALN.
Preparation staff should maintain a current master list of all federal awards, cross-checked annually against the Federal Audit Clearinghouse (FAC) data for similar organizations and their own grant agreements. Regular training on Uniform Guidance requirements is indispensable for minimizing these recurring issues.
Utilizing Technology for Efficient SEFA Compilation
Finally, organizations can vastly improve efficiency and accuracy by utilizing technology for efficient SEFA compilation. Relying solely on manual spreadsheets introduces a high risk of error. Modern accounting and grant management software can be configured to track expenditures by ALN, automatically generate program summaries, and facilitate direct reconciliation with the general ledger.
For entities with a large volume of federal awards, a dedicated grant management module is a worthy investment. At a minimum, organizations should leverage their existing Enterprise Resource Planning (ERP) or accounting system’s reporting capabilities to filter, sort, and summarize federal expenditure accounts, significantly reducing the manual effort required for aggregation and cross-checking. The right technological tools transform SEFA preparation from a last-minute scramble into a manageable, integrated process.
Disclaimer: This article provides general information and should not be considered professional financial or tax advice. Please consult with a qualified CPA or financial advisor for guidance specific to your individual business needs.
Questions?
Kelly has expertise in audit, review, and compilation services across diverse industries, including nonprofit organizations, construction, manufacturing, and technology. Kelly possesses an extensive background in auditing nonprofit organizations, particularly those receiving federal funding.