Criteria
The Academy’s internal control structure should ensure that the accounting data is appropriately calculated, reconciled, and reported in accordance with generally accepted accounting principles.
Condition
The Academy’s accounts required significant adjustments to the general ledger to properly reflect the appropriate balance after the books and records were presented for audit.
Context
We noted several accounts that required reconciling after the general ledger was closed.
Cause and Effect
The Academy did not perform proper reconciliation of accounts and the Academy did not have proper controls in place.
Recommendation
The Academy should institute monthly and yearly closing procedures to reconcile all accounts and match the general ledger.
Management’s Response
The Accounting Manager will adhere to the established monthly checklist and physically check off items as they are completed, including the date of completion. Management will review the monthly close procedural checklist to ensure established processes have been followed and completed and sign off on each month after completion/close is verified.
Criteria
The Academy should have appropriate overall monitoring of the general ledger to ensure timely and accurate financial statements.
Condition
The Academy lacked appropriate overall monitoring of account balances during the year to compile complete and accurate financial reports that resulted in many auditor-proposed journal entries.
Context
We noted that the Academy didn’t have a process in place to ensure that financial statements were accurate and complete.
Cause and Effect
The Academy did not identify the resources necessary to ensure general ledger accounts were monitored and analyzed by appropriate individuals, including taking an overview of fund activity to finalize the accounting records. As a result of the lack of appropriate overall monitoring procedures, there were many auditor-proposed journal entries.
Recommendation
The Academy should develop an overall monitoring procedure to ensure that all fund activity is complete, accurate, and logical. This includes assigning an appropriate individual to each general ledger account, and several individuals are responsible for the entire general ledger and financial statements to perform monitoring, analytical analysis, and adjustment as needed.
Management’s Response
The Director of finance will review staffing resources and make appropriate adjustments to ensure that adequate levels of staffing and quality staff are recruited and retained. New ERP software has been purchased to facilitate input, reporting, and analysis of fund accounting and accurate GL classification.
Criteria
A process should be in place to ensure that the Academy complies with laws and regulations.
Condition
There were instances identified where the Academy was not in compliance with laws and regulations. State School Aid Act MCL 388.1718 requires that annual audits be submitted by November 1 to the Michigan Department of Education. Finally, the Academy was in violation of the Uniform Budgeting and Accounting Act in that there was a deviation from the amended budget.
Context
We noted that the Academy didn’t monitor the budget to actuals on a regular basis. Also, there were shifts in the accounting staff that led to the submission delay. In addition, the different opinions and pre-approvals received as to being an eligible sub-recipient led to delays.
Cause and Effect
There was a change in staff and staff shortages, which led to noncompliance with MCL 388.1718 and deviations in budget to actuals.
Recommendation
We recommend that the Academy implement a process that identifies specific individuals for identifying and monitoring applicable compliance requirements throughout the year.
Management’s Response
The necessary review and analysis of GL accounts will be completed according to the established month end and annual close procedure check lists. Audit engagement will begin no later than August for 2023 SY. Any new, as well as current staff, will receive periodic in-service centered around the MI Public School Accounting manual to ensure thorough understanding of the expectations and processes for school fund accounting.
Criteria
A process should ensure grant revenue is accurately and timely recorded.
Condition
The Academy didn’t have a process in place to ensure that grant revenue was reported accurately and timely.
Context
During our testing, we noted errors in recording various revenue, accounts receivable, and unearned revenue accounts. This included instances where revenues were not properly recorded, and drawdowns for grants were processed beyond the sixty-day requirement, which led to a reduction in revenue.
Cause and Effect
There is no process to ensure that grant revenues are timely and accurately accounted for.
Recommendation
We recommend that the Academy implement a process that would allow for the accurate recording of grant revenue and timely request of cash drawdowns.
Management’s Response
Management will ensure experienced staff is recruited, retained, and trained to support grant revenues, which are accurately drawn and reported to an appropriate accountant for recording.
Criteria
The building leader and the business office approve invoices.
Condition
Controls in place were not adequate to ensure that expenditures were approved by the building leader.
Context
During our testing, we noted multiple invoices without proper approval.
Cause and Effect
The established internal control procedures related to approving an invoice were overlooked in several instances. The effect of unapproved invoices can cause unauthorized disbursements or budget overruns.
Recommendation
We recommend that the Academy implement procedures to ensure each invoice has the proper approval before payment.
Management’s Response
Management has procured New ERP software that supports clear invoicing and purchasing approval processes within the system. Management will have individual training with building leaders to refine the purchasing approval process through the new accounting software, as well as training with front office staff on the collection of the appropriate paperwork upon receipt of deliveries.
