Audit 18096

FINDING 2022-001 Subject: Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs - Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Transportation Federal Program: Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs Assistance Listings Number: 20.106 Federal Award Numbers or and Years (Other Identifying Numbers): AIP 3-18-0068-019-2020, AIP 3-18-0068-021-2021, AIP 3-18-0068-023-2022 Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Finding: Material Weakness Condition and Context The City had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would be effective in preventing, or detecting and correcting, material noncompliance related to wage rate requirements on construction contracts paid with Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs (AIP) funds. Construction contracts in excess of $2,000 financed by federal assistance funds must pay wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) to their laborers and mechanics. Nonfederal entities are to include in its construction contracts subject to the wage rate requirements a provision that the contractor or subcontractor comply with these requirements and the DOL regulations. This would include a requirement to submit a copy of the payroll and statement of compliance to the entity for each week in which contract work was performed. The City's engineering firm received the certified payrolls from the contractors; however, the City did not have any processes in place to ensure the required certified payrolls were completed and submitted. The lack of internal controls was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control 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. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls over wage rate requirements was not designed by management of the City, which would include segregation of key functions to ensure certified payrolls were completed and submitted as required. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City design and implement a proper system of internal controls that would provide segregation of duties for the collection of certified payrolls. Additionally, policies and procedures should be implemented to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-001 Subject: Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs - Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Transportation Federal Program: Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs Assistance Listings Number: 20.106 Federal Award Numbers or and Years (Other Identifying Numbers): AIP 3-18-0068-019-2020, AIP 3-18-0068-021-2021, AIP 3-18-0068-023-2022 Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Finding: Material Weakness Condition and Context The City had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would be effective in preventing, or detecting and correcting, material noncompliance related to wage rate requirements on construction contracts paid with Airport Improvement Program, COVID-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs (AIP) funds. Construction contracts in excess of $2,000 financed by federal assistance funds must pay wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) to their laborers and mechanics. Nonfederal entities are to include in its construction contracts subject to the wage rate requirements a provision that the contractor or subcontractor comply with these requirements and the DOL regulations. This would include a requirement to submit a copy of the payroll and statement of compliance to the entity for each week in which contract work was performed. The City's engineering firm received the certified payrolls from the contractors; however, the City did not have any processes in place to ensure the required certified payrolls were completed and submitted. The lack of internal controls was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control 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. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls over wage rate requirements was not designed by management of the City, which would include segregation of key functions to ensure certified payrolls were completed and submitted as required. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City design and implement a proper system of internal controls that would provide segregation of duties for the collection of certified payrolls. Additionally, policies and procedures should be implemented to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.