Finding Text
Finding: District controls did not always ensure compliance with the Davis-Bacon Act for Federally funded construction projects exceeding $2,000, resulting in questioned costs totaling $716,957.
Criteria: The ES Fund provides Federal funds for school facility repairs and improvements to reduce the risk of virus transmission and exposure to environmental health hazards, and to support student health needs.
Title 29, Section 5.5, Code of Federal Regulations (Davis-Bacon Act), requires the District to include prevailing wage rate clauses in any construction contract exceeding $2,000 that is financed either wholly or in part by Federal funds and ensure that contractors pay workers the prevailing wage rates established by the United States Department of Labor. This includes a requirement for the contractor to submit to the District weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). The United States Department of Labor established “prevailing wages” by geographic area and interprets the Davis-Bacon Act to apply to construction, alteration, or repair of public buildings or public work.
Condition: During the 2022-23 fiscal year, the District expended $16,735,847 from the ES Fund for projects related to 38 construction contracts totaling $52,100,469 to install replacement windows, HVAC systems, flooring, and cooling towers, and to upgrade chiller plants at various District facilities.
Our examination of District records supporting 9 selected construction contracts totaling $25,292,337 disclosed that the District expended $716,957 related to 3 construction contracts and the District did not receive required weekly certified payrolls for those contracts.
Cause: District personnel indicated that the District typically complied with Davis-Bacon Act and considered the 3 contracts to be purchase-service contracts. Notwithstanding, since the contracts included installation of flooring and the replacement of a cooling tower, the contracts were for construction projects subject to the Davis-Bacon Act.
Effect: Absent the required weekly certified payrolls, there is an increased risk that construction contractors paid with Federal moneys will not pay workers the prevailing wage rates established by the United States Department of Labor. Although we requested, the District did not provide the certified payrolls from the contractors demonstrating that the prevailing wage rates were paid for the construction contracts. Consequently, the District incurred questioned costs totaling $716,957.
Recommendation: The District should enhance procedures to ensure compliance with all Davis-Bacon Act requirements. Such procedures should ensure that applicable Federally funded construction contracts require submittal of weekly certified payrolls and that District personnel verify that the payrolls were received. In addition, the District should document to the FDOE the allowability of the questioned costs or contact the FDOE regarding necessary corrective action.
District Response: The District disagrees with the finding and has discussed its position on the corrective action document separately enclosed.
Auditor's Remark: Management's response states that "the services obtained through these contracts were not considered "construction" as no design professional nor general contractor (GC) was needed and no permits were required to perform the work". Notwithstanding, since the contracts included installation of flooring and the replacement of a cooling tower, these were for construction projects subject to the Davis-Bacon Act.