oversight

The School District of the City of Detroit's Administration of Parental Involvement Funds Under the No Child Left Behind Act of 2001

Published by the Department of Education, Office of Inspector General on 2006-06-22.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

The School District of the City of Detroit’s Administration of 

   Parental Involvement Funds Under the No Child Left 

                     Behind Act of 2001





                                    FINAL AUDIT REPORT




                                            ED-OIG/A05F0018

                                               June 2006




Our mission is to promote the efficiency,                      U.S. Department of Education
effectiveness, and integrity of the                            Office of Inspector General
Department’s programs and operations                           Chicago, Illinois
                       NOTICE

Statements that managerial practices need improvements, as well as
other conclusions and recommendations in this report, represent the
  opinions of the Office of Inspector General. Determinations of
   corrective action to be taken will be made by the appropriate
                Department of Education officials.

In accordance with Freedom of Information Act (5 U.S.C. § 552),
 reports issued by the Office of Inspector General are available to
members of the press and general public to the extent information
     contained therein is not subject to exemptions in the Act.
                          UNITED STATES DEPARTMENT OF EDUCATION 

                               OFFICE OF INSPECTOR GENERAL 

                                              Chicago/Kansas City Audit Region

                  III N. Canal St. Ste.940                                8930 Ward Parkway, Ste 2401
                  Chicago, IL 60606-7297                                  Kansas City, MO 64114-3302
                  Phone (312) 886-6503                                    Phone (816) 268-0500
                  Fax (312) 353-0244                                      Fax (816) 823-1398

                                                                                                  June 22, 2006

Michael P. Flanagan
State Superintendent of Public Instruction
Michigan Department of Education
608 W. Allegan Street
P.O. Box 30008
Lansing, MI 48909

Dear Mr. Flanagan:

Enclosed is our final audit report, Control Number ED-OIGIA05FOO 18, titled The School District
ofthe City ofDetroit's Administration ofParental Involvement Funds Under the No Child Left
Behind Act of2001. This report incorporates the comments you provided in response to the draft
report. If you have any additional comments or infonnation that you believe may have a bearing
on the resolution ofthis audit, you should send them directly to the following Education
Department official, who will consider them before taking final Departmental action on this audit:

                                         Henry Johnson
                                         Assistant Secretary
                                         U.S. Department of Education
                                         Office of Elementary and Secondary Education
                                         400 Maryland Avenue, SW
                                         Washington, D.C. 20202

It is the policy of the U. S. Department of Education to expedite the resolution of audits by
initiating timely action on the findings and recommendations contained therein. Therefore,
receipt of your comments within 30 days would be appreciated.

In accordance with the Freedom oflnfonnation Act (5 U.S.c. § 552), reports issued by the Office
oflnspector General are available to members of the press and general public to the extent
infonnation contained therein is not subject to exemptions in the Act.


                                                                Sincerely,




                                                                Regional Inspector General for Audit


Enclosure



       Our mission is to promote the efficiency, effectiveness, and !ntegrity ofthe Department's programs and operations.
                                                   TABLE OF CONTENTS



                                                                                                                                    Page


EXECUTIVE SUMMARY ...........................................................................................................1


BACKGROUND ............................................................................................................................3


AUDIT RESULTS


     FINDING NO. 1 – Detroit Used Title I Parental Involvement Funds For Costs That 

                     Were Unallowable or Inadequately Documented ............................... 4


     FINDING NO. 2 – Detroit Did Not Ensure That Its Contractors Performed In 

                     Accordance With Contract Terms ....................................................... 8


     FINDING NO. 3 – Detroit Did Not Correctly Report Budgeted and Actual 

                     Expenditures to MDE ............................................................................ 9


     FINDING NO. 4 – Detroit Misclassified Expenditures ......................................................10


     FINDING NO. 5 – Detroit’s Parental Involvement Policy Did Not Include All 

                     Required Elements ...............................................................................12


OTHER MATTERS ....................................................................................................................13


OBJECTIVES, SCOPE, AND METHODOLOGY ..................................................................14


Enclosure 1: Schedule of Costs Recommended for Acceptance, Unallowable Costs, and 

             Inadequately Documented Costs for the 2003-2004 School Year....................17


Enclosure 2: Schedule of Costs Recommended for Acceptance, Unallowable Costs, and 

             Inadequately Documented Costs for the 2004-2005 School Year....................20


Enclosure 3: MDE and Detroit Comments to Draft Report ..................................................23

Final Report
ED-OIG/A05F0018                                                                         Page 1 of 28



                                EXECUTIVE SUMMARY


The objectives of our audit were to determine whether the School District of the City of Detroit
(Detroit) (1) consulted with parents in determining how to use Title I parental involvement funds
during the 2004-2005 school year and (2) properly accounted for and used Title I parental
involvement funds during the 2003-2004 and 2004-2005 school years.

Detroit consulted with parents in determining how to use parental involvement funds during the
2004-2005 school year. However, Detroit’s parental involvement policy did not include all the
required elements. In addition, Detroit did not properly account for or use Title I parental
involvement funds during the 2003-2004 and 2004-2005 school years. Detroit (1) used Title I
parental involvement funds for costs that were unallowable or inadequately documented; (2) did
not ensure that contractors performed in accordance with the terms, conditions, and
specifications of their contracts; (3) did not correctly report budgeted and expended funds to the
Michigan Department of Education (MDE); and (4) misclassified expenditures.

We recommend that the Assistant Secretary for Elementary and Secondary Education require
MDE to ensure that Detroit:

• 	 Returns $930,448 in unallowable costs to the U.S. Department of Education (Department).
• 	 Develops and implements policies and procedures for personnel costs that provide reasonable
    assurance that (1) duplicate payroll and fringe benefits costs are not charged to the grant,
    (2) employees are paid only for hours worked and for hours supported by approved timesheets
    and time rosters, (3) only payroll costs related to work on parental involvement activities are
    charged to the grant, (4) only actual expenses for fringe benefits are charged to the grant, and
    (5) complete and accurate semi-annual certifications are maintained.
• 	 Develops and implements policies and procedures that provide reasonable assurance that Title
    I parental involvement non-personnel expenditures are necessary, reasonable, allocable, and
    adequately documented.
• 	 Develops and implements policies and procedures to provide reasonable assurance that
    (1) contractors performed in accordance with the terms, conditions, and specifications of their
    contracts, (2) it provides Consolidated Application amendments and Grants Final
    Expenditure Reports that permit MDE to review Detroit’s level of Title I parental
    involvement expenditures for compliance with the restrictions and prohibitions of applicable
    statutes, and (3) expenditures, including transfers, to Title I parental involvement benefit the
    Title I parental involvement program.
• 	 Revises its parental involvement policy to include all elements required under Section
    1118(a)(2) of the Act and distributes the revised policy to parents.

In response to the draft of this audit report, MDE and Detroit did not dispute most of our
findings and recommendations, but they did not concur with part of FINDING NO. 1. The
comments are summarized at the end of each finding and the full text of the comments are
included as Enclosure 3. Other than reclassifying inadequately documented costs as unallowable
Final Report
ED-OIG/A05F0018                                                                 Page 2 of 28


in Recommendation 1.1, we did not make any changes to our findings and recommendations as a
result of MDE’s and Detroit’s comments.
Final Report
ED-OIG/A05F0018                                                                                  Page 3 of 28



                                           BACKGROUND


The Elementary and Secondary Education Act of 1965, as amended by the No Child Left Behind
Act of 2001 (Act), significantly increased the choices available to the parents of students
attending Title I schools that fail to meet state standards. Local educational agencies (LEA) and
schools are required to provide parents of students attending Title I schools with information, in
an understandable format, about their children’s education, including teacher qualifications, the
availability of public school choice and supplemental educational services, and parental
involvement. Parental involvement provisions of the Act ensure that parents have the ability to
make informed decisions regarding their children’s education, are encouraged to be actively
involved in their children’s education and school, and play an integral role in increasing
children’s academic achievement.

According to Section 1118(a) of the Act, a LEA may receive parental involvement funds only if
it plans and implements programs, activities, and procedures for the involvement of parents with
meaningful consultation with parents of participating children. LEAs are required to develop
with, agree on with, and distribute to, parents of participating children a written parental
involvement policy. The policy must include a description of how the district will (1) involve
parents in developing a LEA plan under Section 1112 of the Act and the process of school
review and improvement under Section 1116 of the Act; (2) provide assistance to schools in
planning and implementing parental involvement activities; (3) build the schools’ and parents’
capacity for strong parental involvement; (4) coordinate and integrate Title I, Part A parental
involvement strategies with other parental involvement strategies; (5) conduct, with the
involvement of parents, an annual evaluation of the effectiveness of the parental involvement
policy; and
(6) involve parents in the activities of the schools. In addition, each LEA must reserve a
minimum of 1 percent of its Title I allocation for parental involvement, distribute at least
95 percent of the minimum required parental involvement funds reserved to schools, and involve
parents in deciding how to allot the parental involvement funds.

