Castle Rock School District No. 401
September 1, 2023 through August 31, 2024
2024-003 The District did not have adequate internal controls and did not
comply with federal wage rate requirements.
Assistance Listing Number and Title: 84.425, COVID-19 Education
Stabilization Fund
Federal Grantor Name: U.S. Department of Education
Federal Award/Contract Number: N/A
Pass-through Entity Name: Office of Superintendent of Public
Instruction
Pass-through Award/Contract
Number:
COVID-19, 84.425D-02372
COVID-19, 84.425D-0120374
COVID-19, 84.425U-0138017
COVID-19, 84.425D-0459515
COVID-19, 84.425U-0137066
COVID-19, 84.425D
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The objectives of the Education Stabilization Fund (ESF) program are to prevent,
prepare for and respond to the COVID-19 pandemic. In fiscal year 2024, the
District reported total expenses of $1,603,672 of its ESF awards. This included
$203,142 in the Elementary and Secondary School Emergency Relief Fund
(ESSERII) subprogram (84.425D) and $1,400,529 in the American Rescue Plan
Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III)
subprogram, (84.425U).
Federal regulations require recipients to establish and maintain internal controls
that ensure compliance with program requirements. These controls include
understanding program requirements and monitoring the effectiveness of
established controls.
Under federal wage rate requirements, also known as the Davis-Bacon Act,
contractors and subcontractors that work on projects financed with more than
$2,000 of federal funds must pay laborers and mechanics wage rates that the U.S.
Department of Labor considers similar to what local workers have been paid for
similar projects.
For construction contracts subject to these wage rate requirements, the District must
include a provision that the contractors and subcontractors must comply with those
requirements and the Department of Labor’s regulations. This includes a
requirement that the contractors and its subcontractors must submit certified
payrolls reports to the District weekly, for each week that laborers performed
contract work. These reports must include a copy of the payroll and a signed
statement of compliance.
Description of Condition
The District spent $1,035,138 for payments to five contractors for eight projects to
update the heating, ventilation and air conditioning (HVAC) system controls and
repair insulation in its facilities.
Our audit found the District did not have adequate internal controls for ensuring
compliance with federal wage rate requirements. Specifically, the District did not:
• Include the required wage rate provisions in all the contracts
• Collect weekly certified payroll reports from five contractors and
subcontractors to confirm they paid laborers the proper prevailing wages
We consider these deficiencies in internal controls to be material weaknesses that
led to material noncompliance.
Cause of Condition
District staff did not know about the federal wage rate contract clause requirement.
Additionally, when the District paid for work on some of the projects, staff did not
intend to use federal funds to pay for the costs. As a result, the District did not
follow requirements to obtain and review certified payrolls before payment.
Effect of Condition
Without adequate internal controls to ensure it includes the wage rate clauses in its
contracts and collects all weekly certified payroll reports, the District cannot
demonstrate it complied with federal wage rate requirements. The District could
also be liable for paying any additional wages if the contractor and subcontractor
did not pay prevailing wage rates to laborers working on the contract.
The District did not collect eight out of a total of 73 weekly certified payroll reports.
Also, the District did not include federal wage provisions in seven out of eight
contracts.
Recommendation
We recommend the District strengthen internal controls to ensure compliance with
federal wage rate requirements. This should include inserting wage rate clauses into
contracts, as well as implementing effective monitoring processes to collect and
review all weekly certified payroll reports from contractors and subcontractors.
Additionally, we recommend the District provide training to ensure staff overseeing
compliance with federal programs are aware of all applicable requirements.
District’s Response
The District will:
• Provide a check list for finance, facilities, and procurement staff on Davis-
Bacon compliance requirements, including how to access and apply wage
determinations from SAM.gov.
• Require all contractors and subcontractors on federally funded projects to
sign certifications of compliance with federal wage laws.
• Implement a checklist for federal construction projects.
• Provide training to all relevant staff on reviewing and verifying certified
payroll reports.
Auditor’s Remarks
We thank the District for its cooperation throughout the audit and the steps it is
taking to address these concerns. We will review the status of the District’s
corrective action during our next audit.
Applicable Laws and Regulations
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 516, Audit findings, establishes reporting
requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes
the requirements for auditees to maintain internal controls over federal programs
and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant
deficiencies and material weaknesses in its Codification of Statements on Auditing
Standards, section 935, Compliance Audits, paragraph 11.
Title 29 CFR, Section 3.3 – Weekly statement with respect to payment of wages,
and Section 3.4 – Submission of weekly statements and the preservation and
inspection of weekly payroll records, establishes requirements for contractor or
subcontractor submission of weekly certified payroll reports.
Title 29 CFR, Section 5.5 – Contract provisions and related matters establishes the
requirements for the contracting officer to insert in full 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 with federal funds the clauses listed, which
includes but is not limited to the minimum wages to be paid and payrolls and basic
records to be maintained (submission of weekly certified payrolls).