Audit 355620

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Central Valley School District No. 356 September 1, 2023 through August 31, 2024 2024-001       The District did not have adequate internal controls and did not comply with federal wage rate requirements Assistance Listing Number and Title: 84.425, COVID-19 Education Stabilization Fund Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425D COVID-19, 84.425D-0120411 COVID-19, 84.425U-0137146 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-002     Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In fiscal year 2024, the District spent a total of $380,868 of its ESF awards. This included $368,263 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D) and $12,605 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). The District spent $47,577 in program funds for improvements to its heating, ventilation and air conditioning (HVAC) system at one school building. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Under federal wage rate requirements, also known as the Davis-Bacon Act, contractors and subcontractors that work on projects financed with more than $2,000 of federal funds must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. For construction contracts subject to these wage rate requirements, the District must include a provision that the contractors and subcontractors must comply with those requirements and the Department of Labor’s regulations. This includes a requirement that the contractors and its subcontractors must submit certified payroll reports to the District weekly, for each week that laborers performed contract work. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition During the 2024 school year, the District spent $47,577 for payments to one contractor to update the HVAC system controls in one school. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not collect weekly certified payroll reports from the contractor and all subcontractors to confirm they paid laborers the proper prevailing wages. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The District experienced turnover and the employee responsible for obtaining weekly certified payroll reports said they were misinformed the project ended in September 2023. As a result, they were unaware that weekly certified payrolls needed to be collected, and did not collect them as required. Effect of Condition Without adequate internal controls to ensure it collects all weekly certified payroll reports, the District cannot demonstrate it complied with federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and subcontractors did not pay prevailing wage rates to laborers working on the contract. The District did not collect all weekly certified payrolls for one contractor and five subcontractors. Recommendation We recommend the District establish internal controls to ensure compliance with federal wage rate requirements. This should include obtaining the federal certified payroll reports, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports from contractors and subcontractors. District’s Response The District agrees with the auditors that they did not comply with federal wage rate requirements, specifically around collecting weekly certified payroll reports. The district paid its final invoices toward these projects on October 10, 2023 for work that was performed through September 2023. While we realize there was a communication breakdown, and federal certified payroll reports were not collected, the District has put internal controls in place to ensure it complies with federal wage rate requirements. The District’s Purchasing Manager is responsible for creating all purchase orders related to capital projects, including those using federal funds. Prior to any purchase order being created, the Purchasing Manager will ensure all required paperwork from the vendor is submitted and reviewed. That includes communication to the vendor on the district’s expectations around submitting weekly certified payroll reports. The Purchasing Manager will track and document this weekly during the life of the project. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.   Title 29 CFR, Section 3.3 – Weekly statement with respect to payment of wages, and Section 3.4 – Submission of weekly statements and the preservation and inspection of weekly payroll records, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Central Valley School District No. 356 September 1, 2023 through August 31, 2024 2024-001       The District did not have adequate internal controls and did not comply with federal wage rate requirements Assistance Listing Number and Title: 84.425, COVID-19 Education Stabilization Fund Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425D COVID-19, 84.425D-0120411 COVID-19, 84.425U-0137146 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-002     Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In fiscal year 2024, the District spent a total of $380,868 of its ESF awards. This included $368,263 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D) and $12,605 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). The District spent $47,577 in program funds for improvements to its heating, ventilation and air conditioning (HVAC) system at one school building. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Under federal wage rate requirements, also known as the Davis-Bacon Act, contractors and subcontractors that work on projects financed with more than $2,000 of federal funds must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. For construction contracts subject to these wage rate requirements, the District must include a provision that the contractors and subcontractors must comply with those requirements and the Department of Labor’s regulations. This includes a requirement that the contractors and its subcontractors must submit certified payroll reports to the District weekly, for each week that laborers performed contract work. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition During the 2024 school year, the District spent $47,577 for payments to one contractor to update the HVAC system controls in one school. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not collect weekly certified payroll reports from the contractor and all subcontractors to confirm they paid laborers the proper prevailing wages. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The District experienced turnover and the employee responsible for obtaining weekly certified payroll reports said they were misinformed the project ended in September 2023. As a result, they were unaware that weekly certified payrolls needed to be collected, and did not collect them as required. Effect of Condition Without adequate internal controls to ensure it collects all weekly certified payroll reports, the District cannot demonstrate it complied with federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and subcontractors did not pay prevailing wage rates to laborers working on the contract. The District did not collect all weekly certified payrolls for one contractor and five subcontractors. Recommendation We recommend the District establish internal controls to ensure compliance with federal wage rate requirements. This should include obtaining the federal certified payroll reports, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports from contractors and subcontractors. District’s Response The District agrees with the auditors that they did not comply with federal wage rate requirements, specifically around collecting weekly certified payroll reports. The district paid its final invoices toward these projects on October 10, 2023 for work that was performed through September 2023. While we realize there was a communication breakdown, and federal certified payroll reports were not collected, the District has put internal controls in place to ensure it complies with federal wage rate requirements. The District’s Purchasing Manager is responsible for creating all purchase orders related to capital projects, including those using federal funds. Prior to any purchase order being created, the Purchasing Manager will ensure all required paperwork from the vendor is submitted and reviewed. That includes communication to the vendor on the district’s expectations around submitting weekly certified payroll reports. The Purchasing Manager will track and document this weekly during the life of the project. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.   Title 29 CFR, Section 3.3 – Weekly statement with respect to payment of wages, and Section 3.4 – Submission of weekly statements and the preservation and inspection of weekly payroll records, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Central Valley School District No. 356 September 1, 2023 through August 31, 2024 2024-001       The District did not have adequate internal controls and did not comply with federal wage rate requirements Assistance Listing Number and Title: 84.425, COVID-19 Education Stabilization Fund Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425D COVID-19, 84.425D-0120411 COVID-19, 84.425U-0137146 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-002     Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In fiscal year 2024, the District spent a total of $380,868 of its ESF awards. This included $368,263 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D) and $12,605 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). The District spent $47,577 in program funds for improvements to its heating, ventilation and air conditioning (HVAC) system at one school building. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Under federal wage rate requirements, also known as the Davis-Bacon Act, contractors and subcontractors that work on projects financed with more than $2,000 of federal funds must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. For construction contracts subject to these wage rate requirements, the District must include a provision that the contractors and subcontractors must comply with those requirements and the Department of Labor’s regulations. This includes a requirement that the contractors and its subcontractors must submit certified payroll reports to the District weekly, for each week that laborers performed contract work. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition During the 2024 school year, the District spent $47,577 for payments to one contractor to update the HVAC system controls in one school. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not collect weekly certified payroll reports from the contractor and all subcontractors to confirm they paid laborers the proper prevailing wages. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The District experienced turnover and the employee responsible for obtaining weekly certified payroll reports said they were misinformed the project ended in September 2023. As a result, they were unaware that weekly certified payrolls needed to be collected, and did not collect them as required. Effect of Condition Without adequate internal controls to ensure it collects all weekly certified payroll reports, the District cannot demonstrate it complied with federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and subcontractors did not pay prevailing wage rates to laborers working on the contract. The District did not collect all weekly certified payrolls for one contractor and five subcontractors. Recommendation We recommend the District establish internal controls to ensure compliance with federal wage rate requirements. This should include obtaining the federal certified payroll reports, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports from contractors and subcontractors. District’s Response The District agrees with the auditors that they did not comply with federal wage rate requirements, specifically around collecting weekly certified payroll reports. The district paid its final invoices toward these projects on October 10, 2023 for work that was performed through September 2023. While we realize there was a communication breakdown, and federal certified payroll reports were not collected, the District has put internal controls in place to ensure it complies with federal wage rate requirements. The District’s Purchasing Manager is responsible for creating all purchase orders related to capital projects, including those using federal funds. Prior to any purchase order being created, the Purchasing Manager will ensure all required paperwork from the vendor is submitted and reviewed. That includes communication to the vendor on the district’s expectations around submitting weekly certified payroll reports. The Purchasing Manager will track and document this weekly during the life of the project. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.   