FAC Explorer

Finding 33005 (2022-004)

Significant Deficiency
Requirement
F
Questioned Costs
-
Year
2022
Accepted
2023-03-27
Audit: 36669
Organization: Grants-Cibola County Schools (NM)
Auditor: Manning Accounting and Consulting Services

AI Summary

  • Core Issue: The District failed to comply with the Davis-Bacon Act and did not obtain necessary approvals for equipment purchases exceeding $5,000.
  • Impacted Requirements: Contracts lacked required prevailing wage provisions, and the District did not secure the Federal Grant Equipment Form for two musical instruments.
  • Recommended Follow-Up: Ensure all contracts include prevailing wage language and obtain necessary approvals for high-value equipment purchases to avoid future compliance issues.

Finding Text

2022-004 ? Non-Compliance with Davis-Bacon Act and Capital Expenditure Requirements (Significant Deficiency) Federal Program Information: Funding Agency: U.S. Department of Education Title: Education Stabilization Fund Assistance Listing: 84.425 D Passthrough: N/A Award Year: 2022 Criteria: APPENDIX II TO PART 200?CONTRACT PROVISIONS FOR NON-FEDERAL ENTITY CONTRACTS UNDER FEDERAL AWARDS (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. The non-Federal entity must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. The contracts must also include a provision for compliance with the Copeland ``AntiKickback?? Act (40 U.S.C. 3145), as supplemented by Department of Labor regulations (29 CFR Part 3, ``Contractors and Subcontractors on Public Building or Public Work Financed in Whole or in Part by Loans or Grants from the United States??). The Act provides that each contractor or subrecipient must be prohibited from inducing, by any means, any person employed in the construction, completion, or repair of public work, to give up any part of the compensation to which he or she is otherwise entitled. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. New Mexico Public Education Department award letter requirements for capital expenditures and construction projects for funds allocated to Fund 24308 on page 3. You must receive written prior approval for purchase of equipment with a unit cost equal to or in excess of $5,000. Failure to do so will result in denial of reimbursement for the cost of such an item. Attach an approved Federal Grant Equipment Form to your BAR if you will include budget in object code 57331 ?Fixed Assets (more than $5,000).? Attach the approved form to your application if you submit an initial 2021-22 OBMS budget. The approved Federal Grant Equipment Form must also be uploaded with your request for reimbursement (RFR) containing such expenses. You must receive written prior approval for construction projects. Approval is documented in the SharePoint application and on a Federal Grant Equipment Form. Any approved construction projects must comply with applicable Uniform Guidance requirements, as well as the Department?s regulations regarding construction. See 34 CFR ? 76.600. As is the case with all construction contracts using laborers and mechanics financed by federal education funds, and LEA that uses ESSER funds for construction contracts over $2,000 must meet all Davis-Bacon prevailing wage requirements and include language in the construction contracts that all contractors or subcontractors must pay wages that are not less than those established for the locality of the project (prevailing wage rates). (See 20 U.S.C. 1232b Labor Standards.) Condition: During our testing of single audit disbursements and with regards to requirements of the Compliance Supplement for equipment/real property management and special tests and provisions, we identified that the District had not obtained the Federal Grant Equipment Form for the purchase of two musical instruments which exceed $5,000 in value individually. The District had obtained Federal Grant Equipment forms for construction projects on the year as required. The projects were also included in their grant application. Additionally, the District did not meet the requirement for the Davis-Bacon Act prevailing wage requirement. The District had not included the prevailing wage requirements in the contract with the vendor nor did the District obtain the weekly certified payroll reports from the contractor for each of the projects. The District had obtained at least one wage determination report from the New Mexico Workforce Solutions Agency for the projects and had obtained some of the weekly wage certification reports but had not obtained them for all projects which would come under the requirements of the Act. Questioned Costs: None. The State of New Mexico Public Education Department (PED) had approved the grant application of the District prior to obtaining the contracts the construction projects. As such, it had approved the construction project via approval of the grant application. Additionally, the PED has been approving the requests for reimbursement which include details of the expenditures which indicate the PED is still approving the ongoing costs of these upgrades with these funds which are appropriate use of the funds. Cause: District personnel had obtained approval for their grant application from the PED and simply missed that two musical instruments were in excess of $5,000 and such did not obtain the Federal Grant Equipment Form. Additionally, the District did not pay attention to the bullet point in the award letter requiring them to include language in the contract with regards to prevailing wages, nor was the District aware of the requirements of the Uniform Guidance requirements of obtaining weekly payroll certifications. The District had obtained at least one wage rate determination and some of the weekly wage rate certifications, but had failed to obtained wage rate certifications for each project or weekly wage certifications from the vendors. Policies had not been properly communicated, and no responsibility for obtaining these items had been specifically assigned in the District. Effect: The District is not in compliance with Federal and PED regulations related to the grant and could put funding in jeopardy or require the District to reimburse the program for improper grant distributions. The fact that the grant was approved by the PED and that the contractors are aware of prevailing wage requirements on construction projects for school districts does not relieve the District of following Federal, State, and grant requirements. Auditor?s Recommendation: We recommend that the District establish a policy and implement internal control procedures regarding the review of all grant award letters to ensure that the District is aware of all requirements that are imposed on the District with accepting the funds. We also recommend that the District work with the contractor to obtain weekly wage certifications going back from the beginning of the project forward to be able to demonstrate that the appropriate wages were paid during the full time-frame of the project. Responsible Official?s Plan: ? Specific corrective action plan for finding: o The District has developed new language that will be included in all agreements for projects meeting the criteria of the Davis-Bacon Act and will include the language in all applicable purchase orders. o The District has reviewed all currently-qualified projects and has obtained the required certified payroll reports for projects commencing or continuing in SY22-23. o The Director for Student Services (Federal Programs) has created a checklist for obtaining permission to purchase at $5,000 or above for single items. o The District has established a protocol for including the written permission from PED in the documentation accompanying the purchase requisition and purchase order. ? Timeline for completion of corrective action plan: o The new language is being reviewed by CPA and will be established by February 1, 2023. o The checklist and uploading of approved purchase at $5,000 or above is already in place. o All projects requiring certified payroll reports will have documentation uploaded to the accounting system no later than February 28, 2023. ? Employee position(s) responsible for meeting the timeline: o Finance Director

