Finding Text
Identification of the federal program U.S. Department of Commerce
Economic Development Cluster
Assistance Listing Number 11.307 Economic Adjustment Assistance
Federal Award Number – 08-79-05441
Award Period – 7/12/2021 – 7/11/2026
Criteria or specific requirement (including statutory, regulatory, or other citation) 2 CFR 200.303(a) requires that a non-federal entity must “(a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).”
Criteria or specific requirement (including statutory, regulatory, or other citation) (continued) Per the May 2023 OMB Compliance Supplement, “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. Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR Part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); OMB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326). This reporting is often done using Optional Form WH-347, which includes the required statement of compliance (OMB No. 1235-0008).”
Condition Texas Biomed did not obtain the required weekly certified payrolls from contractors and subcontractors for each week in which work was performed. Texas Biomed did not include the required provision that the contractor or subcontractor comply with the wage rate requirements in 1 of 5 selected construction contracts.
Cause Texas Biomed did not have effective internal controls and procedures in place to ensure Texas Biomed complied with wage rate requirements.
Effect or potential effect Texas Biomed did not comply with the wage rate requirements noted above. As a result, Texas Biomed did not have the ability to review required certified payroll reports to ensure contractors and subcontractors are paying prevailing wage rates.
Questioned costs None.
Context EY selected and tested 5 of 28 contractors and subcontractors in relation to the Economic Development Cluster.
For 3 contractors/subcontractors, Texas Biomed did not obtain certified payrolls. For 2 contractors/subcontractors, Texas Biomed obtained minimal certified payrolls which did not cover the period in which work was performed.
Texas Biomed did not include the required provision that the contractor or subcontractor comply with the wage rate requirements in 1 of 5 selected construction contracts.
All of the expenditures for the Economic Development Cluster were for construction costs, including the $4,000,000 federal grant and Texas Biomed’s $6,000,000 match.
Identification as a repeat finding, if applicable This is not a repeat finding.
Recommendation We recommend Texas Biomed design and implement internal controls to ensure weekly certified payrolls are obtained from contractors and subcontractors and the required wage rate provisions are included in contracts for federally funded construction grants, as required.
Views of responsible
officials Management agrees with the finding and will implement controls to ensure compliance with Wage Rate Requirements.