Finding 2023-003
Information on the federal program:
Subject: Education Stabilization Fund (ESF) – Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Criteria: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries
and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal
entity, not exceeding 100% of compensated activities . . .
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives
if the employee works on more than one Federal award; a Federal award and non-Federal award; an
indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using
different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ."
Indiana Department of Education Onsite Fiscal Monitoring Document - Monitoring Topic 1-Compliance with
compensation for personnel services requirements, page 2 states:
"Show evidence that personnel in 'split-funded' positions maintain Program Activity Reports (PAR)/Time
and Effort logs and evidence that personnel paid 100% with federal funds complete accurate and timely
'Semi-Annual Certification' forms." Finding 2023-003 (Continued)
Condition: The School Corporation had not established an effective internal control system related to the
grant agreement and the Allowable Costs/Cost Principles compliance requirement.
The School Corporation failed to comply with the allowable costs/cost principle requirements that
employees who work 100 percent of their time on a federal award maintain semiannual certifications as
required by the pass-through agency, and that employees who work on a federal award and a non-federal
award have Program Activity Reports or equivalent documentation to support the distribution of their
salaries or wages.
Cause: The School Corporation's management had not developed an effective system of internal controls
that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles
compliance requirement.
Effect: The failure to establish an effective internal control system enabled material noncompliance to go
undetected. Noncompliance with the grant agreement or the compliance requirement could have resulted
in the loss of federal funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: Six pay periods were selected for testing of payroll charges to the ESF grants during the audit
period in which employees were charged 100% to the ESF grant awards. There were no Semi-Annual
Certification or other supporting documentation (Personnel Activity Reports or equivalent documentation)
maintained to support payroll and benefits for employees who worked 100 percent of the time on the ESF
funded initiatives.
Identification as a repeat finding: No.
Recommendation: We recommended that the School Corporations' management establish controls to
ensure compliance and comply with the Allowable Costs/Cost Principles compliance requirement including
maintaining Personnel Activity Reports, Semi-Annual Certifications, or equivalent documentation to support
payroll charges allocated to federal grants.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-003
Information on the federal program:
Subject: Education Stabilization Fund (ESF) – Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Criteria: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries
and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal
entity, not exceeding 100% of compensated activities . . .
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives
if the employee works on more than one Federal award; a Federal award and non-Federal award; an
indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using
different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ."
Indiana Department of Education Onsite Fiscal Monitoring Document - Monitoring Topic 1-Compliance with
compensation for personnel services requirements, page 2 states:
"Show evidence that personnel in 'split-funded' positions maintain Program Activity Reports (PAR)/Time
and Effort logs and evidence that personnel paid 100% with federal funds complete accurate and timely
'Semi-Annual Certification' forms." Finding 2023-003 (Continued)
Condition: The School Corporation had not established an effective internal control system related to the
grant agreement and the Allowable Costs/Cost Principles compliance requirement.
The School Corporation failed to comply with the allowable costs/cost principle requirements that
employees who work 100 percent of their time on a federal award maintain semiannual certifications as
required by the pass-through agency, and that employees who work on a federal award and a non-federal
award have Program Activity Reports or equivalent documentation to support the distribution of their
salaries or wages.
Cause: The School Corporation's management had not developed an effective system of internal controls
that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles
compliance requirement.
Effect: The failure to establish an effective internal control system enabled material noncompliance to go
undetected. Noncompliance with the grant agreement or the compliance requirement could have resulted
in the loss of federal funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: Six pay periods were selected for testing of payroll charges to the ESF grants during the audit
period in which employees were charged 100% to the ESF grant awards. There were no Semi-Annual
Certification or other supporting documentation (Personnel Activity Reports or equivalent documentation)
maintained to support payroll and benefits for employees who worked 100 percent of the time on the ESF
funded initiatives.
Identification as a repeat finding: No.
