If your organization is subject to single audit requirements, you must also prepare for a SEFA audit.
The Schedule of Expenditures of Federal Awards (SEFA) is a foundational piece of the single audit. In this post, we’ll explain the Schedule of Expenditures of Federal Awards, its role in the audit process, and how best to approach your SEFA audit.
The Schedule of Expenditures of Federal Awards (SEFA)
If your organization receives over $750,000 in federal awards during a fiscal year, it is subject to the Uniform Guidance single audit requirement.
As part of single audit requirements, you or your management team must review the Schedule of Expenditures of Federal Awards (SEFA). The SEFA helps your organization keep track of:
- Award amounts expended throughout the fiscal year
- Which of your organization’s programs received those award amounts
- Which federal agencies awarded the money
Think of the SEFA as a list. It helps you keep track of the awards your organization receives and how that money is spent. Your accounting department is responsible for documenting these financial statements and ensuring these statements properly align with your internal controls.
The Role of the SEFA in the Single Audit
During a federal single audit, an independent auditor will audit an organization’s federal awards according to Generally Accepted Government Auditing Standards (GAGAS) to determine if your financial statements comply with Government Accounting Standards Board (GASB) reporting requirements. Accounting Principles (GAAP). This means an independent auditor will examine the:
- Financial statements
- Compliance with state and federal rules
- Internal controls
The SEFA is a vital part of the single audit process, as it helps your auditor determine the validity and accuracy of your internal controls. An auditor must review the SEFA during a single audit, but an independent auditor cannot prepare it. Your accounting department must prepare, document, and review your organization’s SEFA.
How to Prepare for Your Next SEFA Audit
It’s helpful to consider your internal review of the SEFA as essential to the single audit process. Before you work with your audit firm on your SEFA audit, there are two things you should do to best prepare for it.
1. Understand SEFA Audit Requirements
A SEFA consists of many parts. Before compiling your financial statements, take some time to ensure you and your team understand its requirements. You’ll need a detailed paper trail of the federal money your organization receives and where it’s spent. That includes:
- A list of awards received from federal programs, their agencies, and whether the award was direct or a sub award to your organization.
- A list of cluster programs (or closely related programs that can be lumped into the same category).
- Award amounts and totals paid to any sub-recipients, grants, and contract numbers.
- Award amounts expended for each of your programs.
- Policy descriptions, including if your organization elects the 10% de minimus cost rate for indirect cost reimbursements.
2. Review Your Internal Controls
According to the Uniform Guidance and the Single Audit Act, your organization must produce your SEFA without the help of an independent audit team. Technically, your SEFA is a foundational part of your internal controls.
A good practice is to have a member of your internal accounting team who does not have a hand in compiling the financial statements designated as a reviewer. This person will be able to identify any holes in your internal controls, and you should work to fix these issues before your single audit. Failing to do so could result in an audit finding.
Finalizing Your Audit
The Schedule of Expenditures of Federal Awards is an integral part of the single audit. When gathering documents in preparation for a single audit, it’s important to prepare this document with accuracy and care. It will greatly help your engagement go smoothly and avoid delays.
At Assurance Dimensions, we’re here to help you with your auditing needs. With over 75 years of industry experience, we understand your single audits need. More importantly, we’re available to help however it’s convenient for you—whether that’s in person or online through our secure cloud-based software. Contact us today to schedule your next engagement.