Is your nonprofit subject to a Schedule of Expenditures of Federal Awards (SEFA)?
Over the past several years, many nonprofits availed themselves of federal grants. These funds may have been related to the pandemic relief programs or separate programs intended to support the work of nonprofits. However, the increase in federal grant programs, and the number of nonprofits tapping into them, may mean that your organization is now subject to the Single Audit. To determine whether you now complete a Single Audit, you should first complete the SEFA.
What Is SEFA?
SEFA is a separate document required as part of an audited financial statement. It may be presented in the accrual or cash-based method of accounting.
If federal grants total more than $75,000 over an organization’s fiscal year, the organization is then subject to the Single Audit. SEFA must be completed as part of the Code of Uniform Guidance.
What should be included in the SEFA? According to the guidelines, federal expenditures to be included should be based on when the federal award is considered “expended.”
Determining which funds should be included is a bit more complex than looking over your awards and determining which came from federal sources. The Uniform Guidelines categorize the following to be included:
- Cost-based Contracts under Federal Acquisition Regulations (FAR)
- Cooperative Agreements
- Direct Appropriations
Loans and Loan Guarantees
Loans and loan guarantees should also be considered under SEFA. The basis of determining them may be found in 2 CFR Part 200.502 as:
- Value of new loans made or received during the audit period; plus
- Beginning of the audit period balance of loans from previous years for which the federal government imposes continuing compliance requirements; plus
- Any interest subsidy, cash, or administrative cost allowance received
Donated Personal Protective Equipment (PPE)
If your organization received a donation of PPE, you must account for its value. Calculate the fair market value at the time of the donation and include it as a footnote on the SEFA.
Note that the amount of the donated PPE should not count towards the determination of a Single Audit.
Donated Property and Donated Food
Donated property and food follow similar guidelines to PPE. The fair market value should be calculated at the time of the donation.
Determining Receipt of Income
The receipt of income date is determined for the SEFA by assessing the date by which the income from a federal source was received or used by the program.
Endowment funds from federal sources should be reported on the SEFA at the cumulative year-end balance if the restriction applies.
Medicare and Medicaid
Check with your state’s regulations or consult with a nonprofit accountant. In many cases, Medicare and Medicaid funding is not counted towards SEFA calculations. However, state guidelines may make your state an exception to the rule.
Presenting the SEFA
To ensure clarity and transparency, it is vital to report the information on the SEFA according to the Uniform Guidelines. The Guidelines specify that organizations should list each individual federal program by federal agency, and you can group a cluster of programs together. You must also note the name of any passthrough entities and identifying numbers if the organization received funds through a passthrough entity. The same applies if your organization passes funds through to another entity—you’ll be required to provide the total amounts provided to each subrecipient.
The totals on the SEFA are required for each federal program and Assistance Listing (AL) number (formerly the Catalog of Domestic Assistance, CFDA). If the AL number is not available, organizations can use another identifying number. Each cluster reported on the SEFA must also provide a total.
Lastly, footnotes: yes, they’re required. Nonprofits must disclose the outstanding balance of any loan and loan guarantees reported on the SEFA as of the end of the audit period. Additionally, organizations are required to disclose whether they utilized the de minimis indirect recovery during the year.
AICPA provides a checklist to help guide you through the complexities of SEFA preparation.
Preparing the SEFA properly requires a great deal of time and attention to detail, not to mention nonprofit accounting expertise. We highly recommend contacting us for assistance to ensure full compliance and the best preparation of these important documents.