Recommendation: We recommended that the School Corporations' management establish controls to
ensure compliance and comply with the Allowable Costs/Cost Principles compliance requirement including
maintaining Personnel Activity Reports, Semi-Annual Certifications, or equivalent documentation to support
payroll charges allocated to federal grants.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-003
Information on the federal program:
Subject: Education Stabilization Fund (ESF) – Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Criteria: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries
and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal
entity, not exceeding 100% of compensated activities . . .
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives
if the employee works on more than one Federal award; a Federal award and non-Federal award; an
indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using
different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ."
Indiana Department of Education Onsite Fiscal Monitoring Document - Monitoring Topic 1-Compliance with
compensation for personnel services requirements, page 2 states:
"Show evidence that personnel in 'split-funded' positions maintain Program Activity Reports (PAR)/Time
and Effort logs and evidence that personnel paid 100% with federal funds complete accurate and timely
'Semi-Annual Certification' forms." Finding 2023-003 (Continued)
Condition: The School Corporation had not established an effective internal control system related to the
grant agreement and the Allowable Costs/Cost Principles compliance requirement.
The School Corporation failed to comply with the allowable costs/cost principle requirements that
employees who work 100 percent of their time on a federal award maintain semiannual certifications as
required by the pass-through agency, and that employees who work on a federal award and a non-federal
award have Program Activity Reports or equivalent documentation to support the distribution of their
salaries or wages.
Cause: The School Corporation's management had not developed an effective system of internal controls
that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles
compliance requirement.
Effect: The failure to establish an effective internal control system enabled material noncompliance to go
undetected. Noncompliance with the grant agreement or the compliance requirement could have resulted
in the loss of federal funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: Six pay periods were selected for testing of payroll charges to the ESF grants during the audit
period in which employees were charged 100% to the ESF grant awards. There were no Semi-Annual
Certification or other supporting documentation (Personnel Activity Reports or equivalent documentation)
maintained to support payroll and benefits for employees who worked 100 percent of the time on the ESF
funded initiatives.
Identification as a repeat finding: No.
Recommendation: We recommended that the School Corporations' management establish controls to
ensure compliance and comply with the Allowable Costs/Cost Principles compliance requirement including
maintaining Personnel Activity Reports, Semi-Annual Certifications, or equivalent documentation to support
payroll charges allocated to federal grants.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-003
Information on the federal program:
Subject: Education Stabilization Fund (ESF) – Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Criteria: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries
and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal
entity, not exceeding 100% of compensated activities . . .
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives
if the employee works on more than one Federal award; a Federal award and non-Federal award; an
indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using
different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ."
Indiana Department of Education Onsite Fiscal Monitoring Document - Monitoring Topic 1-Compliance with
compensation for personnel services requirements, page 2 states:
"Show evidence that personnel in 'split-funded' positions maintain Program Activity Reports (PAR)/Time
and Effort logs and evidence that personnel paid 100% with federal funds complete accurate and timely
'Semi-Annual Certification' forms." Finding 2023-003 (Continued)
Condition: The School Corporation had not established an effective internal control system related to the
grant agreement and the Allowable Costs/Cost Principles compliance requirement.
The School Corporation failed to comply with the allowable costs/cost principle requirements that
employees who work 100 percent of their time on a federal award maintain semiannual certifications as
required by the pass-through agency, and that employees who work on a federal award and a non-federal
award have Program Activity Reports or equivalent documentation to support the distribution of their
salaries or wages.
Cause: The School Corporation's management had not developed an effective system of internal controls
that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles
compliance requirement.
Effect: The failure to establish an effective internal control system enabled material noncompliance to go
undetected. Noncompliance with the grant agreement or the compliance requirement could have resulted
in the loss of federal funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: Six pay periods were selected for testing of payroll charges to the ESF grants during the audit
period in which employees were charged 100% to the ESF grant awards. There were no Semi-Annual
Certification or other supporting documentation (Personnel Activity Reports or equivalent documentation)
maintained to support payroll and benefits for employees who worked 100 percent of the time on the ESF
funded initiatives.
