Finding Text
Finding 2023-008: Compliance with Federal Wage Requirements
Federal Program:
COVID-19 - Education Stabilization Funds awarded by the U.S. Department of Education under assistance listing number 84.425U - American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP ESSER) under award number S425U210041 (Federal Award Year 2023). Passed through the Illinois State Board of Education under award number 22-4998-E3.
Condition:
The District did not include federal wage rate requirements in construction contracts which were partially funded with federal grant funds. Additionally, the District did not require the contractors in those agreements to submit weekly certified payrolls.
Criteria:
Federal regulations, 29 CFR 5.5(a), require contracts in excess of $2,000 for the construction, alteration, or repair of a public building to include specific clauses or references to the applicable federal requirements for the wage rates to be paid, reporting of the wages, and retention of records. Federal regulations, 29 CFR 5.5(a)(3)(ii), also require the contractor submit weekly certified payrolls to the contracting entity.
Cause:
The District has not historically used federal funds for construction projects and therefore had not designed and implemented internal control procedures for ensuring compliance with grant management specific to the federal requirements. The District’s contracts contain language to comply with state regulations related to wages and certified reporting, but those requirements differ from what is required under federal regulations.
Questioned Costs:
Between $3,067,000 and $4,735,000.
Context:
Of the expenditures reported on the schedule of federal expenditures of federal awards, $12,768,670, related to construction contracts which do not have the federal wage requirement language in the contracts and for which the District did not receive weekly certified payrolls. The District’s contracts did contain language to comply with the State of Illinois’ wage requirements which requires contractors to submit certified payrolls directly to the Illinois Department of Labor on a monthly basis.
Recommendation:
We recommend the District update its standard contract language for construction contracts to include the federal wage rate requirement clauses and start to obtain weekly certified payrolls from the contractors working on projects that are partially or wholly funded with federal funds.
District’s Response:
The District will update the language used for construction contracts and develop an internal process for the collection and retention of the required weekly certified payrolls.
Potential Effect:
Failure to fully comply with federal regulations could result in amounts being considered unallowable by granting agencies.