Finding Text
Information on the federal program:
Subject: Education Stabilization Fund – Internal Controls
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425U
Federal Award Numbers: S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Significant Deficiency
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). . . ."
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.. . .”
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 establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were no questioned costs identified.
Context: For the one project sampled for Davis-Bacon requirements, the contract with the company did not include the clause for the federal wage rate requirements. The amount disbursed and reported on the SEFA during the audit period is $784,155. The School Corporation did obtain the weekly payroll reports certifications from the company that performed renovations.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation implement a formal process to ensure the contracts including labor costs over $2,000 funded by federal awards have Davis Bacon wage rate requirement clause in written contract.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.