SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Okanogan School District No. 105 September 1, 2021 through August 31, 2022 2022-001 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: U.S. 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, 0120469 COVID-19, 84.425U, 0138248 COVID-19, 84.425W, 0459025 COVID-19, 84.425W, 0459580 COVID-19, 84.425U, 137037 COVID-19, 84.425U, 0712261 COVID-19, 84.425U, 712313 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 fiscal year 2022, the District spent $1,917,896 of its ESF awards. This included $1,113,450 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $802,272 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U), and $2,173 in the American Rescue Plan Elementary and Secondary School Emergency Relief ? Homeless Children and Youth (ARP ESSER - HCY I & II) subprogram (84.425W)Federal regulations require award 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 subcontractor 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 2021-22 school year, the District spent $449,988 from its ESSER III award to pay one contractor for work it performed on a project to add a portable building to the District?s campus. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not include the required prevailing wage rate clauses in the contract with the prime contractor. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. This issue was reported as a finding in the prior audit as finding 2021-001. Cause of Condition District staff included the state prevailing wage language in the construction contract. However, staff did not know the District also needed to include the federal prevailing wage requirements.Effect of Condition and Questioned Costs Without adequate internal controls to ensure it includes the required prevailing wage clauses in public works contracts, the District cannot demonstrate it complied with federal wage rate requirements. This increases the risk that contractors would not know the project is subject to federal prevailing wage requirements and pay the higher of state or federal wage. The District could also be liable for paying any additional wages if the contractor and subcontractors did not pay prevailing wage rates to laborers working on the contracts. Recommendation We recommend the District develop internal controls to ensure compliance with federal wage rate requirements. This should include inserting the prevailing wage rate clauses into construction contracts. District?s Response The District administration will obtain and include required Davis-Bacon Act contract language to facilitate adequate internal controls for ensuring compliance with the federal wage rate requirements in future federally funded projects. 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 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. 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).