Finding 398043 (2023-001)

Material Weakness
Requirement
N
Questioned Costs
-
Year
2023
Accepted
2024-05-21

AI Summary

  • Core Issue: The District lacked adequate internal controls to ensure compliance with federal wage rate requirements, specifically failing to include necessary provisions in contracts.
  • Impacted Requirements: Federal regulations mandate that contracts for projects over $2,000 include wage rate clauses and require certified payroll reports from contractors.
  • Recommended Follow-Up: Strengthen internal controls by adding wage rate clauses to contracts, obtaining federal certified payroll reports, and providing training for staff on compliance with federal requirements.

Finding Text

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Riverside School District No. 416 September 1, 2022 through August 31, 2023 2023-001 The District did not have adequate internal controls for ensuring compliance 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 the Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425D, 0120466 COVID-19, 84.425U, 0138094 COVID-19, 84.425U, 0137128 COVID-19, 84.425U, 0142520 COVID-19, 84.425D, 0145079 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 the fiscal year 2023, the District spent a total of $3,141,325 of its ESF awards. This included $445,364 in the Elementary and Secondary School Emergency Relief Fund (ESSERII) subprogram (84.425D) and $2,695,961 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). The District spent $2,590,048 in program funds for various improvements and repairs as part of its middle school modernization project. 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 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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 2023 school year, the District spent $2,590,048 for payments to one contractor and their subcontractors for the middle school modernization project to renovate and repair the common area. 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 federal wage rate provisions in the contract. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition District staff did not fully understand the requirements for contract language and were not aware of the additional language for federal prevailing wage that they needed to include. While District officials knew about state wage requirements, they were not aware of the federal regulations. Therefore, the District focused on the state requirements. Effect of Condition Without adequate internal controls to ensure it includes the wage rate clauses in its contracts, the District cannot demonstrate it complied with federal wage rate requirements. Additionally, because the District did not notify the contractor that the project was federally funded, the contractor submitted state certified payroll reports instead of federal certified payroll reports. 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. 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 and obtaining the federal certified payroll reports. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with federal programs are aware of all applicable requirements. District’s Response We appreciate the opportunity to work with the State Auditor’s Office in regard to this matter and will work to implement the required changes going forward. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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).

Categories

Subrecipient Monitoring Internal Control / Segregation of Duties Special Tests & Provisions Allowable Costs / Cost Principles Material Weakness Reporting

Other Findings in this Audit

  • 398038 2023-001
    Material Weakness
  • 398039 2023-001
    Material Weakness
  • 398040 2023-001
    Material Weakness
  • 398041 2023-001
    Material Weakness
  • 398042 2023-001
    Material Weakness
  • 974480 2023-001
    Material Weakness
  • 974481 2023-001
    Material Weakness
  • 974482 2023-001
    Material Weakness
  • 974483 2023-001
    Material Weakness
  • 974484 2023-001
    Material Weakness
  • 974485 2023-001
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
84.010 Title I Grants to Local Educational Agencies $480,410
84.027 Special Education Grants to States $384,154
10.553 School Breakfast Program $142,176
10.555 National School Lunch Program $96,204
84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) $80,470
84.027 Covid 19 - Special Education Grants to States $68,364
10.559 Summer Food Service Program for Children $58,230
84.424 Student Support and Academic Enrichment Program $28,744
32.009 Covid-19 Emergency Connectivity Fund Program $20,075
84.173 Special Education Preschool Grants $16,791
84.048 Career and Technical Education -- Basic Grants to States $7,497
84.425 Covid-19 Education Stabilization Fund $6,495
84.173 Covid 19 - Special Education Preschool Grants $5,724