The Uniform Administrative Requirements for Grants and Cooperative Agreements to State and
Local Governments (34 C.F.R. Part 80) 1 sets forth the fiscal and administrative requirements that
government grantees or subgrantees must follow. Pursuant to 34 C.F.R. § 80.20(a) (Standards
for financial management systems), a State as well as its subgrantees must establish fiscal control
and accounting procedures sufficient to, among other requirements, “permit the tracing of funds
to a level of expenditures adequate to establish that such funds have not been used in violation of
the restrictions and prohibitions of applicable statutes.” According to 34 C.F.R. § 80.22
(Allowable Costs), State and local governments must follow Office of Management and Budget
(OMB) Circular A-87. 2 OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal
1
  All regulatory citations are as of July 1, 2003.

2 The Office of Management and Budget revised OMB Circular A-87, effective June 9, 2004. This version 

rescinded and superseded OMB Circular A-87, as amended, issued May 4, 1995. All citations to OMB Circular 

A-87 are applicable to both versions.

Final Report
ED-OIG/A05F0018                                                                        Page 4 of 28


Governments (Circular A-87) establishes principles for determining the allowable costs incurred
by state and local governments under grants, cost reimbursement contracts, and other agreements
with the federal government. To ensure compliance with procurement procedures, State and
local governments must adhere to the requirements set forth in 34 C.F.R. § 80.36(a)
(Procurement).

Detroit paid for a variety of programs and activities with Title I parental involvement funds. The
programs and activities included hiring parental liaisons and liaison assistants, health awareness
classes, parent enrichment seminars and training classes, district-wide parent meetings, a parent
resolution hotline, and a door-to-door campaign that targeted traditionally difficult to reach
parents. In addition, Detroit used Title I parental involvement funds to pay for several outside
consultants and half the salary of Detroit’s Chief of Community and Public Affairs.

Detroit enrolled 150,415 students and 141,148 students during the 2003-2004 and
2004-2005 school years, respectively. MDE allocated approximately $127.8 million and
$130.2 million in Title I funds to Detroit for the 2003-2004 and 2004-2005 school years,
respectively. For the 2003-2004 school year, Detroit budgeted $4.4 million for Title I parental
involvement, of which it expended $2.8 million, including approximately $1.3 million
distributed to schools (1 percent of the total Title I allocation). For the 2004-2005 school year,
Detroit budgeted $4.7 million for Title I parental involvement, of which it expended $4 million,
including approximately $1.3 million distributed to schools (1 percent of the total Title I
allocation).



                                     AUDIT RESULTS


Detroit consulted with parents in determining how to use parental involvement funds during the
2004-2005 school year. However, Detroit’s parental involvement policy did not include all the
required elements.

In addition, Detroit did not properly account for or use Title I parental involvement funds during
the 2003-2004 and 2004-2005 school years. Specifically, Detroit (1) used Title I parental
involvement funds for costs that were unallowable or inadequately documented; (2) did not
ensure that contractors performed in accordance with the terms, conditions, and specifications of
their contracts; (3) did not correctly report budgeted and actual expenditures to MDE; and
(4) misclassified expenditures.

FINDING NO. 1 – Detroit Used Title I Parental Involvement Funds For Costs That Were
                Unallowable or Inadequately Documented

For the 2003-2004 and 2004-2005 school years, Detroit charged the Title I parental involvement
program for personnel (payroll and fringe benefits) and non-personnel costs that were
Final Report
ED-OIG/A05F0018                                                                                         Page 5 of 28


unallowable ($277,061) or inadequately documented ($653,387). 3 [See Figure 1]

    Figure 1
                                   Unallowable                           Inadequately Documented
                     Non-Personnel        Payroll      Fringe       Non-Personnel       Payroll        Fringe
     2003-2004            $65,179          $7,066      $11,667          $304,614        $68,819            N/A
     2004-2005           $171,714         $20,729         $706          $273,811         $6,143            N/A

For the 2003-2004 school year, we reviewed $906,867 of $2,531,978 Detroit charged the Title I
parental involvement program for payroll and non-personnel costs. For the 2004-2005 school
year, we reviewed $957,636 of $3,604,893 Detroit charged to the Title I parental involvement
program for payroll and non-personnel expenditures.

Unallowable personnel costs included charges for (1) duplicate payroll and fringe benefits;
(2) auto allowance costs that should have been paid from non-federal funds; (3) non-Title I and
non-parental involvement activities (for example, student recruitment); (4) incorrectly calculated
fringe benefits; and (5) one employee who stopped working for the district in April 2005 but was
paid with parental involvement funds through the end of June 2005. Unallowable non-personnel
costs included (1) an advance of funds for a consultant that should have reduced future invoiced
amounts; (2) overcharges because of mathematical errors on invoices; (3) charges at an hourly
rate greater than the rate specified in the applicable contract; (4) invoices paid more than once;
(5) capital expenditures for general purpose equipment that MDE did not approve; (6) charges
for entertainment; and (7) charges for promotional items, memorabilia, advertising, and public
relations designed solely to promote Detroit to the general public.

We considered personnel costs to be inadequately documented because Detroit did not provide
us with (1) all payroll time rosters supporting social workers’ salaries charged to parental
involvement, (2) all timesheets for hourly employees, and (3) mileage or other travel records to
support auto allowance charges. We considered non-personnel expenditures as inadequately
documented because Detroit did not provide enough documentation to support that the costs
were necessary and reasonable, allowable, and allocable to Title I parental involvement, and the
documentation provided for these costs did not demonstrate how the costs benefited Title I
parental involvement.

OMB Circular A-87, Attachment A, Paragraph C.1 provides that, to be allowable, costs must be,
among other things, necessary and reasonable for proper and efficient performance and
administration of Federal awards, allocable to Federal awards, and adequately documented.

Detroit charged unallowable and inadequately documented personnel and non-personnel costs to
the parental involvement program because it did not have adequate policies and procedures to
ensure that parental involvement costs were necessary, reasonable, allocable, and adequately

3
 See Enclosure 1 and Enclosure 2 for details about total costs (1) Detroit charged to the Title I parental involvement
program, (2) we reviewed, (3) we recommend for acceptance, (4) we determined to be unallowable, and (5) we
determined to be inadequately documented.
Final Report
ED-OIG/A05F0018                                                                                            Page 6 of 28


documented. Detroit did not (1) require pre-approved purchase orders for Title I parental
involvement expenditures; (2) ensure that invoices paid were accurate and adequately
demonstrated that costs were necessary, reasonable, and allocable to Title I parental
involvement; (3) provide us with semi-annual certifications that were complete and accurate; (4)
ensure hourly employees signed timesheets and supervisors signed all payroll time rosters; (5)
correctly calculate hourly employees’ overtime pay; (6) ensure timesheets were free of math
errors; and
(7) reconcile hours included on timesheets and payroll time rosters with the hours for which
Detroit paid employees. Also, Detroit charged fringe benefits for insurance for a budgeted
amount rather than actual expenses.

Detroit could have used the $277,061 in unallowable costs charged to the Title I parental
involvement program for effective parental involvement activities. Also, Detroit cannot show
how $653,387 in inadequately documented costs benefited the Title I program or parents of
participating children, and there are no assurances that these costs did not benefit an employee
personally.

Recommendations

We recommend that the Assistant Secretary for Elementary and Secondary Education require
MDE to ensure that Detroit —

1.1 	 Returns $930,448 in unallowable 4 costs to the Department.

1.2 	 Develops and implements policies and procedures for personnel costs that provide
      reasonable assurance that (a) duplicate payroll and fringe benefits costs are not charged to
      the grant, (b) employees are paid only for hours worked and for hours supported by
      approved timesheets and time rosters, (c) only payroll costs related to work on parental
      involvement activities are charged to the grant, (d) only actual expenses for fringe benefits
      are charged to the grant, and (e) complete and accurate semi-annual certifications are
      maintained.

1.3 	 Develops and implements policies and procedures that provide reasonable assurance that
      Title I parental involvement non-personnel expenditures are necessary, reasonable,
      allocable, and adequately documented.