Identification as a repeat finding: No.
Recommendation: We recommended that the School Corporations' management establish controls to
ensure compliance and comply with the Allowable Costs/Cost Principles compliance requirement including
maintaining Personnel Activity Reports, Semi-Annual Certifications, or equivalent documentation to support
payroll charges allocated to federal grants.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-004
Information on the federal program:
Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards in compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award. These internal controls should be in
compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the
Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ."
29 CFR 5.5 states in part:
a. The Agency head shall cause or require the contracting officer to insert in full in any contract in excess
of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and
decorating, of a public building or public work, or building or work financed in whole or in part from Federal
funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of
any contract of a Federal agency to make a loan, grant or annual contribution (except where a different
meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts
listed in §5.1, the following clauses…
(1) Minimum wages.
(i) All laborers and mechanics employed or working upon the site of the work (or under the United States
Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project),
will be paid unconditionally and not less often than once a week, and without subsequent deduction or
rebate on any account (except such payroll deductions as are permitted by regulations issued by the
Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe
benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those
contained in the wage determination of the Secretary of Labor which is attached hereto and made a part
hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and
such laborers and mechanics…
(3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy
of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract,
but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or
owner, as the case may be, for transmission to the (write in name of agency).
2 CFR 200 Appendix II states in part: Finding 2023-004 (Continued)
In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by
the non-Federal entity under the Federal award must contain provisions covering the following, as
applicable. . . .
(D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation,
all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a
provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented
by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts
Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must
be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified
in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay
wages not less than once a week.. . .”
Condition: An effective internal control system was not in place at the School Corporation in order to
ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions
– Wage Rate Requirements compliance requirements. The School Corporation did not include Davis Bacon
wage rate requirements in its contract with vendor which includes labor. The School Corporation did not
obtain the weekly payroll reports certifications from a construction company for a building project.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the compliance requirements listed above.
Effect: The failure to design and implement an effective internal control system enabled material
noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and
Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal
funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation expended $324,887 during the audit period on an HVAC project was
charged to the ESSER III grant award (84.425U). The construction contract did not include a Davis-Bacon
clause prescribing federal wage rate requirements required for construction contracts. The School
Corporation did not have an internal control designed to collect the weekly payroll reports certifications from
the construction company and its subcontractors, as applicable, for the construction project to verify
prevailing wages were being paid during the project period. Therefore, no review was performed by
management to ensure that pay rates complied with the federal wage rate requirements. The construction
payments represented approximately 52% of the Education Stabilization Fund disbursements reported on
the SEFA for the period under audit.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation include Davis-Bacon wage requirements in
construction contracts which are federally funded and implement a formal process to ensure the required
weekly payroll report certifications are collected and reviewed by management to ensure compliance with
the federal wage rate requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-004
Information on the federal program:
Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards in compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award. These internal controls should be in
compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the
Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ."
29 CFR 5.5 states in part:
a. The Agency head shall cause or require the contracting officer to insert in full in any contract in excess
of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and
decorating, of a public building or public work, or building or work financed in whole or in part from Federal
funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of
any contract of a Federal agency to make a loan, grant or annual contribution (except where a different
meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts
listed in §5.1, the following clauses…
(1) Minimum wages.
(i) All laborers and mechanics employed or working upon the site of the work (or under the United States
Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project),
will be paid unconditionally and not less often than once a week, and without subsequent deduction or
rebate on any account (except such payroll deductions as are permitted by regulations issued by the
Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe
benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those
contained in the wage determination of the Secretary of Labor which is attached hereto and made a part
hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and
such laborers and mechanics…
(3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy
of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract,
but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or
owner, as the case may be, for transmission to the (write in name of agency).
2 CFR 200 Appendix II states in part: Finding 2023-004 (Continued)
In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by
the non-Federal entity under the Federal award must contain provisions covering the following, as
applicable. . . .
