WHITEHALL DISTRICT SCHOOLS

Finding 2025-001: Head Start Cluster Semi-Annual Certification Procedures U.S. Department of Education Type of Finding: Control Pass-through agency: Michigan Department of Education Assistance Listing Number: 93.600 Award numbers: 05CH011882-04, 05CH011882-05 Award year ends: November 30, 2024 and November 30, 2025 Specific Requirement: Allowable Costs/Cost Principles Criteria: Section 200.430 of the Cost Principles of the Title 2 U.S. Code of Federal Regulations (CFR) Part 200—Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires charges to federal award for salaries and wages to be based on records that accurately reflect the work performed. These records must (1) be supported by a system of internal controls which provide reasonable assurance that charges are accurate, allowable and properly allocated, (2) reasonably reflect total activity for which the employee is compensated, (3) encompass both federally assisted and all other activities compensated by the entity, (4) support the distribution of the employee’s wages among specific cost objectives if the employee works on more than one federal award, (5) be reconciled with payroll budget estimates with necessary adjustments made to accounting records to ensure that excess costs are not charged to federal programs. Appendix B to 2 CFR, Part 225—Selected Items of Cost indicates that where employees are expected to work solely on a single Federal award or cost objective, charges for their salaries and wages will be supported by periodic certifications that the employees worked solely on that program for the period covered by the certification. These certifications will be prepared at least semi-annually and will be signed by the employee or supervisory official having first-hand knowledge of the work performed by the employee. Questioned Costs: None. Condition: During our detailed testing of time-and-effort reporting for the Head Start Cluster programs, we noted that semi-annual certifications were prepared to comply with federal time and effort requirements. However, the reports were not timely prepared or timely reviewed by the program supervisors with documented approval. Context: Thirteen employees working in the federal program were eligible for semi-annual certifications because their payroll costs were fully allocated to a single federal program or cost objective. Separate semi-annual certifications were prepared for each six-month period during the fiscal year. While all certifications contained the proper components, including documented supervisor approval, they inadvertently excluded two eligible employees from each report originally. These reports were later re-prepared to include these two employees, however, they were not prepared timely as the forms were completed and certified at least two months after the six-month period ending dates. The sample was not a statistically valid sample. This appears to be an isolated condition. Effect: Failure to timely prepare and review time-and-effort reporting could allow improper payroll expenses to be charged to the School District’s federal programs. As a result, payroll compensation and fringe benefits charged for these employees could be disallowed, or there could be missed opportunities for reimbursement. Cause: The School District program personnel inadvertently excluded two employees from the list of 100% eligible Head Start employees who are required to complete semi-annual certifications. Although these reports were later fixed, they were not timely reviewed and approved. As a result, semi-annual certifications were not reviewed and approved for these employees during the required timeframes. Repeat Finding: This is not a repeat finding. Recommendation: The School District should provide training to educate all employees working in federal programs of the requirements for verifying program employee listings are complete under Uniform Guidance, and the School District should require proper time-and-effort documentation to be timely reviewed and approved by the appropriate program supervisor. Views of Responsible Officials: The School District agrees with this finding.

U.S. Department of Agriculture Finding 2022-004: Child Nutrition Cluster Resource Management Procedures Pass-through entity: Michigan Department of Education CFDA/Assistance Listing Number(s): 10.555, 10.559, and 10.558 Award Numbers: COVID-19: 211971, 221971, 211961, 220910, 221961, 210904, 211920, 212010, 211925, 221920, 222010 Award Year Ends: June 30, 2021 and June 30, 2022 Specific Requirement: Resource Management and Special Tests ? General Program Management Criteria: Section 210.14(b) and 210.19(a)(1) of the Cost Principles of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires a School District to limit its net cash resources in the Food Service Fund to the maximum allowable amount of three months of average expenditures. Questioned Costs: None. Condition: During our testing of the Child Nutrition Cluster net cash resources, we noted that the School District Food Service Fund net cash resources were in excess of maximum allowable amount. Context: As of June 30, 2022, the School District Food Service Fund net cash resources were in excess of the maximum allowable amount. Effect: The School District could receive reduced funding in future years if the condition continues. Cause: The School District served more meals than it had anticipated through the Child Nutrition Cluster Summer Food Service and Child and Adult Care Food Programs as a result of the COVID-19 pandemic. This caused a significant increase in funding, which resulted in excess fund balance. The School District had planned to reduce its Food Service Fund net cash resources below the maximum threshold, but due to timing, was unable to get proper approvals, order and receive purchased goods and/or services by the end of the fiscal year. Repeat Finding: This is a repeat finding. Recommendation: The School District should develop and complete a spend-down plan to ensure it reduces its Food Service Fund net cash resources below the maximum allowable amount. Views of Responsible Officials: The School District agrees with this finding.

