Finding 1081366 (2024-001)

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.