Troy City Board of Education

Item 2023-001 Special Tests and Provisions – Wage Rate Requirements Education Stabilization Fund (ESF) ALN# 84.425U U.S. Department of Education Passed through the State Department of Education, Pass Through Grantor Number 199 Criteria – Grantees should have controls in place to ensure that contractors and subcontractors are notified of the requirement to pay prevailing wage rates to all laborers and mechanics employed on construction contracts in excess of $2,000 financed by federal assistance funds and to submit weekly certified payrolls for each week in which contract work is performed. 2 CFR 200.303 requires the non‐Federal entity to “(a) establish and maintain effective internal controls over the Federal award that provides reasonable assurance that the non‐Federal entity is managing the Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR 200.326 and 29 CFR Part 5, Labor Standards Provisions Applicable to Contracts Governing Federally Financed and Assisted Construction (DOL Regulations) require the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). Condition – Adequate controls were not in place to ensure that contractors and subcontractors were notified of the requirements to comply with the wage rate requirements and provided timely certified payrolls throughout the construction projects. Cause – A clause describing the Wage Rate Requirements was not added to the construction contracts. There was a lack of sufficient controls over the communication of this requirement to ensure that accurate and complete certified payrolls were provided to the Board. Effect – Lack of notification of the wage rate requirements to the contractors and subcontractors could lead to disallowed costs. We noted that payments to contractors did not have supporting documentation of certified payrolls. However, our audit disclosed no instances of unallowable costs. Questioned Costs – $149,982 Recommendation – We recommend the strengthening of controls to ensure the prevailing wage rate clauses are included in the contracts and that certified payrolls are received for each week in which construction work is performed. Management’s Response – The Board will strengthen the controls in place to provide assurance that proper prevailing wage rate clauses are added to construction contracts and certified payrolls are received from each week in which construction work is performed.

Item 2022-001 Activities Allowed/Allowable Costs & Costs Principles (Significant Deficiency - Payroll) Education Stabilization Fund (ESF) ALN# 84.425U U.S. Department of Education Passed through the State Department of Education, Pass Through Grantor Number COVID-19 199 Criteria ? Grantees should have controls in place to ensure that grant monies are for allowable costs and allowable activities. 2 CFR 200.303 requires the non-Federal entity to ?(a) establish and maintain effective internal controls over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal statutes, regulations, and the terms and conditions of the Federal award.? 2 CFR 200.430 (i) requires that Federal awards for salaries and wages be properly supported. Condition ? There were three noted instances out of 120 tested, where an employee?s time and effort certification was not prepared/approved for payroll charged to the program. Cause ? The errors noted above were caused by human error. The CSFO and payroll clerk review the payroll register for payroll charged to the program to determine time and effort certifications needed. The CSFO?s and payroll clerk?s review did not include the employee in question, as the employee was hired after the CSFO?s and payroll clerk?s review. Effect ? Failure to comply could result in disallowed costs. Questioned Costs ? None noted Recommendation ? We recommend a more detailed and frequent review of the payroll register used to prepare the time and effort certifications should be performed and documented. Management?s Response ? Management agrees with the finding.

Criteria ? 2 CFR 200.303 requires the non-Federal entity to ?(a) establish and maintain effective internal controls over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.? 2 CFR 200.430(i)(viii) states the following: (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition ? Time and effort reporting requirements for three of twenty-four program employees did not allow the District to determine the actual time spent on program activities. Payroll charges were based on budgeted amounts. Review of actual time spent versus budget amounts was not performed, and it is not clear if the final amount charged to the Federal award is accurate, allowable, and properly allocated. Cause ? The Board lacked sufficient controls to ensure evidence of compliance with activities allowed and allowable costs regarding time and effort reporting requirements of the program. Questioned Costs ? Not determinable Effect ? Failure to properly review time and effort requirements could result in unallowable expenditures and disallowed costs. Recommendation ? We recommend that controls should be put into place to better monitor and document the compliance of time and effort reporting. Views of Responsible Officials ? The Board agrees with this finding and will adhere to the correction action plan on page 72 in this audit report. Management Response ? The Board will implement additional controls to ensure there is evidence of review of time and effort reporting. The CSFO will be responsible for the corrective action and anticipates completion of corrective action will be taken before September 30, 2021.

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