Audit 375877

2024-003 Federal Highway Project Sponsor Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance Severity of Deficiency: Significant Deficiency Federal Agency: U.S. Department of Transportation Program: 20.205 Highway Planning and Construction Award Number and Year: 1052200, 2024 Pass-Through Agency: Minnesota Department of Transportation Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Minnesota Department of Transportation State Aid Manual provides guidance and responsibilities for project sponsors. In addition to acting as the fiscal agent, the sponsor takes responsibility that the project will be completed in accordance with federal and state rules and regulations that apply. Condition: Murray County acted as the sponsor for a highway construction project for a local city and the Minnesota Department of Transportation. The County did not develop controls over the sponsored project to ensure compliance. This included: • The County did not have documented approval of disbursements by the appropriate County staff with knowledge of the project and the sponsorship relationship. • The County did not maintain documentation to demonstrate the expenditures were for allowable costs. • The County did not verify the correct percentage was used for the local matching requirements or that the source of the funds used for matching requirements were from an allowable source. • The County did not have evidence of internal controls over the contracting process, including approval of the construction contract by the County Board. • The County did not maintain documentation that the requirements for suspension or debarment were met by (a) checking SAM.gov exclusions, (b) collecting a certification from the vendor, or (c) verifying a clause or condition was included in the contract. • The County did not maintain evidence that the prevailing wage rate clause was included in the contract. • The County did not maintain evidence that the Build America Buy America clause was included in the contract. • The County did not maintain evidence of review of certified payrolls submitted by contractors and subcontractors. Questioned Costs: None. Context: In December 2019, the County approved a resolution to act as a sponsoring agent for a city project. The resolution indicates the sponsorship includes a willingness to secure and guarantee the local share of costs associated with this project and responsibility for seeing this project through to its completion, with compliance of all applicable laws, rules, and regulations. Total project expenditures were $241,256 with payments made to the city to reimburse for contractor payments. The city contracted with one prime contractor who used five subcontractors. Effect: Without controls in place over the sponsored project, there is an increased risk of noncompliance with applicable laws, rules, and regulations. Cause: The County was unaware of the responsibilities of a project sponsor. Recommendation: We recommend the County implement controls to ensure projects the County sponsors are completed in accordance with all the federal and state rules and regulations that apply. View of Responsible Official: Acknowledge

2024-004 Special Tests and Provisions – Davis-Bacon Act Prior Year Finding Number: 2023-003 Year of Finding Origination: 2023 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Transportation Program: 20.205 Highway Planning and Construction Award Number and Year: 1052200; 2024 Pass-Through Agency: Minnesota Department of Transportation Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Davis-Bacon Act (23 U.S.C. § 113) and Title 29 U.S. Code of Federal Regulations Part 5 require that contractors and subcontractors performing work on federal contracts in excess of $2,000 pay their laborers and mechanics not less than the prevailing wage rates and fringe benefits listed in the contract’s wage determination class. Each contractor and subcontractor must, on a weekly basis, provide a copy of the payrolls providing the information listed under payrolls and basic records of Title 29 U.S. Code of Federal Regulations § 5.5 (a)(3)(i) for the preceding weekly payroll period. Condition: Murray County did not obtain or review all required certified payroll reports for contracts that received federal funding in 2024. Questioned Costs: None. Context: The County did not obtain one of nine certified payrolls selected for testing from the two contracts that received federal funding. Total federal expenditures related to the contracts were $2,421,256. The work was performed by two prime contractors and 24 subcontractors between May and July 2024, with a total of 83 payroll periods. The sample size was based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The County is not in compliance with the Davis-Bacon Act and Title 29 U.S. Code of Federal Regulations Part 5. Cause: Murray County indicated they did not have procedures in place to ensure all weekly certified payroll reports were received and reviewed. Recommendation: We recommend County staff obtain and properly review the certified payrolls received from all contractors and subcontractors for compliance with the Davis-Bacon Act and Title 29 U.S. Code of Federal Regulations Part 5 and ensure documentation exists to support monitoring of and compliance with this requirement. View of Responsible Official: Acknowledge