Finding Text
Finding 2024-004: Allowable Activities – Allocable Fringe Benefits
Program Name: Title I Grants to Local Educational Agencies – Assistance Listing 84.010
Awarding Agency: U.S. Department of Education, passed through Michigan Department of Education
Finding Type: Material Weakness on Internal Controls over Compliance and Material Noncompliance
Questioned Cost Amount: $74,789
Context / Criteria: The School District determines salary and hourly rates based on contractual agreements and other approved rates and charges these expenses to grants in accordance with approved grant agreements. The School District should allocate related fringe benefits such as retirement, payroll taxes and health benefits in a manner consistent with the pattern of benefits attributable to the individuals of employees whose salaries are chargeable to the Federal awards in accordance with 2CFR200.431.
Condition: During our payroll testing we noted the School District’s average retirement rate across the School District was 29.05%. However, the rate charged to Title I Grants to Local Educational Agencies was 40.84%, resulting in an estimated overcharge of $74,789. We did not note any major budget overages for Title I Grants to Local Educational Agencies at June 30, 2024, however, the grant period for Title I Grants to Local Educational
Agencies ends September 30 each year and budget overages could exist that have not yet been identified based
on spending through June 30, 2024.
Cause / Effect: The School District did not maintain sufficient procedures to ensure charges for fringe benefits were consistent with fringe benefits for the School District as a whole. The School District may have overcharged Title I Grants to Local Educational Agencies based on the retirement rate used for June 30, 2024. Additionally, the School District did not maintain sufficient procedures to ensure expenses charged to the grant were allowable based on the approved budget which may have allowed the School District to detect the retirement expense difference before it was charged to the Federal award.
Recommendation: We recommend the School District maintain a method to allocate Federal awards consistent with the School District as a whole. Additionally, the School District should review all expenditures and compare them to budget to detect any overcharges or undercharges to Federal awards. The School District should ensure the budget used for this comparison agrees to the approved grant budget.
Views of Responsible Officials and Corrective Actions: Management agrees with the finding. See accompanying Corrective Action Plan.