SCHOOL DISTRICT OF THE CITY OF DEARBORN, MICHIGAN

Assistance Listing Number, Federal Agency, and Program Name Student Financial Assistance Cluster U.S. Department of Education: • ALN 84.007 Federal Supplemental Educational Opportunity Grant Program • ALN 84.033 Federal Work Study Program • ALN 84.063 Federal Pell Grant Program • ALN 84.268 Federal Direct Loan Program Federal Award Identification Number and Year Various Pass through Entity N/A Finding Type Significant deficiency Repeat Finding No Criteria The School District has 45 days from the date the School District determines a student’s withdrawal date to calculate a return to Title IV refund calculation for the student and return the funds. Withdrawal dates are defined as the time when the student officially withdraws or expresses notification to withdraw or, if the student does not officially withdraw, the date that the School District determines the student is no longer in attendance (34 CFR Section 668.22(j)). Condition For one student, the School District used an incorrect number of days attended in the return to Title IV calculation, resulting in an inaccurate refund amount. Questioned Costs $3,069 ALN 84.063 Federal Pell Grant Program If Questioned Costs are not Determinable, Description of Why Known Questioned Costs were Undetermined or Otherwise Could not be Reported N/A Identification of How Questioned Costs Were Computed The questioned costs include the total Title IV assistance disbursed to the one student tested in which the School District used an incorrect number of days attended in the return to Title IV calculation. Context 6 of the 40 calculations tested involved students enrolled in shorter sessions (8 12 weeks), which require careful tracking of attendance dates. The error occurred in one of these cases. Cause and Effect The School District does not have a formal review process for return to Title IV calculations. This increases the risk of manual errors, which may lead to incorrect refunds and potential noncompliance with federal regulations. Recommendation The School District should implement a documented review procedure for all return to Title IV calculations, including verification of withdrawal dates and days attended, to ensure accuracy and compliance. Views of Responsible Officials and Corrective Action Plan We have conducted ongoing training, created R2T4 Quick References, Term Calendar Calculators, and R2T4 Decision Trees, as well as other tools to assist R2T4 team members. These are supplemental to the body of regulations related to R2T4 found in the Student Aid Handbook. We will also perform and document a sample based review of R2T4 calculations on a semester by semester basis.

Assistance Listing, Federal Agency, and Program Name - 84.010 - Title I Grants to Local Education Agencies Federal Award Identification Number and Year - 231530, 241530 Pass through Entity - Michigan Department of Education Finding Type - Material weakness Repeat Finding - No Criteria - The School District applies the simplified method to determine indirect costs for the Title I program. The allocation of indirect costs and the computation of an indirect cost rate may be accomplished through simplified allocation procedures described in 2 CFR Part 200, Appendix VII, paragraph C.2. The indirect cost rate is approved by the Michigan Department of Education. Condition - The School District did not accurately apply the approved indirect cost rate. Questioned Costs - None Identification of How Questioned Costs Were Computed - Not applicable Context - Proper segregation of duties and review functions are critical key internal control functions to prevent errors or irregularities in financial reporting. The indirect cost allocation for the Title I program included an error in the indirect cost rate applied as identified during the audit. Management reduced the indirect costs charged to the Title I program by $615,547 to correct the error. Cause and Effect - The School District calculated indirect costs using an inaccurate rate. The School District reported indirect costs in excess of the approved rate for the federal program. Recommendation - We recommend that a review of the indirect cost calculations occur to detect errors in the indirect cost rates applied. Views of Responsible Officials and Corrective Action Plan - Management agrees with the finding and is in the process of enhancing procedures.

Assistance Listing Number, Federal Agency, and Program Name 84.425U, U.S. Department of Education, COVID 19 ARP ESSER III Funds Formula Federal Award Identification Number and Year 213713 Pass through Entity Michigan Department of Education Finding Type Significant deficiency and material noncompliance with laws and regulations Repeat Finding No Criteria Approved construction projects must comply with applicable Uniform Guidance requirements, as well as the department’s regulations regarding construction at 34 CFR § 76.600. As is the case with all remodeling or construction contracts using laborers and mechanics financed by federal education funds, an LEA that uses ESSER or GEER funds for minor remodeling, renovation, repair, or construction contracts over $2,000 must meet all Davis Bacon prevailing wage requirements and include language in the contracts that all contractors or subcontractors must pay wages that are no less than those established for the locality of the project (prevailing wage rates). (See 20 U.S.C. 1232b Labor Standards.) (See also FAQ B 6.) Condition During testing of the grant, we noted the School District utilized funds from the Education Stabilization Funds (ESF) for minor remodeling and renovations of the school buildings. Per the 2023 Compliance Supplement, recipients and subrecipients that use ESF for minor remodeling, renovation, or construction contracts that are over $2,000 and use laborers and mechanics must meet Davis Bacon prevailing wage requirements. We noted the School District expended approximately $168,000 in ESSER funds that related to repairs and renovations out of a total of approximately $11,800,000 in ESSER construction funds that did not include the prevailing wage requirement within the contract’s language. This was one contract during changeover of construction administration that missed the bid language, however, was paid at prevailing wages. Questioned Costs None Identification of How Questioned Costs Were Computed N/A No questioned costs Context We noted one of three samples tested for repairs and renovation contracts charged to the ESSER III grant did not include prevailing wage language. The omission occurred during a transition period in the procurement process. The School District verified that the referenced contract prevailing wages were actually paid. Cause and Effect Excluding the prevailing wage rate language in contracts could cause contractors using federal dollars to not pay appropriate wages to their employees. The School District not receiving or reviewing the certified payroll reports from contractors could lead to nondetection of contractors not paying their employees at prevailing wage rates or in accordance with contract provisions. Recommendation We recommend the School District ensure contracts with vendors that are performing repairs, construction, renovations, etc. include the prevailing wage rate language in the contract and that the School District have a process and control in place to ensure that certified payroll reports from the contractors are being received and reviewed by the School District timely. Views of Responsible Officials and Corrective Action Plan As it pertains to the use of any federal funds for construction projects in the School District, when said funds will be used to compensate for labor for any construction project, the School District will stipulate Davis Bacon requirements for prevailing wages as it relates to the use of laborers and mechanics for all projects over $2,000.

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