Finding 1123519 (2024-003)

Material Weakness Repeat Finding
Requirement
N
Questioned Costs
-
Year
2024
Accepted
2025-03-31
Audit: 351438
Organization: City of Temecula (CA)
Auditor: Eide Bailly LLP

AI Summary

  • Core Issue: The City failed to maintain effective internal controls over the review of certified payroll, leading to delays and inaccuracies in compliance with wage rate requirements.
  • Impacted Requirements: Noncompliance with federal wage rate laws and lack of timely review of certified payroll submissions, as mandated by DOL regulations and 2 CFR guidelines.
  • Recommended Follow-Up: Strengthen internal controls to ensure timely reviews of certified payroll and verify the accuracy of information from project managers to prevent future noncompliance.

Finding Text

2024-003 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: Multiple Grant Award Number: Multiple 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 Contacts 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: In March 2024, the City implemented procedural changes to their certified payroll review process. Until February 2024, the City did not retain evidence to document the individual who reviewed the certified payroll for each week in which work was performed by construction contractors and subcontractors. Due to backlog, the City was not able to catch up on certifications until August 2024 which was after the fiscal year had ended. For fifty-four (54) of sixty (60) weeks of certified payroll submissions selected for testing, we noted that the City did not review the contractors’ submissions of certified payroll in a timely manner. For six (6) out of sixty (60) weeks of certified payroll submissions selected, we noted that a statement of non-performance was submitted. However, the tracking spreadsheet provided to the City by its 3rd party project manager indicated that work had been performed. For nineteen (19) out of sixty (60) weeks of certified payroll submissions selected, we noted that the contractor or subcontractor had not submitted the weekly certified payroll in a timely manner. The contractor had submitted their certified payroll several weeks after the week of work 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 accuracy of the tracking of work weeks being performed as well as the contractor’s and subcontractor’s timely submittal of certified payroll. Effect: Ineffective controls over this area of compliance could result in noncompliance with the wage rate compliance requirements. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: Sampling was used. We selected sixty (60) out of all weeks indicated as work weeks for the City’s project for testing. However, due to the condition noted above, the population of work weeks could not be verified. Repeat Finding from the Prior Year(s): Yes, 2023-003. 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. This could include performing procedures to ensure that information being provided to the City by its consultant project managers is accurate and that the required certified payroll is being submitted by contractors and subcontractors in a timely manner. View of Responsible Official and Planned Corrective Actions The City concurs with the finding. See separate corrective action plan.

Categories

Matching / Level of Effort / Earmarking Special Tests & Provisions Material Weakness

Other Findings in this Audit

  • 547066 2024-002
    Significant Deficiency Repeat
  • 547067 2024-002
    Significant Deficiency Repeat
  • 547068 2024-002
    Significant Deficiency Repeat
  • 547069 2024-002
    Significant Deficiency Repeat
  • 547070 2024-002
    Significant Deficiency Repeat
  • 547071 2024-002
    Significant Deficiency Repeat
  • 547072 2024-004
    Material Weakness
  • 547073 2024-004
    Material Weakness
  • 547074 2024-004
    Material Weakness
  • 547075 2024-004
    Material Weakness
  • 547076 2024-004
    Material Weakness
  • 547077 2024-003
    Material Weakness Repeat
  • 1123508 2024-002
    Significant Deficiency Repeat
  • 1123509 2024-002
    Significant Deficiency Repeat
  • 1123510 2024-002
    Significant Deficiency Repeat
  • 1123511 2024-002
    Significant Deficiency Repeat
  • 1123512 2024-002
    Significant Deficiency Repeat
  • 1123513 2024-002
    Significant Deficiency Repeat
  • 1123514 2024-004
    Material Weakness
  • 1123515 2024-004
    Material Weakness
  • 1123516 2024-004
    Material Weakness
  • 1123517 2024-004
    Material Weakness
  • 1123518 2024-004
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
20.934 Nationally Significant Freight and Highway Projects $24.24M
14.218 Covid-19 Community Development Block Grants/entitlement Grants $443,291
14.218 Community Development Block Grants/entitlement Grants $389,181
21.027 Covid-19 Coronavirus State and Local Fiscal Recovery Funds $200,000
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $125,321
97.042 Emergency Management Performance Grants $28,338
16.738 Edward Byrne Memorial Justice Assistance Grant Program $10,417
97.046 Fire Management Assistance Grant $919
20.205 Highway Planning and Construction $-154,839