Audit 415734

2025-006: WAGE RATE COMPLIANCE ALN Title: Education Stabilization Fund ALN: 84.425U Federal Award Number: 044 0800 93 2021 Federal Agency: U.S. Department of Education Pass-through Entity: Montana Office of Public Instruction 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. CONDITION: During testing of ESSER-funded construction expenditures, we identified projects with construction contracts or construction activity exceeding $2,000 for which the School District did not maintain sufficient documentation to demonstrate compliance with applicable Wage Rate Requirements. EFFECT: Since the School District did not maintain the required contract provisions and certified payroll documentation, the School District could not demonstrate that applicable ESSER-funded construction activities complied with federal Wage Rate Requirements. This increases the risk that laborers and mechanics may not have been paid the applicable DOL prevailing wage rates and that noncompliance with federal award requirements would not be detected timely. 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. QUESTIONED COSTS: Known questioned costs of $675,666 are reported for Assistance Listing 84.425U, Federal Award Number 044 0800 93 2021. The questioned costs represent ESSER-funded construction expenditures tested for which the School District did not maintain adequate documentation to support compliance with applicable Wage Rate Requirements. CAUSE: The School District did not have sufficient processes in place to identify and implement federal compliance requirements related to construction activities, including prevailing wage requirements. RECOMMENDATION: The School District should strengthen controls over federally funded construction projects to ensure applicable wage rate requirements are identified before work begins, required prevailing wage provisions are included in contracts and subcontracts, and weekly certified payroll reports are obtained and retained for all covered projects.