Criteria
The State School Aid Act of 1979 Article 10 Section 388.1702 does not allow for districts receiving funds under the act to operate under a deficit.
Condition
The Academy did not monitor the budget to actuals on a regular basis.
Context
We noted that the General Fund has an unassigned deficit fund balance as of June 30, 2022.
Cause and Effect
The academy lacked adequate budgetary controls. The Academy has filed a deficit elimination plan with the State.
Recommendation
The Academy should follow its deficit elimination plan and submit needed revisions as they arise.
Management’s Response
The Academy will monitor the budget to actual numbers on a monthly basis and review with the Board. We will also put in place tighter budgetary controls. The building leaders' and all other administrators' budgets will be monitored monthly, and budget overages will be resolved immediately. The Academy will follow the currently approved deficit reduction plan and submit revisions if needed.
Criteria
According to Section 2 CFR Part 2 00.430 (i) Standard for Documentation of Personnel Expenses, Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. The records must support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award, a federal award, and a non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
Condition
Controls were inadequate to ensure the Academy maintained timekeeping documentation of individuals assigned to Title I.
Questioned Cost
Questioned costs include the wages, benefits, and applicable charges for employees whose time and effort reports were unavailable. The total wages, benefits, and applicable taxes totaled $97,564 in FY 22 for the employees selected for testing. Management was unable to provide support for the salaries, wages, benefits, and applicable taxes for the other employees assigned to the grant.
Context
During the testing allowability of Title I expenses, we discovered personnel expenses charged to Title I without time and effort support, i.e., a personal activity report or semi – certification reports. The Academy utilized budget estimates according to the approved consolidated application instead of actual time-keeping documentation.
Cause and Effect
The Academy didn’t require staff charged to multiple federal grants to prepare documentation that support hours worked in Title I.
Management’s Response
The Academy has put in place additional staff to monitor time and effort support, personal activity reporting, and certification processes around the Title I program.
Criteria
Michigan Department of Education requires that Paraprofessionals hired after January 2, 2022, and charged to Title I meet one of the following requirements:
a) Complete at least two years of study at an accredited institution of higher education (equal to 60 semester hours) *; or
b). Obtain an associate degree (or higher); or
c). Meet a rigorous standard of quality and demonstrate, through passage of an approved formal state academic assessment in the following areas.
i. Knowledge of, and the ability to assist in instructing reading, writing, and mathematics; or
ii. Knowledge of, and the ability to assist in, instructing reading readiness, writing readiness, and mathematics readiness, as appropriate.
Condition
Controls were inadequate to ensure the Academy maintained responsibility for compliance with eligibility standards when assigning teachers.
Questioned Costs
Questioned costs include the wages, benefits, and applicable charges for the two employees who were unqualified to perform Title I services, totaling $46,673.
Context
During the testing of Title I staff qualification, we discovered two employees who didn’t meet the paraprofessional requirements.
Cause and Effect
The Academy hired an individual that didn’t meet the requirements.
Recommendation
We recommend the human resource department work with the Title I coordinator to ensure that the assigned staff meets the teacher’s eligibility standards.
Management’s Response
The Academy has put in place a Title I Coordinator to work with the Human Resources Department to ensure that the assigned staff meets the teacher’s eligibility standards for Title I.
Criteria
Michigan Department of Education awarded the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) program to public school academies operating before fiscal year 2022. Under the program, Academies cannot allow the transfer of ESSER funding to other academies.
Condition
The Academy incurred related ESSER expenditures based on the intergovernmental agreement with Washington-Parks Academy. Pursuant to the intergovernmental agreement, approved by the relevant PSA Boards and Authorizer, the Academy received ESSER funding as a second-tier subrecipient. However, the State of Michigan deemed the incurred expenditures ineligible. Expenditure reimbursements were initially made by the State and the Academy firmly disputes that the subsequent reimbursements were unallowable because of the pre-approvals received by the Academy to be a sub-recipient of a federal award, but supports trying to resolve the relevant issues.
Context
During the year ending June 30, 2022, the Academy incurred ESSER expenses according to the previously approved intergovernmental agreement from a pass-through entity as a second-tier subrecipient, which the State subsequently disallowed.
Cause and Effect
The Academy relied on the previously approved intergovernmental agreement as authority to incur ESSER expenditures.
Recommendation
We recommend the Academy return ESSER dollars received from Washington-Parks Academy.
Management’s Response
The Academy signed a Promissory Note with Washington Parks Academy on February 8, 2024, to return all the ESSER dollars transferred to the Academy plus interest back to Washington Parks Academy over the next 60 months.
Criteria
The Academy’s internal control structure should ensure that the accounting data is appropriately calculated, reconciled, and reported in accordance with generally accepted accounting principles.
Condition
The Academy’s accounts required significant adjustments to the general ledger to properly reflect the appropriate balance after the books and records were presented for audit.
Context
We noted several accounts that required reconciling after the general ledger was closed.
Cause and Effect
The Academy did not perform proper reconciliation of accounts and the Academy did not have proper controls in place.
Recommendation
The Academy should institute monthly and yearly closing procedures to reconcile all accounts and match the general ledger.
Management’s Response
The Accounting Manager will adhere to the established monthly checklist and physically check off items as they are completed, including the date of completion. Management will review the monthly close procedural checklist to ensure established processes have been followed and completed and sign off on each month after completion/close is verified.
Criteria
The Academy should have appropriate overall monitoring of the general ledger to ensure timely and accurate financial statements.
Condition
The Academy lacked appropriate overall monitoring of account balances during the year to compile complete and accurate financial reports that resulted in many auditor-proposed journal entries.
Context
We noted that the Academy didn’t have a process in place to ensure that financial statements were accurate and complete.
Cause and Effect
The Academy did not identify the resources necessary to ensure general ledger accounts were monitored and analyzed by appropriate individuals, including taking an overview of fund activity to finalize the accounting records. As a result of the lack of appropriate overall monitoring procedures, there were many auditor-proposed journal entries.
Recommendation
The Academy should develop an overall monitoring procedure to ensure that all fund activity is complete, accurate, and logical. This includes assigning an appropriate individual to each general ledger account, and several individuals are responsible for the entire general ledger and financial statements to perform monitoring, analytical analysis, and adjustment as needed.
Management’s Response
The Director of finance will review staffing resources and make appropriate adjustments to ensure that adequate levels of staffing and quality staff are recruited and retained. New ERP software has been purchased to facilitate input, reporting, and analysis of fund accounting and accurate GL classification.
Criteria
A process should be in place to ensure that the Academy complies with laws and regulations.
Condition
There were instances identified where the Academy was not in compliance with laws and regulations. State School Aid Act MCL 388.1718 requires that annual audits be submitted by November 1 to the Michigan Department of Education. Finally, the Academy was in violation of the Uniform Budgeting and Accounting Act in that there was a deviation from the amended budget.
Context
We noted that the Academy didn’t monitor the budget to actuals on a regular basis. Also, there were shifts in the accounting staff that led to the submission delay. In addition, the different opinions and pre-approvals received as to being an eligible sub-recipient led to delays.
Cause and Effect
There was a change in staff and staff shortages, which led to noncompliance with MCL 388.1718 and deviations in budget to actuals.
Recommendation
We recommend that the Academy implement a process that identifies specific individuals for identifying and monitoring applicable compliance requirements throughout the year.
Management’s Response
The necessary review and analysis of GL accounts will be completed according to the established month end and annual close procedure check lists. Audit engagement will begin no later than August for 2023 SY. Any new, as well as current staff, will receive periodic in-service centered around the MI Public School Accounting manual to ensure thorough understanding of the expectations and processes for school fund accounting.
Criteria
A process should ensure grant revenue is accurately and timely recorded.
Condition
The Academy didn’t have a process in place to ensure that grant revenue was reported accurately and timely.
Context
During our testing, we noted errors in recording various revenue, accounts receivable, and unearned revenue accounts. This included instances where revenues were not properly recorded, and drawdowns for grants were processed beyond the sixty-day requirement, which led to a reduction in revenue.
Cause and Effect
There is no process to ensure that grant revenues are timely and accurately accounted for.
Recommendation
We recommend that the Academy implement a process that would allow for the accurate recording of grant revenue and timely request of cash drawdowns.
Management’s Response
Management will ensure experienced staff is recruited, retained, and trained to support grant revenues, which are accurately drawn and reported to an appropriate accountant for recording.
Criteria
The building leader and the business office approve invoices.
Condition
Controls in place were not adequate to ensure that expenditures were approved by the building leader.
Context
During our testing, we noted multiple invoices without proper approval.
Cause and Effect
The established internal control procedures related to approving an invoice were overlooked in several instances. The effect of unapproved invoices can cause unauthorized disbursements or budget overruns.
Recommendation
We recommend that the Academy implement procedures to ensure each invoice has the proper approval before payment.
Management’s Response
Management has procured New ERP software that supports clear invoicing and purchasing approval processes within the system. Management will have individual training with building leaders to refine the purchasing approval process through the new accounting software, as well as training with front office staff on the collection of the appropriate paperwork upon receipt of deliveries.