(D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation,
all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a
provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented
by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts
Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must
be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified
in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay
wages not less than once a week.. . .”
Condition: An effective internal control system was not in place at the School Corporation in order to
ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions
– Wage Rate Requirements compliance requirements. The School Corporation did not include Davis Bacon
wage rate requirements in its contract with vendor which includes labor. The School Corporation did not
obtain the weekly payroll reports certifications from a construction company for a building project.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the compliance requirements listed above.
Effect: The failure to design and implement an effective internal control system enabled material
noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and
Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal
funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation expended $324,887 during the audit period on an HVAC project was
charged to the ESSER III grant award (84.425U). The construction contract did not include a Davis-Bacon
clause prescribing federal wage rate requirements required for construction contracts. The School
Corporation did not have an internal control designed to collect the weekly payroll reports certifications from
the construction company and its subcontractors, as applicable, for the construction project to verify
prevailing wages were being paid during the project period. Therefore, no review was performed by
management to ensure that pay rates complied with the federal wage rate requirements. The construction
payments represented approximately 52% of the Education Stabilization Fund disbursements reported on
the SEFA for the period under audit.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation include Davis-Bacon wage requirements in
construction contracts which are federally funded and implement a formal process to ensure the required
weekly payroll report certifications are collected and reviewed by management to ensure compliance with
the federal wage rate requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-004
Information on the federal program:
Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards in compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award. These internal controls should be in
compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the
Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ."
29 CFR 5.5 states in part:
a. The Agency head shall cause or require the contracting officer to insert in full in any contract in excess
of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and
decorating, of a public building or public work, or building or work financed in whole or in part from Federal
funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of
any contract of a Federal agency to make a loan, grant or annual contribution (except where a different
meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts
listed in §5.1, the following clauses…
(1) Minimum wages.
(i) All laborers and mechanics employed or working upon the site of the work (or under the United States
Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project),
will be paid unconditionally and not less often than once a week, and without subsequent deduction or
rebate on any account (except such payroll deductions as are permitted by regulations issued by the
Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe
benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those
contained in the wage determination of the Secretary of Labor which is attached hereto and made a part
hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and
such laborers and mechanics…
(3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy
of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract,
but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or
owner, as the case may be, for transmission to the (write in name of agency).
2 CFR 200 Appendix II states in part: Finding 2023-004 (Continued)
In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by
the non-Federal entity under the Federal award must contain provisions covering the following, as
applicable. . . .
(D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation,
all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a
provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented
by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts
Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must
be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified
in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay
wages not less than once a week.. . .”
Condition: An effective internal control system was not in place at the School Corporation in order to
ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions
– Wage Rate Requirements compliance requirements. The School Corporation did not include Davis Bacon
wage rate requirements in its contract with vendor which includes labor. The School Corporation did not
obtain the weekly payroll reports certifications from a construction company for a building project.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the compliance requirements listed above.
Effect: The failure to design and implement an effective internal control system enabled material
noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and
Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal
funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation expended $324,887 during the audit period on an HVAC project was
charged to the ESSER III grant award (84.425U). The construction contract did not include a Davis-Bacon
clause prescribing federal wage rate requirements required for construction contracts. The School
Corporation did not have an internal control designed to collect the weekly payroll reports certifications from
the construction company and its subcontractors, as applicable, for the construction project to verify
prevailing wages were being paid during the project period. Therefore, no review was performed by
management to ensure that pay rates complied with the federal wage rate requirements. The construction
payments represented approximately 52% of the Education Stabilization Fund disbursements reported on
the SEFA for the period under audit.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation include Davis-Bacon wage requirements in
construction contracts which are federally funded and implement a formal process to ensure the required
weekly payroll report certifications are collected and reviewed by management to ensure compliance with
the federal wage rate requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-003
Information on the federal program:
Subject: Education Stabilization Fund (ESF) – Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Criteria: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries
and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal
entity, not exceeding 100% of compensated activities . . .
