Finding Text
Subject: Education Stabilization Fund – Internal Controls
Federal Agency: Department of Education
Federal Program: COVID-19 - Education Stabilization Fund
Assistance Listing Number: 84.425D, 84.425U
Federal Award Numbers: S425D210013, S425U210013
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements
Audit Findings: Significant Deficiency
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards 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 or the 'Internal Control Integrated Framework', issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ."
2 CFR 200 Appendix II states in part:
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. (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.. . .”
Condition: An effective internal control system was not in place at the School Corporation in order to
ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions
– Wage Rate Requirements compliance requirements.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the compliance requirements listed above.
Effect: The failure to design and implement an effective internal control system enabled material
noncompliance to go undetected. Noncompliance with the grant agreement and the Special Tests and
Provisions – Wage Rate Requirements compliance requirement could result in the loss of future federal
funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context: For the three projects sampled for Davis-Bacon requirements, the contracts with the companies
did not include the clauses for the federal wage rate requirements. The amount disbursed and reported on
the SEFA during the audit period is $1,367,798. The School Corporation did obtain the weekly payroll
reports certifications from the companies that performed renovations.
Identification as a repeat finding: No.
Recommendation: We recommend the School Corporation implement a formal process to ensure the
contracts including labor costs over $2,000 funded by federal awards have Davis Bacon wage rate
requirement clause in written contract.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.