Audit 388817

Management acknowledged its responsibility to establish and maintain effective internal controls to reasonably assure compliance with federal statutes, regulations and terms and conditions of federal awards and controls relating to preparing the Schedule of Expenditures of Federal Awards (the Schedule), as required by Uniform Guidance (2 CFR § 200.303(a)), in the audit engagement letter. Furthermore, Uniform Guidance (2 CFR Subpart F § 200.510(b)) requires the auditee prepare the Schedule for the period covered by the District’s financial statements which must include the total federal awards expended as determined in accordance with § 200.502. Due to insufficient controls over the monitoring of grant activity, the District did not retain appropriate support on the dates of the determination to charge prior year costs to the American Rescue Plan Elementary and Secondary School Emergency Relief Fund (ARP ESSER) grant in the amount of $678,544. The grant award was for $1,019,060, which had a grant period spanning calendar years 2020 through 2024. Lack of maintaining such documentation could result in expenditures determined to be unallowable under grant guidelines and funds required to be returned. Ineffective internal controls related to federal grants could lead to noncompliance with program requirements. Additionally, the determination of unallowable costs could have an adverse effect on future grant awards by the awarding agency or agencies in addition to an inaccurate assessment of major federal programs that would be subjected to audit. District management should implement a system to review the Schedule for errors and omissions as well as a method to monitor the related internal controls over compliance with federal grant requirements. This will help ensure the Schedule is complete and accurate, major federal programs are accurately identified for audit, and internal controls over compliance requirements are implemented and operating effectively.

Appendix II to 2 CFR Part 200 states, in part, all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following: (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 “Anti-Kickback” 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. Lack of effective controls led to the District expending $92,404 to Peterson Construction Company for a noncompliant contract/project of American Rescue Plan Elementary and Secondary School Emergency Relief Fund (ARP ESSER) AL #84.425U which did not meet the requirements of the Davis-Bacon Act. The District entered into an agreement subject to the wage rate requirements with a contractor that did not contain provisions to ensure the contractor complied with those requirements and the DOL regulations (29 CFR Part 5) and the District did not obtain copies of the weekly certified payroll reports from the contractors to verify prevailing wages were paid on a weekly basis for each week in which any work was performed. Failure to have effective controls in place over wage-rate requirements may result in the District and its contractors failing to pay prevailing wages when required by Federal law and could result in reduction of future Federal funding or other sanctions imposed by Federal grantors. When required by Federal grant legislation, the District should ensure prime construction contracts in excess of $2,000 paid with Federal grant monies contain provisions that require the contractor to comply with wage rate requirements and the DOL regulations (29 CFR Part 5). Further, the District should ensure certified payroll reports are provided weekly by the contractor.