SEFA Prep: 3 Tips to Avoid Errors and Verify Accurate Federal Reporting

Preparing a Schedule of Expenditures of Federal Awards (SEFA) can be a daunting task, especially when your organization receives millions of dollars in federal funding. Here are tips to help you get ready.

What is a SEFA and who needs one?

A SEFA provides transparency and accountability for using federal funds, providing information on how federal awards were spent to show the funds were used for their intended purposes.

If your organization spends more than $750,000 in federal awards, a SEFA is required for that fiscal year.

SEFA preparation tips

1. Avoid common SEFA errors

As you begin the preparation process, watch for the following common errors:

• Not separating programs — COVID-19 programs and expenditures must be shown separately on the SEFA and in the data collection form. List the amounts under the section where the funding originated and label with “COVID-19” so readers can easily identify it.
• Including state or local funding — Only list federal grants and expenditures on the SEFA. Exclude state or local funding because they are not federally derived funds. If you are unsure whether a grant is federally funded, you can look up the grant name or assistance listing number (ALN) on the Office of Management and Budget (OMB) Compliance Supplement.
• “Double reporting” — Do not include interagency grants (IGAs) on the SEFA because that would “double report” the funds. For example, imagine Agency A received federal funding and entered into an agreement with Agency B who needs the funding. Agency B does not have the resources to properly expend the funds and asks Agency A for help to do so. Agency B should report the funds on their SEFA. Agency A should not report these funds, as they were not the intended recipient.

These are only a few common SEFA preparation errors. For government agencies, additional guidance can be found on the Government Finance Officers Association’s SEFA preparation webpage.

2. Utilize the OMB Compliance Supplement and your accounting system

Treat the annual OMB Compliance Supplement as one of your main SEFA preparation resources. You can also use Sam.gov for updated ALNs.

• Appendix V of the Compliance Supplement has a list of high-level changes from the prior year.
• Review for new, altered, or eliminated clusters each year. A “cluster” is a grouping of ALNs that should be reported in individual lines on the SEFA under the cluster name with a subtotal.

Review Grant Award Letters (GALs) to determine relevant ALNs and awarding agencies. The GAL can also help determine whether funding was received directly from the federal awarding agency or indirectly through a state or local agency. For accurate SEFA reporting, include specific accounts for each federal source in your chart of accounts.

3. Include expenditures with different funding sources

SEFA presentation can be impacted by various types of federal funding including:

• Direct grants, payments, and loans — These are the most common types of federal funding impacting SEFA presentation because they are given from federal agencies directly to the recipient. These awards can come with restrictions on their use, such as project type or eligibility requirements for program participants.
• Pass-through funds or sub-awards — List these separately from direct awards. Both the pass-through entity and the subrecipient should record these expenditures on their respective SEFAs. For example, if Agency A received funding from the federal government and entered into an agreement with Agency B to give them part of the funding to help carry out program functions, Agency A should report that amount as pass-through expenditures and Agency B should report it as a sub-award.
• Non-cash and other forms of financial assistance — Non-cash items include but are not limited to free rent, commodities such as Supplemental Nutrition Assistance Program (SNAP) or Pandemic Electronic Benefit Transfer (P-EBT), and donated property. Other types of financial assistance can come from guaranteed/insured loans, endowments, interest subsidies, and insurance, all of which must be included on the SEFA.

How we can help

CLA’s experienced team can assist with accurate and compliant SEFA preparation and reporting. Contact us today to learn how we can help.