Finding Text
Federal Agency: Department of Education
Cluster/Program: Education Stabilization Fund
AL Number(s): 84.425/84.425D/84.425U
Award Year: 2023 & 2022
Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements
Type of Finding
Compliance
Internal Control over Compliance - Significant Deficiency
Criteria or Specific Requirement
All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) (40 USC 3141–3144, 3146, and 3147. Recipients and subrecipients that use Education Stabilization Fund funds for minor remodeling, renovation or construction contracts that are over $2,000 and use laborers and mechanics must ensure that wage rate requirements are met.
Management of the School District is also responsible for establishing and maintaining effective internal control over compliance with federal requirements that have a direct and material effect on a federal pro¬gram. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of per¬forming their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis.
Condition and Context
During our single audit of School District for the fiscal year ended June 30, 2023, it was noted that there was insufficient documentation to support compliance with the wage rate requirements set forth by the Davis-Bacon Act. The School District was unable to locate payroll records that included the necessary evidence to verify that all workers were paid the correct wage rates as per the specified standards.
Cause
The cause of the finding appears to be a lack of adequate internal controls and procedures to ensure that payroll documentation is properly maintained and reviewed regularly for compliance with federal wage rate requirements.
Effect or Potential Effect
The absence of adequate support for the wage rate compliance jeopardizes the School District's standing with respect to future federal funding and could potentially result in financial sanctions or reimbursement of funds to the federal program.
Questioned Costs
The questioned costs amount to $18,228, which represents wages paid during the audit period that lacked adequate supporting documentation.
Recommendation
The School District should implement robust internal control procedures to ensure compliance with wage rate requirements. This should include regular training for payroll staff, periodic internal audits to review compliance, and maintaining detailed records that demonstrate that all workers are paid in accordance with the applicable wage rates.
Views of Responsible Official
Management agrees with the finding.
Planned Corrective Action
Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.