The Schedule of Expenditures of Federal Awards is the document your Single Audit gets built on. Your auditor reads it before deciding which of your programs to test, which means an inaccurate schedule does not just cause a correction. It changes the scope of your audit, and the fee that comes with it.

Most organizations try to assemble the schedule in March, a few weeks before fieldwork. That is the hard way, and this post is mostly about why.

Where the schedule actually comes from

Here is the whole argument of this post, up front.

Your general ledger either tags federal spending by award as the money goes out, or it does not. When it does, the schedule is a report you run in an afternoon. When it does not, somebody has to rebuild a year of spending from source documents, and that work costs more than most organizations expect.

Picture the reconstruction version. Somebody opens last year's bank statements and a folder of award letters and starts asking which invoice belonged to which grant. Payroll gets allocated from memory and a spreadsheet nobody has opened since the person who built it left. A subaward turns up that was coded to general program expense. The auditor's first request list arrives and the answer to most of it is "give us two weeks."

Call that a bookkeeping failure if you like, but the books in that scenario are usually clean. They reconcile. They produce a board report nobody has complained about. They simply cannot answer the one question the schedule asks: how much federal money, from which federal program, did this organization spend this year.

That question has to be answerable transaction by transaction, as the transactions happen. Adding it back afterward is slow, and parts of it come down to guesswork.

What the schedule is, who prepares it, and where it goes

The Schedule of Expenditures of Federal Awards lists every federal award your organization expended during the year, grouped by federal agency, with totals. It covers the same period as your financial statements. The amounts are federal awards expended as 2 CFR 200.502 defines them, which is not always the same as cash out the door.

You need one if you expended $1,000,000 or more in federal awards during the fiscal year. That threshold, and the counting rules behind it, are covered in our post on the Single Audit threshold. This post assumes you already know you are over it.

Two things about the schedule surprise people.

The auditee prepares it. 2 CFR 200.510(b) puts the schedule on the auditee. Your auditor audits it. They will help you understand the format, and a good one will tell you early what they need, but the document is yours and the numbers in it are your representation. An auditor who builds your schedule from scratch is doing work that raises independence questions, and they will charge you for it besides.

It goes to the federal government too. The schedule is part of the reporting package submitted to the Federal Audit Clearinghouse, which is a public database. Funders look there. So do prospective funders, and so do journalists.

What the schedule has to carry

2 CFR 200.510(b) sets out what the schedule must include. Formats vary, and your auditor will have a layout they prefer, so treat the list below as the content requirement rather than a template.

  • Federal agency and program name. Programs are grouped by the federal agency that awarded them, and each program is identified by name.

  • Assistance Listing number. The identifier for the federal program, formerly called the CFDA number. If a program has no Assistance Listing number, you use another identifier that describes the award, and you explain it.

  • Pass-through entity name. For any award you received as a subrecipient rather than directly from a federal agency, you name the organization the money came through.

  • The pass-through entity's identifying number. Their number for your subaward, not yours. This is the single most common gap in a first-year schedule, because the number lives on the subaward agreement and nobody captured it when the agreement was signed.

  • Total federal awards expended for each program. The dollars, by program, for the year.

  • Cluster totals. Where programs form a cluster, the schedule shows the cluster name, the programs in it, and a total for the cluster.

  • Amounts passed through to subrecipients. If you subaward federal money to anyone else, the total you provided to subrecipients from each federal program is shown separately.

  • Loan and loan guarantee balances. For the programs described at 2 CFR 200.502(b), the notes disclose balances outstanding at the end of the audit period. These programs still appear on the schedule with total expenditures.

Research and development awards get a small concession. They may be totaled per award, or by federal agency and major subdivision within the agency, rather than broken out program by program.

The notes, which almost everyone forgets

The schedule has required notes, and they are short enough that people skip them and then get a finding for something that would have taken four sentences to write.

2 CFR 200.510(b)(6) requires two things.

The significant accounting policies used in preparing the schedule. In practice this is mostly your basis of accounting. Most organizations prepare the schedule on the same basis as the financial statements, which for a nonprofit on GAAP means accrual. Say which basis you used and say it plainly. If any part of the schedule is prepared differently, the note is where that gets disclosed.

Whether you elected to use the de minimis indirect cost rate of up to 15 percent under 2 CFR 200.414. A yes or a no. If yes, say so.

That second one deserves a warning, because it generates a persistent myth.

There is no de minimis election form. There is no filing, no registration, no letter to an agency, no box to check in a federal portal. The election is made by using the rate and disclosing it in the notes to this schedule. If you read somewhere that you must file an election, that source is wrong, and you can check it against the regulation yourself in about a minute.

If you are below the Single Audit threshold, you have no SEFA and therefore no note. You still elect the rate the same way: by charging it and applying it consistently. The disclosure requirement attaches to the schedule, not to the election.

Clusters count as one program

Some federal programs are grouped into clusters, and a cluster is treated as a single program when your auditor works out which programs to test. 2 CFR 200.518(b)(3) says so directly.

This matters more than it sounds like it should. Three programs at $400,000 each look like three modest programs when you list them separately. If they belong to the same cluster, they are one $1.2 million program, and that number is on the wrong side of a line we will get to in a moment.

The practical consequence is that you cannot work out your own audit scope by eyeballing program sizes. You have to know which of your programs cluster, and that is determined by the Compliance Supplement for the year, not by what looks related to you. Programs can share a funder and a purpose and not be a cluster. Programs can look unrelated and be one.

