Finding Text
2023-003 Special Tests and Provisions – Wage Rate Requirements
14.872 Public Housing Capital Fund
Material Weakness in Internal Control, Material Noncompliance
Condition: Only one contract funded by the Capital Fund Program was awarded during the audit period above the small purchase threshold. The contract did not contain the required wage rate clause, and the Authority was not able to provide documentation showing that the contractor had submitted the required certified payrolls.
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. 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. 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.
Questioned Costs: None.
Effect: The Authority is not in compliance with applicable HUD regulations.
Cause: The Authority did not have adequate internal controls in place to ensure compliance with federal wage rate requirements, particularly under the Davis-Bacon Act. Specific deficiencies included:
• Documentation Deficiencies: The Authority failed to maintain accurate or complete certified payroll records required for Davis-Bacon compliance. Supporting documentation, such as wage interviews, contractor certifications, and labor classifications, was either missing or incomplete. There was no formal process in place to verify or monitor contractor compliance with prevailing wage requirements.
• Lack of Staff Knowledge and Oversight: Staff lacked sufficient training on Davis-Bacon requirements and did not consistently enforce wage rate compliance during procurement and contract administration. Internal controls were not designed to detect or prevent noncompliance with federal labor standards.
Recommendation: We recommend that the Authority ensure the required wage rate clause is included in all contracts above $2,000 and that certified payrolls are being submitted and documentation retained.
Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will implement review procedures and provide ongoing training to staff to ensure they are in compliance with HUD requirements.