Auditee Comments
Detroit and MDE did not dispute the majority of the finding and recommendations. Detroit
agreed that many of the costs were unallowable and modified its procedures and made staffing
changes to ensure future compliance. However, Detroit did not concur that (1) $1,100 for
advertising was unallowable, (2) $1,000 for live musical entertainment was unallowable, or
(3) $11,667 of fringe benefits was unallowable. Detroit requested that the $1,100 for advertising

4 In its response to the draft of this report, Detroit did not provide any documentation to support the costs identified
as inadequately documented in Enclosures 1 and 2. Therefore, the inadequately documented costs are unallowable
pursuant to OMB Circular A-87, Attachment A, Paragraph C.1.
Final Report
ED-OIG/A05F0018                                                                         Page 7 of 28


be considered allowable because it was related to a function at which the Title I Office provided
school choice and SES information, answered questions, and provided handouts. Detroit
requested that the $1,000 for live musical entertainment be considered allowable because it was
part of a total parent volunteer recognition event. Regarding the fringe benefits charges for
$11,667 (included $9,802 in fringe benefits charged for duplicate payroll and $1,865 in fringe
benefits costs for insurance that exceeded the actual expenditure), Detroit cited OMB Circular
A-87, Attachment B, Paragraph 8, which provides that the costs of fringe benefits shall be
allocated to Federal awards and other activities in a manner consistent with the pattern of
benefits attributable to the individuals and groups of employees whose salaries and wages are
chargeable to such Federal awards. Detroit stated that, under this rule, as long as it consistently
applies a fringe benefits rate to all employees and all Federal programs, those costs are
allowable. Detroit stated that its Office of Accounting will ensure that future charges for fringe
benefits will be charged at an actual rate rather than at the projected budgeted rate.

Detroit further stated that it will revise and implement policies and procedures that provide
reasonable assurance that (1) duplicate payroll and fringe benefits costs are not charged to
grants, (2) employees are paid only for hours worked and for hours supported by approved
timesheets and time rosters, (3) only payroll costs related to corresponding approvable activities
are charged to grants, and (4) complete and accurate semi-annual certifications are maintained.
Detroit indicated that no additional payroll time rosters, timesheets, or mileage records have
been located after the departure of the former administrator.

Finally, Detroit stated that it drafted a parental involvement policy that includes statements that
all Title I parental involvement expenditures must be necessary, reasonable, allocable, and
adequately documented. Detroit also stated that (1) the current parental involvement activities
administrator is working with the Office of Title I Compliance to ensure proposed expenditures
comply with Federal and State mandates, are approved by MDE, and are necessary, reasonable,
and allocable; (2) the Office of Title I Compliance will review all Title I requisitions;
(3) procedures are in place to ensure no future advance of funds; and (4) the parental
involvement activities administrator and Offices of Title I and Accounting will monitor Detroit
staff’s review of invoices.

OIG Response
We did not change our finding or recommendations. Detroit did not provide any documentation
to support the inadequately documented costs identified in Enclosures 1 and 2. Therefore, the
costs are unallowable pursuant to OMB Circular A-87, Attachment A, Paragraph C.1. Detroit
did not concur with our conclusion that the $1,100 for advertising (paid for travel mugs and
calculators imprinted with the district logo) is unallowable, but it did not dispute our conclusion
that this expenditure solely promoted the governmental unit. Detroit did not concur with our
conclusion that the $1,000 paid for live musical entertainment is unallowable, even though
entertainment is explicitly unallowable per OMB Circular A-87, Attachment B, Paragraph 14.
Detroit also did not demonstrate that either of these expenses were necessary and reasonable for
the proper and efficient performance and administration of federal awards.

While Detroit did not concur that $11,667 for fringe benefits charges was unallowable, Detroit
Final Report
ED-OIG/A05F0018                                                                        Page 8 of 28


did not dispute our conclusion that $9,802 of this $11,667 was charged for duplicate payroll.
The payroll costs should not have been charged to parental involvement funds twice. Therefore,
the related fringe benefit costs are unallowable. Regarding the $1,865 in fringe benefits costs for
insurance, we do not agree with Detroit’s interpretation of OMB Circular A-87. Because Detroit
charged Title I a projected budgeted rate that exceeded the actual rate, Detroit did not comply
with OMB Circular A-87, Attachment A, Paragraph C.1, which provides that, to be allowable,
costs must be, among other things, necessary and reasonable for proper and efficient
performance and administration of Federal awards, and allocable to Federal awards.

Detroit stated that it will develop or has already developed policies and procedures that provide
reasonable assurance that personnel and non-personnel costs are allowable and adequately
documented. However, Detroit did not provide us with any documentation to support the
procedural changes it described.


FINDING NO. 2 – Detroit Did Not Ensure That Its Contractors Performed In Accordance
                With Contract Terms

Pursuant to 34 C.F.R. § 80.36(a), when procuring property and services under a grant, a State
will follow the same policies and procedures it uses for procurements from its non-Federal funds.
Contrary to the Michigan Department of Management and Budget policy procedures in 0510.08,
regarding agency contract administrators, Detroit’s contract administrator did not adequately
certify that work was performed in conformance with the terms and conditions of the contract
and review vendor invoices. As a result,

• 	 Detroit entered into a contract with American Counselors, Consultants, and Distributors for
    the period February 1, 2004, through January 30, 2005, for a total sum not to exceed
    $500,000. This contract, for which Detroit paid $481,245, stated that all consultant
    employees shall be free from any felony convictions and that failure to certify past criminal
    convictions may result in termination of the contract. The company’s President, who signed
    the contract, was convicted of a felony before the start of this contract.
• 	 Detroit entered into a contract with a second contractor for the period April 1, 2004, through
    June 30, 2005. While this contractor was to be compensated hourly for a total sum not to
    exceed $50,000, Detroit paid this contractor $69,900 during this time period, which exceeded
    the contract limit by $19,900.
• 	 Detroit entered into a contract with a third contractor for the period November 1, 2003,
    through October 31, 2005. While this contractor was to be compensated hourly for a total
    sum not to exceed $80,000, Detroit paid this contractor $87,031 through June 30, 2005,
    which exceeded the contract limit by $7,031.
• 	 Detroit entered into a contract with a fourth contractor for the period October 25, 2004,
    through June 30, 2005. While this contractor was to be compensated hourly for a total sum
    not to exceed $24,000, Detroit paid this contractor $25,182, which exceeded the contract
    limit by $1,182.
We also identified invoices submitted under the above contracts (1) for unallowable services and
services that lacked adequate support, (2) that resulted in Detroit paying more or less than it
Final Report
ED-OIG/A05F0018                                                                          Page 9 of 28


should have paid, (3) for the wrong hourly rate, or (4) that Detroit paid more than once. These
amounts are included under the unallowable and inadequately documented amounts described in
FINDING NO. 1.

Without an adequate contract administration system, Detroit did not use Title I parental
involvement funds for their identified purpose, made duplicate and incorrect payments, and
reduced the amount of Title I funds available for other parental involvement activities. In
addition, Title I parental involvement funds were exposed to an increased risk for fraud and
abuse.

Recommendation

We recommend that the Assistant Secretary for Elementary and Secondary Education require
MDE to ensure that Detroit—

2.1   Develops and implements policies and procedures to provide reasonable assurance that
      (a) contractors perform in accordance with the terms, conditions, and specifications of their
      contracts and (b) it does not pay invoices submitted for unallowable services or invoices
      that lack adequate support, are inaccurate, are duplicative, or exceed contract limits.

Auditee Comments and OIG Response
We did not change our finding or recommendation. Detroit did not dispute our finding. Detroit
stated that it will revise its policies and procedures to outline which Detroit units will be
responsible for monitoring contractor performance. Detroit also stated that it has addressed the
portion of the recommendation to develop policies and procedures to provide reasonable
assurance that it does not pay invoices submitted for unallowable services or invoices that lack
adequate support, are inaccurate, are duplicative, or exceed contract limits, by matching receipts
to purchase orders to verify invoice validity. However, Detroit did not provide any
documentation to support this revised procedure.


FINDING NO. 3 – Detroit Did Not Correctly Report Budgeted and Actual
                Expenditures to MDE

For the 2003-2004 Title I school year, Detroit did not provide an accurate, current, or complete
disclosure of the financial results of Title I parental involvement activities sufficient to permit
MDE to adequately monitor Detroit’s Title I parental involvement expenditures. On the
2003-2004 Consolidated Application, Detroit budgeted $607,082 for parental involvement
activities. Detroit subsequently increased the amount of Title I funds budgeted for Title I
parental involvement activities to $4,446,167 but did not amend the 2003-2004 Consolidated
Application to reflect this budget increase. On the Grants Final Expenditure Report Detroit
submitted to MDE on November 24, 2004, Detroit reported total Title I parental involvement
expenditures (both budgeted and actual) of $607,082. However, according to Detroit’s
accounting system, budgeted and actual expenditures were $4,446,167, and $2,820,213,
respectively.
Final Report
ED-OIG/A05F0018                                                                       Page 10 of 28



According to 34 C.F.R. § 80.20(a) (Standards for financial management systems), a State as well
as its subgrantees must establish fiscal control and accounting procedures sufficient to, among
other requirements, permit the tracing of funds to a level of expenditures adequate to establish
that such funds have not been used in violation of the restrictions and prohibitions of applicable
statutes.

