Most of a schedule of expenditures of federal awards (SEFA) is arithmetic: awards, expenditures, totals. The judgment sits in the edge cases. Is donated property an award expended? Do Medicaid payments count? What does the note about the de minimis rate have to say? These questions come up in nearly every first-year Single Audit and in many repeat engagements, and a wrong answer misstates the base used for the audit threshold.
This guide covers noncash assistance, the items that are excluded, and the required note on the de minimis rate. It paraphrases 2 CFR 200.502, 200.510 and 200.414. For identification and clustering see the SEFA guide on Assistance Listing numbers, clusters and loans.
Noncash assistance
Federal assistance does not always arrive as cash. Under 2 CFR 200.502(g), noncash assistance such as free rent, food commodities and donated property must be valued at fair market value at the time of receipt, or at the assessed value provided by the federal agency, and included in determining federal awards expended.
The auditor needs three things to support the figure:
- The source document. An agency notice, transfer record or award document showing what was received and when.
- The valuation basis. Either the agency's assessed value or a fair market value determination at receipt. Where the agency supplies a value, the auditee uses it; where it does not, the auditee documents how it measured fair market value.
- The recording trail. A schedule showing where the item appears in the accounting records, and how the SEFA figure ties to it.
Food commodities deserve their own line of inquiry. The expenditure-timing rules in 2 CFR 200.502(a) include the distribution or use of food commodities, so the amount counted depends on distribution or use during the period, not on what is sitting in inventory at year-end. Obtain the inventory records and the distribution log, and confirm that the schedule reflects what was used or distributed.
Free rent
Free rent received by itself is not a federal award expended under Part 200. It counts only when it is part of a federal award that provides financial support to a federal program. The reading procedure is straightforward: obtain the arrangement, determine whether the rent benefit is described in a federal award for a federal program, and include it in the SEFA only if it is. A landlord that happens to be a federal agency does not by itself create an award.
Medicare and Medicaid
Two exclusions affect health care auditees directly.
Medicare. Under 2 CFR 200.502(h), payments received for patient care provided to Medicare-eligible individuals are not federal awards expended under Part 200. A hospital's Medicare reimbursement therefore does not go on the SEFA, even though it is federal money.
Medicaid. Under 200.502(i), payments to a subrecipient for Medicaid patient care are not federal awards expended, unless a state requires the funds to be treated as federal awards expended because reimbursement is on a cost-reimbursement basis. The check is a question to the client and to the state agency, not an assumption: does the state treat this stream as a federal award for Single Audit purposes? Document the answer and the source.
These rules limit the SEFA, but they do not remove other federal funding from the picture. A hospital that also receives grants for specific programs reports those grants. The exclusions apply to the patient care payments themselves.
The de minimis rate note
An auditee that has no current federal negotiated indirect cost rate may elect the de minimis rate under 2 CFR 200.414(f). The regulation sets these terms:
- The rate is up to 15 percent, and the entity chooses the rate, up to that cap.
- The base is modified total direct costs.
- No documentation is required to justify the rate, and the entity may use it indefinitely.
- A recipient or subrecipient without a current negotiated rate, including a provisional rate, may elect it but is not required to.
- Once elected, it applies to all federal awards until the entity chooses to receive a negotiated rate.
These terms come from the April 22, 2024 revision of the Uniform Guidance (89 FR 30046), effective government-wide on October 1, 2024. An award still governed by the earlier version carries the earlier de minimis rate of 10 percent of modified total direct costs, as Part 3.1 of the 2025 Compliance Supplement states. Check the award terms before testing the rate.
The related SEFA requirement is in 2 CFR 200.510(b): the notes to the schedule must state whether the auditee elected to use the de minimis rate. The disclosure sits in the notes to the SEFA, and the auditor checks it against the auditee's actual practice.
The test is simple:
- Determine whether the auditee has a current negotiated indirect cost rate agreement, including a provisional rate.
- If it does not, determine whether it charged indirect costs to federal awards at a flat rate, and what rate.
- Confirm that the base used was modified total direct costs.
- Confirm that the note reflects the answer. An auditee that charged a flat rate and says in the note that it did not elect the rate has an inconsistency to resolve.
Where the auditee has a negotiated rate, the note says it did not use the de minimis rate. The auditor tests that the negotiated rate was current for the period and that charges followed it. The standards-level discussion is in the indirect costs and de minimis rate page.
How errors reach the audit
Each of the items above changes the SEFA total, and the SEFA total drives the threshold test and the major program determination.
- Including Medicare payments overstates the schedule and may pull an auditee over the threshold test that it would otherwise fall under.
- Omitting noncash assistance or including it at an unsupported value misstates the base used to identify major programs.
- A wrong de minimis note leaves the reader without a correct statement about how indirect costs were charged.
Treat these as tie-out items in the audit file, each with a source document and a conclusion. See the major program determination guide for how the totals are used afterward.
Staging checklist
- Obtain a list of every noncash item received, with source documents and values.
- Obtain the lease for any free-rent arrangement and determine whether a federal award describes it.
- List all health care payment streams and classify each as Medicare, Medicaid or grant.
- Confirm the status of the indirect cost rate agreement and the rate charged.
- Draft the SEFA notes, including the de minimis statement, and compare them to the findings of the steps above.
CORAA prepares ready-to-review audit files for US CPA firms, including the supporting schedules for these items. The firm keeps the client, the review and the signature. See /us.
Sources
- Legal Information Institute, 2 CFR 200.502, Basis for determining Federal awards expended: https://www.law.cornell.edu/cfr/text/2/200.502
- Legal Information Institute, 2 CFR 200.510, Financial statements: https://www.law.cornell.edu/cfr/text/2/200.510
- Legal Information Institute, 2 CFR 200.414, Indirect (F&A) costs: https://www.law.cornell.edu/cfr/text/2/200.414
- OMB, Compliance Supplement 2025, Part 3, Compliance Requirements: https://www.whitehouse.gov/wp-content/uploads/2025/05/Part-3-Compliance-Requirements.pdf
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AU-C references are to AICPA Professional Standards, paraphrased here; read the standard itself before relying on a requirement. This page is guidance, not professional advice. Report an error