Corrective Action Plan

SY2021-22 AUDIT FS 2022-001 Internal Controls Over District Cash (Material Weakness) Repeated And Modified ? This has been an ongoing process to achieve final reconciliation. In SY21-22 the District worked with PED to facilitate a second Permanent Cash Transfer request in order to reconcile closed or unused funds. The approval from PED was not received prior to the closing of the fiscal year ? The District has worked closely with PED to re-apply for the Permanent Cash Transfer and has come to agreement on which funds will be transferred ? The District is working with a CPA firm to properly adjust cash balances and has developed a new procedure and checklist for completing the ?rollover? of funds from the prior year ? The District now has a new procedure to more accurately record the Health and Well-Being employee reimbursements and will include a review of this process each quarter when the District meets with the CPA to conduct a mini-audit ? The correct accounts and procedures for properly recording Bond proceeds have been established FS 2022-002 Budgetary Controls (Significant Deficiency) Repeated and Modified ? The District provided additional training for staff using the Visions accounting system so that errors related to inputting the budget in the accounting system will be reduced ? The District also implemented a process whereby funds submitted and approved in OBMS can be compared to on a monthly basis with the actual expenditures coded in Visions ? Our Coordinator for Procurement and Capital Projects now meets monthly with fund managers to ensure that all expenditures match the budgeted amounts and are coded in the correct object ? A new process was implemented to record Bond interest within Visions so that the cash is more accurately reflected and matches the bank balances ? Journal entries are reviewed weekly to ensure proper allocation ? The bank reconciliations are reviewed now by a second Business Office employee ? All fund balances are now checked before a purchase order is approved ? Business Office personnel will meet quarterly with our CPA to review transactions for accuracy and to review any process improvements necessary FS 2022-003 Lack Of Internal Controls Over Payroll Liabilities Accounts And RHC Payments (Material Weakness) ? Segregation of duties were re-established so that the payroll clerk would be responsible for timely submission and reporting of payroll liabilities ? The District Accountant will be responsible for bank reconciliations as well as for verifying outstanding liabilities each month FA 2022-004 Non-Compliance With Davis-Bacon Act And Capital Expenditure Requirements (Significant Deficiency) ? The District has developed new language that will be included in all agreements for project meeting the criteria of the Davis-Bacon Act and will include the language in all applicable purchase orders ? The District has reviewed all currently-qualified projects and has obtained the required certified payroll reports for projects commencing or continuing in SY22-23 ? The Director for Student Services (Federal Programs) has created a checklist for obtaining permission to purchase at $5,000 or above for single items ? The District has established a protocol for including the written permission from PED in the documentation accompanying the purchase requisition and purchase order NM 2022-005 Improper Approval Of Budget Adjustments (Other Non-Compliance ? The Business Office has a process documented to ensure BARs are properly obtained prior to any use of funds NM 2022-006 Purchase Order And Authorization (Other Non-Compliance) ? The District continues to provide regular training (4 x per year) to school site and department staff who have access to purchase requisitions, though the problem persists ? The District has implemented a new vendor agreement as well, outlining the specific terms vendors must adhere to as vendor the District. One of the terms is that the vendor will not perform any service nor provide any product without first receiving a signed and authorized purchase order NM 2022-007 Timeliness Of Deposits (Other