U.S. Department of Education Finding 2021-001: Child Nutrition Cluster Resource Management Procedures Pass-through entity: Michigan Department of Education CFDA: 10.555, 10.559, and 10.558 Award Numbers: 200900 COVID-19, 210904 COVID-19, Bonus and Entitlement Commodities, 201920, 202010, 211920 and 212010 Award Year Ends: June 30, 2021 Specific Requirement: Special Tests ? Net Cash Resources Criteria: Section 210.14(b) and 210.19(a)(1) of the Cost Principles of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires a School District to limit its net cash resources in the Food Service Fund to the maximum allowable amount of three months of average expenditures. Questioned Costs: None. Condition: During our testing of the Child Nutrition Cluster net cash resources, we noted that the School District Food Service Fund net cash resources were in excess of maximum allowable amount. Context: As of June 30, 2021, the School District Food Service Fund net cash resources were in excess of the maximum allowable amount. Effect: The School District could receive reduced funding in future years if the condition continues. Cause: The School District served more meals than it had anticipated through the Child Nutrition Cluster Summer Food Service and Child and Adult Care Food Programs as a result of the COVID-19 pandemic. This caused a significant increase in funding, which resulted in excess fund balance. The School District had planned to reduce its Food Service Fund net cash resources below the maximum threshold, but due to timing, was unable to get proper approvals, order and receive purchased goods and/or services by the end of the fiscal year. Repeat Finding: This is not a repeat finding. Recommendation: The School District should develop and complete a spend-down plan to ensure it reduces its Food Service Fund net cash resources below the maximum allowable amount. Views of Responsible Officials: The School District agrees with this finding.

U.S. Department of Education Finding 2021-002: Child Nutrition Cluster Reporting Review Procedures Pass-through entity: Michigan Department of Education (MDE) CFDA: 10.559 Award Numbers: 200900 COVID-19 and 210904 COVID-19 Award Year Ends: June 30, 2021 Specific Requirement: Reporting Criteria: Section 200.303 of the Cost Principles of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires a non-Federal entity to establish and maintain effective internal control over the Federal award that provides a reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with the specified guidance that requires proper segregation of duties by dividing key responsibilities among different people to reduce the risk of error or fraud. This should include separating the responsibilities for authorizing transitions, processing and recording them, reviewing the transactions, and handling any related assets. No one individual should control all key aspects of a transaction or event. In addition, this guidance also requires transactions and internal controls to be clearly documented, and the records should be properly maintained and readily available for examination. Questioned Costs: None. Condition: During our detailed testing of the Child Nutrition Cluster claims reports, we noted that the claims reports were properly performed in accordance with federal requirements and reviewed with documented approval. However, despite this review, the incorrect meal count was reported for one month during the fiscal year. Context: Of the 12 claims reports filed by the School District, one of the 12 claims reports tested contained a clerical error. The November 2020 claims report inadvertently included the Head Start meal count for the previous month instead of the current month. The review and approval of the November 2020 report was documented, but the report was submitted to MDE requesting payment for more meals than the School District had served for that month. The over requested funds were subsequently deferred, and the requested funds from a following month were reduced accordingly upon the detection and reporting of the error to MDE. Effect: Failure to properly prepare and review claims reports could allow funds to be over requested and potentially overstate federal revenue resulting in excess monies paid to the School District. In addition, there could be missed opportunities for reimbursement. Cause: The School District?s claims report review process did not include an established procedure for the reviewer to verify the time periods of the underlying reports of meals served. Repeat Finding: This is a repeat finding. Recommendation: The School District should modify its claims report review procedures to require the verification of the clerical accuracy of the reports, including the time periods for the underlying reports of meals served. Views of Responsible Officials: The School District agrees with this finding.

SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS U.S. Department of Education Finding 2020-002: Child Nutrition Cluster Reporting and Verification Review Procedures Pass-through entity: Michigan Department of Education CFDA: 10.555 Award Numbers: 191960, 200902 COVID-19, 201922 and 201960 Award Year End: September 30, 2020 Specific Requirement: Reporting and Special Tests ? Verification Criteria: Section 200.303 of the Cost Principles of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires a non-Federal entity to establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with the specified guidance that requires proper segregation of duties by dividing key responsibilities among different people to reduce the risk of error or fraud. This should include separating the responsibilities for authorizing transactions, processing and recording them, reviewing the transactions, and handling any related assets. No one individual should control all key aspects of a transaction or event. In addition, this guidance also requires transactions and internal controls to be clearly documented, and the records should be properly maintained and readily available for examination. Questioned Costs: None. Condition: During our detailed testing of the Child Nutrition Cluster claims reports and verification calculations, we noted that while the claims reports and verification calculations were properly performed in accordance with federal requirements, the claims reports and verification calculations performed by the School District were not reviewed with documented approval by another qualified individual. Context: Of the 9 claims reports filed by the School District, all 3 of the claims reports tested were lacking documented approval by a qualified individual. In addition, of the 6 verification calculations performed by the School District, all 6 calculations tested were lacking documented approval by a qualified individual, and the status was incorrectly changed from reduced to free for 2 of the applications tested. Effect: Failure to review claims reports and verification calculations on a timely basis could (1) potentially result in excess claims paid to the School District and (2) allow meals to be served to ineligible students. Cause: The School District did not have established procedures that required documented review and approval of the Child Nutrition Cluster claims reports and verification calculations. Repeat Finding: This is not a repeat finding. Recommendation: The School District should implement procedures to require the documented review and approval of all claims reports and verifications performed. Views of Responsible Officials: The School District agrees with this finding.

SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS