Audit 374865

Program Name: Literacy Excellence Accelerates Performance – 84.215G Awarding Agency: U.S. Department of Education Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance Questioned Cost Amount: Our testing identified known questioned costs of $103,970. We extrapolated the error rate to the total population, based on our sample, which calculates extrapolated questioned costs of $103,970. Context / Criteria: The School District should maintain internal controls to document disbursements and salaries and wages that accurately reflect the expenditures incurred and work performed based on Uniform Guidance. The internal controls should provide reasonable assurance that the charges are accurate, allowable, and properly allocated as to account and period. Condition: The School District’s documentation for disbursements indicated the use of incorrect account and object codes, as well as a lack of supporting documentation for certain transactions. Specifically, 4 out of the 40 disbursements tested were charged to the general ledger as disbursements instead of payroll transactions, and support could not be provided for 4 out of the 40 disbursements tested. Cause / Effect: The School District is not appropriately labeling expenditures for posting and/or not appropriately reviewing expenditures compared to budget to prevent and identify errors. Additionally, the School District is not reviewing expenditures to supporting documentation to prevent and identify errors. The lack of review for charges being posted to these accounts could result in the School District over or under-charging certain function or object codes compare to approved budgets. Recommendation: We recommend management implement procedures to ensure all expenditures are being allocated to the correct program, account and object code. A comparison of actual expenditures to budget may help identify and prevent misstatements to account for function, program and object codes. Views of Responsible Officials and Corrective Actions: Management is in agreement with the finding. See accompanying corrective action plan.

Program Name and Awarding Agency: Education Stabilization Fund –84.425V, 84.425W, 84.425U, U.S. Department of Education, passed through Michigan Department of Education Literacy Excellence Accelerates Performance – 84.215G, U.S. Department of Education Supporting Educator Excellence and Knowledge – 84.374A, U.S. Department of Education Magnet Schools Assistance ARC (Academically Rigorous Choices) – 84.165A, U.S. Department of Education Head Start Cluster – 93.600, U.S. Department of Health and Human Services, passed through Washtenaw Intermediate School District Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance Questioned Cost Amount: None Context / Criteria: The Michigan School Accounting Manual (Bulletin 1022) serves as a mandatory guide to the uniform classification and recording of accounting transactions for Michigan public school districts. Furthermore, the School District shall not incur an expenditure against an appropriation account in excess of the amount authorized by the Board of Education. The School District is also responsible for comparing budget to actual expenses by function for programs. The School District should also import its original and final budgets into the accounting system to monitor spending and reduce errors in posting expenditures to the chart of accounts. Condition: The School District incurred material budget overages in multiple budgeted functions as adopted by the Board of Education and disclosed in the June 30, 2025 financial statements. Additionally, total actual expenditures of $91,760,599 exceed total budgeted expenditures of $75,840,532 by $15,920,067 in the General Fund. No adopted budget was provided for the Student and School Activities Fund. The final budget also was not imported into the School District’s accounting software. Cause / Effect: The budget was not properly monitored allowing the budget overages to exist. The School District has not established appropriate controls to ensure that the budget is monitored during the year and has overspent the Board-approved budget by a material amount. Additionally, the lack of budgets imported in the accounting software combined with the numerous federal and restricted state grants the School District receives increases the risk of the wrong account codes being used for expenditures which could have a material effect on reporting of Federal and restricted state grants. Recommendation: We recommend that the School District establish policies and procedures to ensure the budget is properly maintained and monitored throughout the year. An amended budget should be adopted throughout the year, as needed, to reflect changes in spending needs. Views of Responsible Officials and Corrective Actions: Management is in agreement with the finding. See accompanying corrective action plan.

Program Name: Literacy Excellence Accelerates Performance – 84.215G Magnet Schools Assistance ARC – 84.165 Awarding Agency: U.S. Department of Education Finding Type: Significant Deficiency on Internal Controls over Compliance and Noncompliance Questioned Cost Amount: None Context / Criteria: The School District should maintain internal controls to retain documentation that is available to support the expenditures that were paid prior to the request for reimbursement based on Uniform Guidance. The internal controls should provide reasonable assurance that the expenditures are accurate, allowable, and properly allocated as to grant and period. Condition: We noted one reimbursement request for the Literacy Excellence Accelerates Performance program and one for the Magnet Schools Assistance ARC program where supporting documentation did not match the amounts requested for reimbursement. Cause / Effect: The School District has not established appropriate controls for all cash reimbursement requests to have a report retained that reflects the supporting expenditures. The School District may undercharge or overcharge the grant as a result. Recommendation: We recommend that the School District implement a process to ensure the School District is following and complying with 2 CFR 200.305(b)(3). Views of Responsible Officials and Corrective Actions: Management is in agreement with the finding. See accompanying corrective action plan.