@jfruhwirth I completely understand how the except grades populating in PowerSchool as zero or an F can be disconcerting and alarming. The new SIS Integration between Canvas and PowerSchool is using the OneRoster 1.1 specifications developed by IMSGlobal, which is an ed-tech industry consortium that developed the specification to facilitate the transfer of data between services, tools and providers in the education sector. Part of the OneRoster specification dictates that the "score" value reported with a "result" (a student's grade on an assignment) must be a floating-point decimal. This means that a numeric value must be sent with the result when the assignment is synced.
Since there typically is no score entered in the Canvas gradebook when an assignment is marked "exempt", there is no score value to report during grade passback, but one is required. No score is essentially the same as zero, so this is the value included in the grade passback. It is PowerSchool's implementation of the OneRoster grade sync that is displaying the zero grade instead of the "exempt" status. I can't speak for why PowerSchool elects to display a grade when a result is marked exempt, and it isn't including the grade in the calculation of the total grade. I the Canvas gradebook, if a grade is entered for an assignment that is later marked as exempt, the grade does not display--the exemption does.