SCHEDULE OF FEDERAL AWARD FINDINGS AND
QUESTIONED COSTS
Public Utility District No. 1 of Skamania County
January 1, 2021 through December 31, 2021
2021-002 The District did not have adequate internal controls for ensuring compliance with federal wage rate requirements.
Assistance Listing Number and Title: 11.307, Economic Adjustment Assistance
Federal Grantor Name: Economic Development Administration, Department of Commerce
Federal Award/Contract Number: 07 79 07485; 112341
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The Economic Adjustment Assistance (EAA) program helps state and local entities respond to a wide range of economic challenges. In fiscal year 2021, the District spent a total of $749,170 of its EAA award.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant 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 construction contracts financed with more than $2,000 of federal money must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects.
For construction contracts subject to these wage rate requirements, the District must include a provision that the contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractor and its subcontractor to submit to the District weekly, for each week in which any contract work is performed, certified payroll reports. These reports must include a copy of the payroll and a signed statement of compliance.
Description of Condition
During fiscal year 2021, the District spent $162,241 to pay a contractor and its subcontractor to upgrade a substation, install an emergency generator at the District’s headquarters, and install radio system repeaters. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not collect weekly certified payroll reports from the contractor and its subcontractor to confirm they paid laborers proper prevailing wages.
We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance.
Cause of Condition
The District does not typically spend federal funds on construction projects. Because of this, District management did not know about the federal requirements to collect all certified payroll reports from the contractor and its subcontractor each week to confirm they paid laborers proper prevailing wages.
Effect of Condition
Without adequate internal controls that ensure it collects all weekly certified payroll reports, the District cannot demonstrate it complied with federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and its subcontractor did not pay prevailing wage rates to laborers working on the contract.
During the audit period, the District was required to collect certified payroll reports from one contractor and one subcontractor. We found the District did not obtain any of the weekly certified payroll reports.
Recommendation
We recommend the District develop internal controls to ensure compliance with federal wage rate requirements. This should include implementing effective monitoring processes to collect and review all weekly certified payroll reports timely from contractors and subcontractors.
District’s Response
The District acknowledges certified payrolls were not received weekly from contractors. The District did verify certified weekly payrolls, confirmed wages were in compliance with Davis Bacon, and requested payrolls on a weekly basis, but the process was not documented. Timely receipt of payrolls is challenging, but the District will move forward with continuing to initiate and document certified payroll requests in the future.
Auditor’s Remarks
We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review corrective action taken during the 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 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).