Melvindale - Northern Allen Park Public SchoolsLocal Government

Finding Type:Material noncompliance; material weakness in internal controls over compliance Program Name: ElementaryandSecondarySchoolEmergencyRelief(ESSERIII)Funds(AL:84.425U) Criteria: Compliance with cash management requires that when grant program activities are funded on a reimbursement basis, program costs must be initially funded by available entity resources before reimbursement amounts are requested from the federal government. Condition: The District requested cash reimbursements in excess of program expenditures for the ESSER III program. Context: Cash drawdowns for the ESSER program exceeded expenditures for one transaction/event. Cause: A mathmatical error caused funds to be drawn twice for the same expenditures. Effect: The District was not in compliance with cash management criteria for the ESSER program. Questioned Costs: None Recommendation: The District should only request reimbursement for services that have been performed and for which payment has been made. View of Responsible Officials: TheDistrictwillnotdrawdownfundsuntilasecondmemberofthebusinessofficehasreviewedtheledgerandconfirmedthatthedrawisappropriate.Bothmembers will initial the ledger and it will be saved in the grant files.

2021-001 General Ledger and Internal Controls Over Financial reporting Finding Type: Material weakness in financial internal controls; material weakness in internal controls over compliance Criteria: The District should have staffing and accounting policies in place to ensure that financial records are balanced and reconciled on a timely basis to provide management with complete and accurate interim financial information and to meet annual financial reporting requirements of the Michigan Department of Education. Condition: The District's audit for the year ended June 30, 2021 was required to be submitted to the state of Michigan by November 1, 2021. Context: The District did not have balanced and reconciled financial records for the year ended June 30, 2021 until after January 1, 2022. The audit for the year ended June 30, 2021 was not started until February 2022. Cause: The District's finance director resigned in June of 2021 and the District did not hire a new finance director or make staffing changes to ensure timely and accurate financial records and to complete the financial statement audit by the date required under State law. A third party consultant was hired in December 2021 to reconcile the financial records and prepare complete and accurate financial reports for the year ended June 30, 2021 that could be audited in accordance with professional standards. Effect: The District was unable to maintain accurate and complete financial records on an interim basis and was unable to submit their audit to the State of Michigan on the required deadline of November 1, 2021. As a result of not filing the audit timely, the state withheld the monthly state aid allowance for the months of November 2021, December 2021, and January 2022, impacting the ability of the District to meet operating cash flow needs. Recommendation: The District needs to properly staff and manage the finance department to ensure that complete and accurate financial records are prepared on a timely basis and maintained throughout the year to allow the audit to be completed by November 1 each year as required by State law. View of Responsible Officials: "Melvindale-Northern Allen Park Public Schools acknowledges the conditions noted above and the consequences of those occurrences. The District is committed to hiring and retaining highly qualified and effective business office personnel. In September of 2021, the District hired a Director of Finance with prior school district experience. Additionally, the District is committed to provide necessary training to all business office staff to ensure that all employees understand the Districts policies and procedures and receive updated training through District provided membership in the Michigan School Business Officials organization. The District will ensure that operations are completed, reconciled, and ready for audit in a timely manner to have the audited financial statements submitted to the Michigan Department of Education by the statutory required deadline of November 1, 2022. "

2021-002 Reporting and Cash Management Finding Type: Material noncompliance; material weakness in internal controls over compliance Program Names: Elementary and Secondary School Emergency Relief Fund (ESSER I), AL 84.425D; Governor's Emergency Education Relief Fund (GEAR), AL 84.425C; and Coronavirus Relief Fund, AL 21.019 Criteria: Expenditures charged to federal grants must be supported by costs which have not been funded through other revenue sources such as program income or other state or federal grant programs. Condition: The initial grant reporting prepared by the client, including the initial Schedule of Expenditures of Federal Awards (SEFA), was not accurate as certain allowable expenditures were reported and requested for reimbursement under more than one federal grant program. Specific allowable expenditures of $179,256 were reported and requested for reimbursement under both the GEER and ESSER programs. Additionally, $90,801 of specific allowable expenditures were reported and requested for reimbursement under both the ESSER and Coronavirus Relief programs. Federal grant expenditures were overstated in the initial SEFA by a total of $270,057 for the year ended June 30, 2021. The overreported expenditures were submitted for reimbursement subsequent to June 30, 2021. Subsequent to year end, the client identified $270,057 of disbursements funded through general operating revenues during the year ended June 30, 2021 that were allowable grant expenditures to "replace" the double counted expenditures. Context: The majority of the federal grant expenditures were initially expended in non grant accounts when the disbursements occurred. Subsequent to the initial expenditure, allowable grant costs were identified and posted to the appropriate grant expenditure accounts via a manual journal entry reclassing the expenditures to a grant funded expenditure account. When making the manual journal entries, the District errantly recorded the same expenditures in multiple grant programs, Cause: The District's finance director resigned in June 201 and the District did not hire a new finance director or make staffing changes necessary to properly monitor the grant financial activities. Effect: Federal expenditures and reimbursement requested were duplicated in multiple grant funds, resulting an overreporting of total federal grant expenditures of $270,057. Subsequent to year end, these overreported expenditure amounts were requested for reimbursement, Questioned Costs: None. The client was able to identify expenditures of $270,057 funded through general operating revenues that were allowable grant expenditures and used these expenditures as support for the total grant expenditures reported for the year ended June 30, 2021. Recommendation: The District should ensure that grant reimbursement expenditure posting requests are specifically identified with the related grant disbursements and that expenditures are not posted to multiple grant funds. View of Responsible Officials: "Melvindale-Northern Allen Park Public Schools acknowledges the situation and the consequences of these occurrences' Director of Finance will create a unique set of accounts according to the approved grant applications. This will allow the District to record expenditures on a unique set of account codes to track grant expenditures. The District will keep separate records for all grant expenditures by grant, that include documentation of all expenditures to be reviewed by two business office staff to address the risk of duplicating records. The Director of Finance and Superintendent will ensure updated procedures for reporting and cash management are implemented in February of 2022.

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