Finding Text
FINDING 2024-006
Subject: COVID-19 - Education Stabilization Fund - Special Tests
and Provisions - Wage Rate Requirements
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listings Numbers: 84.425D, 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2022-003.
Condition and Context
An effective internal control system was not designed or implemented at the School Corporation to
ensure compliance with requirements related to the grant agreement and the Special Tests and
Provisions - Wage Rate Requirements compliance requirement.
INDIANA STATE BOARD OF ACCOUNTS
28
LA PORTE COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Construction contracts in excess of $2,000 financed by federal assistance funds must pay wages
not less than those established for the locality of the project (prevailing wage rates) by the Department of
Labor (DOL) to their laborers and mechanics. Nonfederal entities are to include in their construction
contracts subject to the wage rate requirements a provision that the contractor or subcontractor comply
with these requirements and the DOL regulations.
The School Corporation did not have adequate policies or procedures to ensure that all construction
contracts in excess of $2,000 paid from federal grant funds included a prevailing wage rate clause. The
School Corporation had four contracts related to an HVAC project during the audit period that was subject
to the wage rate requirements. Three of the four contracts did not have the required prevailing wage rate
clause included in the contract.
The lack of control and noncompliance was isolated to the three contracts mentioned above.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
29 CFR 5.5 states in part:
"(a) The Agency head will cause or require the contracting officer to require the contracting
officer to insert in full, or (for contracts covered by the Federal Acquisition Regulation
(48 CFR chapter 1)) by reference, in 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 from Federal funds or in
accordance with guarantees of a Federal agency or financed from funds obtained by pledge of
any contract of a Federal agency to make a loan, grant or annual contribution (except where a
different meaning is expressly indicated), and which is subject to the labor standards provisions
of any of the laws referenced by § 5.1, the following clauses. . . .
(1) Minimum wages.
(i) All laborers and mechanics employed or working upon the site of the work (or
otherwise working in construction or development of the project under a development
statute), will be paid unconditionally and not less often than once a week, and without
subsequent deduction or rebate on any account (except such payroll deductions as
are permitted by regulations issued by the Secretary of Labor under the Copeland Act
(29 CFR part 3)), the full amount of basic hourly wages and bona fide fringe benefits
(or cash equivalents thereof) due at time of payment computed at rates not less than
those contained in the wage determination of the Secretary of Labor which is attached
hereto and made a part hereof, regardless of any contractual relationship which may
be alleged to exist between the contractor and such laborers and mechanics. . . ."
INDIANA STATE BOARD OF ACCOUNTS 29
LA PORTE COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
2 CFR 200 Appendix II states in part:
"In addition to other provisions required by the Federal agency or non-Federal entity; all
contracts made by the non-Federal entity under the Federal award must contain provisions
covering the following, as applicable. . . .
(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. . . ."
Cause
Management had not established a system of internal controls that would have ensured compliance
or that the required clause was included in the contracts for the Special Tests and Provisions - Wage Rate
Requirements compliance requirement. The School Corporation posted Davis Bacon posters at the jobsite
of the HVAC project in lieu of including the cause in the contract for the identified vendors.
Effect
The failure to establish an effective system of internal controls over the Special Test and
Provisions - Wage Rate Requirement resulted in three contracts not meeting the guidelines established.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management establish internal controls to ensure
compliance and comply with the grant agreement and the Special Tests and Provisions - Wage Rate
Requirements compliance requirement.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.