Audit 357204

Wellpinit School District No. 49 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 the Superintendent of Public Instruction Pass-through Award/Contract Number: 84.425U-138046 and 84.425U-142138 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A 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 $548,061 in ESF awards, which were spent in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). 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 2023-24 school year, the District spent $56,710 from its ESSER III award to pay one contractor for the Softball Field Dugout Replacement and Revitalization project. This project was part of the District’s school facility capital improvement efforts to prevent the spread of COVID-19 and enable school operations by providing upgraded outdoor spaces for social distancing. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not: • Establish a formal contract with the contractor and, therefore, did not include required wage rate provisions in the contract • Collect weekly certified payroll reports from the contractor and their subcontractors to confirm they paid laborers proper prevailing wages We consider these deficiencies in internal controls to be a material weakness, which led to material noncompliance. Cause of Condition District management did not know the threshold to establish a contract was $2,000 for this requirement and that it was required to include the federal wage rate clauses in the contract. Additionally, District management did not know about the federal requirement to collect all certified payroll reports from the contractor and their subcontractors, each week, to confirm they paid laborers prevailing wages. Effect of Condition Without adequate internal controls to ensure it establishes contracts, includes the wage rate clauses in its contracts, and 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. Recommendation We recommend the District design internal controls to ensure compliance with federal wage rate requirements. This should include establishing contracts and inserting wage rate clauses into the contracts, 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 acknowledges the finding regarding noncompliance with federal wage rate requirements under the Davis-Bacon Act for a federally funded construction project. At the time, the District was unaware of the $2,000 threshold triggering these requirements and did not include the necessary wage rate provisions in the contract or collect certified payroll reports. To address this, the District is: • Updating procurement and contracting procedures to include Davis-Bacon Act requirements • Providing staff training on federal wage rate compliance • Implementing procedures to ensure proper contract language and weekly certified payroll collection • Establishing monitoring processes to verify ongoing compliance These actions will strengthen internal controls and ensure adherence to all applicable federal requirements moving forward. Auditor’s Remarks We appreciate the District’s commitment to resolving this finding, and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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. Title 29 CFR, Section 5.5 – Contract provisions and related matters establishes the requirements for the contracting officer to insert in full 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 with federal funds the clauses listed, which includes but is not limited to the minimum wages to be paid and payrolls and basic records to be maintained (submission of weekly certified payrolls).

Wellpinit School District No. 49 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 the Superintendent of Public Instruction Pass-through Award/Contract Number: 84.425U-138046 and 84.425U-142138 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A 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 $548,061 in ESF awards, which were spent in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). 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 2023-24 school year, the District spent $56,710 from its ESSER III award to pay one contractor for the Softball Field Dugout Replacement and Revitalization project. This project was part of the District’s school facility capital improvement efforts to prevent the spread of COVID-19 and enable school operations by providing upgraded outdoor spaces for social distancing. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not: • Establish a formal contract with the contractor and, therefore, did not include required wage rate provisions in the contract • Collect weekly certified payroll reports from the contractor and their subcontractors to confirm they paid laborers proper prevailing wages We consider these deficiencies in internal controls to be a material weakness, which led to material noncompliance. Cause of Condition District management did not know the threshold to establish a contract was $2,000 for this requirement and that it was required to include the federal wage rate clauses in the contract. Additionally, District management did not know about the federal requirement to collect all certified payroll reports from the contractor and their subcontractors, each week, to confirm they paid laborers prevailing wages. Effect of Condition Without adequate internal controls to ensure it establishes contracts, includes the wage rate clauses in its contracts, and 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. Recommendation We recommend the District design internal controls to ensure compliance with federal wage rate requirements. This should include establishing contracts and inserting wage rate clauses into the contracts, 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 acknowledges the finding regarding noncompliance with federal wage rate requirements under the Davis-Bacon Act for a federally funded construction project. At the time, the District was unaware of the $2,000 threshold triggering these requirements and did not include the necessary wage rate provisions in the contract or collect certified payroll reports. To address this, the District is: • Updating procurement and contracting procedures to include Davis-Bacon Act requirements • Providing staff training on federal wage rate compliance • Implementing procedures to ensure proper contract language and weekly certified payroll collection • Establishing monitoring processes to verify ongoing compliance These actions will strengthen internal controls and ensure adherence to all applicable federal requirements moving forward. Auditor’s Remarks We appreciate the District’s commitment to resolving this finding, and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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. Title 29 CFR, Section 5.5 – Contract provisions and related matters establishes the requirements for the contracting officer to insert in full 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 with federal funds the clauses listed, which includes but is not limited to the minimum wages to be paid and payrolls and basic records to be maintained (submission of weekly certified payrolls).