On the schedule itself, a cluster is shown by name, with its member programs listed under it and a total for the cluster as a whole. If your schedule lists cluster members as standalone programs with no cluster identified, your auditor will catch it, and fixing it can change which programs get tested.

It has to tie to the general ledger

The schedule has to reconcile to the accounting records it came from, and your auditor will test exactly that.

The reconciliation runs in both directions. Total federal expenditures on the schedule should agree to what the general ledger says you spent on those awards. The revenue side should make sense against the grant revenue recognized in the statement of activities, with the differences explained rather than shrugged at.

Those differences are normal and most of them have ordinary causes:

  • Timing. Expenditure under the Uniform Guidance is not the same event as revenue recognition under GAAP, and a conditional contribution can sit unrecognized while the related cost has been incurred.

  • Non-cash and loan items. Donated property, food commodities, and loan programs can put amounts on the schedule that no cash transaction matches.

  • Cost share. Matching funds you spent are your own money. They do not belong in federal awards expended, and they are a frequent source of an overstated schedule.

  • Indirect cost recovery. How you charge indirect costs affects what lands in each program's total.

Explain a difference in a sentence and nobody minds. Discover one during fieldwork that you cannot explain and the consequences escalate quickly: more testing at best, and at worst a finding about internal control over federal reporting, which goes in the reporting package and is visible to every funder who looks.

The fix is unglamorous. Reconcile the schedule to the ledger monthly or quarterly, while you still remember what the transactions were.

Your auditor picks major programs off this schedule

This is the part that turns a paperwork error into a bill.

A Single Audit does not test every federal program you run. It tests the ones selected as major programs, and 2 CFR 200.518 lays out how that selection works. Your schedule is the input.

Step one sorts your programs by size. Programs above a threshold are Type A, everything else is Type B. For an organization expending $34 million or less in total federal awards, the Type A threshold is $1,000,000. Clusters are sized as one program.

Step two asks which Type A programs are low risk. A Type A program qualifies as low risk only if it was audited as a major program in at least one of the two most recent audit periods, and in the most recent one had no material weaknesses in internal control over the program, no modified opinion, and no known or likely questioned costs above five percent of the program's total awards.

Step three looks for high-risk Type B programs. The auditor uses judgment against the criteria in 2 CFR 200.519. The number identified is capped at one-fourth of the low-risk Type A programs, and only Type B programs above 25 percent of the Type A threshold require a risk assessment at all.

Step four sets the floor. The auditor must test all Type A programs that are not low risk, all Type B programs identified as high risk, and then enough additional programs to meet the coverage rule: at least 20 percent of total federal awards expended if you qualify as a low-risk auditee, and at least 40 percent if you do not.

Now put the error back in. A program understated on the schedule can fall below the Type A line and escape selection. A program overstated can pull a program into scope that did not belong there. A cluster you failed to identify can sit under the threshold in pieces when it belongs above it whole. Each of those changes the testing your auditor performs, and testing is the expensive part of a Single Audit.

If the error surfaces after scoping, the work gets redone. That conversation happens in fieldwork, at fieldwork rates, usually in the same week your Form 990 preparer is also asking you for things.

What to set up now so next year's schedule is a report

None of this requires expensive software. It requires that the information exist in the ledger at the moment money moves, rather than being inferred later.

  • One tracking dimension for each individual award. In QuickBooks Online that usually means a Project for each individual award. Two awards from the same agency for different programs are two Projects. An award that renews is a new Project each award year, because the schedule reports by award year and commingling them destroys the breakdown.

  • Capture the identifiers when the agreement is signed. Assistance Listing number, federal awarding agency, pass-through entity name, the pass-through entity's identifying number, award period, and total award amount. Put them somewhere structured and attached to the award, not in the body of an email. Chasing a pass-through identifying number eighteen months later means emailing a program officer who has since changed jobs.

  • Decide whether a cost is federal when you enter it. Every transaction that touches a federal award gets coded to that award when it is entered. Payroll included, which means a time and effort process that actually runs, because payroll is usually the largest number on the schedule and the one auditors test hardest.

  • Track subrecipient payments separately. Amounts you pass through to subrecipients are reported on their own line. If subawards are coded to the same expense account as direct program costs, you cannot pull that number without going transaction by transaction.

  • Keep cost share out of federal expenditures. Matching funds need their own tracking so they stay off the schedule. Overstating federal expenditures can pull you over the threshold, or move a program into Type A, for no reason.

  • Run a draft schedule quarterly. Not for anyone else. Run it, look at it, and fix whatever looks wrong while the transactions are still recent. The organizations that find the audit painless are the ones that have seen the number four times before the auditor asks.

If your books cannot do this today, the fix is usually a setup project measured in days. It rarely requires changing systems.

One North Carolina note. Where the pass-through entity is a State agency, the same subaward is also counted under State law. G.S. 143C-6-23 and 09 NCAC 03M set a reporting level based on State grant funds, and federal money passed through a State agency counts toward it. The schedule you build for the Single Audit does not discharge that obligation, and the determination is made on its own.

Where to start if you are not sure

Most people start by asking how to format the schedule. The more useful question is whether your current books could produce one at all.

That is what the Grant Readiness Review is for. It is a fixed-fee, two-week assessment starting at $1,500 that tells you what an auditor or a funder would find in your books, including whether your federal awards are tracked well enough to produce the schedule without a scramble. If you want a broader look at how we handle restricted funds and grant tracking, that is on the grant compliance page.

Sources