What to Know About Preparing a SEFA

Organizations that receive federal funding may be required to prepare a Schedule of Expenditures of Federal Awards (SEFA). This report is a central part of the Single Audit, a compliance requirement triggered when an entity spends a certain amount of federal funds in a fiscal year.

Currently, that threshold is $750,000 in total federal expenditures. Beginning with fiscal years starting on or after October 1, 2024, the threshold will increase to $1 million, which means some smaller organizations may no longer need to complete this process. Still, for those that continue to meet the threshold or anticipate crossing it in the future, understanding how to prepare a SEFA is essential to staying in compliance and audit-ready. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.

What’s Included in a SEFA?

The SEFA summarizes how an entity used federal funds over the course of a year. It’s a required component of the Single Audit and helps auditors determine which federal programs require testing. The schedule must be based on the organization’s accounting records and reflect all federal awards received, whether directly from a federal agency or passed through another organization. Key components include:

• Name of the federal awarding agency
• Assistance Listing Number (ALN) (formerly CFDA)
• Program title
• Award date
• Amount received/expended
• Name of any pass-through entity
• Amounts passed through to subrecipients

It also includes footnotes describing the basis of accounting, whether the entity used the 10% de minimis indirect cost rate, and any non-cash awards, such as donated goods or loan balances. These disclosures help auditors understand how the SEFA was prepared and whether it aligns with federal requirements.

Who Needs to Prepare a SEFA?

Any organization that spends $750,000 or more in federal funds during its fiscal year is subject to the Single Audit and must prepare a SEFA. That number will rise to $1 million for fiscal years beginning on or after October 1, 2024. Entities commonly subject to SEFA requirements include: 

• Nonprofit organizations
• State and local governments
• Public school districts and universities
• Tribal governments and housing authorities
• Community development and health organizations

In some cases, government contractors may also be required to prepare a SEFA, particularly if they receive funds through a grant or cooperative agreement. Standard procurement contracts, which are governed by the Federal Acquisition Regulation (FAR), typically do not trigger SEFA or Single Audit requirements.

Best Practices for SEFA Preparation

One of the most challenging parts of preparing a SEFA is identifying and tracking all federal funds. This is because federal awards don’t always come directly from a federal agency. More often than not, they pass through state agencies, local governments, county health departments, school districts, or even larger nonprofit organizations.

For example, a health provider could receive federal funds through a county health department, or an affordable housing developer might get HUD funds from a city government program. In both cases, the money is federal, and the organization needs to report it with the associated ALN. 

This can make it harder to recognize the federal source at first glance. That’s why preparing a SEFA often requires careful tracking and internal coordination. Here are a few best practices to help:

Gather documentation — Keep a record of award letters, grant agreements, subrecipient details, and any correspondence confirming the federal source. This step alone saves time and stress later.

Identify all funding sources — Confirm the correct ALN for each award and determine whether it came directly from a federal agency or through another organization. Flag any programs that belong to a federal cluster.

Track expenditures — Set up systems to track spending by program and ALN. Document any amounts passed through to subrecipients and include non-cash assistance, if applicable.

Reconcile with the general ledger — Periodically compare SEFA data to the accounting system to make sure everything aligns. Discrepancies caught early are easier to fix.

Draft a SEFA schedule — Use clear formatting and include all required fields. Be consistent in how programs and agencies are listed. Include footnotes on accounting methods and indirect costs.

Coordinate with independent auditors — Share a draft SEFA before audit fieldwork begins. It’s an opportunity to confirm program classifications and clarify anything that looks unusual.

Common Mistakes to Avoid

Even experienced grant recipients can run into trouble with SEFA reporting. Some of the most common errors include:

• Leaving out pass-through or non-cash awards
• Using incorrect or outdated ALNs
• Misclassifying vendors as subrecipients
• Failing to disclose indirect cost rates
• Submitting a SEFA that doesn’t reconcile with the general ledger

Contact Us

For organizations that remain subject to Single Audit requirements, SEFA preparation will continue to play a key role in annual compliance. Even organizations below the threshold will want to adopt best practices to help with readiness if funding increases or audit requirements change. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.