Detroit had inadequate procedures to ensure that it submitted amendments to the 2003-2004
Consolidated Application to MDE for budget changes. The Detroit official responsible for
submitting amendments to MDE was not instructed to submit one for the increase in Title I funds
budgeted for parental involvement. In addition, the electronic Grants Final Expenditure Report
Detroit submitted to MDE did not permit expenditures to exceed budgeted amounts. Therefore,
Detroit only reported parental involvement expenditures up to the amount originally budgeted in
the 2003-2004 Consolidated Application.

Recommendation

We recommend that the Assistant Secretary for Elementary and Secondary Education require
MDE to ensure that Detroit—

3.1 	 Implements procedures that provide reasonable assurance that it provides Consolidated
      Application amendments and Grants Final Expenditure Reports that permit MDE to review
      Detroit’s level of Title I parental involvement expenditures for compliance with the
      restrictions and prohibitions of applicable statutes.

Auditee Comments and OIG Response
Detroit did not dispute our finding. Detroit stated that its (1) Department of Federal, State, and
Local Grant Development and Program Compliance will amend the Consolidated Application to
ensure MDE has the opportunity to review and approve proposed expenditures and (2) Office of
Accounting will ensure that Grants Final Expenditure Reports reflect actual expenditures.
Detroit did not provide any documentation to support these procedures.

We have not changed our finding or recommendation. Detroit did not provide us with any
documentation to support the procedures it described.


FINDING NO. 4 – Detroit Misclassified Expenditures

Detroit misclassified and used Title I parental involvement funds for social workers’ salaries
($731,164) and fringe benefits ($392,255) for the 2003-2004 school year. Detroit originally
charged these expenditures to non-Title I funds and then transferred them to a Title I parental
involvement account. These expenditures benefited the Title I program and were, therefore,
generally allowable as Title I expenditures. 5 However, Detroit should not have used Title I

5
    A portion of the social workers’ salaries is unsupported. See FINDING NO. 1.
Final Report
ED-OIG/A05F0018                                                                          Page 11 of 28


funds budgeted for parental involvement to pay for these costs because the social workers’
activities did not provide any benefit to Detroit’s Title I parental involvement program.

Pursuant to 20 U.S.C. § 7846(a)(5), Detroit must use fiscal control and fund accounting
procedures as will ensure proper disbursement of, and accounting for, Federal funds. According
to 34 C.F.R. § 80.20(a) (Standards for financial management systems), a State as well as its
subgrantees must establish fiscal control and accounting procedures sufficient to, among other
requirements, permit the tracing of funds to a level of expenditures adequate to establish that
such funds have not been used in violation of the restrictions and prohibitions of applicable
statutes.

Detroit misclassified these expenditures because it did not have adequate procedures to ensure
that expenditures transferred to Title I parental involvement benefited Detroit's Title I parental
involvement program. By misclassifying these expenditures, Detroit did not use the $1,123,419
for parental involvement activities as intended. Also, misclassifying these expenditures reduced
MDE’s and Detroit’s ability to trace funds to a level of expenditures adequate to establish that
such funds had not been used in violation of the restrictions and prohibitions of applicable
statutes.

Recommendation

We recommend that the Assistant Secretary for Elementary and Secondary Education require
MDE to ensure that Detroit—

4.1 	 Develops and implements procedures that provide reasonable assurance that expenditures,
      including transfers, to Title I parental involvement benefit the Title I parental involvement
      program.

Auditee Comments and OIG Response
In its response to our draft audit report, Detroit did not dispute our finding. Detroit stated that its
Department of Federal, State, and Local Grant Development and Program Compliance will
review all transfers to ensure they benefit Title I parental involvement. Detroit did not provide
any documentation to support this procedure.

We have not changed our finding or recommendation. Detroit did not provide us with any
documentation to support the procedure it described.
Final Report
ED-OIG/A05F0018                                                                                   Page 12 of 28


FINDING NO. 5 – Detroit’s Parental Involvement Policy Did Not Include All
                Required Elements

For the 2004-2005 school year, Detroit's parental involvement policy did not contain all of the
elements required by Section 1118(a)(2) of the Act. Specifically, the policy did not contain
required descriptions of how the district would

• 	 Involve parents in the joint development of the LEA plan under Section 1112 of the Act and
    the process of school review and improvement under Section 1116 of the Act; and
• 	 Conduct, with the involvement of parents, an annual evaluation of the content and
    effectiveness of the parental involvement policy in improving the academic quality of the
    schools served under Title I, Part A of the Act, and use the findings of such evaluation to
    design strategies for more effective parental involvement, and to revise, if necessary, parental
    involvement policies.

By not providing parents with a parental involvement policy describing how it would involve
parents in the joint development of the LEA plan, the process of school review and
improvement, and the evaluation of the parental involvement policy, Detroit increased the risk
that parents were not aware of the extent to which they were entitled to be involved in their
children's education and therefore did not participate in these processes. Without this parental
involvement, Detroit may not be able to effectively evaluate the parental involvement policy or
create more effective parental involvement strategies.

Detroit officials believed they included all required elements in the parental involvement policy
using non-technical language that parents could easily understand.

Recommendations

We recommend that the Assistant Secretary for Elementary and Secondary Education require
MDE to ensure that Detroit —

5.1 	 Revises its parental involvement policy to include all elements required under Section
      1118(a)(2) of the Act. Once the Department awards a Parental Information and Resource
      Center (PIRC) project in Michigan, Detroit should consider seeking technical assistance
      from the PIRC. 6

5.2 	 Distributes the revised policy to parents.




6
 The PIRC program supports school-based and school-linked parental information and resource centers that, among
other things, help implement effective parental involvement policies, programs, and activities that will improve
children’s academic achievement.
Final Report
ED-OIG/A05F0018                                                                                       Page 13 of 28


Auditee Comments and OIG Response
Detroit did not dispute our finding. Detroit stated that it is currently revising its parental
involvement policy to include all required elements and will post the revised policy on its
website and add it to the parent handbook, which it distributes to all Detroit parents. Detroit
provided us with a draft copy of its revised parental involvement policy. We reviewed this draft
parental involvement policy and determined that it includes a description of how the district will
(1) involve parents in developing a LEA plan under Section 1112 of the Act and the process of
school review and improvement under Section 1116 of the Act; (2) provide assistance to schools
in planning and implementing parental involvement activities; (3) conduct, with the involvement
of parents, an annual evaluation of the effectiveness of the parental involvement policy; and
(4) involve parents in the activities of the schools.

Because the policy is in draft form, and Detroit has not approved the final document, we have
not changed our finding or recommendations. We reviewed Detroit’s draft parental involvement
policy and determined that it does not describe how it will coordinate and integrate parental
involvement strategies. The draft policy corrects the other deficiencies we described in the
finding.



                                           OTHER MATTERS


A financial audit conducted by Detroit’s Office of Internal Audit disclosed that Redford High
School used Title I funds for unallowable expenditures. 7 The report, which covered the period
July 1, 2003, through May 31, 2004, stated that Redford High School used $5,758 in Title I
funds to purchase five, 36-inch flat screen televisions, a purchase that was not necessary to
operate a Title I, Part A program. In addition, Redford High School used $63,000 in Title I
funds to pay a vendor for conflict resolution/anger management classes that did not supplement
Detroit's responsibilities (Detroit employed a conflict resolution specialist for classroom and
anger management). Detroit disallowed the expenditures but did not require Redford High
School to return these funds to the Title I program because (1) of confusion over whether the
funds were actually disallowed and (2) Detroit did not have policies and procedures to require
restitution from schools for unallowable costs.

Because these funds were not used to benefit participating children, we suggest that the Assistant
Secretary for Elementary and Secondary Education require MDE to ensure that Detroit develops
policies and procedures for handling unallowable costs it identifies while monitoring schools’ use
of Federal funds to ensure that it returns future disallowed funds. Further, we suggest that the
Assistant Secretary for Elementary and Secondary Education require MDE to determine whether
the funds in question should be returned to the Title I program.


7
  This financial audit did not address whether the unallowable expenditures were paid with Title I parental
involvement funds.
Final Report
ED-OIG/A05F0018                                                                      Page 14 of 28




                 OBJECTIVES, SCOPE, AND METHODOLOGY


The objectives of our audit were to determine whether Detroit (1) consulted with parents in
determining how to use Title I parental involvement funds during the 2004-2005 school year
(July 1, 2004, through June 30, 2005) and (2) properly accounted for and used Title I parental
involvement funds during the 2003-2004 and 2004-2005 school years (July 1, 2003, through
June 30, 2005.

