Audit 394175

Program: Nationally Significant Freight and Highway Projects Financial Assistance Listing Number: 20.934 Federal Agency: U.S. Department of Transportation Pass-through: California Department of Transportation Award Year: 2019 Grant Award Number: INFRALUL-5459(031) Compliance Requirements: Special Tests and Provisions – Wage Rate Requirements Type of Finding: Material Weakness in Internal Control over Compliance and Material Instance of Noncompliance Criteria: All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) 40 USC 3141–3144, 3146, and 3147. 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 (29 CFR Part 5, Labor Standards Provisions Applicable to Contracts Governing Federally Financed and Assisted Construction). This includes a requirement for 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) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); OMB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326. 2 CFR 200.303, the non-Federal entity must 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. This includes internal controls over maintaining records of the receipt and review of certified payrolls. Condition: For fifty-seven (57) out of sixty (60) weeks of certified payroll submissions selected, we noted that the City did not have appropriate internal controls in place to review the contractors’ statement of compliance of certified payroll to determine they were prepared and submitted in a timely manner. For thirty-four (34) out of sixty (60) weeks of certified payroll submissions selected, we noted that the contractor or subcontractor had not submitted on a timely basis the certified payroll weekly for each week in which the contract work was performed. Cause: The City’s procedures did not include documenting the review of the certified payroll received. In addition, the City did not have the necessary internal controls in place to ensure the contractor’s and subcontractor’s certified payroll were submitted weekly. The City’s monitoring was done on a monthly basis through April 2025 and was changed to weekly in May 2025. Effect: Ineffective controls over this area of compliance resulted in noncompliance with the wage rate compliance requirements. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: A nonstatistical sample of sixty (60) contractor work weeks out of greater than two hundred and fifty (250) were selected for testwork. Repeat Finding from the Prior Year(s): Yes, prior year finding 2024-003 Recommendation: We recommend that the City strengthen its internal controls to ensure that timely reviews of certified payroll submissions are being performed by the City. View of Responsible Officials Management agrees. See separate Corrective Action Plan.