Non-Compliance) Repeated And Modified ? The District has made steady and deliberate moves to eliminate cash collected from all events, concessions and fundraising efforts by moving to a cashless system ? This process has still not been completely implemented because not all locations in all sites had wifi accessible internet access. The District has been working to correct that ? All school sites and cafeteria workers have been trained on the cashless system and in all but a two locations, the program has been fully implemented NM 2022-008 Failure To Timely remit Federal Withholding Taxes As Required (Other Non-Compliance) Repeated And Modified ? The District recognized that when supplemental payrolls were run after the regular payroll, the required payroll taxes for those particular supplemental payrolls were not made on the same day that supplemental payroll was run. Because of this, the District also recognized this was a repeated finding and a new procedure was established that required all payroll taxes to be prepared and the payment processed on the same day payroll was uploaded to the bank. NM 2022-009 Equity In Athletics Reporting (Other Non-Compliance) ? The District has placed on its calendar, reminders of when the Title IX report is due in the fall ? The District has determined that the three Athletic Directors (Grants High School, Laguna Acoma High School and Los Alamitos Middle School) will be responsible for gathering the data required to file the report ? The athletic directors will receive training on how to properly complete the report and upload it to the PED site NM 2022-010 Background Checks and I-9 Documentation (Other Non-Compliance) Repeated And Modified ? The HR Department has reviewed every single personnel file and identified those individuals who required an updated FBI check ? The HR Department contracted with a mobile fingerprinting provider and scheduled over 150 employees for updated fingerprinting and completed updated background checks ? The HR Department will implement a new 24-month cycle review and establish a rotating schedule to regularly update required background checks NM 2022-011 Failure To Complete An Annual Physical Inventory And Complete Certification By The Board (Other Non-Compliance) ? In SY21-22 the District began a complete inventory of all assets. The process was not completed until the beginning of SY22-23. Prior to this, an accurate accounting of assets was not updated. ? In the Fall of 2022 the board approved the newly-completed asset list and depreciation schedule ? Moving forward, each July the board is scheduled to receive an updated listing of assets for review and approval. NM 2022-012 Late Filing Of Audit Report (Other Non-Compliance) ? The District is working with a CPA firm to assist in quarterly mini-audit reviews in an effort to spot any anomalies that may delay the audit filing Responsible Party For Completing These Corrective Actions C Steven Maldonado, Director of Finance

Categories

Equipment & Real Property Management Matching / Level of Effort / Earmarking Special Tests & Provisions Procurement, Suspension & Debarment Subrecipient Monitoring Cash Management Significant Deficiency

Other Findings in this Audit

  • 609447 2022-004
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
10.555 National School Lunch Program $1.92M
10.553 School Breakfast Program $917,017
84.027 Special Education_grants to States $769,408
84.041 Impact Aid $703,529
84.367 Improving Teacher Quality State Grants $312,475
84.060 Indian Education_grants to Local Educational Agencies $290,347
10.672 Rural Development, Forestry, and Communities $225,990
10.565 Commodity Supplemental Food Program $199,362
84.424 Student Support and Academic Enrichment Program $167,003
10.582 Fresh Fruit and Vegetable Program $75,647
84.048 Career and Technical Education -- Basic Grants to States $59,547
84.365 English Language Acquisition State Grants $35,832
12.357 Rotc Language and Culture Training Grants $31,968
84.173 Special Education_preschool Grants $29,390
84.425 Education Stabilization Fund $1,734
84.010 Title I Grants to Local Educational Agencies $-525