Finding Text
Assistance Listing Number, Federal Agency, and Program Name - 84.425U, U.S. Department of Education, COVID-19 ESSER III Funds - Formula
Federal Award Identification Number and Year - 213712 for 2021-2022, 213713 for 2022-2023
Pass-through Entity - Michigan Department of Education
Finding Type - Material weakness and material noncompliance with laws and regulations
Repeat Finding - Yes, 2022-01
Criteria - Approved construction projects must comply with applicable Uniform Guidance requirements, as well as the department’s regulations regarding construction at 34 CFR § 76.600. As is the case with all remodeling or construction contracts using laborers and mechanics financed by federal education funds, an LEA that uses ESSER or GEER funds for minor remodeling, renovation, repair, or construction contracts over $2,000 must meet all Davis-Bacon prevailing wage requirements and include language in the contracts that all contractors or subcontractors must pay wages that are no less than those established for the locality of the project (prevailing wage rates). (See 20 U.S.C. 1232b Labor Standards.) (See also FAQ B-6.)
Condition - During testing of the grant, we noted the School District utilized funds from the Education Stabilization Funds (ESF) for minor remodeling and renovations of the school buildings. Per the 2023 Compliance Supplement, recipients and subrecipients that use ESF for minor remodeling, renovation, or construction contracts that are over $2,000 and use laborers and mechanics, must meet Davis-Bacon prevailing wage requirements. The School District expended ESSER funds that related to repairs and renovations; however, the prevailing wage requirement was not included in any of the related contracts' language, nor did the School District receive or review the certified payroll reports from any of the contractors.
Questioned Costs - None
Identification of How Questioned Costs Were Computed - N/A - No questioned costs
Context - We noted over $300,000 of repairs and renovation contracts were charged to the ESSER III grant, which had a total of approximately $2.2 million in expenditures. The contracts related to the renovation and repair contracts that the School District did not receive or review the certified payroll reports from the contractors.
Cause and Effect - Excluding the prevailing wage rate language in contracts could cause contractors using federal dollars not to pay appropriate wages to their employees. The School District not receiving or reviewing the certified payroll reports from contractors could lead to nondetection of contractors not paying their employees at prevailing wage rates or in accordance with contract provisions.
Recommendation - We recommend the School District ensure contracts with vendors that are performing repairs, construction, renovations, etc. include the prevailing wage rate language in the contract and that the School District have a process and control in place to ensure that certified payroll reports from the contractors are being received and reviewed by the School District.
Views of Responsible Officials and Corrective Action Plan - As it pertains to the use of any federal funds for construction projects in South Redford School District (SRSD), when said funds will be used to compensate for labor for any construction project, the School District will stipulate in all RFPs Davis-Bacon requirements for prevailing wages as it relates to the use of laborers and mechanics for all projects over $2,000. All responses to RFPs must meet the following criteria:
1. Acknowledge the Davis-Bacon prevailing wage requirement
2. All bid pricing must reflect prevailing wage requirements.
3. Bid recipients must have a process in place for reporting their compliance to the prevailing wage requirement and submit documentation along with all invoices, be it directly to SRSD or to the construction management firm, who will then include said documentation with their backup and invoices to SRSD.