FINDING 2024-008
Subject: COVID-19 - Education Stabilization Fund - Special Test and Provision - 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 Test and Provision - Wage Rate Requirements
Audit Findings: Material Weakness, Modified Opinion
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.
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. This would include a requirement to submit a copy of
the payroll and statement of compliance to the entity for each week in which contract work was performed.
INDIANA STATE BOARD OF ACCOUNTS 30
NEW PRAIRIE UNITED SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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. One
construction contract was paid from the COVID-19 - Education Stabilization Fund grant funds, totaling
$1,278,001, during the audit period. This construction contract was subject to the wage rate requirements;
however, the contract did not have the required prevailing wage rate clause included in the contract, nor
were certified payrolls submitted by the contractor timely.
The lack of internal controls and failure to maintain and provide adequate supporting documentation
were systemic issues throughout the audit period.
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) Required contract clauses. 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) Wage rates and fringe benefits. 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 31
NEW PRAIRIE UNITED 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. . . ."
29 CFR 5.5 (a)(3)(ii)(A) states in part:
". . . The contractor or subcontractor must submit weekly for each week in which any DBA- or
Related Acts-covered work is performed, certified payrolls to the (write in name of appropriate
federal agency) if the agency is a party to the contract, but if the agency is not such a party,
the contractor will submit the payrolls to the applicant, sponsor, or owner, or other entity, as the
case may be, for transmission to the (write in name of agency). . . ."
Cause
The School Corporation 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. Also, the School Corporation was unaware of the
requirement to collect weekly certified payrolls.
Effect
The failure to establish an effective system of internal controls over the Special Test and
Provisions - Wage Rate Requirement resulted in one contract not meeting the guidelines established.
Noncompliance with the grant agreement and the Special Tests and Provisions - Wage Rate Requirements
could result in the loss of future federal funds to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommend 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.
INDIANA STATE