Audit 397499

2025-002 Wage Rate Compliance (Repeated 2024-003) CFDA Title: Education Stabilization Fund CFDA Number: 84.425 Federal Award Number: 2021 Federal Agency: U.S. Department of Education Pass-through Entity: Montana Office of Public Instruction Condition: The District did not comply with Wage Rate Requirements related to construction expenditures funded by the Education Stabilization Fund (ESSER). This condition represents a repeat finding from the prior year audit. Context: During testing of significant claims for the ESSER major program related to construction, we identified expenditures where contracts were in place or should have been in place, and the Wage Rate Requirements (Davis-Bacon related provisions) were applicable. However, required provisions and supporting documentation were not maintained. Criteria: Compliance Requirement - Education Stabilization Fund (ESSER) expenditures used for construction, are subject to Wage Rate Requirements (20 U.S.C. §1232b). In accordance with federal requirements: • All laborers and mechanics employed by contractors or subcontractors on construction contracts in excess of $2,000 funded with federal assistance must be paid wages at rates not less than those determined by the U.S. Department of Labor (DOL) (40 U.S.C. §§ 3141–3144, 3146, and 3147). • Non-federal entities are required to include prevailing wage (Davis-Bacon) provisions in all applicable construction contracts and subcontracts (29 CFR Part 5; 2 CFR §200.326). • Contractors and subcontractors must submit weekly certified payrolls, including a statement of compliance, for each week in which work is performed (29 CFR §§ 5.5 and 5.6). These requirements are incorporated into federal grant compliance standards and must be followed when federal funds are used for construction or remodeling activities. Effect: The District was not in compliance with federal Wage Rate Requirements applicable to ESSER-funded construction activities, which increases the risk that contractors and subcontractors were not compensated in accordance with federal labor standards. Cause: The District did not have sufficient processes in place to identify and implement federal compliance requirements related to construction activities, including prevailing wage requirements. This issue was also noted in the prior year, indicating that corrective actions were not fully implemented. Recommendation: The District should strengthen internal controls over federal grant compliance to ensure all applicable requirements are identified and implemented. Specifically, the District should: 1. Establish procedures to identify federal compliance requirements for all grant-funded activities, including construction-related provisions. 2. Ensure that all applicable construction contracts include required prevailing wage (Davis-Bacon) clauses for contractors and subcontractors. 3. Implement procedures to obtain and retain weekly certified payroll reports from contractors and subcontractors for all applicable projects. 4. Provide training or guidance to management and staff responsible for grant administration to ensure awareness of federal compliance requirements.