TLDR
The SEFA cluster-identification rule is where 80% of single-audit findings originate. If you misclassify a program into the wrong cluster — or fail to identify a cluster at all — the major-program determination falls apart and your auditor must expand testing.
SEFA Preparation Checklist for Nonprofits
The Schedule of Expenditures of Federal Awards is the foundation of every single audit. Auditors use it to determine which programs are “major programs” requiring audit opinions. When it’s wrong, audit scope expands — and findings multiply.
Most SEFA errors are not accounting mistakes. They are classification errors: programs that should be in a cluster are listed separately, pass-through subrecipient data is missing, or indirect costs are omitted from program expenditures. The checklist below addresses each of these systematically.
What Must Appear on the SEFA
The SEFA is a supplemental schedule — not part of the basic financial statements, but presented with them. It is management’s representation of every federal program the organization administered during the year.
Per 2 CFR 200.510(b), each line of the SEFA must include:
| Column | Required | Common errors |
|---|---|---|
| Federal agency name | Yes | Omitting pass-through federal agency |
| Pass-through entity name | When applicable | Omitting when funded via state agency |
| ALN/CFDA number | Yes | Using state program codes instead of ALN |
| Federal program name | Yes | Using grant project name instead |
| Program cluster name | When applicable | Omitting cluster designation |
| Total expenditures | Yes | Excluding indirect costs |
| Amounts passed to subrecipients | When applicable | Missing even small subawards |
The Cluster Problem
OMB defines program clusters in Appendix VI to 2 CFR Part 200 and updates the list each year in the Compliance Supplement. A cluster groups related programs — Research and Development, SNAP, Aging Cluster, Student Financial Aid — and treats them as one program for major-program selection.
If an organization receives funding under ALN 93.914 (HIV Emergency Relief) and ALN 93.917 (Ryan White Part B), both belong to the same cluster. They must appear as a cluster on the SEFA, grouped together with the cluster name. Listing them separately as two standalone programs understates cluster expenditures, potentially misidentifying the major programs the auditor selects.
The OMB Compliance Supplement Appendix VI is updated annually. The current year’s supplement must be used — cluster membership changes year to year.
Pass-Through Subrecipient Reporting
For organizations that receive federal awards and pass portions to subrecipient organizations, the SEFA must identify:
- Each federal program from which pass-through funds were disbursed
- Total amount passed through to subrecipients under each program
- Names of the subrecipient organizations
This requirement applies regardless of the dollar amount. A $5,000 subaward from a $500,000 federal grant must be disclosed.
The most common omission: state-funded subgrants that the nonprofit organization passes to community partners, where the original funding is federal. If the organization received state funding that itself originated as federal dollars (Department of Health and Human Services, Department of Education, etc.), those passthrough amounts belong on the SEFA as federal expenditures.
Indirect Costs on the SEFA
Indirect costs charged to a federal award are federal expenditures and belong on the SEFA. Organizations that omit indirect cost recovery from SEFA expenditures understate their federal program activity — and may misidentify which programs cross the major-program threshold.
For organizations using a negotiated indirect cost rate (NICRA), include the indirect costs recovered during the year. For organizations using the de minimis rate, include indirect costs calculated at 15% of MTDC. The SEFA notes must disclose whether the de minimis rate was used.
Reconciling the SEFA to the General Ledger
The SEFA must agree to the general ledger. Auditors reconcile them. Unexplained differences are findings.
Common reconciling items that must be explained in notes:
- Accrued expenditures recognized in one period, paid in another
- Indirect cost allocations posted at year-end versus grants-paid basis
- Deferred revenue for federal advances not yet earned
- Cost-sharing contributions if separately tracked
Document every reconciling item before submitting the SEFA to the auditor.
How GrantPipe Helps
GrantPipe’s grant management module tracks expenditures by award and ALN as costs are incurred, making SEFA preparation a report run rather than a manual assembly exercise. The system flags pass-through subrecipient relationships at grant setup, so subrecipient data is captured at the source — not reconstructed at year-end from emails and contract files. The audit trail provides the documentation auditors need to trace SEFA line items to source transactions without back-and-forth requests.
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Source: 2 CFR Part 200, Subpart F
- SEFA
- Schedule of Expenditures of Federal Awards — a supplemental schedule required of entities expending $750,000+ in federal awards. It lists all federal programs, their ALN numbers, and total expenditures for the fiscal year.
DEFINITION
- ALN (Assistance Listing Number)
- Formerly the CFDA number. A five-digit number (XX.XXX) identifying each federal assistance program in SAM.gov. Every SEFA row requires an ALN.
DEFINITION
- Cluster
- A group of related federal programs defined in Appendix VI to Part 200 and the OMB Compliance Supplement. For major-program determination, a cluster is treated as a single program.
DEFINITION
- Major program
- A federal program that must receive a program-specific audit opinion as part of the single audit. Determined using risk-based criteria in 2 CFR 200.518. Higher-risk and higher-dollar programs are selected as major.
DEFINITION
- Pass-through entity
- A non-federal entity that receives federal awards and passes them to subrecipients. Pass-through entities must identify subrecipient payments on the SEFA.
DEFINITION
Q&A
How are program clusters identified on the SEFA?
Appendix VI to 2 CFR Part 200 and the OMB Compliance Supplement define program clusters. When an organization receives funding under multiple ALNs that belong to a defined cluster, those ALNs must be grouped together on the SEFA and labeled with the cluster name. Failure to cluster ALNs that belong together causes the auditor to undercount expenditures in the cluster, potentially misidentifying major programs.
Q&A
What happens if the SEFA is materially misstated?
The auditor issues a finding on the SEFA and may expand major-program testing. In severe cases, the auditor may be unable to express an opinion on compliance with specific requirements. Federal awarding agencies can use SEFA errors to support disallowance of costs or suspension of future awards.
Q&A
Do indirect costs get included on the SEFA?
Yes, to the extent indirect costs are charged to the federal award. Organizations using an indirect cost rate agreement include the amounts recovered under that rate in SEFA expenditures. Organizations using the de minimis rate also include their de minimis-recovered amounts. Indirect costs omitted from the SEFA understates program expenditures.
Frequently asked