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives
if the employee works on more than one Federal award; a Federal award and non-Federal award; an
indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using
different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ."
Indiana Department of Education Onsite Fiscal Monitoring Document - Monitoring Topic 1-Compliance with
compensation for personnel services requirements, page 2 states:
"Show evidence that personnel in 'split-funded' positions maintain Program Activity Reports (PAR)/Time
and Effort logs and evidence that personnel paid 100% with federal funds complete accurate and timely
'Semi-Annual Certification' forms." Finding 2023-003 (Continued)
Condition: The School Corporation had not established an effective internal control system related to the
grant agreement and the Allowable Costs/Cost Principles compliance requirement.
The School Corporation failed to comply with the allowable costs/cost principle requirements that
employees who work 100 percent of their time on a federal award maintain semiannual certifications as
required by the pass-through agency, and that employees who work on a federal award and a non-federal
award have Program Activity Reports or equivalent documentation to support the distribution of their
salaries or wages.
Cause: The School Corporation's management had not developed an effective system of internal controls
that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles
compliance requirement.
Effect: The failure to establish an effective internal control system enabled material noncompliance to go
undetected. Noncompliance with the grant agreement or the compliance requirement could have resulted
in the loss of federal funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: Six pay periods were selected for testing of payroll charges to the ESF grants during the audit
period in which employees were charged 100% to the ESF grant awards. There were no Semi-Annual
Certification or other supporting documentation (Personnel Activity Reports or equivalent documentation)
maintained to support payroll and benefits for employees who worked 100 percent of the time on the ESF
funded initiatives.
Identification as a repeat finding: No.
Recommendation: We recommended that the School Corporations' management establish controls to
ensure compliance and comply with the Allowable Costs/Cost Principles compliance requirement including
maintaining Personnel Activity Reports, Semi-Annual Certifications, or equivalent documentation to support
payroll charges allocated to federal grants.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-003
Information on the federal program:
Subject: Education Stabilization Fund (ESF) – Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Criteria: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries
and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal
entity, not exceeding 100% of compensated activities . . .
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives
if the employee works on more than one Federal award; a Federal award and non-Federal award; an
indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using
different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ."
Indiana Department of Education Onsite Fiscal Monitoring Document - Monitoring Topic 1-Compliance with
compensation for personnel services requirements, page 2 states:
"Show evidence that personnel in 'split-funded' positions maintain Program Activity Reports (PAR)/Time
and Effort logs and evidence that personnel paid 100% with federal funds complete accurate and timely
'Semi-Annual Certification' forms." Finding 2023-003 (Continued)
Condition: The School Corporation had not established an effective internal control system related to the
grant agreement and the Allowable Costs/Cost Principles compliance requirement.
The School Corporation failed to comply with the allowable costs/cost principle requirements that
employees who work 100 percent of their time on a federal award maintain semiannual certifications as
required by the pass-through agency, and that employees who work on a federal award and a non-federal
award have Program Activity Reports or equivalent documentation to support the distribution of their
salaries or wages.
Cause: The School Corporation's management had not developed an effective system of internal controls
that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles
compliance requirement.
Effect: The failure to establish an effective internal control system enabled material noncompliance to go
undetected. Noncompliance with the grant agreement or the compliance requirement could have resulted
in the loss of federal funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: Six pay periods were selected for testing of payroll charges to the ESF grants during the audit
period in which employees were charged 100% to the ESF grant awards. There were no Semi-Annual
Certification or other supporting documentation (Personnel Activity Reports or equivalent documentation)
maintained to support payroll and benefits for employees who worked 100 percent of the time on the ESF
funded initiatives.
Identification as a repeat finding: No.