To achieve our objectives, we interviewed Detroit officials and reviewed documents provided by
Detroit to gain an understanding of Detroit’s internal control over compliance with the parental
involvement provisions of the Act, applicable regulations, and cost principles. The documents
we reviewed included:

1. 	 Detroit’s organizational chart;
2. Detroit’s 2003-2004 Consolidated Application, 2004-2005 Consolidated Application, and
     Grants Final Expenditure Report for the 2003-2004 school year;
3. 	 Accounting records pertaining to Title I parental involvement funds budgeted and expended;
4. 	 Contracts with vendors, invoices, purchase orders, cancelled checks, supervisory time
     rosters, timesheets, employee earning statements, and employee semi-annual certifications;
5. 	 Detroit’s parental involvement policy and related documents; and
6. 	 Prior audit reports, including the Comprehensive Annual Financial Report For the Fiscal
     Year Ended June 30, 2004, Federal Awards Supplemental Information, June 30, 2004, and
     the Financial Audit Report, Redford High School, released December 7, 2004.

We reviewed Detroit’s parental involvement policy to determine if it included descriptions of
how the district would (1) involve parents in developing a LEA plan under Section 1112 of the
Act and the process of school review and improvement under Section 1116 of the Act;
(2) provide assistance to schools in planning and implementing parental involvement activities;
(3) coordinate and integrate Title I, Part A parental involvement strategies with other parental
involvement strategies; (4) conduct, with the involvement of parents, an annual evaluation of the
effectiveness of the parental involvement policy; and (5) involve parents in the activities of the
schools. Because the focus of this audit was to determine whether Detroit consulted with parents
in determining how to use Title I parental involvement funds, we did not determine whether the
policy described how the district would build the schools’ and parents’ capacity for strong
parental involvement.

To determine whether Detroit’s use of Title I parental involvement funds was in compliance with
Section 1118 of the Act, applicable regulations, and cost principles, we selected samples of
transactions shown in Detroit’s accounting system as Title I parental involvement expenditures.
Our review of non-personnel expenditures was limited to testing of Title I parental involvement
funds expended for district-level activities.
Final Report
ED-OIG/A05F0018                                                                                          Page 15 of 28


For personnel and non-personnel transactions recorded for the 2003-2004 and 2004-2005 school
years, we selected transactions randomly and/or judgmentally. 8

• 	 For the 2003-2004 school year, we reviewed 6 judgmentally selected personnel transactions,
    totaling $72,972, from a universe of 11 transactions totaling $889,196, plus additional
    personnel costs totaling $60,125. 9 We reviewed personnel costs totaling $133,097.
• 	 For the 2004-2005 school year, we reviewed 14 randomly and/or judgmentally selected
    personnel transactions, totaling $133,522, from a universe of 101 transactions totaling
    $1,023,259, plus an additional $13,447 in personnel costs related to these transactions. We
    reviewed personnel costs totaling $146,969. For the 2003-2004 and 2004-2005 school years,
    we also reviewed fringe benefits related to $40,302 and $38,282 in personnel expenditures,
    respectively.
• 	 For the 2003-2004 school year, we reviewed 114 randomly and/or judgmentally selected
    non-personnel transactions, totaling $773,770, from a universe of 478 transactions totaling
    $1,642,782.
• 	 For the 2004-2005 school year, we reviewed 151 randomly and/or judgmentally selected
    non-personnel transactions, totaling $810,667, from a universe of 945 transactions totaling
    $2,581,634.

We judgmentally selected larger dollar transactions and transactions that exhibited anomalies
such as unexpected descriptions and document identification numbers that were not like any
others. For non-personnel transactions, we selected all transactions greater than $10,000 and no
transactions under $100. For transactions from $100 through $10,000, we selected transactions
randomly and/or judgmentally. For the 2003-2004 and 2004-2005 school years, we
judgmentally selected contractor transactions, adjusting journal entries, and transactions that
exhibited anomalies such as consecutively numbered invoices from the same vendor, similar
dollar amounts, and identical purchase order numbers and check numbers.

To achieve our audit objective of determining whether Detroit properly accounted for and used
parental involvement funds, we relied, in part, on computer-processed data from Detroit’s
PeopleSoft Enterprise Resource Planning 8.4 application. This data contained our universe of
personnel and non-personnel transactions for the 2003-2004 and 2004-2005 school years. All
transactions we reviewed were generally supported by evidence such as invoices, purchase
orders, cancelled checks, supervisory time rosters, timesheets, and employee earning statements.
 We did not identify any unexplained or missing key data, unexplained relationships among the
data, data outside valid time frames, or unexplained negative amounts. Therefore, we concluded
that the computer-processed data were sufficiently reliable for the purposes of this audit.

We performed our audit work at Detroit’s administrative offices and our Chicago office from

8
  Because there is no assurance that the transactions selected were representative of the entire universes, the results 

should not be projected over the unsampled transactions.

9
  The universe of transactions included one adjusting journal entry for $731,164 that was salary for social workers. 

For this transaction, we reviewed 12 judgmentally selected salary payments totaling $25,604 (included in the 

$72,972 sample transactions total). We also reviewed additional personnel costs, totaling $60,125, that were related 

to the six personnel transactions selected.

Final Report
ED-OIG/A05F0018                                                                 Page 16 of 28


July 2005 through February 2006. We discussed the results of our audit with MDE and Detroit
officials on February 8, 2006. We performed our audit in accordance with generally accepted
government auditing standards appropriate to the scope of the review described above.
         Final Report
         ED-OIG/A05F0018                                                                                     Page 17 of 28


                                          Enclosure 1:

               Schedule of Costs Recommended for Acceptance, Unallowable Costs, and 

                   Inadequately Documented Costs for the 2003-2004 School Year


                         TOTAL                     COSTS
                      CHARGED TO   TOTAL      RECOMMENDED             INADEQUATELY
  COST                 PARENTAL    COSTS             FOR  UNALLOWABLE DOCUMENTED
CATEGORY             INVOLVEMENT REVIEWED      ACCEPTANCE      COSTS       COSTS
                              10
Payroll              $889,196    $133,097 (1) $57,213     $7,066 (2)  $68,819 (3)
Professional
Activities,
Consultants,
Workshops            $1,351,372            $588,670          $355,309                 $39,320 (4)              $194,041 (5)
Local Travel          $242                  $242             $242                     $0                       $0
Advertising           $216,825             $143,718          $30,144                  $3,000 (6)               $110,573 (7)
Consumable
Food                 $5,098                $2,419            $2,419                   $0                       $0
Office
Equipment &
Supplies             $52,300               $24,416           $1,557                   $22,859 (8)              $0
Telephone            $16,204               $13,564           $13,564                  $0                       $0
Mail/Postage          $740                  $740             $740                     $0                       $0
Totals               $2,531,978            $906,866          $461,188                 $72,245                  $373,433

              (1) We also reviewed fringe benefits charges related to one payroll transaction, totaling 

                  $40,302, that was not included in the payroll totals. 


              (2) For the pay period ended July 9, 2004, Detroit charged $25,909 in duplicate payroll to Title
                  I parental involvement funds. Detroit reversed only a portion ($18,843) of this amount.
                  OMB Circular A-87, Attachment A, Paragraph C.1 provides that, to be allowable, costs
                  must be, among other things, necessary and reasonable for proper and efficient
                  performance and administration of Federal awards, and allocable to Federal awards.
                  Therefore, the remaining $7,066 that Detroit did not reverse was unallowable. In addition
                  to these unallowable payroll costs for this pay period, Detroit charged unallowable fringe
                  benefits totaling $11,667 (not included in the above table). When Detroit charged the
                  $25,909 in duplicate payroll, fringe benefits costs for the Federal Insurance Contributions
                  Act, insurance, and retirement, totaling $9,802, automatically posted to Title I parental
                  involvement funds. Detroit did not reverse any of these fringe benefits charges. Therefore,
                  this $9,802 was unallowable. Also, for insurance, Detroit charged $1,865 more to the grant
                  than it actually expended. In total, fringe benefits of $11,667 were unallowable.


         10
           Some totals in Enclosure 1 and Enclosure 2 do not add to the exact dollar because of rounding differences. All
         amounts are rounded to the nearest dollar.
Final Report
ED-OIG/A05F0018                                                                       Page 18 of 28



 (3) For one social worker, all three payroll time rosters we reviewed showed that she did not
     work and was not on paid leave during each of the three pay periods. For a second social
     worker, we did not receive support for a portion of her salary. OMB Circular A-87,
     Attachment A, Paragraph C.1 provides that, to be allowable, costs must be, among other
     things, adequately documented. Because we do not have adequate documentation for the
     three pay periods reviewed, and Detroit did not provide payroll time rosters for any other
     pay periods, the first social worker’s entire salary charged to parental involvement for the
     2003-2004 school year ($66,655) was inadequately documented. The second social
     worker’s earnings statement showed two salary payments for the pay period ended October
     3, 2003; we did not receive adequate documentation for the second salary payment of
     $2,164.

