Ecorse Public SchoolsLocal Government

Allowable Activities – Allocable Wages, Chart of Accounts, and Budget Monitoring Program Name: Title I Grants to Local Educational Agencies – Assistance Listing 84.010 Awarding Agency: U.S. Department of Education, passed through Michigan Department of Education Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance Questioned Cost Amount: $156,818 removed from Title I expenditures Context / Criteria: The School District should maintain internal controls to document wages that accurately reflect the work performed based on 2CFR200.430(i). The internal controls should provide reasonable assurance that the charges are accurate, allowable, and properly allocated as to account and period. Additionally, transactions need to be recorded based on the Michigan School Accounting Manual. The manual has the appropriate account classification with regard to account code dimensions (fund, function, and object code). Condition: The School District improperly charged salaries to the Title I grant. Noted there was one employee that was overcharged to the grant based upon the budget. Cause / Effect: Management has not developed or implemented a control to sufficiently accumulate and document the individuals charged to Title I resulting in inaccuracies in financial reporting and overcharging of the grant. Additionally, the School District did not have adequate controls in place to ensure transactions were being recorded to the proper accounts based on fund, function, and object code. The lack of consistency caused unnecessary variations between the accounting records and supporting documentation. Recommendation: We recommend management implement procedures to document the employees charged throughout the year to ensure they are following the budget, and the School District review the Michigan School Accounting Manual and follow the guidelines for recording transactions with appropriate account classifications. Views of Responsible Officials and Corrective Actions: Management agrees with the finding. See accompanying Corrective Action Plan.

Finding 2024-003, 2023-002: Allowable Activities – Chart of Accounts and Budget Monitoring Program Name: Title I Grants to Local Educational Agencies – Assistance Listing 84.010 Awarding Agency: U.S. Department of Education, passed through Michigan Department of Education Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance Questioned Cost Amount: $27,350 Context / Criteria: Transactions need to be recorded based on the Michigan School Accounting Manual. The manual has the appropriate account classification with regard to account code dimensions (fund, function, and object code). Condition: During our review of revenue and expenditures, we noted transactions are not being recorded to the appropriate revenue and expense accounts based on the Michigan School Accounting Manual for fund, function, and object code. These inconsistencies could have affected the filing of Federal Expenditure Reports and caused budget-to-actual differences that could have been undetected by management. Additionally, cash receipts for notes payable were posted in General Fund but the related proceeds were posted in Debt Service Fund for debt unrelated to tax levies. Cause / Effect: The School District did not have adequate controls in place to ensure transactions were being recorded to the proper accounts based on fund, function, and object code. The lack of consistency caused unnecessary variations between the accounting records and supporting documentation. Inconsistent or improper use of the State Chart of Accounts could also cause errors or misstatements when comparing to approved budgets and filing final expenditure reports. The School District did not have adequate controls in place to ensure transactions were being recorded to the proper accounts based on fund, function, and object code. During our audit of Title I, Grants to Local Educational Agencies, we noted expenditures for purchased services charged to social work services (function 216) in the amount of $27,350 with no corresponding budgeted expenditures for this function. We noted instructional staff (function 227) had a budgeted expenditure amount of $42,574 but no expenditure was charged to this function. The lack of consistency caused unnecessary variations between the accounting records and supporting documentation. Inconsistent or improper use of the State Chart of Accounts could also cause errors or misstatements when comparing to approved budgets and filing final expenditure reports. Recommendation: We recommend the School District review the Michigan School Accounting Manual and follow the guidelines for recording transactions with appropriate account classifications. Views of Responsible Officials and Corrective Actions: Management agrees with the finding. See accompanying Corrective Action Plan.