Recommendation: We recommended that the School Corporations' management establish controls to
ensure compliance and comply with the Allowable Costs/Cost Principles compliance requirement including
maintaining Personnel Activity Reports, Semi-Annual Certifications, or equivalent documentation to support
payroll charges allocated to federal grants.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-003
Information on the federal program:
Subject: Education Stabilization Fund (ESF) – Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Criteria: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries
and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal
entity, not exceeding 100% of compensated activities . . .
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives
if the employee works on more than one Federal award; a Federal award and non-Federal award; an
indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using
different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ."
Indiana Department of Education Onsite Fiscal Monitoring Document - Monitoring Topic 1-Compliance with
compensation for personnel services requirements, page 2 states:
"Show evidence that personnel in 'split-funded' positions maintain Program Activity Reports (PAR)/Time
and Effort logs and evidence that personnel paid 100% with federal funds complete accurate and timely
'Semi-Annual Certification' forms." Finding 2023-003 (Continued)
Condition: The School Corporation had not established an effective internal control system related to the
grant agreement and the Allowable Costs/Cost Principles compliance requirement.
The School Corporation failed to comply with the allowable costs/cost principle requirements that
employees who work 100 percent of their time on a federal award maintain semiannual certifications as
required by the pass-through agency, and that employees who work on a federal award and a non-federal
award have Program Activity Reports or equivalent documentation to support the distribution of their
salaries or wages.
Cause: The School Corporation's management had not developed an effective system of internal controls
that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles
compliance requirement.
Effect: The failure to establish an effective internal control system enabled material noncompliance to go
undetected. Noncompliance with the grant agreement or the compliance requirement could have resulted
in the loss of federal funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: Six pay periods were selected for testing of payroll charges to the ESF grants during the audit
period in which employees were charged 100% to the ESF grant awards. There were no Semi-Annual
Certification or other supporting documentation (Personnel Activity Reports or equivalent documentation)
maintained to support payroll and benefits for employees who worked 100 percent of the time on the ESF
funded initiatives.
Identification as a repeat finding: No.
Recommendation: We recommended that the School Corporations' management establish controls to
ensure compliance and comply with the Allowable Costs/Cost Principles compliance requirement including
maintaining Personnel Activity Reports, Semi-Annual Certifications, or equivalent documentation to support
payroll charges allocated to federal grants.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-003
Information on the federal program:
Subject: Education Stabilization Fund (ESF) – Allowable Costs/Cost Principles
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Criteria: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries
and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal
entity, not exceeding 100% of compensated activities . . .
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives
if the employee works on more than one Federal award; a Federal award and non-Federal award; an
indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using
different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ."
Indiana Department of Education Onsite Fiscal Monitoring Document - Monitoring Topic 1-Compliance with
compensation for personnel services requirements, page 2 states:
"Show evidence that personnel in 'split-funded' positions maintain Program Activity Reports (PAR)/Time
and Effort logs and evidence that personnel paid 100% with federal funds complete accurate and timely
'Semi-Annual Certification' forms." Finding 2023-003 (Continued)
Condition: The School Corporation had not established an effective internal control system related to the
grant agreement and the Allowable Costs/Cost Principles compliance requirement.
The School Corporation failed to comply with the allowable costs/cost principle requirements that
employees who work 100 percent of their time on a federal award maintain semiannual certifications as
required by the pass-through agency, and that employees who work on a federal award and a non-federal
award have Program Activity Reports or equivalent documentation to support the distribution of their
salaries or wages.
Cause: The School Corporation's management had not developed an effective system of internal controls
that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles
compliance requirement.
Effect: The failure to establish an effective internal control system enabled material noncompliance to go
undetected. Noncompliance with the grant agreement or the compliance requirement could have resulted
in the loss of federal funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: Six pay periods were selected for testing of payroll charges to the ESF grants during the audit
period in which employees were charged 100% to the ESF grant awards. There were no Semi-Annual
Certification or other supporting documentation (Personnel Activity Reports or equivalent documentation)
maintained to support payroll and benefits for employees who worked 100 percent of the time on the ESF
funded initiatives.