 (4) Detroit paid (a) an invoice for $27,500 that was an advance of funds for a consultant that
     should have been repaid through a 25 percent deduction of each subsequent invoice
     submitted under the contract; (b) invoices with mathematical errors that resulted in the
     program being overcharged by $1,070; (c) an invoice that charged an hourly rate ($30) that
     was greater than the hourly rate specified in the contract ($20), resulting in the program
     being overcharged by $2,000; (d) a duplicate invoice for $6,900; and (e) $1,850 for
     advertising and public relations that solely promoted the district, including design of a
     district logo. OMB Circular A-87, Attachment A, Paragraph C.1 provides that, to be
     allowable, costs must be, among other things, necessary and reasonable for proper and
     efficient performance and administration of Federal awards, and allocable to Federal
     awards. In addition, OMB Circular A-87, Attachment B, Paragraph 1.f(4) provides that
     costs for advertising and public relations designed solely to promote the governmental unit
     are unallowable.

 (5) Contrary to OMB Circular A-87, Attachment A, Paragraph C.1, Detroit did not provide
     adequate documentation to show that these costs were necessary and reasonable for proper
     and efficient performance of Federal awards, and allocable to Federal awards. Detroit paid
     a contractor for the distribution of announcements, flyers, and pamphlets. Some of the
     contractor's invoices for these services did not include examples of the flyers distributed,
     and other invoices included flyers promoting a non-Title I event ($112,763). In addition,
     documentation for goods and services provided by other contractors did not adequately
     demonstrate benefit to the Title I program. Invoices indicating that services benefited non-
     Title I activities ($37,412), and one invoice was for services provided by a contractor when
     those same services were provided by district employees ($2,000). Other inadequately
     documented costs included (a) purchases of tote bags and shirts ($10,650); (b) payments
     for a membership fee for a professional organization and for several events ($25,516); (c)
     payments for local meals, hotel, and travel expenses ($4,701); and (d) payment for an
     invoice dated before services were provided with no documentation to demonstrate the
     vendor provided these services ($1,000).

 (6) Costs of advertising and public relations that solely promoted the district, including design
     of a district logo. OMB Circular A-87, Attachment B, Paragraph 1.f(4) provides that
Final Report
ED-OIG/A05F0018                                                                     Page 19 of 28


    advertising and public relations designed solely to promote the governmental unit are
    unallowable.

 (7) Contrary to OMB Circular A-87, Attachment A, Paragraph C.1, Detroit did not provide
     adequate documentation to show that these costs were necessary and reasonable for proper
     and efficient performance of Federal awards, and allocable to Federal awards. These costs
     included (a) services with inadequate documentation to demonstrate benefit to the Title I
     program, including invoices indicating that services may have benefited non-Title I
     activities ($19,750); (b) purchases of imprinted folders, tape measures, calculators, and
     travel mates ($25,658); and (c) advertising ($65,166).

 (8) Capital expenditures for general purpose equipment that MDE did not approve. T   	 his
     equipment included bookcases, tables, an audio visual cabinet, a love seat, a lounge chair,
     computers, and personal data assistants. OMB Circular A-87, Attachment B, Paragraph
     15.b(1) provides that capital expenditures for general purpose equipment, buildings, and
     land are unallowable as direct charges, except where approved in advance by the awarding
     agency. Detroit did not budget any general purpose equipment in its 2003-2004
     Consolidated Application.
         Final Report
         ED-OIG/A05F0018                                                                      Page 20 of 28


                                       Enclosure 2:

            Schedule of Costs Recommended for Acceptance, Unallowable Costs, and 

                Inadequately Documented Costs for the 2004-2005 School Year 


                        TOTAL                     COSTS
                    CHARGED TO   TOTAL      RECOMMENDED             INADEQUATELY
    COST             PARENTAL    COSTS             FOR  UNALLOWABLE DOCUMENTED
CATEGORY           INVOLVEMENT REVIEWED      ACCEPTANCE      COSTS       COSTS
Payroll            $1,023,259  $146,969 (1) $120,097    $20,729 (2) $6,143 (3)
Professional
Activities,
Consultants,
Workshops          $2,318,311          $674,987       $252,348             $161,392 (4)         $261,248 (5)
Local Travel       $3,095              $785           $785                 $0                   $0
Local Postage      $1,036              $1,036         $1,036               $0                   $0
Advertising        $71,279             $18,136        $6,604               $1,100 (6)           $10,432 (7)
Rental Land &
Building           $35,179             $34,668        $34,668              $0                   $0
Consumable
Food               $108,120            $64,750        $58,300              $4,318 (6)           $2,131 (8)
Office Supplies
& Equipment        $44,593             $16,305        $11,401              $4,904 (9)           $0
Printing &
Binding            $20                 $0             $0                   $0                   $0
Totals             $3,604,893          $957,636       $485,239             $192,443             $279,954

         (1) We also reviewed fringe benefits related to three payroll transactions totaling $38,282, which
             are not included in the payroll totals.

         (2) Includes auto allowance charges ($2,631), parent liaison salary ($10,819), and overtime
             ($7,279). OMB Circular A-87, Attachment A, Paragraph C.1 provides that, to be allowable,
             costs must be, among other things, necessary and reasonable for proper and efficient
             performance and administration of Federal awards, and allocable to Federal awards. Detroit
             charged the entire auto allowance for its Chief of Community and Public Affairs to Title I
             parental involvement, though she spent only 50 percent of her time working on parental
             involvement activities. Because no more than half of the auto allowance should have been
             charged to Title I parental involvement, half ($2,631) of the auto allowance was unallowable.
             Three months (April 2005 through June 2005) of one parent liaison’s salary ($10,819) was
             unallowable because she stopped working for the district in April 2005, but was paid with
             Title I parental involvement funds through the end of June 2005. Three parent liaisons
             employed at the time stated that she left the district in April 2005. Overtime charged to
             parental involvement for the pay period ending October 1, 2004 ($7,279), was unallowable
             because the services provided did not benefit the Title I program, including parental
             involvement. The service, calling all students not returning to the district, was a general
Final Report
ED-OIG/A05F0018                                                                      Page 21 of 28


   enrollment activity that should not have been charged to Title I. In addition to these
   unallowable payroll costs, Detroit charged unallowable fringe benefits costs for insurance to
   the grant ($706 more than it actually expended; this amount is not included in the above
   table).

(3) Contrary to OMB Circular A-87, Attachment A, Paragraph C.1, Detroit did not provide
    adequate documentation to show that auto allowance charges ($2,631) and parent liaison and
    liaison assistant payroll ($3,512) were necessary and reasonable for proper and efficient
    performance of Federal awards, and allocable to Federal awards. Detroit did not provide us
    with adequate documentation, such as mileage or use of personally owned vehicle records,
    for half ($2,631) of the auto allowance charged to parental involvement. OMB Circular A-
    87, Attachment B, Paragraph 43.a states that travel costs are the expenses for transportation,
    lodging, subsistence, and related items incurred by employees who are in travel status on
    official business of the governmental unit. Such costs may be charged on an actual cost
    basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a combination of
    the two. For other payroll costs ($3,512), we did not receive adequate documentation for
    transactions that included timesheets. Detroit did not provide us with timesheets supporting
    $3,302 paid to hourly employees for the pay period ended October 1, 2004. Also, for three
    of our sample transactions, payroll time rosters reported more hours than the number of hours
    documented by timesheets. Therefore, an additional $210 was inadequately documented.

(4) Detroit paid (a) invoices with mathematical errors that resulted in the program being
    overcharged by $4,820; (b) invoices that charged an hourly rate ($30) greater than the rate
    specified in the contract ($20), resulting in the program being overcharged by $6,700; (c)
    duplicate invoices for $11,373; (d) $1,000 for live musical entertainment at a parent
    recognition event; (e) $121,978 for capital expenditures for general purpose equipment that
    MDE did not approve, including desks, chairs, tables, cabinets, and digital copiers; and (f)
    $15,520 for materials imprinted with the district logo. OMB Circular A-87, Attachment A,
    Paragraph C.1 provides that, to be allowable, costs must be, among other things, necessary
    and reasonable for proper and efficient performance and administration of Federal awards,
    and allocable to Federal awards. Also, OMB Circular A-87, Attachment B, Paragraph 14
    provides that costs for entertainment, including amusement, diversion, and social activities
    and any costs directly associated with such costs are unallowable. OMB Circular A-87,
    Attachment B, Paragraph 15.b(1) provides that capital expenditures for general purpose
    equipment, buildings, and land are unallowable as direct charges, except where approved in
    advance by the awarding agency. Detroit did not budget any general purpose equipment in
    its Consolidated Application. In addition, OMB Circular A-87, Attachment B, Paragraph 1.f
    provides that costs for promotional items, memorabilia, advertising, and public relations
    designed solely to promote the governmental unit are unallowable.

