Finding 539042 (2024-004)

Material Weakness
Requirement
N
Questioned Costs
-
Year
2024
Accepted
2025-03-28

AI Summary

  • Core Issue: The School Corporation failed to include required prevailing wage rate clauses in construction contracts over $2,000 funded by federal assistance, leading to noncompliance.
  • Impacted Requirements: This finding violates federal regulations regarding wage rate requirements and internal controls as outlined in 2 CFR 200.303 and 29 CFR 5.5.
  • Recommended Follow-Up: Implement a robust internal control system to ensure compliance with wage rate requirements and mandate weekly certified payroll submissions from contractors.

Finding Text

FINDING 2024-004 Subject: COVID-19 - Education Stabilization Fund - Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Modified Opinion Condition and Context Construction contracts in excess of $2,000 financed by federal assistance funds must pay wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) to their laborers and mechanics. Nonfederal entities are to include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with these requirements and the DOL regulations. This would include a requirement to submit a copy of the payroll and statement of compliance to the entity for each week in which contract work was performed. The School Corporation had not designed nor implemented a system of internal controls to ensure that construction contracts in excess of $2,000 paid from federal grant funds included a prevailing wage rate clause. Two construction contracts, totaling $9,625 from ESSER funds, were paid during the audit period. The contracts did not include the required prevailing wage rate clause, nor were the certified payrolls submitted by both the contractors. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The 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 or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 METROPOLITAN SCHOOL DISTRICT OF NORTH POSEY COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 29 CFR 5.5 states in part: "(a) Required contract clauses. The Agency head will cause or require the contracting officer to require the contracting officer to insert in full, or (for contracts covered by the Federal Acquisition Regulation (48 CFR chapter 1)) by reference, in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, 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 (except where a different meaning is expressly indicated), and which is subject to the labor standards provisions of any of the laws referenced by § 5.1, the following clauses . . . (1) Minimum wages — (i) Wage rates and fringe benefits. All laborers and mechanics employed or working upon the site of the work (or otherwise working in construction or development of the project under a development statute), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of basic hourly wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. . . . (3) Records and certified payrolls — . . . (ii) Certified payroll requirements — (A) Frequency and method of submission. The contractor or subcontractor must submit weekly, for each week in which any DBA- or Related Acts-covered work is performed, certified payrolls to the [write in name of appropriate Federal agency] if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the certified payrolls to the applicant, sponsor, owner, or other entity, as the case may be, that maintains such records, for transmission to the [write in name of agency]. The prime contractor is responsible for the submission of all certified payrolls by all subcontractors. A contracting agency or prime contractor may permit or require contractors to submit certified payrolls through an electronic system, as long as the electronic system requires a legally valid electronic signature; the system allows the contractor, the contracting agency, and the Department of Labor to access the certified payrolls upon request for at least 3 years after the work on the prime contract has been completed; and the contracting agency or prime contractor permits other methods of submission in situations where the contractor is unable or limited in its ability to use or access the electronic system. . . ." INDIANA STATE BOARD OF ACCOUNTS 21 METROPOLITAN SCHOOL DISTRICT OF NORTH POSEY COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. . . ." Cause The School Corporation was unaware of the Davis Bacon Act and its requirements on contracts which use federal funds. This resulted in no internal control for the wage rate requirements for these contracts. Effect Without the proper implementation of an effectively designed system of internal controls, there were no internal controls to verify compliance for federal funds spent on construction. As a result, construction contracts entered into did not contain the required wage rate requirements clauses nor were certified payrolls obtained by the School Corporation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls and include the wage rate requirement clause in construction contracts. In addition, certified payrolls should be obtained as required. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Corrective Action Plan

FINDING 2024-004 Finding Subject: COVID-19 Education Stabilization Fund- Special Tests and Provisions-Wage Rate Requirements Contact Person Responsible for Corrective Action: Todd Slagle Contact Phone Number and Email Address: 812-874-2243 tslagle@northposey.k12.in.us Views of Responsible Officials: We concur with the finding. Description of Corrective Action Plan: The School Corporation is now aware of additional wage rules when funding a project through a federal grant. All wage rules will be followed for future projects. Anticipated Completion Date: We have corrected the wage rules upon notification and will immediately implement changes beginning on the next project.

Categories

Matching / Level of Effort / Earmarking Special Tests & Provisions

Other Findings in this Audit

  • 539033 2024-002
    Material Weakness
  • 539034 2024-002
    Material Weakness
  • 539035 2024-002
    Material Weakness
  • 539036 2024-002
    Material Weakness
  • 539037 2024-002
    Material Weakness
  • 539038 2024-002
    Material Weakness
  • 539039 2024-003
    Material Weakness Repeat
  • 539040 2024-003
    Material Weakness Repeat
  • 539041 2024-003
    Material Weakness Repeat
  • 539043 2024-004
    Material Weakness
  • 539044 2024-004
    Material Weakness
  • 539045 2024-004
    Material Weakness
  • 1115475 2024-002
    Material Weakness
  • 1115476 2024-002
    Material Weakness
  • 1115477 2024-002
    Material Weakness
  • 1115478 2024-002
    Material Weakness
  • 1115479 2024-002
    Material Weakness
  • 1115480 2024-002
    Material Weakness
  • 1115481 2024-003
    Material Weakness Repeat
  • 1115482 2024-003
    Material Weakness Repeat
  • 1115483 2024-003
    Material Weakness Repeat
  • 1115484 2024-004
    Material Weakness
  • 1115485 2024-004
    Material Weakness
  • 1115486 2024-004
    Material Weakness
  • 1115487 2024-004
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
10.555 National School Lunch Program 2023 $528,166
84.425 Education Stabilization Fund 2023 $416,034
10.555 National School Lunch Program 2024 $395,267
84.425 Education Stabilization Fund 2024 $182,037
84.010 Title I Grants to Local Educational Agencies 2024 $121,618
84.424 Student Support and Academic Enrichment Program 2024 $116,300
32.009 Emergency Connectivity Fund Program 2023 $103,950
84.010 Title I Grants to Local Educational Agencies 2023 $99,693
10.553 School Breakfast Program 2023 $96,277
84.027 Special Education Grants to States 2024 $68,876
10.553 School Breakfast Program 2024 $68,364
84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) 2024 $29,286
84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) 2023 $23,538
93.778 Medical Assistance Program 2024 $16,121
84.424 Student Support and Academic Enrichment Program 2023 $11,577
93.778 Medical Assistance Program 2023 $10,128
84.027 Special Education Grants to States 2023 $4,508
84.173 Special Education Preschool Grants 2024 $3,341
84.173 Special Education Preschool Grants 2023 $2,102
10.649 Pandemic Ebt Administrative Costs 2023 $628