Audit Preparation and Your SEFA
by Michael A. Hoerig, CPA, Audit Manager
Posted on July 6, 2012
As outlined in the Office of Management and Budget (OMB) Circular A-133, local governments that expend at least $500,000 of federal awards are subject to a Single Audit (or a program-specific audit). While the Single Audit has several auditing aspects, one of the key objectives is to test the recipient’s compliance with key Federal requirements. In preparation for this testing, your auditor will perform a major Federal program assessment. This includes an assessment of the total Federal awards expended and a election of individual grant awards based upon criteria outlined by OMB Circular A-133.
The Schedule of Expenditures of Federal Awards (SEFA) is a key element of the Single Audit report. It summarizes the various types and amounts of federal grants that are expended during the fiscal year. A draft version is used by your auditors for determining the Federal compliance focus of the annual Single Audit. Compiling an accurate SEFA draft helps ensure that effective planning and efficient performance of your audit. Incorrect (or outdated) SEFA data can lead to audit errors and inefficiencies such as misidentification of Federal programs or incorrect selection of major Federal programs. Additionally, in extreme cases, erroneous SEFA data could also indicate poor internal controls and potentially result in audit findings.
During the audit planning phase, the most critical pieces of your SEFA are:
- Catalog of Federal Domestic Assistance (CFDA) numbers,
- Identification of American Recovery and Reinvestment Act (ARRA) awards, and
- Amounts expended to date in each grant.
The CFDA number indicates the applicable funding program and Federal oversight agency and the ARRA distinction notifies the auditor of the special funding source. OMB Circular A‑133 guidance requires that (1) certain CFDA numbers be combined (“clustered”) during the major Federal program assessment and (2) auditors consider ARRA grants to be a higher risk during the major Federal program assessment. For these reasons, accurate identification of CFDA numbers and ARRA awards help your auditor with the correct identification of major Federal programs.
As noted above, the last critical part of your SEFA is the amount of awards expended during the fiscal year. These amounts help your auditors determine the relative importance of the Federal grant award in relation to other funding sources. This is important because larger expenditures typically indicate more risk. Some common errors include:
- Omission of outstanding grant reimbursements
- Year-end cutoff errors, and
- Using the amount of awards received rather than the amount expended.
Other useful information that can assist your auditors with performing an accurate major Federal program assessment include:
- Grant award amounts and budgets,
- Revenues received to date,
- Amounts estimated to be spent (if the SEFA is prepared prior to year-end), and
- Amounts provided to subrecipients (if any).
There are also many resources available to assist with compiling your SEFA. Information is available from the granting agencies (i.e. the Federal departments) and pass-through entities (i.e. State agencies, counties, etc.). Federal awarding agencies and pass-through entities must monitor grant recipients and therefore have a vested interest in ensuring that your entity’s SEFA is presented correctly. You may also utilize the knowledge of your external auditors to discuss different approaches or to obtain additional tips or recommendations on preparing the SEFA. Finally, there are also several online resources that provide information on Single Audits and the SEFA:
