South Redford School DistrictLocal Government

2024-001 – Special Tests and Provisions – Wage Rate Requirements Finding Type. Material Noncompliance; Material Weakness in Internal Controls over Compliance Federal program(s) U.S. Department of Education - COVID-19 - Education Stabilization Fund (ALN 84.425D); Passed through the Michigan Department of Education; All project numbers. Criteria. The Uniform Guidance requires that all laborers and mechanics employed by contractors to work on construction contracts in excess of $2,000 financed by federal assistance funds be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL). Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with those requirements and the DOL regulations, which include a requirement to obtain weekly certified payrolls from contractors. Condition. For the amounts tested that were subject to the Wage Rate Requirements the District did not obtain the required certified payrolls during project completion and was unable to obtain them in a timely fashion upon request. Cause. The District does not have the proper internal controls in place to ensure that all contracts awarded have complied with federal requirements or that the prevailing wage was paid by all contractors. Effect. The District did not follow federal requirements to obtain the required certified payrolls from contractors. Questioned Costs. The total charges included in our testing that were not supported by allowable documentation amounted to $490,983. Recommendation. We recommend that the District reviews its procedures to ensure that certified payrolls are obtained from any contractors used (including subcontractors) whenever federal funds are used. View of Responsible Officials. District officials will ensure that construction contracts contain these requirements during the bid process and that certified payroll is obtained from the contractors in a timely fashion and retained as audit support. Responsible Official. Finance Director Estimated Completion Date. June 30, 2025

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.

ALN, Federal Agency, and Program Name - 84.425U, U.S. Department of Education, COVID-19 ESSER III Funds - Formula Federal Award Identification Number and Year - 213713, 21 22 Pass-through Entity - Michigan Department of Education Finding Type - Material weakness 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 2022 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 approximately $300,000 in 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 $300,000 of repairs and renovation contracts were charged to the ESSER III grant, which had a total of approximately $2.1 million in expenditures. The contracts related to the renovation and repair contracts did not include prevailing wage language, nor did the School District receive or review the certified payroll reports from any of the contractors. 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. 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. Verbal communications have been made to all stakeholders, including the superintendent, owner representative (who oversees all construction projects for the School District), construction management team, assistant superintendent of operations, and all finance team members. A written copy of the corrective action will be delivered to each of the stakeholders listed above. Further, the director of finance will review all RFPs to ensure prevailing wage requirements are met.

CFDA Number, Federal Agency, and Program Name 21.019, U.S. Department of Treasury, Coronavirus Relief Fund Federal Award Identification Number and Year - 20 21, 2021 Pass through Entity - Copper Country Intermediate School District Finding Type - Significant deficiency Repeat Finding - No Criteria - Per the terms of the grant agreement, expenditures for the MAISA CRF award were required to be incurred from 3/1/20 12/31/20. Secondary reviews around timing of expenditures and review of grant requirements is a vital part of internal control that reduces the risk of expenditures being charged outside of the period of allowability. Condition - The District received payment related to the MiConnect/MAISA grant for expenditures incurred outside of the period of allowability. The period of allowability for the grant ended December 31, 2020 and expenditures incurred during January March 31, 2021 were incorrectly charged to the grant. Questioned Costs $23,588 Identification of How Questioned Costs Were Computed - The questioned costs relate to expenditures charged to the grant outside of the period of allowability. Context - It was noted that the School District incorrectly charged expenditures to the grant outside of the period of allowability. The absence of a secondary review of the grant requirements contributed to this error not being detected through the School District's internal controls. Cause and Effect - Due to lack of review of grant requirements and expenditures, the School District charged $23,588 to the grant outside of the period of allowabilty. Subsequent to year end, the School District refunded the money back to Copper Country ISD. Recommendation - The School District should implement procedures to ensure review of grant requirements and review general ledger detail to ensure expenditures are charged within the grant's period of performance. Views of Responsible Officials and Corrective Action Plan - The District will ensure that all grant agreements are reviewed for period of allowability to ensure that all funds are being spent in the appropriate time frame. The District will gain a better understanding of each grant it receives, including end dates, and approved use of funds.