George Washington Carver AcademyLocal Government

Finding Type – Material noncompliance and material weakness in internal control over compliance. Repeat Finding – No. Federal Program(s) – U.S. Department of Education: Education Stabilization Fund (ALN 84.425); Passed through MDE; All project numbers. Compliance Requirement – Allowable Costs/Cost Principles ‐ Disbursements. Criteria – The Uniform Guidance requires the Academy to establish internal controls over disbursements related to the compliance requirements applicable to allowable costs/cost provisions. The Academy's policies require an independent review and approval of expenditures by Academy official(s). Condition – The Academy could not provide supporting documentation for costs charged to the programs for (2) out of (37) disbursements selected for testing. Cause / Effect – The condition appears to be the result of the Academy not adhering to established internal control policies and procedures. As a result, the Academy is at an increased risk of unallowable costs being charged to federal programs without being detected by its internal controls. Questioned Costs – Known questioned costs ‐ $31,731; Likely questioned costs ‐ $59,377; Total questioned costs $91,108. Recommendation – The Academy should follow its internal control policies and procedures that require an independent review and approval of expenditures by Academy official(s). Auditee Response – The Academy along with its new management company are reviewing, revising, and developing internal controls as necessary in order to comply with compliance requirements relevant to federal programs.

Finding Type – Material noncompliance and material weakness in internal control over compliance. Repeat Finding – No. Federal Program(s) – U.S. Department of Education: Education Stabilization Fund (ALN 84.425); Passed through MDE; All project numbers. Compliance Requirement – Allowable Costs/Cost Principles ‐ Payroll documentation. Criteria – The Uniform Guidance requires the Academy to support payroll charged to federal cost objectives with adequate documentation in accordance with the Academy's payroll policies. Per the Academy's federal policies, the Academy is required to support payroll charges to federal cost objectives with adequate documentation including personnel activity reports or timesheets for those who split their time between multiple cost objectives. Condition – Of the (8) payroll transactions selected for testing, the Academy was unable to provide documentation for (2) of those charges. Cause / Effect – This condition appears to be the result of the Academy charging costs to federal programs that were not properly supported using allowable methods. As a result, the Academy does not have appropriate support for all payroll charges to the programs. Questioned Costs – Known questioned costs ‐ $3,292; Likely questioned costs ‐ $67,713; Total questioned costs $71,005. Recommendation – The Academy should limit payroll charged to federal programs to costs that are supported by documentation that is allowable under federal cost principles and its own policies and procedures. Auditee Response – The Academy along with its new management company are reviewing, revising, and developing internal controls as necessary in order to comply with compliance requirements relevant to federal programs.

Finding Type – Material noncompliance and material weakness in internal control over compliance. Repeat Finding – No. Federal Program(s) – U.S. Department of Education: ESSER III Formula – American Rescue Plan (ARP‐ESSER) ALN 84.425U; Passed through MDE; Project number 213713. Compliance Requirement – Special Tests and Provisions – Wage Rate Requirements. Criteria – All construction contracts in excess of $2,000 awarded by non‐Federal entities must include a provision for compliance with the Davis‐Bacon Act as supplemented by Department of Labor regulations. Condition – The Academy did not have controls in place to ensure construction contracts in excess of $2,000 included provisions for compliance with the Davis‐Bacon Act. Cause / Effect – The Academy entered into a contract with a construction manager for a project funded by federal funds. The original contract and bid alternate did not include a provision for compliance with the Davis‐Bacon Act. As a result, the Academy entered into a construction contract that was not in compliance with 2 CFR Part 176 Subpart C. Questioned Costs – Unknown. The Academy believes prevailing wages were paid; however, the Academy did not have controls in place to retain adequate documentation to determine that the compliance requirement was met. Recommendation – The Academy should implement internal controls and procedures to ensure construction contracts entered into that utilize federal funding are reviewed for compliance with federal requirements. Auditee Response – The Academy along with its new management company are reviewing, revising, and developing internal controls as necessary in order to comply with compliance requirements relevant to federal programs.

Finding 2022-004 ESSER Expenditures Compliance with Budget Finding Type: Compliance Finding/Significant Deficiency in Internal Control Over Compliance of a Major Program. Criteria: Expenditures charged to the ESSER grants should be consistent with and stay within the expenditures budget submitted to and approved by the State of Michigan. Condition: Expenditures for the purchase of books ($6,422) which could not be traced to the state approved ESSER II budget, and transportation service in excess of the state approved budget in ESSER II ($8,568) were charged to the ESSER II grant during the year ended June 30, 2022. Cause: Expenditures are being requested and charged to ESSER grant programs in the general ledger without verification that the expenditures are in accordance with the state approved budgeted activities and amounts. Effect: Expenditures of $14,990 were charged to the ESSER II grant while it appears that they were not included in the most recently amended state approved ESSER II budget, or exceeded the approved budgeted amount. Recommendation: The Academy should verify that proposed ESSER grant expenditures relate to an allowable activity and\or available budget exists in the State approved ESSER budgets before charging such expenditures to the grant. View of Responsible Officials: George Washington Carver Academy and the finance company have added procedures that all items posted to federal grants are reviewed by two people to ensure that the expenses is allowable to federal grants, along with appropriations left in the grant and from the finance company along with the Superintendent to ensure the proper posting of expenditures in accordance to the grant application. Questioned Costs: $14,990

Finding 2021-002 Title I Reporting Finding Type: Significant Deficiency in Internal Control Over Major Programs Criteria: The OMB Compliance Supplement for Title I Funds requires that an annual Federal Expenditure Report be filed with the State of Michigan accurately reporting all expenditures of Title I funds. Condition: The Academy filed an annual Federal Expenditure Report that overstated Title I expenditures. Cause: A clerical error was made on the report totaling grant expenditures eligible for reimbursement. Effect: The Academy is not in compliance with the reporting criteria of the Title I Program and has requested grant reimbursements in excess of expenditures. Recommendation: The Academy should implement a policy that includes proper documentation of Federal expenditures prior to each request that includes expenditure reports generated directly from the accounting software. View of Responsible Officials: Current Financial Department staff are tracking Federal expenditures directly from the accounting software. Questioned Costs: $9,110

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