Wellpinit School District No. 49 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 the Superintendent of Public Instruction Pass-through Award/Contract Number: 84.425U-138046 and 84.425U-142138 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A 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 $548,061 in ESF awards, which were spent in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). 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 2023-24 school year, the District spent $56,710 from its ESSER III award to pay one contractor for the Softball Field Dugout Replacement and Revitalization project. This project was part of the District’s school facility capital improvement efforts to prevent the spread of COVID-19 and enable school operations by providing upgraded outdoor spaces for social distancing. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not: • Establish a formal contract with the contractor and, therefore, did not include required wage rate provisions in the contract • Collect weekly certified payroll reports from the contractor and their subcontractors to confirm they paid laborers proper prevailing wages We consider these deficiencies in internal controls to be a material weakness, which led to material noncompliance. Cause of Condition District management did not know the threshold to establish a contract was $2,000 for this requirement and that it was required to include the federal wage rate clauses in the contract. Additionally, District management did not know about the federal requirement to collect all certified payroll reports from the contractor and their subcontractors, each week, to confirm they paid laborers prevailing wages. Effect of Condition Without adequate internal controls to ensure it establishes contracts, includes the wage rate clauses in its contracts, and 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. Recommendation We recommend the District design internal controls to ensure compliance with federal wage rate requirements. This should include establishing contracts and inserting wage rate clauses into the contracts, 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 acknowledges the finding regarding noncompliance with federal wage rate requirements under the Davis-Bacon Act for a federally funded construction project. At the time, the District was unaware of the $2,000 threshold triggering these requirements and did not include the necessary wage rate provisions in the contract or collect certified payroll reports. To address this, the District is: • Updating procurement and contracting procedures to include Davis-Bacon Act requirements • Providing staff training on federal wage rate compliance • Implementing procedures to ensure proper contract language and weekly certified payroll collection • Establishing monitoring processes to verify ongoing compliance These actions will strengthen internal controls and ensure adherence to all applicable federal requirements moving forward. Auditor’s Remarks We appreciate the District’s commitment to resolving this finding, and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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. Title 29 CFR, Section 5.5 – Contract provisions and related matters establishes the requirements for the contracting officer to insert in full 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 with federal funds the clauses listed, which includes but is not limited to the minimum wages to be paid and payrolls and basic records to be maintained (submission of weekly certified payrolls).

Wellpinit School District No. 49 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 the Superintendent of Public Instruction Pass-through Award/Contract Number: 84.425U-138046 and 84.425U-142138 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A 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 $548,061 in ESF awards, which were spent in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). 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 2023-24 school year, the District spent $56,710 from its ESSER III award to pay one contractor for the Softball Field Dugout Replacement and Revitalization project. This project was part of the District’s school facility capital improvement efforts to prevent the spread of COVID-19 and enable school operations by providing upgraded outdoor spaces for social distancing. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not: • Establish a formal contract with the contractor and, therefore, did not include required wage rate provisions in the contract • Collect weekly certified payroll reports from the contractor and their subcontractors to confirm they paid laborers proper prevailing wages We consider these deficiencies in internal controls to be a material weakness, which led to material noncompliance. Cause of Condition District management did not know the threshold to establish a contract was $2,000 for this requirement and that it was required to include the federal wage rate clauses in the contract. Additionally, District management did not know about the federal requirement to collect all certified payroll reports from the contractor and their subcontractors, each week, to confirm they paid laborers prevailing wages. Effect of Condition Without adequate internal controls to ensure it establishes contracts, includes the wage rate clauses in its contracts, and 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. Recommendation We recommend the District design internal controls to ensure compliance with federal wage rate requirements. This should include establishing contracts and inserting wage rate clauses into the contracts, 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 acknowledges the finding regarding noncompliance with federal wage rate requirements under the Davis-Bacon Act for a federally funded construction project. At the time, the District was unaware of the $2,000 threshold triggering these requirements and did not include the necessary wage rate provisions in the contract or collect certified payroll reports. To address this, the District is: • Updating procurement and contracting procedures to include Davis-Bacon Act requirements • Providing staff training on federal wage rate compliance • Implementing procedures to ensure proper contract language and weekly certified payroll collection • Establishing monitoring processes to verify ongoing compliance These actions will strengthen internal controls and ensure adherence to all applicable federal requirements moving forward. Auditor’s Remarks We appreciate the District’s commitment to resolving this finding, and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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. Title 29 CFR, Section 5.5 – Contract provisions and related matters establishes the requirements for the contracting officer to insert in full 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 with federal funds the clauses listed, which includes but is not limited to the minimum wages to be paid and payrolls and basic records to be maintained (submission of weekly certified payrolls).