Common SEFA Errors and How to Avoid these Hazards
by Michael L. Lauzon, CPA, MBA, Audit Partner
Posted on September 19, 2018
What is the Schedule of Expenditures of Federal Awards (SEFA)? Oh yeah, it’s one of those documents my auditors are always asking about. Although it might seem like just another part of the audit preparation, the SEFA serves several very important purposes. Not only does the SEFA report federal expenditures in a summarized format, it also helps the auditor to determine which federal programs are required to be reviewed during the audit. In addition, the auditor is required to give an “in relation to the financial statements” opinion on the accuracy of the SEFA. As a result, the accuracy of the information presented in the SEFA is very important.
One of the most common SEFA reporting errors involve the reporting of the expenditures. Grants should be maintained in separate funds or at least given an identifier in the account structure so that the revenues and expenditures can be easily determined. Another common error is the reporting of expenditures on the SEFA only if the reimbursement is received during the fiscal year. However, even if the monies were not received in the period of availability (typically 60 days), the expenditures should be appropriately identified as federal and reported on the SEFA. Also, another frequently seen error is reporting the revenues or award amount on the SEFA rather than the actual expenditures. A similar error is reporting expenditures on the SEFA in excess of the grant award or amount expected to be received. Those expenditures in excess of the grant award should be moved to another funding source.
Some other common errors involve the Catalog of Federal Domestic Assistance Number (CFDA), Federal/Pass-Through/Agency, and Federal Award Number. Although Uniform Guidance requires pass-through agencies to include the CFDA Number and other information, we have still seen instances where the information is lacking, unclear or incorrect. One helpful step when preparing the SEFA is to check the CFDA numbers against the federal website (https://beta.sam.gov/) and search the CFDA or grant name under the Assistance Listings. (Please note that cfda.gov is no longer an active website.) Closely reviewing the grant documents to ensure the Grantor information is reporting accurately is also critical. This detailed review can also hopefully catch any errors in misidentifying federal funds as state or local, and vice versa.
Finally, other common errors include not properly identifying closely related programs as a cluster or not reporting non-cash awards. Programs that are identified as a cluster (even if only one program is being reported for the year on the SEFA) should be reported as such and totaled by cluster. A good place to go for determining whether you have a cluster or not are the 2017 and 2018 Compliance Supplements. Also, if the entity receives a non-cash award (e.g., commodities, vehicles, equipment), these should be reported as both a revenue and an expenditure in the general ledger and then reported on the SEFA.
There are many ways in which the preparation of the SEFA can result in mistakes. Those mistakes can result in the auditor being required to re-open test work over the federal awards, test additional programs, or add findings that that are presented in the Single Audit Reporting Package. Some recommendations to avoid these potential errors include starting preparation early (don’t wait for the auditor to ask), ensuring the SEFA is reviewed prior to providing it to the auditors, reviewing the governing body minutes for indications that a department has been approved for a federal grant, and reviewing the SEFA multiple times to make sure no major changes have occurred. Proper preparation of the SEFA will help limit errors and will make the audit process go more smoothly and maybe even a little quickly.