Prevailing Wage Rates – Noncompliance/Material Weakness
Finding Number: 2023-003
Assistance Listing Number and Title: AL # 84.425D/84.425U/84.425W COVID-19 Education Stabilization Fund
Federal Award Identification Number / Year: None / 2022/2023
Federal Agency: U.S. Department of Education
Compliance Requirement: Special Tests and Provisions – Wage Rate
Requirements
Pass-Through Entity: Ohio Department of Education and Workforce
Repeat Finding from Prior Audit? No
2 CFR § 3474.1 gives regulatory effect to the Department of Education for Appendix II to 2 CFR § 200
which states that, in addition to other provisions required by the Federal agency or non-Federal entity, all
contracts made by the non-Federal entity under the Federal award must contain provisions covering the
following, as applicable:
Appendix II to Part 200 (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. The non-Federal entity must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. The contracts must also include a provision for compliance with the Copeland “Anti-Kickback” Act (40 U.S.C. 3145), as supplemented by Department of Labor regulations (29 CFR Part 3, “Contractors and Subcontractors on Public Building or Public Work Financed in Whole or in Part by Loans or Grants from the United States”). The Act provides that each contractor or subrecipient must be prohibited from inducing, by any means, any person employed in the construction, completion, or repair of public work, to give up any part of the compensation to which he or she is otherwise entitled. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency.
29 CFR § 5.5(a)(3)(ii)(A) requires, in part, that a contract in excess of $2,000, which is entered into for the actual construction, alteration and/or repair of a public building or public work, or building or work financed
in whole or in part from Federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution shall require a clause that the contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the appropriate agency if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the agency. Agencies which do not directly enter into such contracts shall promulgate the necessary regulations or procedures to require the recipient of the Federal assistance to insert in its contracts the provisions of § 5.5.
29 CFR § 5.6 further states, in part, that no payment, advance, grant, loan, or guarantee of funds shall be
approved by the Federal agency unless the agency ensures that the clauses required by § 5.5 and the appropriate wage determination of the Secretary of Labor are contained in such contracts.
Sound accounting practices require public officials to design and operate a system of internal control that is adequate to provide reasonable assurance over the reliability of federal information provided for federal
reimbursement.
During 2023, the District undertook projects that were subject to prevailing wage requirements. Education Stabilization Funds were used for these project costs. The District included the required prevailing wage language within their contracts. However, evidence could not be provided that certified payrolls were received and monitored by the District for three out of four contracts.
Without proper controls over wage rate requirements, there is an increased risk that the District and its contractors and subcontractors are not in compliance with applicable federal regulations. Additionally, noncompliance could result in federal funding being reduced or taken away, or other sanctions imposed by the federal grantor agency.
The District should establish controls to ensure the required contracts are entered into and include the required clauses of 29 CFR 5.5, particularly those concerning prevailing wage rate and the requirement that the contractor shall submit weekly, for each week in which any contract work is performed, a copy of all payrolls to (or for transmission to, where applicable) the District, in its construction contracts (and subcontracts) greater than $2,000 that are covered by the wage rate requirements and take steps to ensure contractors (and subcontractors, if applicable) are in compliance with all labor standards by collecting the required certified payroll documentation in a timely manner. The District should obtain the necessary information from the contractor to document compliance with the program, in addition to documenting their controls over the compliance requirements.
Officials’ Response: Refer to Corrective Action Plan