Finding Text
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.