FA 2023-001 Improve Controls over Wage Rage Requirements
Compliance Requirement: Special Tests and Provisions
Internal Control Impact: Material Weakness
Compliance Impact: Material Noncompliance
Federal Awarding Agency: U.S. Department of Education
Pass-Through Entity: Georgia Department of Education
AL Number and Title: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund
Federal Award Number: S425D200012 (Year: 2020)
Questioned Costs: None Identified
Description:
A review of construction-related expenditures charged to the Elementary and Secondary School Emergency Relief Fund program revealed that the School District’s internal control procedures were not operating to ensure that Wage Rate Requirements were followed appropriately.
Background:
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak.
Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation.
ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,983,960.74 were expended and reported on the Miller County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal
year 2023.
Criteria:
As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to 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 200.303 – Internal Controls.
Additionally, the Uniform Guidance, Appendix II to Part 200 – Contract Provisions for Non-Federal Entity Contracts Under Federal Awards, Part D addresses Davis-Bacon Act requirements and states,
in part, “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.”
Specifically, 29 CFR, Section 5.5 – Contract Provisions and Related Matters requires that these construction contracts contain certain clauses, including minimum wage rate requirements and the submission of certified payrolls. Provisions included in 29 CFR, Section 5.5(a)(3)(ii) state, in part, that “(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls… (B) Each payroll submitted shall be accompanied by a “Statement of Compliance,” signed by the contractor or subcontractor.”
Condition:
Our review of expenditures charged to the ESSER program revealed that the School District entered
into construction contracts in excess of $2,000, which required the School District to confirm that these
contractors complied with certain Wage Rate Requirements provisions. While it was later noted that the appropriate wage rate was paid to laborers, the School District did not ensure that the contractor submitted the required certified payrolls, which includes a copy of payroll disbursements and a statement of compliance with Wage Rate Requirements, at least weekly during the construction period.
Cause:
In discussing this deficiency with management, they stated that the School District lacked adequate procedures to ensure that Wage Rate Requirements were met.
Effect:
The School District is not in compliance with the Uniform Guidance or U.S. Department of Education (ED) guidance related to the ESSER program. Failure to ensure that appropriate provisions are included in contracts associated with construction financed in part or in whole with federal funds may expose the School District to unnecessary financial strains and shortages as ED or GaDOE may require the School District to return funds associated with these construction expenditures.
Recommendation:
The School District should develop policies and procedures to ensure that all construction contracts financed by federal financial assistance reflect appropriate provisions associated with Wage Rate Requirements and that certified payrolls are obtained from contractors as necessary. Furthermore, management should develop and implement a monitoring process to ensure that controls are operating appropriately.
Views of Responsible Officials:
We concur with this finding.