Finding 976431 (2023-005)

Criteria Michigan Department of Education (“MDE”) awarded the American Rescue Plan Elementary and Secondary School Emergency Relief (“ARP ESSER”) program to public school academies operating before fiscal year 2022. Under the program, Academies cannot transfer ESSER funding to other academies. Condition The Academy incurred related ESSER expenditures based on the intergovernmental agreement with Washington-Parks Academy. Pursuant to the intergovernmental agreement, which was approved by the relevant PSA Boards and the Authorizer, the Academy received ESSER funding as a second tier subrecipient. Also, Washington-Park’s consolidated application, which included ESSER allocations to the Academy, was approved by the MDE. Context During the year ending June 30, 2023, the Academy incurred allowable ESSER expenses pursuant to the intergovernmental agreement submitted to MDE as part of the Washington-Parks Academy Consolidated Application, which MDE approved on October 20, 2022. Cause and Effect The Academy relied on the intergovernmental agreement submitted as part of Washington-Parks Academy’s consolidated application, which MDE approved on October 20, 2022, and released funds pursuant to the application as authority to incur ESSER expenditures. Recommendation We recommend that the Academy return the ESSER dollars received from Washington-Parks Academy. Management’s Response While the Academy disagrees with this finding regarding noncompliance because of MDE’s position regarding the release of funds, it is willing to work to correct the issues and has taken the relevant steps to do so. The Academy relied on MDE by approving Washington-Parks Academy’s consolidated application and releasing funds during the fiscal year. It was not until August 29, 2023, that MDE made the Academy aware of itsconcerns with the intergovernmental agreement, and the Academy did not receive any ESSER funds after such notice from MDE. Moreover, expenditure reimbursements were initially made by the MDE pursuant to Washington-Parks Academy’s ESSER application that included the intergovernmental agreement and the Academy firmly disputes that the subsequent expenses were not reimbursable pursuant to the intergovernmental agreement because of the pre-approvals received by the Academy, but supports trying to resolve the relevant issues. As stated herein, the Academy disputes this finding of noncompliance, and will continue to review this matter in order to reach resolution and potential amendments of the Academy’s financial statements; but supports the submission of this audit in order to ensure continued per pupil funding for the students at the Academy.