Identification as a repeat finding: No.
Recommendation: We recommended that the School Corporations' management establish controls to
ensure compliance and comply with the Allowable Costs/Cost Principles compliance requirement including
maintaining Personnel Activity Reports, Semi-Annual Certifications, or equivalent documentation to support
payroll charges allocated to federal grants.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-004
Information on the federal program:
Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards in compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award. These internal controls should be in
compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the
Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ."
29 CFR 5.5 states in part:
a. The Agency head shall cause or require the contracting officer to insert in full in any contract in excess
of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and
decorating, of a public building or public work, or building or work financed in whole or in part from Federal
funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of
any contract of a Federal agency to make a loan, grant or annual contribution (except where a different
meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts
listed in §5.1, the following clauses…
(1) Minimum wages.
(i) All laborers and mechanics employed or working upon the site of the work (or under the United States
Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project),
will be paid unconditionally and not less often than once a week, and without subsequent deduction or
rebate on any account (except such payroll deductions as are permitted by regulations issued by the
Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe
benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those
contained in the wage determination of the Secretary of Labor which is attached hereto and made a part
hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and
such laborers and mechanics…
(3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy
of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract,
but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or
owner, as the case may be, for transmission to the (write in name of agency).
2 CFR 200 Appendix II states in part: Finding 2023-004 (Continued)
In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by
the non-Federal entity under the Federal award must contain provisions covering the following, as
applicable. . . .
(D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation,
all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a
provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented
by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts
Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must
be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified
in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay
wages not less than once a week.. . .”
Condition: An effective internal control system was not in place at the School Corporation in order to
ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions
– Wage Rate Requirements compliance requirements. The School Corporation did not include Davis Bacon
wage rate requirements in its contract with vendor which includes labor. The School Corporation did not
obtain the weekly payroll reports certifications from a construction company for a building project.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the compliance requirements listed above.
Effect: The failure to design and implement an effective internal control system enabled material
noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and
Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal
funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation expended $324,887 during the audit period on an HVAC project was
charged to the ESSER III grant award (84.425U). The construction contract did not include a Davis-Bacon
clause prescribing federal wage rate requirements required for construction contracts. The School
Corporation did not have an internal control designed to collect the weekly payroll reports certifications from
the construction company and its subcontractors, as applicable, for the construction project to verify
prevailing wages were being paid during the project period. Therefore, no review was performed by
management to ensure that pay rates complied with the federal wage rate requirements. The construction
payments represented approximately 52% of the Education Stabilization Fund disbursements reported on
the SEFA for the period under audit.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation include Davis-Bacon wage requirements in
construction contracts which are federally funded and implement a formal process to ensure the required
weekly payroll report certifications are collected and reviewed by management to ensure compliance with
the federal wage rate requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-004
Information on the federal program:
Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards in compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award. These internal controls should be in
compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the
Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ."
29 CFR 5.5 states in part:
a. The Agency head shall cause or require the contracting officer to insert in full in any contract in excess
of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and
decorating, of a public building or public work, or building or work financed in whole or in part from Federal
funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of
any contract of a Federal agency to make a loan, grant or annual contribution (except where a different
meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts
listed in §5.1, the following clauses…
(1) Minimum wages.
(i) All laborers and mechanics employed or working upon the site of the work (or under the United States
Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project),
will be paid unconditionally and not less often than once a week, and without subsequent deduction or
rebate on any account (except such payroll deductions as are permitted by regulations issued by the
Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe
benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those
contained in the wage determination of the Secretary of Labor which is attached hereto and made a part
hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and
such laborers and mechanics…
(3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy
of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract,
but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or
owner, as the case may be, for transmission to the (write in name of agency).
2 CFR 200 Appendix II states in part: Finding 2023-004 (Continued)
In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by
the non-Federal entity under the Federal award must contain provisions covering the following, as
applicable. . . .