Finding 2024-004: Allowable Activities – Allocable Fringe Benefits Program Name: Title I Grants to Local Educational Agencies – Assistance Listing 84.010 Awarding Agency: U.S. Department of Education, passed through Michigan Department of Education Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance Questioned Cost Amount: $74,789 Context / Criteria: The School District determines salary and hourly rates based on contractual agreements and other approved rates and charges these expenses to grants in accordance with approved grant agreements. The School District should allocate related fringe benefits such as retirement, payroll taxes and health benefits in a manner consistent with the pattern of benefits attributable to the individuals of employees whose salaries are chargeable to the Federal awards in accordance with 2CFR200.431. Condition: During our payroll testing we noted the School District’s average retirement rate across the School District was 29.05%. However, the rate charged to Title I Grants to Local Educational Agencies was 40.84%, resulting in an estimated overcharge of $74,789. We did not note any major budget overages for Title I Grants to Local Educational Agencies at June 30, 2024, however, the grant period for Title I Grants to Local Educational Agencies ends September 30 each year and budget overages could exist that have not yet been identified based on spending through June 30, 2024. Cause / Effect: The School District did not maintain sufficient procedures to ensure charges for fringe benefits were consistent with fringe benefits for the School District as a whole. The School District may have overcharged Title I Grants to Local Educational Agencies based on the retirement rate used for June 30, 2024. Additionally, the School District did not maintain sufficient procedures to ensure expenses charged to the grant were allowable based on the approved budget which may have allowed the School District to detect the retirement expense difference before it was charged to the Federal award. Recommendation: We recommend the School District maintain a method to allocate Federal awards consistent with the School District as a whole. Additionally, the School District should review all expenditures and compare them to budget to detect any overcharges or undercharges to Federal awards. The School District should ensure the budget used for this comparison agrees to the approved grant budget. Views of Responsible Officials and Corrective Actions: Management agrees with the finding. See accompanying Corrective Action Plan.

Finding 2023-002, 2022-002: Reporting - Chart of Accounts Program Name: Title I Grants to Local Educational Agencies – Assistance Listing 84.010 & Education Stabilization Fund – Assistance Listing 84.425C, 84.425D, 84.425U Awarding Agency: U.S. Department of Education, passed through Michigan Department of Education Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance Questioned Cost Amount: None Context / Criteria: Transactions need to be recorded based on the Michigan School Accounting Manual. The manual has the appropriate account classification with regard to account code dimensions (fund, function, major class, and object code). Condition: During our review of revenue and expenditures, we noted transactions are not being recorded to the appropriate revenue and expense accounts based on the Michigan School Accounting Manual for function, major class and object code. These inconsistencies could have affected the filing of Federal Expenditure Reports and caused budget-to-actual differences that could have been undetected by management. Cause / Effect: The School District did not have adequate controls in place to ensure transactions were being recorded to the proper accounts based on function, major class, and object code. The lack of consistency caused unnecessary variations between the accounting records and required reporting for final expenditure reports. Recommendation: We recommend the School District review the Michigan School Accounting Manual and follow the guidelines for recording transaction with appropriate account classifications. Views of Responsible Officials and Corrective Actions: Management agrees with the finding. See accompanying Corrective Action Plan.

Finding 2023-003, 2022-001: Allowable Activities - Payroll Documentation and Reconciliation Program Name: Title I Grants to Local Educational Agencies – Assistance Listing 84.010 & Education Stabilization Fund – Assistance Listing 84.425C, 84.425D, 84.425U Awarding Agency: U.S. Department of Education, passed through Michigan Department of Education Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance Questioned Cost Amount: Unknown Context / Criteria: The School District determines salary and hourly rates based on contractual agreements and other approved rates and charges these expenses to grants in accordance with approved grant agreements. The School District’s payroll processing should maintain internal controls sufficient to pay employees at agreed amounts, ensure timely changes to agreed amounts, and that amounts are charged to the correct grants in compliance with approved budgets. Condition: During our payroll testing we noted that 13 payments to employees charged to Title I and 10 payments to employees charged to ESSER were not paid based on approved rates. It was also noted that 3 employees charged to ESSER were not charged to the correct expense accounts based on their position changes. Additionally, it was noted that a bonus charged to the Title I grant was unallowable. Cause / Effect: The School District did not maintain sufficient procedures to ensure changes in pay rates were communicated to the appropriate departments for payroll processing. Employees could have been over or under-paid as a result. Additionally, the School District did not maintain sufficient procedures to ensure all expenses charged to the grant were allowable based on the approved budget. Recommendation: We recommend the School District document annual pay rates and increases within each personnel file and those pay rates should be communicated to the payroll department to ensure the changes are made within the payroll software. The payroll register should be reviewed before payroll is processed and paid. Additionally, the School District should review all expenditures to ensure the expense is allowable and monitor budget to actual more closely. The School District should ensure the budget used for this comparison agrees to the approved grant budget. Views of Responsible Officials and Corrective Actions: Management agrees with the finding. See accompanying Corrective Action Plan.

