Finding Text
2024-006 - Wage Rate Compliance
Funding Agency: U.S. Department of Education
Title: Impact Aid
AL Number: 84.041
Award year and number: 2024
Criteria or Specific Requirement: Section 7007 construction funds, as well as any Section 7002 or 7003(b) funds spent for construction or minor remodeling, are subject to Wage Rate Requirements (20 USC 1232b). 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).
Non-federal 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 non-Federal 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).
Condition: The District did not comply with the wage rate compliance related to construction projects for expenditures paid from Impact Aid monies.
Context: During the testing of significant claims for the Impact Aid related to construction, we noted claims in which there should be contracts in place and that the wage rate requirements would apply.
Questioned Costs: To be determined by grantor.
Effect: The District could potentially be misspending Impact Aid construction monies that were received.
Cause: The District was aware of the compliance requirement, as it was included in the documented contract request for proposal, which stated that the prevailing wage rate needed to be paid. However, the contract was awarded to a two-member partnership in which the partners do all the work and do not pay salaries and had no subcontractors. As a result, the District and the contractors were unsure how to proceed with compliance with wage rate requirements and no payroll certification was completed.
Auditor's Recommendation: To ensure compliance with Wage Rate Requirements, the District should review and update contracting procedures to clearly state prevailing wage rate requirements. Training sessions and guidance should be provided to contractors and subcontractors, especially those without traditional payroll structures. The District should establish a monitoring system to review certified payrolls and conduct periodic audits. In unclear cases, the District should seek guidance from the Department of Labor. Enhancing communication channels between the District, contractors, and subcontractors will help address compliance issues promptly. Implementing these steps will ensure proper use of Impact Aid construction funds.
View of Responsible Official: The District has created a standard operating procedure document to follow for all construction projects. The District will also share that document with all contractors to help communicate the needs of the District regarding construction projects. If necessary, the District will provide the contractor with training to make sure all payrolls are properly certified and in compliance with applicable law. The District will also create a shared Google document for each construction project to manage the progress and payments.