(5) Contrary to OMB Circular A-87, Attachment A, Paragraph C.1, Detroit did not provide
    adequate support to show that these costs were necessary and reasonable for proper and
    efficient performance of Federal awards, and allocable to Federal awards. Detroit paid a
    contractor for the distribution of announcements, flyers, and pamphlets. Some of the
Final Report
ED-OIG/A05F0018                                                                        Page 22 of 28


   contractor's invoices for these services did not include examples of the flyers distributed, and
   other invoices included flyers promoting a non-Title I event ($209,032). Documentation
   supporting payments for goods and services provided by other contractors also did not
   adequately demonstrate benefit to the Title I program ($13,644). Other inadequately
   documented costs included (a) purchases of shirts ($11,700); (b) a payment for a membership
   fee for a professional organization and payments to its Chief of Community and Public
   Affairs for per diem allowance for other individuals that attended two Title I conferences
   (Detroit provided inadequate documentation to show that all individuals attended one of the
   conferences and provided inadequate documentation to demonstrate that all individuals
   received the per diem allowance) ($16,387); (c) payments for local meals and parking
   expenses ($2,610); and (d) payments for invoices dated before services were provided, with
   no documentation to demonstrate vendors provided these services ($7,875).

(6) Costs of promotional items, memorabilia, advertising, and public relations that solely
    promoted the district. These costs included (a) the cost of food for a back to school rally at a
    casino (Consumable Food, $4,318) and (b) travel mugs and calculators imprinted with the
    district logo (Advertising, $1,100). OMB Circular A-87, Attachment B, Paragraph 1.f
    provides that costs for promotional items, memorabilia, advertising, and public relations
    designed solely to promote the governmental unit are unallowable.

(7) Contrary to OMB Circular A-87, Attachment A, Paragraph C.1, Detroit did not provide
    adequate documentation to show that these costs were necessary and reasonable for proper
    and efficient performance of Federal awards, and allocable to Federal awards. These costs
    included (a) purchases of imprinted pens and pencils, shirts, and travel soap pads ($6,599);
    and (b) payments for advertising ($3,833).

(8) Contrary to OMB Circular A-87, Attachment A, Paragraph C.1, Detroit did not provide
    adequate documentation to show that these costs were necessary and reasonable for proper
    and efficient performance of Federal awards, and allocable to Federal awards. These cost
    included (a) $969 for local meals and (b) $1,163 for invoices dated before services were
    provided, with no documentation to demonstrate the vendor provided these services.

(9) Capital expenditures for general purpose equipment that MDE did not approve. T  	 his
    equipment included laser printers, desktop computers, and a fax machine. OMB Circular A-
    87, Attachment B, Paragraph 15.b(1) provides that capital expenditures for general purpose
    equipment, buildings, and land are unallowable as direct charges, except where approved in
    advance by the awarding agency. Detroit did not budget any general purpose equipment in
    its 2004-2005 Consolidated Application.
        Final Report
        ED-OIG/A05F0018                                                                               Page 23 of 28


                                           Enclosure 3:

                              MDE and Detroit Comments to Draft Report


        MDE received these comments from Detroit and forwarded them to our office. Detroit also
        provided an attachment with a draft version of a revised parental involvement policy. This
        attachment will be made available upon request.

FINDING      OIG RECOMMENDATION AND                            DISTRICT RESPONSE/ PLAN OF ACTION
  NO.                DETAIL
  1.1       Return $277,061 to Department
            Unallowable Personnel Costs
            (1) Duplicate payroll and fringe benefits It was a one time occurrence in which there was an error in the year
            - ($7,066) 2003-04 (See page 13, #2)       end payroll reversal and as such, the entry was done manually for
                                                       all of the District’s 18,000 employees. The error has been corrected
                                                       and now payroll is posted automatically via our accounting
                                                       software which will ensure duplicate payrolls and corresponding
                                                       fringes will not be charged to Title I or any other federal or state
                                                       funded grants.
            (2) Auto allowance costs should have       Procedures have been modified and now in place to ensure auto
            been paid from non-federal funds. -        costs are appropriately charged to the proper funding sources.
            ($2,631) (2004-05) (See page 16, #2)
            (3) Non-Title I and non parental           At this function, the Title I Office provided SES and CHOICE
            involvement activities (for example,       information for all parents who attended, answered questions and
            student recruitment - ($1,100) 2004-05 provided handouts. The District requests that this expenditure is
            (See page 18, #6)                          approved.
            (4) Incorrectly calculated fringe benefits OMB Circular A-87, Attachment B - Selected Items of Cost,
            -($11,667) 2003-04 (See page 13, #2)       Section 8 D - Fringe Benefits states,"The cost of fringe benefits in
                                                       the form of employer contributions or expenses for social security;
                                                       employer life, health, unemployment, and worker's compensation
                                                       insurance, pension plan costs, and other similar benefits are
                                                       allowable, provided such benefits are granted under established
                                                       written policies. Such benefits, whether treated as indirect costs or
                                                       direct costs, shall be allocated to Federal awards and all other
                                                       activities in a manner consistent with the pattern of benefits
                                                       attributable to the individuals or groups of employees whose
                                                       salaries and wages are chargeable to such Federal awards." As
                                                       such, if the District applies a rate to all of its employees for fringe
                                                       benefits. If that rate is consistently applied across all Federal
                                                       programs, then the costs are allowable.
            (5) One employee who stopped working The former administrator who violated District policy is no longer
            for in April 2005 was paid with parental employed by the District. Efforts are under way to recover the
            involvement funds through the end of       payments and the current administrator is working closely with the
            June 2005 - ($20,729) 2004-05 (See         Human Resources Department to ensure policies are not violated.
            page 16, #2)
Final Report
ED-OIG/A05F0018                                                                            Page 24 of 28



   Unallowable Non-personnel Costs
   (1) An advance of funds for a consultant   Procedures have been modified and now in place to ensure no
   that should have reduced future invoiced   future advance of funds. Former administrator in charge of parental
   amounts -($39,320) 2003-04 (See page       involvement activities under whom these activities took place is no
   14, #4)                                    longer employed by DPS and current administrator is working with
                                              Office of Title I Compliance to ensure the activities of the parent
                                              involvement unit is in compliance with all federal and state
                                              mandates. The District is considering recovering the unallowable
                                              amount from the former contracted employee.
   (2) Overcharges because of mathematical DPS administrators are responsible for the proper receipt and
   errors in invoice - ($1,070) 2003-04 (See monitoring of work performed by contactors in their areas. DPS
   page 14, #4); ($4,820) 2004-05 (See        staff will review invoices and contracts to ensure are invoices are
   page 18, #4a)                              void of mathematical errors contracts, are paid at specific rates as
                                              approved in applicable contracts and invoices are not paid more
                                              than once.. Monitoring will be done by the administrator in charge
                                              of the program as well as by the Offices of Title I and Accounting.
   (3) Charges at an hourly rate greater than
   the rate specified in the applicable
   contract - ($2,000) 2003-04 (See page
   14, #4); ($6,700) 2004-05 (See page 17,
   #4b)
   (4) Invoices paid more than once -
   ($6,900) 2003-04 (See page 14, #4);
   ($11,373) 2004-05 (See page 17, #4c)
   (5) Capital expenditures for general       Former administrator in charge of parental involvement activities
   purpose equipment that MDE did not         under whom these activities took place is no longer employed by
   approve - ($22,859) 2003-04 (See page DPS and current administrator is working with Office of Title I
   15, #8); ($4,904) 2004-05 (See page 18, Compliance to ensure proposed purchases by the parent
   #9)                                        involvement unit are in compliance with all federal and state
                                              mandates and approved by MDE.
   (6) Charges for entertainment - ($1,000) These expenditures were made as part of a total parent volunteer
   2004-05 (See page 17, #4d)                 recognition event. The District requests this expense be considered
                                              allowable.
   (7) Charges for promotional items,         Former administrator in charge of parental involvement activities
   memorabilia, advertising, and public       under whom these activities took place is no longer employed by
   relations designed solely to promote       DPS and current administrator is working with Office of Title I
   Detroit to the general public - ($3,000)   Compliance to ensure all expenditures are necessary, reasonable
   2003-04 (See page 15, #6); ($4,318)        and allocable.
   2004-05 (See page 18, #6)
   ADDITIONAL COMMENTS
      Final Report
      ED-OIG/A05F0018                                                                            Page 25 of 28



