Finding Text
Assistance Listing Number, Federal Agency, and Program Name 84.425U, U.S. Department of Education, COVID 19 ARP ESSER III Funds Formula
Federal Award Identification Number and Year 213713
Pass through Entity Michigan Department of Education
Finding Type Significant deficiency and material noncompliance with laws and regulations
Repeat Finding No
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. We noted the School District expended approximately $168,000 in ESSER funds that related to repairs and renovations out of a total of approximately $11,800,000 in ESSER construction funds that did not include the prevailing wage requirement within the contract’s language. This was one contract during changeover of construction administration that missed the bid language, however, was paid at prevailing wages.
Questioned Costs None
Identification of How Questioned Costs Were Computed N/A No questioned costs
Context We noted one of three samples tested for repairs and renovation contracts charged to the ESSER III grant did not include prevailing wage language. The omission occurred during a transition period in the procurement process. The School District verified that the referenced contract prevailing wages were actually paid.
Cause and Effect Excluding the prevailing wage rate language in contracts could cause contractors using federal dollars to not 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 timely.
Views of Responsible Officials and Corrective Action Plan As it pertains to the use of any federal funds for construction projects in the School District, when said funds will be used to compensate for labor for any construction project, the School District will stipulate Davis Bacon requirements for prevailing wages as it relates to the use of laborers and mechanics for all projects over $2,000.