2020-2021 Michigan School Auditing Manual

MICHIGAN SCHOOL AUDITING MANUAL

EFFECTIVE FOR AUDITS OF SCHOOL YEAR 2020-21

Instructions for Use of the 2021 Michigan School Auditing Manual

The fiscal year ending June 30, 2021 will bring many challenges for grants management and the audits of federal funds provided to public education. This section is designed to assist the users of the manual in completing the year end audits. While not an all-inclusive list, the following should be considered in planning and execution of audits for June 30, 2021.

? The Michigan School Auditing Manual is designed to assist auditors in applying the federal Compliance Supplement to the audit of public schools in Michigan. It is considered supplemental guidance.

? The 2021 Compliance Supplement is not expected to be issued before the end of June. Therefore, the 2021 School Auditing Manual is crafted after the 2020 Compliance Supplement (August 2020) and the 2020 Compliance Supplement Addendum (December 2020). Guidance on any new programs created in response to the COVID-19 pandemic since the most recent Compliance Supplement and Addendum may be issued at a later date by the OMB.

? The COVID-19 awards are currently funded under the following acts: o Coronavirus Preparedness and Response Supplemental Appropriations Act. o Families First Coronavirus Response Act. o Coronavirus Aid, Relief, and Economic Security Act (CARES Act). o Paycheck Protection Program and Health Care Enhancement Act. o Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA) o American Rescue Plan Act (ARP Act)

? For the Department of Education, the Education Stabilization program includes the following CFDA/Assistance Listings: o 84.425A Education Stabilization Fund ? State Educational Agency (Outlying Areas). o 84.425C Governor's Emergency Education Relief Fund (GEER). o 84.425D Elementary and Secondary School Emergency Relief Funds (ESSER). o 84.425H Education Stabilization Fund ? Governors (Outlying Areas).

? The 2020 Compliance Supplement used the "pick 6" concept for identifying compliance requirements that are subject to testing. It is not expected there will be a substantive change to the compliance requirements identified for testing from Education based grants, but the auditor must consider the possibility when planning Federal program testing.

? The School Auditing Manual contains more testing guidance than what is contained in the Compliance Supplement. The best practice approach is to consult the Compliance Supplement to determine what compliance requirements are subject to audit, consider the guidance in the Compliance Supplement, then review the School Audit Manual to identify specific guidance for testing the identified compliance requirements subject to testing.

? For auditors testing grants funded under ESSER, specific guidance is included in the 2020 Compliance Supplement Addendum as CFDA/Assistance Listing 84.425C & 84.425D. The auditor should consider Part 7 of the compliance supplement which discusses the approach needed when a federal program is not included in the Compliance Supplement. If guidance is subsequently issued by OMB prior to single audit reports being issued, the auditor may need to review the guidance and assess whether audit testing needs to be revised.

? ESSER funds are allocated to State Education Agencies (SEAs) by a formula based on the state's prior fiscal year share of Title I, Part A. The SEA allocates these ESSER funds to LEAs using this same formula.

? The ESSER funds were authorized by the CARES Act. The certification and agreements with SEAs need to be completed and signed prior to receiving a grant award.

? Lastly, both new and/or existing programs that have substantively changed as a result of the COVID-19 pandemic will have a significant impact on the single audit process. Some key areas of focus for LEAs and auditors are as follows: o LEAs Changes in processes and controls throughout the year will need to be documented and communicated to the auditor as part of audit planning. Multiple periods may need to be considered during transitions in and out of a remote learning environment. Grant performance requirements may have changed. If this is the case, the LEA should document what changed, how it modified processes and/or controls because of the change, and how compliance has been maintained. Segregation of costs may be necessary, and the system must be able to capture the segregation. Consult MDE grant accounting guidance to assist in determining how funds should be accounted for.

 Personnel compensation charged to federal grants is still required to be supported with documentation in accordance with 2 CFR 200 ?430. The LEA should ensure that these requirements are met based on the guidance provided for the specific program and whether/in what capacity employees of the program provided services during periods of shut down or remote learning.

o Auditors Major program selection will require the auditor to obtain an accurate projection of federal expenditures to determine the size of the program (Type A vs Type B), the total federal expenditures incurred, and to gain an understanding of any fluctuations in anticipated grant activity. Careful application of the major program selection criteria will be essential for an effective major program selection process. The major program selection may need to be revisited once a final SEFA has been received and once a comprehensive understanding of potential impacts on risk assessments has been obtained. Fraud risks are raised when significant changes are adopted quickly. Required Fraud assessments should consider applicable risks.

The MDE provides its latest guidance at MDE. LEAs and auditors are encouraged to use this site to obtain the most up-to-date information related to grants management and planning for 2021 single audits.

TABLE OF CONTENTS

INTRODUCTION................................................................................... 1 OVERVIEW.......................................................................................... 3 GENERAL AUDIT ISSUES

SECTION A - Reports and Schedules .............................................. 8 SECTION B ? Report Distribution................................................. 21 SECTION C ? Subrecipient Monitoring .......................................... 25 SECTION D ? Procurement and Management of Audit Services ........ 29 SECTION E ? Indirect Cost Rates ................................................ 32 SECTION F ? Compensation for Personal Services.......................... 34 SECTION G ? Procurement, Suspension and Debarment ................. 37 COMPLIANCE SUPPLEMENTS USDA DONATED FOODS ............................................................ 40 CHILD NUTRITION CLUSTER....................................................... 46 CORONAVIRUS RELIEF FUND.................................................... 101 TITLE I CLUSTER .................................................................... 108 SPECIAL EDUCATION CLUSTER ................................................. 124 TITLE II, PART A ..................................................................... 135 TITLE IV, PART A .................................................................... 144 EDUCATION STABILIZATION FUND PROGRAM............................. 162 CAREER AND TECHNICAL EDUCATION ....................................... 176 MEDICAID ............................................................................. 189 MICHIGAN DEPARTMENT OF EDUCATION GRANTS SYSTEM........... 204 MICHIGAN PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM ..... 210 STATE REQUIREMENTS............................................................ 215 PUPIL MEMBERSHIP ................................................................ 236 APPENDIX Appendix A - Acronyms ........................................................... 244 Appendix B ? Authoritative Literature ........................................ 245 Appendix C ? Useful Online Resources ....................................... 246 Appendix D ? MDE Michigan School Audit Manual Referent Group .. 247

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