Finding 2023-004: Allowable Activities - Journal Entries and Expenditure Documentation Program Name: Title I Grants to Local Educational Agencies – Assistance Listing 84.010 & Education Stabilization Fund – Assistance Listing 84.425C, 84.425D, 84.425U Awarding Agency: U.S. Department of Education, passed through Michigan Department of Education Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance Questioned Cost Amount: Unknown Context / Criteria: Journal entries should be supported by all other elements required by Uniform Guidance and the School District’s internal controls such as invoices, purchase orders, and approvals. Additionally, the journal entry should be in accordance with the requirements of the award such as, be for non-duplicative costs, appropriate for the account used and be necessary and allowable. Condition: During our disbursement testing we noted 13 journal entries for Education Stabilization Fund and 6 journal entries for Title I that lacked specific invoices with the above-mentioned documentation. Sufficient reconciliations and/or invoices were not provided. Cause / Effect: The School District posted certain expenditures based on budget or up-to-allowable budget. Additionally, expenditures were posted to funding sources and moved by journal entry to another funding source. The School District should maintain sufficient documentation (including invoices) and approvals for each journal entry to ensure the underlying costs are appropriately supported, approved by management and in accordance with the awards. This will also reduce the likelihood the same invoices are not used to support journal entries for two different funding sources which could cause the School District to request reimbursement for unsupported expenditures. Recommendation: We recommend management review each purchase to ensure it is supported by proper documentation and is properly approved prior to payment. Views of Responsible Officials and Corrective Actions: Management agrees with the finding. See accompanying Corrective Action Plan.

Finding 2022-002: Reporting and Chart of Accounts Program Name: Elementary and Secondary School Emergency Relief Fund ? Assistance Listing 84.425C, 84.425D Awarding Agency: U.S. Department of Education, passed through Michigan Department of Education, 2022 Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance Questioned Cost Amount: None Context / Criteria: Transactions need to be recorded based on the Michigan School Accounting Manual. The manual has the appropriate account classification with regard to account code dimensions (fund, function, major class, and object code). Condition: During our review of revenue and expenditures, we noted transactions are not being recorded to the appropriate revenue and expense accounts based on the Michigan School Accounting Manual for function, major class and object code. Cause / Effect: The School District did not have adequate controls in place to ensure transactions were being recorded to the proper accounts based on function, major class, and object code. The lack of consistency caused unnecessary variations between the accounting records and required reporting for final expenditure reports. Recommendation: We recommend the School District review the Michigan School Accounting Manual, and follow the guidelines for recording transaction with appropriate account classifications. Views of Responsible Officials and Corrective Actions: Management is in agreement with the finding. See accompanying Corrective Action Plan.

Finding 2022-004: Wage Rate Requirements Program Name: Elementary and Secondary School Emergency Relief Fund ? Assistance Listing 84.425U Awarding Agency: U.S. Department of Education, passed through Michigan Department of Education, 2022 Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance Questioned Cost Amount: Unknown ? The School District believes prevailing wages were paid; however, the School District did not have controls in place to retain adequate documentation to determine that the compliance requirement was met. Context / 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 School District 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 School District entered into a contract with a construction manager for a project not funded by federal funds. Subsequent to the agreement being placed into effect, a change order was added to include a HVAC project that would be funded by federal funds. The original contract and the change order did not include a provision for compliance with the Davis-Bacon Act. As a result, the School District entered into a construction contract that was not in compliance with 2 CFR Part 176 Subpart C. Recommendation: We recommend management implement procedures to ensure construction contracts entered into that utilize federal funding are reviewed for compliance with federal requirements. Views of Responsible Officials and Corrective Actions: Management is in agreement with the finding. See accompanying Corrective Action Plan.

Finding 2021-003 ? Material Weakness and Material Noncompliance ? Uniform Guidance Criteria: Uniform Guidance (2CFR200) applies to all new grant awards and non-competing continuations made on or after December 26, 2014. A grace period for procurement implementation was available until June 30, 2018. Condition: The School District did not update its policies and procedures to comply with Uniform Guidance sections not subject to a grace period. Uniform Guidance implements changes to certain compliance sections and also requires written procedures of possibly already existing procedures. By accepting Federal grants the School District is responsible for maintaining compliance with Uniform Guidance and implementing procedures to ensure Federal grants are properly spent and reported. Questioned Costs: None Cause and Effect: The School District?s policies and procedures are not up-to-date and in compliance with Uniform Guidance. Failure to update the School District?s policies and procedures could result in noncompliance with grant requirements. The result could jeopardize the School District?s ability to receive Federal grants in the future and/or result in penalties related to past Federal grants. Recommendation: We recommend the School District update its policies and procedures to comply with Uniform Guidance as soon as reasonably possible. The School District should take care in preparing procedures for each compliance requirement for each grant it receives. Views of Responsible Officials: Management agrees with the finding. Corrective Action Plan: See attached corrective action plan.