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: O f f i c e of Superintendent of Public
Instruction
Pass-through Award/Contract
Number:
COVID-19, 84.425D,
COVID-19, 84.425D-120541,
COVID-19, 84.425D-140550,
COVID-19, 84.425D-143115,
COVID-19, 84.425D-144548,
COVID-19, 84.425U-137130,
COVID-19, 84.425U-138182,
COVID-19, 84.425U-140667,
COVID-19, 84.425W-459028,
COVID-19, 84.425W-459594,
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 fiscal year 2023, the
District spent $19,090,777 of its ESF awards. This included $9,419,225 in the
Elementary and Secondary School Emergency Relief (ESSER II) Fund subprogram
(84.425D), $9,590,729 in the American Rescue Plan Elementary and Secondary
School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and
$80,823 in the American Rescue Plan Elementary and Secondary School
Emergency Relief – Homeless Children and Youth (ARP HCY) subprogram
(84.425W).
Federal regulations require award recipients to establish and maintain internal
controls that ensure compliance with program requirements. These controls include
understanding grant 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 money 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 contractor and subcontractor comply with those
requirements and the Department of Labor’s regulations. This includes a
requirement for the contractor and its subcontractor 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 2022–2023 school year, the District paid $5,642,979 to contractors for
heating, ventilation and air conditioning upgrades to improve air quality and
circulation to prevent the spread of COVID-19 in 11 school buildings.
Our audit found the District did not have adequate internal controls for ensuring
compliance with federal prevailing wage rate requirements. Specifically, the
District did not collect weekly certified payroll reports from the contractors and
subcontractors to confirm they paid laborers proper prevailing wages.
We consider this deficiency in internal controls to be a material weakness that led
to material noncompliance.
Cause of Condition
The District does not normally use federal funds on public works projects. District
employees said they reviewed the Washington State Department of Labor and
Industries website to confirm the contractor and subcontractor submitted weekly
certified payroll reports. However, they did not know that this process, while
sufficient for state requirements, did not meet federal requirements. As a result, the
District did not obtain weekly certified payroll reports from contractors and
subcontractors when using federal funds for construction projects.
Effect of Condition
Without adequate internal controls to ensure it collects all weekly certified payroll
reports, the District cannot demonstrate it complied with federal wage rate
requirements. The District could also be liable for paying any additional wages if
the contractors and subcontractors did not pay prevailing wage rates to laborers
working on the contracts.
Federal regulations require the District to collect certified payroll reports from 11
contractors and 31 subcontractors during the audit period. We tested three of the
contractors and six subcontractors, and found the District did not obtain any of the
196 weekly certified payroll reports. The District subsequently collected all weekly
certified payroll reports.
Recommendation
We recommend the District establish internal controls to ensure compliance with
federal prevailing wage rate requirements. This should include implementing
effective monitoring processes to collect and review all weekly certified payroll
reports from contractors and subcontractors.
District’s Response
The Renton School District acknowledges the finding that the district has not
complied with obtaining weekly certified payroll reports from contractors and
subcontractors when using federal funds for construction projects in a manner
consistent with federal requirements.
We understand that while our current process of reviewing the Washington State
Department of Labor and Industries (L&I) website for payroll reports meets state
requirements, it does not accurately fulfill federal requirements. We appreciate
your patience as we work to rectify this misalignment of processes.
To address this issue, we are implementing the following corrective actions:
• Training: We will provide comprehensive training to our employees on
federal requirements for public works projects funded by federal money.
This will ensure that our staff is fully aware of the differences between state
and federal requirements.
• Process Revision: We will revise our internal process to include the
collection of weekly certified payroll reports directly from contractors and
subcontractors when federal funds are used. This will ensure we meet both
state and federal compliance expectations.
• Documentation: We will maintain proper documentation of these payroll
reports in accordance with Federal and State document retention laws.
The district is committed to ensuring full compliance with all state and federal
requirements. We are confident that these actions will address the audit finding
effectively.
Auditor’s Remarks
We appreciate the District’s commitment to resolving the issue. We will review the
condition 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.