Why the SEFA Deserves a Seat at the Executive Table

For many nonprofit organizations, including their CFOs and fiscal departments, the Schedule of Expenditures of Federal Awards (SEFA) is viewed as an audit deliverable – something that is compiled by the auditors at the end of the fiscal year to satisfy a requirement under the Uniform Guidance in a Single Audit. This perception understates its importance.

Yes, the SEFA is used by auditors to determine which federal programs are subject to compliance testing in a Single Audit. Yes, it is a public document that reflects the federal awards an organization expended during the year. And yes, it is common for auditors to assist in its preparation. However, nonprofit organizations that take full ownership of the SEFA tend to better understand how it materially affects audit results, staff workload, and overall organizational risk.

From a leadership perspective, the SEFA can help an organization unpack and answer several critical questions:

• What federal programs are being operated?
• How significant are those programs to the organization and its mission?
• Where is compliance risk concentrated?
• How prepared are program and fiscal teams to support compliance testing if selected?

Guidance for a Better SEFA Outcome

Ensuring that the SEFA is accurate is essential if it is going to function as a leadership tool. One of the most common audit issues surrounding the SEFA is its completeness. Nonprofit organizations that approach this as a management concern rather than solely an accounting matter tend to experience better outcomes. Accomplishing this requires deliberate action throughout the entire organization. Practical steps often include:

• Reviewing Grant Agreements and Funding Streams – Federal funding does not always arrive clearly labeled, particularly when it flows through other organizations or entities commonly referred to as pass-through entities.
• Communicating with Pass‑Through Entities Early – Ask upfront if funds are federal or non‑federal in nature, and if federal, request the assistance listing number.
• Reconciling the SEFA to the Trial Balance and General Ledger – This process will help identify missing or misclassified activity before it’s an audit issue.
• Engaging Program Managers and Operational Staff – Individuals outside the fiscal department often have the best insight into new awards, amendments, or program expansions.
• Assuming Things Are the Same as the Prior Year – The prior-year SEFA can be a useful starting point, but it is not authoritative. Things are changing rapidly in the federal award space and over reliance on the prior year increases the risk of errors.

It’s also important to remember that the SEFA is a public document. Single Audits and SEFAs can be found at the Federal Audit Clearinghouse (FAC). Errors or missing information can raise questions not only from auditors, but from funders and regulators reviewing the single audit report.

The Importance of Major Program Determination

Once finalized, the SEFA becomes the starting point for major program determination during the Single Audit. This process directly affects the scope and depth of the audit, and ultimately which federal programs will be selected for testing following the requirements of the Uniform Guidance and the annual OMB Compliance Supplement. While the technical steps of the major program determination are performed by the auditor, nonprofit leadership should understand the following implications:

• Federal programs are identified based on expenditure thresholds, resulting in programs being classified as either Type A or Type B. The current Type A/B threshold is $1 million for organizations, expending between $1 million and $34 million of federal expenditures annually.
• Type A programs are presumed to be high-risk and are required to be audited as a major program at least once every three years.
• Auditors perform risk assessments following the requirements in the Uniform Guidance on all Type A programs, and if there are low-risk Type A programs, risk assessments are performed on a select number of Type B programs. All programs (Type A and Type B) that are deemed to be high-risk are tested as major programs.
• Minimum coverage requirements are applied based on whether an organization qualifies as a low-risk auditee. This will determine whether 20% or 40% of total federal expenditures are tested as major programs during the Single Audit.

Major program determination matters to leadership because each major program increases audit effort. More programs tested mean more documentation requests, more staff time, and likely higher audit costs. While compliance should never be avoided for convenience, understanding what drives major program selection allows management to plan, resource appropriately, and reduce surprises.

Ultimately, the SEFA is not just an audit schedule, it reflects how an organization manages federal resources. When leadership treats it as a year‑round responsibility outside of just the accounting department, audits become more predictable, risks more visible, and surprises far less common. This is why the SEFA deserves a seat at the executive table.

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