SCHEDULE OF FEDERAL AWARD FINDINGS AND
QUESTIONED COSTS Okanogan School District No. 105
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 Superintendent of Public
Instruction
Pass-through Award/Contract
Number:
COVID-19, 84.425D, 0145073
COVID-19, 84.425U, 0138248
COVID-19, 84.425W, 0459025
COVID-19, 84.425W, 0459580
COVID-19, 84.425U, 137037
COVID-19, 84.425D, 9813 61
COVID-19, 84.425D, 9814 61
COVID-19, 84.425D, 9815 61
Known Questioned Cost Amount: $0
Prior Year Audit Finding: Yes, Finding 2022-001 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 $2,014,915 of its ESF awards. This included $64,916 in the
Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram
(84.425D), $1,942,668 in the American Rescue Plan Elementary and Secondary
School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U), and
$7,331 in the American Rescue Plan Elementary and Secondary School Emergency
Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). The
District spent $1,012,834 in program funds for various improvements and repairs
to its facilities. 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.
The District may use a contracted project manager to collect certified payroll
reports from contractors and subcontractors, but ultimately, it is the District‘s
responsibility to comply with these requirements and maintain documentation
demonstrating compliance.
Description of Condition
During the 2023 school year, the District spent $1,012,834 for payments to two
contractors for two projects for various improvements and repairs to its schools.
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 the contract with the prime contractor
for one of two contracts we tested. We consider this deficiency in internal controls
to be a material weakness that led to material noncompliance.
Cause of Condition
The District relied on the contract manager for compliance, and staff were not
aware they needed to monitor the contract manager. In addition, the District did not
notify the contract manager that the project was paid with federal funding and thus
subject to federal wage rate 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.
The District did not include federal wage provisions in one out of two 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 and obtaining the federal certified payroll reports.
District’s Response
District administration acknowledges that contracts signed prior to the 22-23
school year may not have had adequate federal wage rate language but continues
to maintain that contracts signed within the current year audit and beyond contain
all required federal wage rate language clauses.
Auditor’s Remarks
We thank the District for its cooperation and assistance during the audit, and
acknowledge its commitment to resolving this finding. We will review the
corrective action taken 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).