(D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation,
all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a
provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented
by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts
Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must
be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified
in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay
wages not less than once a week.. . .”
Condition: An effective internal control system was not in place at the School Corporation in order to
ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions
– Wage Rate Requirements compliance requirements. The School Corporation did not include Davis Bacon
wage rate requirements in its contract with vendor which includes labor. The School Corporation did not
obtain the weekly payroll reports certifications from a construction company for a building project.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the compliance requirements listed above.
Effect: The failure to design and implement an effective internal control system enabled material
noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and
Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal
funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation expended $324,887 during the audit period on an HVAC project was
charged to the ESSER III grant award (84.425U). The construction contract did not include a Davis-Bacon
clause prescribing federal wage rate requirements required for construction contracts. The School
Corporation did not have an internal control designed to collect the weekly payroll reports certifications from
the construction company and its subcontractors, as applicable, for the construction project to verify
prevailing wages were being paid during the project period. Therefore, no review was performed by
management to ensure that pay rates complied with the federal wage rate requirements. The construction
payments represented approximately 52% of the Education Stabilization Fund disbursements reported on
the SEFA for the period under audit.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation include Davis-Bacon wage requirements in
construction contracts which are federally funded and implement a formal process to ensure the required
weekly payroll report certifications are collected and reviewed by management to ensure compliance with
the federal wage rate requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.
Finding 2023-004
Information on the federal program:
Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Material Weakness, Qualified Opinion
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards in compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award. These internal controls should be in
compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the
Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ."
29 CFR 5.5 states in part:
a. The Agency head shall cause or require the contracting officer to insert in full in any contract in excess
of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and
decorating, of a public building or public work, or building or work financed in whole or in part from Federal
funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of
any contract of a Federal agency to make a loan, grant or annual contribution (except where a different
meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts
listed in §5.1, the following clauses…
(1) Minimum wages.
(i) All laborers and mechanics employed or working upon the site of the work (or under the United States
Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project),
will be paid unconditionally and not less often than once a week, and without subsequent deduction or
rebate on any account (except such payroll deductions as are permitted by regulations issued by the
Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe
benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those
contained in the wage determination of the Secretary of Labor which is attached hereto and made a part
hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and
such laborers and mechanics…
(3)(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy
of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract,
but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or
owner, as the case may be, for transmission to the (write in name of agency).
2 CFR 200 Appendix II states in part: Finding 2023-004 (Continued)
In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by
the non-Federal entity under the Federal award must contain provisions covering the following, as
applicable. . . .
(D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation,
all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a
provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented
by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts
Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must
be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified
in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay
wages not less than once a week.. . .”
Condition: An effective internal control system was not in place at the School Corporation in order to
ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions
– Wage Rate Requirements compliance requirements. The School Corporation did not include Davis Bacon
wage rate requirements in its contract with vendor which includes labor. The School Corporation did not
obtain the weekly payroll reports certifications from a construction company for a building project.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the compliance requirements listed above.
Effect: The failure to design and implement an effective internal control system enabled material
noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and
Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal
funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation expended $324,887 during the audit period on an HVAC project was
charged to the ESSER III grant award (84.425U). The construction contract did not include a Davis-Bacon
clause prescribing federal wage rate requirements required for construction contracts. The School
Corporation did not have an internal control designed to collect the weekly payroll reports certifications from
the construction company and its subcontractors, as applicable, for the construction project to verify
prevailing wages were being paid during the project period. Therefore, no review was performed by
management to ensure that pay rates complied with the federal wage rate requirements. The construction
payments represented approximately 52% of the Education Stabilization Fund disbursements reported on
the SEFA for the period under audit.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation include Davis-Bacon wage requirements in
construction contracts which are federally funded and implement a formal process to ensure the required
weekly payroll report certifications are collected and reviewed by management to ensure compliance with
the federal wage rate requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.