Cleveland Municipal School District

2 CFR § 3474.1 gives regulatory effect to the Office of Budget and Management Guidance in 2 CFR §200.313(d) for the Department of Education, which states, in part, that a control system must be in place to ensure safeguards to prevent loss, damage, or theft of the equipment. It also requires that the recipient or subrecipient maintain property records that include a description of the asset, a serial number or other source of identification (including the FAIN), the source of funding for the property and other data to identify the equipment. Finally, it requires recipients or subrecipients to perform a physical inventory of property purchased with federal funds and reconcile the inventory results to the recipient or subrecipient’s property records at least once every two years. Due to insufficient knowledge of and controls in place over the federal requirements related to equipment and property management we noted the following issues: • The District could not provide evidence that a physical inventory over property purchased with Elementary and Secondary School Emergency Relief (ESSER) Fund (AL #84.425D) and American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) Funds (AL #84.425U) had been taken and reconciled with property records in the required timeframe. • 30 items (out of 60) selected for physical observation during the prior-year audit were still not properly tagged and still could not be reconciled with the District’s property listing provided by management. • 28 property items selected for testing during the prior year still could not be located for physical observation. • Asset records for all ten (100%) assets purchased with ARP ESSER funds during the audit period were not properly updated with the required information; and • District could not determine if there was any equipment purchased with ARP ESSER or ESSER I fund, disposed of during the audit period. Lack of controls over equipment management and failure to complete the required inventory could lead to misappropriation of District assets and potential questioned costs and non-compliance with federal requirements.

District inventory management is governered by Board Policy DID: Inventories, which instructs the Chief Financial Officer to create inventory procedures. After this finding was identified in 2024 Schedule of Findings, a cross-functional work group draft an operational procedure for inventory, incorporating the feedback of Academics, Finance, and Operation. The procedure is now included in the Procure to Pay Manual and will be considered fro annual madatory finance training .

2024-003

1. Prevailing Wage Rate Requirement Finding Number: 2022-001 Assistance Listing Number and Title: 84.425 Education Stabilization Fund Federal Award Identification Number / Year: N/A / 2022 Federal Agency: U.S. Department of Education Compliance Requirement: Special Test and Provisions- Wage Rate Requirements Pass-Through Entity: Ohio Department of Education Repeat Finding from Prior Audit? No NONCOMPLIANCE AND MATERIAL WEAKNESS 2 CFR ? 3474.1 provides that the Department of Education (DOE) adopts the Office of Management and Budget (OMB) Guidance in 2 CFR part 200. Thus, this section gives regulatory effect to the OMB guidance and supplements the guidance as needed for the DOE, except as otherwise noted in that section. Appendix II to 2 CFR part 200, Paragraph D states that all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following: (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, ?Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction?). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. The non-Federal entity must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. . . The District entered into a contract with Panzica Construction Company for installation of kitchen equipment for East Tech Culinary Art Renovation project, in the amount of $783,659. During fiscal year 2022, the District paid Panzica $58,207 with Elementary and Secondary School Emergency Relief (ESSER II) Fund monies related to this project. These expenditures included contractor payroll charges for periods prior to June 30, 2022. However, due to the lack of formal controls and procedures, the District did not obtain the certified payroll information until December 12, 2022. This weakness resulted in the District being non-compliant with the aforementioned federal codes and could result in future reductions or loss of federal funding. The District should ensure certified payroll reports are provided weekly by the contractor. The District should obtain the necessary information from the contractor to document compliance with the program requirements and if the contractor failed to comply then they have an obligation under Appendix II to 2 CFR part 200 to report all suspected or reported violations to the Federal awarding agency.

Finding Number: 2022-001 Planned Corrective Action: The District acknowledges it did not obtain certified payroll information from Panzica Construction until December 2022 which was after the Auditor raised the issue with the District. The District will work to ensure compliance with grant terms, in this instance, by assigning compliance responsibility to the Cost Center Manager who negotiates, monitors, and receives invoices, and authorizes payments. Standard prevailing wage contract language will be developed in consultation with General Counsel?s Office with the language inserted into future contracts, as appropriate. Anticipated Completion Date: 06/30/23 Responsible Contact Person: Nathan J. Mortimer, Interim CFO

2 CFR § 3474.1 provides that the Department of Education (DOE) adopts the Office of Management and Budget (OMB) Guidance in 2 CFR part 200. Thus, this section gives regulatory effect to the OMB guidance and supplements the guidance as needed for the DOE, except as otherwise noted in that section. Appendix II to 2 CFR part 200, Paragraph D states that all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following: (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. The non-Federal entity must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. The non-Federal entity must report all suspected or reported violations to the Federal awarding agency. . . The District entered into a contract with Panzica Construction Company for installation of kitchen equipment for East Tech Culinary Art Renovation project, in the amount of $783,659. During fiscal year 2022, the District paid Panzica $58,207 with Elementary and Secondary School Emergency Relief (ESSER II) Fund monies related to this project. These expenditures included contractor payroll charges for periods prior to June 30, 2022. However, due to the lack of formal controls and procedures, the District did not obtain the certified payroll information until December 12, 2022.This weakness resulted in the District being non-compliant with the aforementioned federal codes and could result in future reductions or loss of federal funding.The District should ensure certified payroll reports are provided weekly by the contractor. The District should obtain the necessary information from the contractor to document compliance with the program requirements and if the contractor failed to comply then they have an obligation under Appendix II to 2 CFR part 200 to report all suspected or reported violations to the Federal awarding agency.

The District acknowledges it did not obtain certified payroll information from Panzica Construction until December 2022 which was after the Auditor raised the issue with the District. The District will work to ensure compliance with grant terms, in this instance, by assigning compliance responsibility to the Cost Center Manager who negotiates, monitors, and receives invoices, and authorizes payments. Standard prevailing wage contract language will be developed in consultation with General Counsel’s Office with the language inserted into future contracts, as appropriate.

GSA_MIGRATION

GSA_MIGRATION

2015-001