1.2      EITHER PROVIDE SUFFICIENT
         DOCUMENTATION TO SUPPORT
         $653,387 IN ADEQUATELY
         DOCUMENTED COSTS OR
         RETURN THAT AMOUNT THE
         DEPARTMENT
         Inadequately Documented Costs -
         Detroit did not:
         Personnel
         (1) Provide all payroll time rosters       No additional payroll time rosters, timesheets or mileage records
         supporting social workers' salaries        have been located after the departure of the former administrator.
         charged to parental involvement -          Current administrator assures all documentation for payrolls and
         ($66,655) 2003-04 (See page 14, #3);       mileage will be retained as required.
         ($2,164) 2003-04 (See page 14, #3)
         (2) Provide all timesheets for hourly
         employees - ($3,512) 2004-05 (See page
         17, #3) / ($210 inadequately
         documented)
         (3) Provide mileage or other travel
         records to support auto allowance
         charges - ($2,631) 2004-05 (See page 17,
         3)
         Unallowable Personnel & Non-
         Personnel
         (1) Require pre-approved purchase          Since the occurrence of the noted activity, the Office of Title I
         orders for Title I parental involvement    Compliance has taken on the responsibility of reviewing all Title I
         expenditures                               requisitions and checking to ensure that proposed expenditures are
                                                    necessary, reasonable, and allocable.
         (2) Ensure that invoices paid were
         accurate and adequately demonstrated
         that costs were necessary, reasonable,
         and allocable to Title I parental
         involvement - ($112,763) ($37,412)
         ($2,000) ($10,650) ($25,516) ($4,701)
         ($1,000) 2003-04 (See page 14, #5);
         ($19,750) ($25,658) ($65,166) 2003-04
         (See page 15, #7); ($3,833) 2004-05 (See
         page 18, #7); ($1,163) ($969) 2004-05
         (See page 18, #8)
         (3) Provide us with semi-annual          The Office of Title I Compliance collects semi-annual certifications
         certifications that were complete        for all employees working 100% in Title I programs. DPS
                                                  executive administration supports the efforts and works with Title I
                                                  Office to ensure employees respond to completing certifications as
                                                  required.
      Final Report
      ED-OIG/A05F0018                                                                              Page 26 of 28



         (4) Ensure hourly employees' signed         Current administrator in charge of parental involvement activities
         timesheets and supervisors signed all       will ensure accurate time reporting via signed timesheets free of
         payroll time rosters                        math errors, reconciliation of hours on timesheets and payroll time
                                                     rosters and correct calculations of hourly employees' overtime pay.
                                                     The Office of Accounting will ensue future charges for fringe
                                                     benefits of employees will be charged at an actual rate rather than at
                                                     the projected budgeted rate.
         (5) Correctly calculate hourly employees'
         overtime pay
         (6) Ensure timesheets were free of math
         errors - ($3,512) 2004-05 (See page 17,
         #3)
         (7) Reconcile hours included on
         timesheets and payroll time rosters with
         the hours for which Detroit paid
         employees. Also Detroit charged fringe
         benefits for insurance for a budgeted
         amount rather than actual expenses.
         ADDITIONAL COMMENTS


1.3      DEVELOP AND IMPLEMENT
         POLICIES AND PROCEDURES
         FOR PERSONNEL COSTS THAT
         PROVIDE REASONABLE
         ASSURANCE THAT:
         (a) duplicate payroll and fringe benefits    It was a one time occurrence in which there was an error in the year
         costs are not charged to the grant          end payroll reversal and as such, the entry was done manually for
                                                     all of the District’s 18,000 employees. The error has been corrected
                                                     and now payroll is posted automatically via our accounting
                                                     software. This recommendation has been addressed.
         (b) employers are paid only for hours       The Office of Accounting will work with the Office of Parental
         worked and for hours supported by           involvement to provide further training on monitoring of and
         approved timesheets and time rosters        approval of time sheets prepared and submitted to payroll.
         (c) only payroll costs related to work on
         parental involvement activities are
         charged to the grant
         (d) only actual expenses for fringe         The District disagrees with this finding. According to OMB
         benefits are charged to the grant           Circular A-87, an entity is allowed to develop a method for
                                                     charging fringe benefits and that method is consistently applied to
                                                     all federal programs. This District does this by reviewing its total
                                                     fringe benefit costs and developing a rate that is applied
                                                     consistently to all federal programs.
      Final Report
      ED-OIG/A05F0018                                                                            Page 27 of 28


         (e) complete and accurate semi-annual     The Office of Title I Compliance collects semi-annual certifications
         certifications are maintained.            for all employees working 100% in Title I programs. DPS
                                                   executive administration supports the efforts and works with Title I
                                                   Office to ensure employees respond to completing certifications as
                                                   required. Copies will be maintained in the Office of Title I
                                                   Compliance and at the worksite of the employee
         ADDITIONAL COMMENTS                       The District will revise and implement policies and procedures that
                                                   provide reasonable assurances that (a) duplicate payroll and fringe
                                                   benefits costs are not charged to grants (b) employers are paid only
                                                   for hours worked and for hours supported by approved timesheets
                                                   and time rosters (c) only payroll costs related to corresponding
                                                   approvable activities are charged to grants (this would include
                                                   parent involvement activities). (e) complete and accurate semi-
                                                   annual certifications are maintained by the District.

1.4      DEVELOP AND IMPLEMENT                     The District's Parent Involvement Policy has been revised and now
         POLICIES AND PROCEDURES                   includes statements that all Title I Parent Involvement expenditures
         THAT PROVIDE REASONABLE                   must be necessary, reasonable, allocable and adequately
         ASSURANCE THAT TITLE I                    documented. Final draft is being prepared to present for approval by
         PARENTAL INVOLVEMENT NON-                 the Board of Education.
         PERSONNEL EXPENDITURES ARE
         NECESSARY, REASONABLE,
         ALLOCABLE, AND ADEQUATELY
         DOCUMENTED

         ADDITIONAL COMMENTS


2.1      DEVELOP AND IMPLEMENT
         POLICIES AND PROCEDURES TO
         PROVIDE REASONABLE
         ASSURANCE THAT:

         (a) contractors perform in accordance      The District's Procurement Policy will be revised and procedures
         with the terms, conditions, and            implemented to provide reasonalbe assurace that contractors
         specifications of their contracts          perform in accordance with the terms, conditions, and specifications
                                                    of their contracts outlining which of the District's units will be
                                                    responsible for monitoring such performance.
         (b) it does not pay invoices submitted for For all invoices that are submitted to Accounts Payable for
         unallowable services or invoices that      processing, there is a match between the receipt and the purchase
         lack adequate support, are inaccurate,     order to ensure that the invoice is valid for payment. Any invoices
         and duplicative, or exceed contract        that do not meet the match are returned to the department where the
         limits.                                    service or contract is being provided for the department
                                                    administrator to investigate. This finding has been addressed.
         ADDITIONAL COMMENTS
        Final Report
        ED-OIG/A05F0018                                                                Page 28 of 28




3.1 	      IMPLEMENT PROCEDURES THAT      The District's Department of Federal, State and Local Grant
           PROVIDE REASONABLE             Development and Program Compliance will amend the consolidated
           ASSURANCE THAT IT PROVIDES     application to ensure MDE has the opportunity to review and
           CONSOLIDATED APPLICATION       approve proposed expenditures as required. the District's Office of
           AMENDMENTS AND GRANTS          Accounting will ensure grant final expenditures will reflect actual
           FINAL EXPENDITURE REPORTS      expenditures.
           THAT PERMIT MDE TO REVIEW
           DETROIT'S LEVEL OF TITLE I
           PARENTAL INVOLVEMENT
           EXPENDITURES FOR
           COMPLIANCE WITH THE
           RESTRICTIONS AND
           PROHIBITIONS OF APPLICABLE
           STATUTES
           ADDITIONAL COMMENTS


4.1 	      DEVELOP AND IMPLEMENT          The District's Department of Federal, State and Local Grant
           PROCEDURES THAT PROVIDE        Development and Program Compliance will review all transfers to
           REASONABLE ASSURANCE THAT      ensure they benefit Title I Parental Involvement and are necessary,
           EXPENDITURES, INCLUDING        reasonable, allocable and adequately documented. This include
           TRANSFERS, TO TITLE I          transfers proposed by the parent involvement unit as well as the
           PARENTAL INVOLVEMENT           District's Offices of Accounting and Budget.
           BENEFIT THE TITLE I PARENTAL
           INVOLVEMENT PROGRAM
           ADDITIONAL COMMENTS


5.1        	 EVISE PARENTAL
           R                              The District's Parental Involvement Policy is currently being
           INVOLVEMENT POLICY TO          revised to include all required elements to be presented and
           INCLUDE ALL ELEMENTS           approved by the Board of Education.
           REQUIRED UNDER SECTION
           1118(A)(2) OF THE ACT
           ADDITIONAL COMMENTS


5.2 	      DISTRIBUTE THE REVISED         The revised policy will be posted on the District's website and
           POLICY TO PARENTS 	            added to the parent handbook that is distributed to each DPS parent
                                          at the beginning of the school year.
           ADDITIONAL COMMENTS