Criteria
The State School Aid Act of 1979 Article 10 Section 388.1702 does not allow for districts receiving funds under the act to operate under a deficit.
Condition
The Academy did not monitor the budget to actuals on a regular basis.
Context
We noted that the General Fund has an unassigned deficit fund balance as of June 30, 2022.
Cause and Effect
The academy lacked adequate budgetary controls. The Academy has filed a deficit elimination plan with the State.
Recommendation
The Academy should follow its deficit elimination plan and submit needed revisions as they arise.
Management’s Response
The Academy will monitor the budget to actual numbers on a monthly basis and review with the Board. We will also put in place tighter budgetary controls. The building leaders' and all other administrators' budgets will be monitored monthly, and budget overages will be resolved immediately. The Academy will follow the currently approved deficit reduction plan and submit revisions if needed.
Criteria
According to Section 2 CFR Part 2 00.430 (i) Standard for Documentation of Personnel Expenses, Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. The records must support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award, a federal award, and a non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
Condition
Controls were inadequate to ensure the Academy maintained timekeeping documentation of individuals assigned to Title I.
Questioned Cost
Questioned costs include the wages, benefits, and applicable charges for employees whose time and effort reports were unavailable. The total wages, benefits, and applicable taxes totaled $97,564 in FY 22 for the employees selected for testing. Management was unable to provide support for the salaries, wages, benefits, and applicable taxes for the other employees assigned to the grant.
Context
During the testing allowability of Title I expenses, we discovered personnel expenses charged to Title I without time and effort support, i.e., a personal activity report or semi – certification reports. The Academy utilized budget estimates according to the approved consolidated application instead of actual time-keeping documentation.
Cause and Effect
The Academy didn’t require staff charged to multiple federal grants to prepare documentation that support hours worked in Title I.
Management’s Response
The Academy has put in place additional staff to monitor time and effort support, personal activity reporting, and certification processes around the Title I program.
Criteria
Michigan Department of Education requires that Paraprofessionals hired after January 2, 2022, and charged to Title I meet one of the following requirements:
a) Complete at least two years of study at an accredited institution of higher education (equal to 60 semester hours) *; or
b). Obtain an associate degree (or higher); or
c). Meet a rigorous standard of quality and demonstrate, through passage of an approved formal state academic assessment in the following areas.
i. Knowledge of, and the ability to assist in instructing reading, writing, and mathematics; or
ii. Knowledge of, and the ability to assist in, instructing reading readiness, writing readiness, and mathematics readiness, as appropriate.
Condition
Controls were inadequate to ensure the Academy maintained responsibility for compliance with eligibility standards when assigning teachers.
Questioned Costs
Questioned costs include the wages, benefits, and applicable charges for the two employees who were unqualified to perform Title I services, totaling $46,673.
Context
During the testing of Title I staff qualification, we discovered two employees who didn’t meet the paraprofessional requirements.
Cause and Effect
The Academy hired an individual that didn’t meet the requirements.
Recommendation
We recommend the human resource department work with the Title I coordinator to ensure that the assigned staff meets the teacher’s eligibility standards.
Management’s Response
The Academy has put in place a Title I Coordinator to work with the Human Resources Department to ensure that the assigned staff meets the teacher’s eligibility standards for Title I.
Criteria
Michigan Department of Education awarded the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) program to public school academies operating before fiscal year 2022. Under the program, Academies cannot allow the transfer of ESSER funding to other academies.
Condition
The Academy incurred related ESSER expenditures based on the intergovernmental agreement with Washington-Parks Academy. Pursuant to the intergovernmental agreement, approved by the relevant PSA Boards and Authorizer, the Academy received ESSER funding as a second-tier subrecipient. However, the State of Michigan deemed the incurred expenditures ineligible. Expenditure reimbursements were initially made by the State and the Academy firmly disputes that the subsequent reimbursements were unallowable because of the pre-approvals received by the Academy to be a sub-recipient of a federal award, but supports trying to resolve the relevant issues.
Context
During the year ending June 30, 2022, the Academy incurred ESSER expenses according to the previously approved intergovernmental agreement from a pass-through entity as a second-tier subrecipient, which the State subsequently disallowed.
Cause and Effect
The Academy relied on the previously approved intergovernmental agreement as authority to incur ESSER expenditures.
Recommendation
We recommend the Academy return ESSER dollars received from Washington-Parks Academy.
Management’s Response
The Academy signed a Promissory Note with Washington Parks Academy on February 8, 2024, to return all the ESSER dollars transferred to the Academy plus interest back to Washington Parks Academy over the next 60 months.