Finding Text
FINDING 2024-005
Information on the federal program:
Subject: Education Stabilization Fund – Special Tests and Provisions - Wage Rate Requirements
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425U
Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Material Weakness
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards 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:
(1) Minimum wages.
(i) All laborers and mechanics employed or working upon the site of the work (or under the United
States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the
project),
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 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…
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
w ages not less than once a week.. . .”
Condition: An effective internal control system was not in place at the School Corporation in order to
ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions
– Wage Rate Requirements compliance requirements.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the compliance requirements listed above.
Effect: The failure to design and implement an effective internal control system enabled material
noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and
Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal
funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: For 1 of 2 sample items tested, we noted the School Corporation expended approximately
$152,000 on a new gym floor, which was funded with ESSER III (84.425U) grant awards. The School
Corporation did not properly include Davis-Bacon wage rate requirements in the vendor contract.
Additionally, the School Corporation did not obtain the weekly payroll reports certifications from the
construction vendor to monitor compliance with Davis-Bacon wage rate requirements. Therefore, no review
was performed to ensure that pay rates complied with the federal wage rate requirements.
Identification as a repeat finding: This is a repeat finding from the immediately prior audit report. The
prior audit finding number was 2022-004.
Recommendation: We recommend the School Corporation ensure vendor contracts with labor installation
in excess of $2,000 which are funded by federal grants including Davis Bacon Wage Rate Requirement
clauses and implement a formal process to ensure the required weekly payroll reports certifications are
collected and reviewed to ensure compliance with federal regulations.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.