The District did not have adequate internal controls for ensuring compliance with wage rate requirements. Assistance Listing Number and Title: 84.425, COVID-19 Education Stabilization Fund Federal Grantor Name: US. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425D-01202 COVID-19, 84.425D-0120484 COVID-19, 84.425U-0138245 COVID-19, 84.425-0137006 Known Questioned Cost Amount: $0 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2022, the District spent $440,436 in federal funding of its ESF awards. This included $154,038 in the Elementary and Secondary School Emergency Relief Fund (ESSER I and II) subprogram (84.425D), and $286,398 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Under federal wage rate requirements, also known as the Davis-Bacon Act, contractors and subcontractors that work on projects financed with more than $2,000 of federal money must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. For construction contracts subject to these wage rate requirements, the District must include a provision that the contractor and subcontractor comply with those requirements and the Department of Labor?s regulations. This includes a requirement for the contractor and its subcontractors to submit to the District weekly, for each week in which any contract work is performed, certified payroll reports. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition During the 2020-21 school year, the District paid $67,082.40 from its ESSER II award to hire a contractor to build pavilions that allow for covered, open air spaces for eating and learning to help prevent the spread of COVID-19. Our audit found the District did not have adequate internal controls for ensuring compliance with federal prevailing wage rate requirements. Specifically, the District did not: ? Include a provision in the contract that the contractor comply with federal wage rate requirements ? Collect weekly certified payroll reports from the contractor to confirm it paid laborers proper prevailing wages We considered these deficiencies in internal controls to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition While District officials knew about state prevailing wage requirements, they did not know about the federal requirements since this was the District?s first federally funded construction project. Specifically, officials did not know the District needed to obtain all certified payroll reports each week, and that the contract between the District and the contractor needed to include specific language to meet prevailing wage rate requirements. Effect of Condition Without adequate internal controls that ensure it includes the prevailing wage rate clauses in its contracts and collects all weekly certified payroll reports, the District cannot demonstrate it complied with the federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor did not pay prevailing wage rates to laborers working on the contracts. Recommendation We recommend the District develop internal controls that ensure compliance with federal wage rate requirements. This should include inserting wage rate clauses into contracts, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports timely from contractors and subcontractors. Additionally, we recommend the District consider the benefit of additional training to ensure staff overseeing compliance with federal programs are aware of all applicable requirements. District?s Response Ocosta School District did not complete the required documentation to ensure prevailing wage was paid. We did not collect weekly certified payroll reports. Moving forward, before any project begins staff will be reminded of all federal requirements. Ocosta School District will train staff on federal program requirements. Staff will be instructed what the expectations are for the contractors. They will be directed to have the appropriate time sheets available to give to the contractor, explain that weekly payroll reports will be completed and certified. Auditor?s Remarks We appreciate the District?s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 29 CFR, Section 5.5 ? Contract provisions and related matters establishes the requirements for the contracting officer to insert in full 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 with federal funds the clauses listed, which includes but is not limited to the minimum wages to be paid and payrolls and basic records to be maintained (submission of weekly certified payrolls). Title 29 CFR, Section 3.3 ? Weekly statement with respect to payment of wages, and Section 3.4 ? Submission of weekly statements and the preservation and inspection of weekly payroll records, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports.