Audit 377488

MATERIAL WEAKNESS IN INTERNAL CONTROLS AND NON-COMPLIANCE 2025-003 – UNALLOWABLE COSTS Federal Agency: U.S. Department of Agriculture Program Name: Child Nutrition Cluster Assistance Listing Number(s): 10.553, 10.555, 10.559 Pass-through Entity: Michigan Department of Education Grant Number(s): 241970, 251970, 241960, 251960, 250900 Criteria: Grant agreements describe both allowable and unallowable costs. It is the responsibility of the School District to have internal controls in place to ensure grant spending is properly monitored and expenses are allowable. Condition: Suspected misappropriation of District assets was investigated by law enforcement. It is alleged that school funds were misappropriated by an individual over a period of six years. A portion of these funds related to the Food Service Fund and the Child Nutrition Cluster. Cause: Break-down of the internal control environment and related control activities. Specifically, dual authorization was not required for electronic disbursements and bank statements were not being reviewed by second individual. Effect: Fraudulent invoices were paid, which makes the costs unallowable. Questioned Costs: None. Subsequent to the discovery of the misappropriation, the District reviewed and identified the unallowable costs and reimbursed the Food Service Fund. Identification of How Questioned Costs were Computed: Not applicable. Perspective: Not applicable. Repeat Finding: No. Recommendation: It is recommended that the District require two individuals review/authorize electronic payments made through electronic fund transfers (EFTs) or automated clearinghouse arrangements (ACHs). It is also recommended that bank statements be reviewed by an individual outside of the accounting department, preferably the Superintendent or a Board member. Views of Responsible Officials: Management agrees with the finding and has taken corrective action.

SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL 2025-004 – MEAL COUNT REPORTING Federal Agency: U.S. Department of Agriculture Program Name: Child Nutrition Cluster Assistance Listing Number(s): 10.553, 10.555, 10.559 Pass-through Entity: Michigan Department of Education Grant Number(s): 241970, 251970, 241960, 251960, 250900 Criteria: The District participates in the USDA's Community Eligibility Program (CEP). As a CEP district, reimbursements from the program are based on student meal counts. The total meal counts are multiplied by the District's claiming percentage to determine the number of meals reimbursed by the federal government at the "free" rate versus the "paid" rate. Condition: The School District under reported meal counts on reimbursement requests. Cause: For the School Breakfast Program and National School Lunch Program the wrong number of meals was reported due to a transcription error. For the Summer Food Service Program, meals were being tracked on multiple reports and all reports were not consolidated when completing the reimbursement request. Effect: The District did not claim the correct number of meals and thereby received less in reimbursement than what the District was eligible to claim. Questioned Costs: None Identification of How Questioned Costs were Computed: Not applicable. Perspective: Not appliable. Repeat Finding: No. Recommendation: Procedures should be put in place to improve internal controls such as having multiple staff be involved in reporting meal counts. Views of Responsible Officials: Management agrees with the finding and has taken corrective action.