LA CONNER SCHOOL DISTRICT

La Conner School District No. 311 September 1, 2020 through August 31, 2021 2021-001 The District did not have adequate internal controls for ensuring compliance with Davis-Bacon Act (prevailing wage rate) requirements. CFDA 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: 84.425D 0120058, 84.425D 0120390 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 2021, the District spent a total of $365,189 in federal funding under its ESF awards. This included $92,895 of its Elementary and Secondary School Emergency Relief ESSER) Fund subprogram award funded by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (ESSER I), and $272,294 of its ESSER subprogram award funded by the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act (ESSER II). Federal regulations require award recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. The Davis-Bacon Act requires contractors and subcontractors that work on construction contracts in excess of $2,000 financed with federal financial assistance to pay laborers and mechanics prevailing wages?the wage rates the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. Prevailing wage rate requirements specify that the contract between the District and the prime contractor include specific language to ensure contractors and subcontractors are paid at prevailing wage rates. Description of Condition The District hired one contractor for the elementary school HVAC unit replacement project. During the 2020-2021 school year, the District paid $74,161 from its ESSER II award to the contractor for work performed on the project. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not ensure the contract with the prime contractor included the required prevailing wage rate clauses. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition The District experienced significant staff turnover in the Business Office, which includes the main position in charge of overseeing the ESF program. The District had completed the contract prior to the turnover, so current staff were unaware of the missing prevailing wage rate requirements. Additionally, the District does not typically complete projects with federal funds. Effect of Condition Without adequate internal controls that ensure it includes the required prevailing wage rate clauses in its contracts, the District cannot demonstrate compliance with the Davis-Bacon Act requirements. The District could be liable for paying any additional wages if the contractor did not pay prevailing wage rates to laborers working on the contract. Recommendation We recommend the District develop internal controls to ensure compliance with federal wage rate requirements. This should include inserting the required prevailing wage rate clauses in full into contracts. Additionally, we recommend the District consider the benefit of additional trainings to ensure staff overseeing compliance with federal programs are aware of all applicable requirements. District?s Response The district concurs with the audit finding and will be sure to include the Federal prevailing wage rate clauses in future contracts per Code of Federal Regulations (CFR) language for future projects that are federally funded in excess of $2,000. 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 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)

CORRECTIVE ACTION PLAN FOR FINDINGS REPORTED UNDER UNIFORM GUIDANCE La Conner School District No. 311 September 1, 2020 through August 31, 2021 This schedule presents the corrective action the District is planning to take for findings included in this report in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Finding ref number: 2021-001 Finding caption: The District did not have adequate internal controls for ensuring compliance with Davis-Bacon Act (prevailing wage rate) requirements Name, address, and telephone of District's contact person: Brian Gianello, Business Manager 305 N 6th St La Conner, WA 98257 (360) 466-3171 Corrective action the auditee plans to take in response to the finding: (If the auditee does not concur with the finding, the auditee must list the reasons for disagreement). The district does not typically complete projects with Federal funds. ATS Automation was hired as the Energy Company through the State Department of Enterprise Services (DES) roster, which allows selection of pre-approved energy companies from a State roster. For future projects, that are Federally funded in excess of $2,000, La Conner School District {LCS) will be sure that the Federal prevailing wage rate clauses are included in future contracts per Code of Federal Regulations {CFR) language (weblink: eCFR :: 29 CFR Part 5 -- Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction (Also Labor Standards Provisions Applicable to Nonconstruction Contracts Subject to the Contract Work Hours and Safety Standards Act) Anticipated date to complete the corrective action: June 23, 2022