Finding 517198 (2024-002)

Significant Deficiency Repeat Finding

Requirement

Questioned Costs

Year

2024

Accepted

2024-12-30

Audit: 335172

Organization: Big Sky Economic Development Corporation (MT)

Auditor: Kcoe Isom LLP

AI Summary

Core Issue: The Organization lacks controls to ensure compliance with Davis-Bacon wage requirements for future loans.
Impacted Requirements: Noncompliance could lead to legal and financial penalties under federal wage laws.
Recommended Follow-Up: Implement procedures for compliance checks, train staff, and monitor contractor adherence to prevailing wage rates.

Finding Text

Noncompliance with Davis-Bacon Wage Requirements Assistance Title: COVID-19 - Economic Adjustment Assistance - Coronavirus Aid, Relief, and Economic Security (CARES) Act Revolving Loan Fund Assistance Listing Number: 11.307 Federal Agency: U.S. Department of Commerce Type of Finding: Significant Deficiency Category of Finding: Special Tests and Provisions – Davis-Bacon Act Known Questioned Costs: $0 Likely Questioned Costs: $0 Criteria In accordance with section 602 of PWEDA (42 U.S.C. § 3212), all laborers and mechanics employed by contractors or subcontractors on construction-related projects receiving investment assistance under PWEDA shall be paid wages not less than those prevailing on similar construction in the locality, as determined by the U.S. Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code. See 13 CFR § 302.13. Condition During the fiscal year ended June 30, 2024, the Organization did not disburse any loans that were subject to Davis-Bacon wage requirements. However, we noted there are no internal controls in place to verify compliance with prevailing wage rates in the event that such loans are disbursed in the future. Cause There are no controls in place to verify compliance with prevailing wage rates for federally funded projects, risking legal and financial penalties due to potential noncompliance with federal wage laws. Effect Without proper controls, the Organization risks noncompliance with federal wage laws if loans subject to Davis-Bacon requirements are disbursed. This could lead to legal and financial penalties, including potential repayment of federal funds or jeopardizing future funding opportunities. Repeat Finding This is a repeat finding from the prior year. Recommendation We recommend that the Organization implement procedures to ensure compliance with Davis-Bacon wage requirements. This includes training staff on federal wage laws, incorporating compliance checks into the loan disbursement process, and regularly monitoring contractor adherence to prevailing wage rates. Management’s Response Management concurs with this finding. See Management’s Response and Corrective Action plan section.

Corrective Action Plan

Noncompliance with Davis-Bacon Wage Requirements Description of the Finding: BSEDC does not have internal controls in place to verify compliance with prevailing wage rates in the event that such loans are disbursed. Planned Corrective Actions: BSEDC’s Director of Business Finance/Program Finance Director has amended the organization’s EDA-RLF Plan, including details on the Davis-Bacon requirements for any loan funding construction or renovations of more than $2,000. It will be the responsibility of Big Sky Finance to notify the borrower as soon as possible regarding the Davis-Bacon requirements for wages paid. The borrower will in turn notify their contractor of the requirement. Big Sky Finance will require evidence from the general contractor of the prevailing wages being paid prior to loan funds being disbursed. Timeline for Completion: The Davis-Bacon requirement for funds disbursed through BSEDC’s Federal EDARLF loan fund will be immediately implemented for all EDA-RLF loans funded going forward. BSEDC’s EDARLF Plan will be amended and approved by its Board of Directors within a reasonable amount of time. A draft of this change is in place. However, as a matter of practice, Davis-Bacon requirements will be adhered to from this date forward. Responsible Person or Party: BSEDC’s Director of Business Finance/Program Finance Director, will be responsible for making the changes to the plan, presenting to the Board and adhering to the plan going forward.

Other Findings in this Audit

517197 2024-001

Significant Deficiency
1093639 2024-001

Significant Deficiency
1093640 2024-002

Significant Deficiency Repeat

Programs in Audit

ALN	Program Name	Expenditures
11.307	Economic Adjustment Assistance	$1.70M