Audit 298006

Federal Program Information: Funding Agency: U.S. Department of Education Title: Education Stabilization Fund Assistance Listing: 84.425 D Passthrough: N/A Award Year: 2023 Criteria: APPENDIX II TO PART 200—CONTRACT PROVISIONS FOR NON-FEDERAL ENTITY CONTRACTS UNDER FEDERAL AWARDS (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. The non-Federal entity must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. The contracts must also include a provision for compliance with the Copeland ‘‘AntiKickback’’ Act (40 U.S.C. 3145), as supplemented by Department of Labor regulations (29 CFR Part 3, ‘‘Contractors and Subcontractors on Public Building or Public Work Financed in Whole or in Part by Loans or Grants from the United States’’). The Act provides that each contractor or subrecipient must be prohibited from inducing, by any means, any person employed in the construction, completion, or repair of public work, to give up any part of the compensation to which he or she is otherwise entitled. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. New Mexico Public Education Department award letter requirements for capital expenditures and construction projects for funds allocated to Fund 24308 on page 3. You must receive written prior approval for purchase of equipment with a unit cost equal to or in excess of $5,000. Failure to do so will result in denial of reimbursement for the cost of such an item. Attach an approved Federal Grant Equipment Form to your BAR if you will include budget in object code 57331 “Fixed Assets (more than $5,000).” Attach the approved form to your application if you submit an initial 2021-22 OBMS budget. The approved Federal Grant Equipment Form must also be uploaded with your request for reimbursement (RFR) containing such expenses. You must receive written prior approval for construction projects. Approval is documented in the SharePoint application and on a Federal Grant Equipment Form. Any approved construction projects must comply with applicable Uniform Guidance requirements, as well as the Department’s regulations regarding construction. See 34 CFR § 76.600. As is the case with all construction contracts using laborers and mechanics financed by federal education funds, and LEA that uses ESSER funds for construction contracts over $2,000 must meet all Davis-Bacon prevailing wage requirements and include language in the construction contracts that all contractors or subcontractors must pay wages that are not less than those established for the locality of the project (prevailing wage rates). (See 20 U.S.C. 1232b Labor Standards.) Condition: During our testing of single audit disbursements and with regards to requirements of the Compliance Supplement for equipment/real property management and special tests and provisions, we identified that the District had not obtained the Federal Grant Equipment Form for the purchase of one musical instrument which exceed $5,000 in value individually, nor had it obtained the form for multiple construction projects during the year. Additionally, the District did not meet the requirement for the Davis-Bacon Act prevailing wage requirement. The District had not included the prevailing wage requirements in the contract with the vendors nor did the District obtain the weekly certified payroll reports from the contractor for each of the projects. The District had obtained at least one wage determination report from the New Mexico Workforce Solutions Agency for the project. Questioned Costs: None. The State of New Mexico Public Education Department (PED) had approved the grant application of the District prior to obtaining the contracts for the construction projects. As such, it had approved the construction project via approval of the grant application. Additionally, the PED has been approving the requests for reimbursement which include details of the expenditures, which indicate the PED is still approving the ongoing costs of these upgrades with these funds, which are appropriate use of the funds. Cause: District personnel had miscommunications between the various parties in the District who were over the projects and capital purchases. Some of the projects being funded from the stabilization funds were communicated to the person who obtained the Federal Grant Equipment Form for those projects. However, not all projects funded from stabilization funds were properly communicated to the individual who was unaware of the need to obtain these forms. Additionally, the District did not pay attention to the bullet point in the award letter requiring them to include language in the contract with regards to prevailing wages, nor was the District aware of the requirements of the Uniform Guidance requirements of obtaining weekly payroll certifications. Policies had not been properly communicated, and no responsibility for obtaining these items had been specifically assigned in the District. Effect: The District is not in compliance with Federal and PED regulations related to the grant and could put funding in jeopardy or require the District to reimburse the program for improper grant distributions. The fact that the grant was approved by the PED and that the contractors are aware of prevailing wage requirements on construction projects for school districts does not relieve the District of following Federal, State, and grant requirements. Auditor’s Recommendation: We recommend that the District establish a policy and implement internal control procedures regarding the review of all grant award letters to ensure that the District is aware of all requirements that are imposed on the District with accepting the funds. We also recommend that the District work with the contractor to obtain weekly wage certifications going back from the beginning of the project forward to be able to demonstrate that the appropriate wages were paid during the full time-frame of the project. Finally, we recommend that the District include the proper language in all contracts with firms completing construction and maintenance work, which is funded from the stabilization funds. Responsible Official’s Plan: • Specific corrective action plan for finding: After receiving this finding during the previous audit, the District added language reflecting the Davis-Bacon requirements to all affected and qualified purchase orders. However, this was insufficient to meet the proper documentation required by Davis-Bacon. The District (during SY23-24) began adding additional language, provided by our CPA, onto all qualifying CONTRACTS. We have reviewed all existing, qualifying agreements to add the appropriate language to all current agreements. The Coordinator for Procurement and Capital Projects will perform a double-check on all qualifying agreements issued moving forward. The Maintenance Department contacts the affected contractors to obtain the certified payroll reports for these projects. • Timeline for completion of corrective action plan: This process has already been established and is in place. • Employee position(s) responsible for meeting the timeline: Finance Director