Title 29 CFR, Section 3.3 – Weekly statement with respect to payment of wages, and Section 3.4 – Submission of weekly statements and the preservation and inspection of weekly payroll records, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Central Valley School District No. 356 September 1, 2023 through August 31, 2024 2024-001       The District did not have adequate internal controls and did not comply with federal wage rate requirements Assistance Listing Number and Title: 84.425, COVID-19 Education Stabilization Fund Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425D COVID-19, 84.425D-0120411 COVID-19, 84.425U-0137146 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-002     Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In fiscal year 2024, the District spent a total of $380,868 of its ESF awards. This included $368,263 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D) and $12,605 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). The District spent $47,577 in program funds for improvements to its heating, ventilation and air conditioning (HVAC) system at one school building. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Under federal wage rate requirements, also known as the Davis-Bacon Act, contractors and subcontractors that work on projects financed with more than $2,000 of federal funds must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. For construction contracts subject to these wage rate requirements, the District must include a provision that the contractors and subcontractors must comply with those requirements and the Department of Labor’s regulations. This includes a requirement that the contractors and its subcontractors must submit certified payroll reports to the District weekly, for each week that laborers performed contract work. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition During the 2024 school year, the District spent $47,577 for payments to one contractor to update the HVAC system controls in one school. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not collect weekly certified payroll reports from the contractor and all subcontractors to confirm they paid laborers the proper prevailing wages. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The District experienced turnover and the employee responsible for obtaining weekly certified payroll reports said they were misinformed the project ended in September 2023. As a result, they were unaware that weekly certified payrolls needed to be collected, and did not collect them as required. Effect of Condition Without adequate internal controls to ensure it collects all weekly certified payroll reports, the District cannot demonstrate it complied with federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and subcontractors did not pay prevailing wage rates to laborers working on the contract. The District did not collect all weekly certified payrolls for one contractor and five subcontractors. Recommendation We recommend the District establish internal controls to ensure compliance with federal wage rate requirements. This should include obtaining the federal certified payroll reports, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports from contractors and subcontractors. District’s Response The District agrees with the auditors that they did not comply with federal wage rate requirements, specifically around collecting weekly certified payroll reports. The district paid its final invoices toward these projects on October 10, 2023 for work that was performed through September 2023. While we realize there was a communication breakdown, and federal certified payroll reports were not collected, the District has put internal controls in place to ensure it complies with federal wage rate requirements. The District’s Purchasing Manager is responsible for creating all purchase orders related to capital projects, including those using federal funds. Prior to any purchase order being created, the Purchasing Manager will ensure all required paperwork from the vendor is submitted and reviewed. That includes communication to the vendor on the district’s expectations around submitting weekly certified payroll reports. The Purchasing Manager will track and document this weekly during the life of the project. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.   Title 29 CFR, Section 3.3 – Weekly statement with respect to payment of wages, and Section 3.4 – Submission of weekly statements and the preservation and inspection of weekly payroll records, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Central Valley School District No. 356 September 1, 2023 through August 31, 2024 2024-001       The District did not have adequate internal controls and did not comply with federal wage rate requirements Assistance Listing Number and Title: 84.425, COVID-19 Education Stabilization Fund Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425D COVID-19, 84.425D-0120411 COVID-19, 84.425U-0137146 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-002     Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In fiscal year 2024, the District spent a total of $380,868 of its ESF awards. This included $368,263 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D) and $12,605 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). The District spent $47,577 in program funds for improvements to its heating, ventilation and air conditioning (HVAC) system at one school building. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Under federal wage rate requirements, also known as the Davis-Bacon Act, contractors and subcontractors that work on projects financed with more than $2,000 of federal funds must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. For construction contracts subject to these wage rate requirements, the District must include a provision that the contractors and subcontractors must comply with those requirements and the Department of Labor’s regulations. This includes a requirement that the contractors and its subcontractors must submit certified payroll reports to the District weekly, for each week that laborers performed contract work. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition During the 2024 school year, the District spent $47,577 for payments to one contractor to update the HVAC system controls in one school. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not collect weekly certified payroll reports from the contractor and all subcontractors to confirm they paid laborers the proper prevailing wages. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The District experienced turnover and the employee responsible for obtaining weekly certified payroll reports said they were misinformed the project ended in September 2023. As a result, they were unaware that weekly certified payrolls needed to be collected, and did not collect them as required. Effect of Condition Without adequate internal controls to ensure it collects all weekly certified payroll reports, the District cannot demonstrate it complied with federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and subcontractors did not pay prevailing wage rates to laborers working on the contract. The District did not collect all weekly certified payrolls for one contractor and five subcontractors. Recommendation We recommend the District establish internal controls to ensure compliance with federal wage rate requirements. This should include obtaining the federal certified payroll reports, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports from contractors and subcontractors. District’s Response The District agrees with the auditors that they did not comply with federal wage rate requirements, specifically around collecting weekly certified payroll reports. The district paid its final invoices toward these projects on October 10, 2023 for work that was performed through September 2023. While we realize there was a communication breakdown, and federal certified payroll reports were not collected, the District has put internal controls in place to ensure it complies with federal wage rate requirements. The District’s Purchasing Manager is responsible for creating all purchase orders related to capital projects, including those using federal funds. Prior to any purchase order being created, the Purchasing Manager will ensure all required paperwork from the vendor is submitted and reviewed. That includes communication to the vendor on the district’s expectations around submitting weekly certified payroll reports. The Purchasing Manager will track and document this weekly during the life of the project. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.   Title 29 CFR, Section 3.3 – Weekly statement with respect to payment of wages, and Section 3.4 – Submission of weekly statements and the preservation and inspection of weekly payroll records, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Central Valley School District No. 356 September 1, 2023 through August 31, 2024 2024-001       The District did not have adequate internal controls and did not comply with federal wage rate requirements Assistance Listing Number and Title: 84.425, COVID-19 Education Stabilization Fund Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425D COVID-19, 84.425D-0120411 COVID-19, 84.425U-0137146 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-002     Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In fiscal year 2024, the District spent a total of $380,868 of its ESF awards. This included $368,263 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D) and $12,605 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). The District spent $47,577 in program funds for improvements to its heating, ventilation and air conditioning (HVAC) system at one school building. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Under federal wage rate requirements, also known as the Davis-Bacon Act, contractors and subcontractors that work on projects financed with more than $2,000 of federal funds must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. For construction contracts subject to these wage rate requirements, the District must include a provision that the contractors and subcontractors must comply with those requirements and the Department of Labor’s regulations. This includes a requirement that the contractors and its subcontractors must submit certified payroll reports to the District weekly, for each week that laborers performed contract work. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition During the 2024 school year, the District spent $47,577 for payments to one contractor to update the HVAC system controls in one school. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not collect weekly certified payroll reports from the contractor and all subcontractors to confirm they paid laborers the proper prevailing wages. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The District experienced turnover and the employee responsible for obtaining weekly certified payroll reports said they were misinformed the project ended in September 2023. As a result, they were unaware that weekly certified payrolls needed to be collected, and did not collect them as required. Effect of Condition Without adequate internal controls to ensure it collects all weekly certified payroll reports, the District cannot demonstrate it complied with federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and subcontractors did not pay prevailing wage rates to laborers working on the contract. The District did not collect all weekly certified payrolls for one contractor and five subcontractors. Recommendation We recommend the District establish internal controls to ensure compliance with federal wage rate requirements. This should include obtaining the federal certified payroll reports, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports from contractors and subcontractors. District’s Response The District agrees with the auditors that they did not comply with federal wage rate requirements, specifically around collecting weekly certified payroll reports. The district paid its final invoices toward these projects on October 10, 2023 for work that was performed through September 2023. While we realize there was a communication breakdown, and federal certified payroll reports were not collected, the District has put internal controls in place to ensure it complies with federal wage rate requirements. The District’s Purchasing Manager is responsible for creating all purchase orders related to capital projects, including those using federal funds. Prior to any purchase order being created, the Purchasing Manager will ensure all required paperwork from the vendor is submitted and reviewed. That includes communication to the vendor on the district’s expectations around submitting weekly certified payroll reports. The Purchasing Manager will track and document this weekly during the life of the project. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.   Title 29 CFR, Section 3.3 – Weekly statement with respect to payment of wages, and Section 3.4 – Submission of weekly statements and the preservation and inspection of weekly payroll records, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports.