ONAWAY AREA COMMUNITY SCHOOLS

Condition and Criteria: The Michigan Department of Education (MDE) Audit Manual requires that the accounting information submitted to the MDE, which would include the Financial Information Database (FID) and Final Expenditure Report (FER), be accurate and true representations of the expenditures for each project, by funding source code. During the audit, we found multiple areas where incorrect funding source codes were used for various expenditures. While we noted no material overages in amounts charged to grants after completion of the FERs, we did note discrepancies between the ending trial balances and the FERs. In addition, we found that those charges included in the District's trial balance were not always compared back to the approved grant applications. Effect: The District had multiple adjusting journal entries that had to be recorded after year end to correctly report the various grant activities, which identified errors in what was reported in year end FER's, resulting in small overages in what was claimed. Cause: Expenditures by grant code are not consistently matched against the amounts being claimed or against the approved grant applications, as well as against the Final Expenditure Reports when submitted. Context: During the audit, we found multiple areas where incorrect funding source codes were used for various expenditures, which in turn caused errors between ending balances and the FERs that were submitted. In addition, we found that those charges included in the District's trial balance were not always compared back to the approved grant applications. Questioned Costs: $1,730 - ESSER II Summer Programing; $1,099 - ESSER II - Before and After School Programs; $2,885 - GEER II Teamer & Support Staff Payments. Auditors' Recommendation: We recommend that management continue verifying the accuracy of the coding of each transaction, documenting such coding on each invoice, and that management then compare the trial balance to the individual grant draws, each time a draw is made, prior to completing the trial balance for the audit, and prior to completing the annual FER. In addition, we recommend that when coding the transactions, management compare each transaction to the applicable approved grant application. Views of Responsible Officials and Planned Corrective Actions: The District understands the issue and will begin comparing each transaction to the approved grant application and to ensure proper coding and allowability in all areas.

Condition and Criteria: The Michigan Department of Education’s Auditing Manual requires that all monies are not requested until after the expenses have been incurred as well as after actual disbursement of those funds. At year end, the District drew down more funds than were actually disbursed, including accruals and encumbrances in the final draw. Effect: The District received more grant dollars from the Michigan Department of Education than they had disbursed. Cause: The District did not realize the requirement to not draw down the funds until physically disbursed. Context: At year end, the District drew down more funds than were actually disbursed, including accruals and encumbrances in the final draw. However, the encumbrances drawn were subsequently reduced back out of the District's expenditures, with additional expenditures that were not previously coded to the correct funding source code, being added back to each grant, resulting in no remaining questioned costs. In addition, the accruals were subsequently disbursed, resulting in no excess funds being drawn as of the date of the audit report. Questioned Costs: None. Auditors' Recommendation: We recommend that the District ensure that only disbursed funds are included in their draws at year end, at that the final draw, including accrued payroll, not be drawn until after the last pay in August each year. Views of Responsible Officials and Planned Corrective Actions: The District understands the issue and will make sure to only draw disbursed funds moving forward.