The City did not have adequate internal controls and did not
comply with federal wage rate requirements.
Assistance Listing Number and Title: 14.218 Community Development
Block Grants/Entitlement Grants
Federal Grantor Name: Assistant Secretary for Community
and Development, Housing, and
Urban Development, Department
of Housing and Urban
Development
Federal Award/Contract Number: CDBG-24-QP/CDBG-2024-QH
Pass-through Entity Name: Thurston County
Pass-through Award/Contract
Number:
1920.CDBG.BGPF.Tenino.House
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The primary objective of the Community Development Block Grants/Entitlement
Grants (CDBG) programs is to help provide decent and affordable housing,
particularly for people with moderate, low and very low incomes. Funds also help
recipients implement strategies for achieving an adequate supply of decent housing
and providing suitable living environments and expanded economic opportunities
for people with low incomes. The purpose of the City’s renovation was to enhance
safety and improve the operational efficiency of the Quarry Pool in preparation for
its reopening. The project qualifies as an eligible CDBG activity under 24 CFR
570.201(c) – Improvements to a Public Facility. In 2023, the City spent $690,454
for its CDBG program.
Federal regulations require recipients to establish and maintain internal controls
that ensure compliance with program requirements. These controls include
understanding program requirements and monitoring the effectiveness of
established controls.
Under federal wage rate requirements, also known as the Davis-Bacon Act,
contractors and subcontractors that work on projects financed with more than
$2,000 of federal funds must pay laborers and mechanics wage rates that the U.S.
Department of Labor considers similar to what local workers have been paid for
similar projects.
For construction contracts subject to these wage rate requirements, the City must
include a provision that the contractors and subcontractors must comply with those
requirements and the Department of Labor’s regulations. This includes a
requirement that the contractors and their subcontractors must submit certified
payrolls reports to the City weekly, for each week that laborers performed contract
work. These reports must include a copy of the payroll and a signed statement of
compliance.
Description of Condition
During fiscal year 2023, the City spent $582,000 for payments to two contractors
for the rehabilitation and modernization of the interior areas of the Quarry House
and Pool to make it more usable, comfortable and accessible to the public. The City
made interior improvements to the house and replaced the pool’s falling wall.
Our audit found the City lacked adequate internal controls for ensuring compliance
with federal wage rate requirements. Specifically, the City did not:
-Include the required wage rate provisions in the contracts
- Collect federal weekly certified payroll reports from the contractors to
confirm the City paid laborers the proper prevailing wages
We consider this deficiency in internal controls to be a material weakness that led
to material noncompliance.
Cause of Condition
City staff did not know about the federal wage rate contract clause requirement nor
the requirement to obtain all certified payroll reports each week.
Effect of Condition
Without adequate internal controls to ensure it includes the wage rate clauses in its
contracts and collects all weekly certified payroll reports, the City cannot
demonstrate it complied with federal wage rate requirements. Additionally, because
the City did not notify the contractors that the project was federally funded, the
contractors submitted state-certified payroll reports instead of federal-certified
payroll reports. The City could also be liable for paying any additional wages if the
contractors did not pay prevailing wage rates to laborers working on the contracts.
The City did not include federal wage rate provisions in its contracts and did not
collect weekly certified payroll reports for two contractors.
Recommendation
We recommend the City develop internal controls to ensure compliance with
federal wage rate requirements. This should include inserting wage rate clauses into
contracts and obtaining the federal-certified payroll reports, as well as
implementing effective monitoring processes to collect and review all weekly
certified payroll reports from contractors and subcontractors. Additionally, we
recommend the City provide training to ensure staff overseeing compliance with
federal programs are aware of all applicable requirements.
City’s Response
In response to the Single Audit of the City of Tenino from January 1, 2023-
December 31, 2023. We appreciate the thoroughness and professionalism with
which the audit was conducted, and we acknowledge receipt of the audit findings.
The City of Tenino is committed to ensuring compliance, transparency, and
adherence to best practices in all aspects of our operations. Your audit report has
been instrumental in identifying areas where improvements can be made, and we
are dedicated to implementing these improvements promptly.
The City was previously unaware of the requirement to include a provision in
contracts regarding the federal wage requirements known as the Davis-Bacon Act.
In addition, the City had no process to ensure weekly certified payrolls from
contractors confirming laborers were paid the proper prevailing wages.
As stated in our Corrective Action plan included with our response, the City will
ensure language in future contracts includes the required wage rate provisions.
The City will also require weekly certified payroll reports from contractors and
require all necessary reports be submitted prior to billing payment.
Auditor’s Remarks
We appreciate the steps the City is taking to resolve this issue. We will review the
corrective action taken during our next audit.
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards
(Uniform Guidance), section 516, Audit findings, establishes reporting
requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes
the requirements for auditees to maintain internal controls over federal programs
and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant
deficiencies and material weaknesses in its Codification of Statements on Auditing
Standards, section 935, Compliance Audits, paragraph 11.
Title 29 CFR, Section 3.3 – Weekly statement with respect to payment of wages,
and Section 3.4 – Submission of weekly statements and the preservation and
inspection of weekly payroll records, establishes requirements for contractor or
subcontractor submission of weekly certified payroll reports.
Title 29 CFR, Section 5.5 – Contract provisions and related matters establishes the
requirements for the contracting officer to insert in full in any contract in excess of
$2,000 which is entered into for the actual construction, alteration and/or repair,
including painting and decorating, of a public building or public work, or building
or work financed in whole or in part with federal funds the clauses listed, which
includes but is not limited to the minimum wages to be paid and payrolls and basic
records to be maintained (submission of weekly certified payrolls).