Welcome to Thunderdome

Depends on the details of what the grant says. If the grant specified the fake companies as the sole acceptable supplier of services then they might be off the hook as then they're just a pass-through agency for the cash and performance is up to the specific venders. Or the grant could have been just a block grant to Detroit earmarked for tutoring, in which case how it's spent is indeed their responsibility. But that second kind usually comes with reporting that would make it obvious to someone in the grant office there as to what was going on. If that's the case she had someone still on the inside helping her, I bet.