Federal Program Information: Funding Agency: U.S. Department of Education Title: Education Stabilization Fund Assistance Listing: 84.425 D Passthrough: N/A Award Year: 2023 Criteria: APPENDIX II TO PART 200—CONTRACT PROVISIONS FOR NON-FEDERAL ENTITY CONTRACTS UNDER FEDERAL AWARDS (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. The non-Federal entity must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. The contracts must also include a provision for compliance with the Copeland ‘‘AntiKickback’’ Act (40 U.S.C. 3145), as supplemented by Department of Labor regulations (29 CFR Part 3, ‘‘Contractors and Subcontractors on Public Building or Public Work Financed in Whole or in Part by Loans or Grants from the United States’’). The Act provides that each contractor or subrecipient must be prohibited from inducing, by any means, any person employed in the construction, completion, or repair of public work, to give up any part of the compensation to which he or she is otherwise entitled. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. New Mexico Public Education Department award letter requirements for capital expenditures and construction projects for funds allocated to Fund 24308 on page 3. You must receive written prior approval for purchase of equipment with a unit cost equal to or in excess of $5,000. Failure to do so will result in denial of reimbursement for the cost of such an item. Attach an approved Federal Grant Equipment Form to your BAR if you will include budget in object code 57331 “Fixed Assets (more than $5,000).” Attach the approved form to your application if you submit an initial 2021-22 OBMS budget. The approved Federal Grant Equipment Form must also be uploaded with your request for reimbursement (RFR) containing such expenses. You must receive written prior approval for construction projects. Approval is documented in the SharePoint application and on a Federal Grant Equipment Form. Any approved construction projects must comply with applicable Uniform Guidance requirements, as well as the Department’s regulations regarding construction. See 34 CFR § 76.600. As is the case with all construction contracts using laborers and mechanics financed by federal education funds, and LEA that uses ESSER funds for construction contracts over $2,000 must meet all Davis-Bacon prevailing wage requirements and include language in the construction contracts that all contractors or subcontractors must pay wages that are not less than those established for the locality of the project (prevailing wage rates). (See 20 U.S.C. 1232b Labor Standards.) Condition: During our testing of single audit disbursements and with regards to requirements of the Compliance Supplement for equipment/real property management and special tests and provisions, we identified that the District had not obtained the Federal Grant Equipment Form for the purchase of one musical instrument which exceed $5,000 in value individually, nor had it obtained the form for multiple construction projects during the year. Additionally, the District did not meet the requirement for the Davis-Bacon Act prevailing wage requirement. The District had not included the prevailing wage requirements in the contract with the vendors nor did the District obtain the weekly certified payroll reports from the contractor for each of the projects. The District had obtained at least one wage determination report from the New Mexico Workforce Solutions Agency for the project. Questioned Costs: None. The State of New Mexico Public Education Department (PED) had approved the grant application of the District prior to obtaining the contracts for the construction projects. As such, it had approved the construction project via approval of the grant application. Additionally, the PED has been approving the requests for reimbursement which include details of the expenditures, which indicate the PED is still approving the ongoing costs of these upgrades with these funds, which are appropriate use of the funds. Cause: District personnel had miscommunications between the various parties in the District who were over the projects and capital purchases. Some of the projects being funded from the stabilization funds were communicated to the person who obtained the Federal Grant Equipment Form for those projects. However, not all projects funded from stabilization funds were properly communicated to the individual who was unaware of the need to obtain these forms. Additionally, the District did not pay attention to the bullet point in the award letter requiring them to include language in the contract with regards to prevailing wages, nor was the District aware of the requirements of the Uniform Guidance requirements of obtaining weekly payroll certifications. Policies had not been properly communicated, and no responsibility for obtaining these items had been specifically assigned in the District. Effect: The District is not in compliance with Federal and PED regulations related to the grant and could put funding in jeopardy or require the District to reimburse the program for improper grant distributions. The fact that the grant was approved by the PED and that the contractors are aware of prevailing wage requirements on construction projects for school districts does not relieve the District of following Federal, State, and grant requirements. Auditor’s Recommendation: We recommend that the District establish a policy and implement internal control procedures regarding the review of all grant award letters to ensure that the District is aware of all requirements that are imposed on the District with accepting the funds. We also recommend that the District work with the contractor to obtain weekly wage certifications going back from the beginning of the project forward to be able to demonstrate that the appropriate wages were paid during the full time-frame of the project. Finally, we recommend that the District include the proper language in all contracts with firms completing construction and maintenance work, which is funded from the stabilization funds. Responsible Official’s Plan: • Specific corrective action plan for finding: After receiving this finding during the previous audit, the District added language reflecting the Davis-Bacon requirements to all affected and qualified purchase orders. However, this was insufficient to meet the proper documentation required by Davis-Bacon. The District (during SY23-24) began adding additional language, provided by our CPA, onto all qualifying CONTRACTS. We have reviewed all existing, qualifying agreements to add the appropriate language to all current agreements. The Coordinator for Procurement and Capital Projects will perform a double-check on all qualifying agreements issued moving forward. The Maintenance Department contacts the affected contractors to obtain the certified payroll reports for these projects. • Timeline for completion of corrective action plan: This process has already been established and is in place. • Employee position(s) responsible for meeting the timeline: Finance Director