Auburn School District No. 408
September 1, 2021 through August 31, 2022
2022-001 The District did not have adequate internal controls for ensuring
compliance with 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-120367
COVID-19, 84.425U-138204
COVID-19, 84.425U-137142
COVID-19, 84.425U-9810
Known Questioned Cost Amount: $0
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 2022, the
District spent $18,872,744 of its ESF awards. This included $3,566,208 of its
Elementary and Secondary School Emergency Relief (ESSER II) Fund subprogram
(84.425D), $15,258,978 of its American Rescue Plan Elementary and Secondary
School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U), and
$47,558 of ESSER subprogram award for Safe School Meals Grant (84.425U).
Federal regulations require recipients to establish and maintain internal controls
that ensure compliance with program requirements. These controls include
understanding grant 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 money must pay laborers and mechanics wage rates that the U.S.
Department of Labor considers being 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 contractor and subcontractor comply with those
requirements and the Department of Labor’s regulations. This includes a
requirement for the contractor and its subcontractor to submit to the District weekly,
for each week in which any contract work is performed, certified payroll reports.
These reports must include a copy of the payroll and a signed statement of
compliance.
Description of Condition
During the 2021-22 school year, the District paid $3,285,549 from its ESSER III
award to seven contractors for 35 projects to update the existing heating, ventilation
and air conditioning (HVAC) systems’ controls, repair insulation, and install new
HVAC equipment (heat pumps) in school buildings. These projects were part of
the District’s school facility capital improvement efforts to prevent the spread of
COVID-19 and enable school operations by facilitating greater air flow and
filtration.
Our audit found the District did not have adequate internal controls for ensuring
compliance with federal prevailing wage rate requirements. Specifically, the
District did not collect weekly certified payroll reports from three contractors tested
to confirm they paid laborers proper prevailing wages.
We consider this deficiency in internal controls to be a material weakness, which
led to material noncompliance.
The issue was not reported as a finding in the prior audit.
Cause of Condition
While District officials knew about state prevailing wage requirements, they did
not know about the federal requirements because the District does not usually apply
federal funds to construction projects.
Effect of Condition
Without adequate internal controls that ensure it collects all weekly certified payroll
reports, the District cannot demonstrate it complied with federal wage
requirements. The District could also be liable for paying any additional wages if
the contractors and subcontractors did not pay prevailing wage rates to laborers
working on the contracts.
Recommendation
We recommend the District develop internal controls to ensure compliance with
federal prevailing wage rate requirements. Additionally, we recommend the
District implement effective monitoring processes to collect and review all weekly
certified payroll reports from contractors and subcontractors.
District’s Response
As stated in the “Cause of Condition” section, the district is aware of prevailing
wage requirements, but the district does not typically use federal funds for
construction projects. The district was unaware of the requirement to review weekly
certified payroll reports from the vendors. The district received prior approval from
OSPI and has guidance and procedures as it related to Intents, Affidavits, and
payments to vendors. The district has implemented internal controls to ensure
compliance with federal prevailing wage requirements.
Auditor’s Remarks
We appreciate the District’s commitment to resolving the issue. We will review the
condition 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).