Finding Text
Assistance Listing, Federal Agency, and Program Name - ALN 66.443, Environmental Protection Agency, Reducing Lead in Drinking Water (SDWA 1459B) Federal Award Identification Number and Year - 00E03346, 2023 Pass through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303, the recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 29 CFR Part 5.5(a), DWSD is required to insert, in full, into contracts subject to the regulations specific clauses that are outlined in the referenced CFR that relate to various federal wage rate requirements. Additionally, per 29 CFR Part 5.5(a)(3)(ii)(A), the contractor must submit certified payrolls, including a copy of the payroll records, to DWSD weekly, for each week in which contract work is performed. Condition - DWSD did not have controls in place to verify that required contract provisions were included in contracts executed under this award or to ensure receipt of weekly certified payroll records from all contractors. Questioned Costs - None If questioned costs are not determinable, description of why known questioned costs were undetermined or otherwise could not be reported - N/A Identification of How Questioned Costs Were Computed - N/A Refer to Context for additional information Context - During the year ended June 30, 2025, three contracts were subject to the applicable Davis-Bacon wage rate requirements. None of these contracts included the required Davis-Bacon provisions. In addition, DWSD did not have a process in place during the year to obtain and review weekly certified payroll reports. Subsequent to year-end, DWSD obtained the required weekly certified payroll reports, and appropriate personnel performed reviews for compliance with Davis-Bacon requirements. Based on procedures performed on a sample of these subsequently obtained reports, no instances of noncompliance were identified related to evidence of review by the assigned individual. Cause and Effect - The lack of controls resulted in the omission of required clauses from the contracts, untimely receipt of certified payroll records, and noncompliance with federal wage rate requirements. Recommendation - We recommend that the City design and implement internal controls to ensure compliance with wage rate requirements. This should include establishing formal policies and procedures to verify that all required clauses are incorporated into applicable contracts and that certified payroll records are obtained on a weekly basis for every contract subject to wage rate provisions. Views of Responsible Officials and Corrective Action Plan - During the audit period, formalized controls were not adequately documented or consistently implemented to ensure that all required federal award provisions were incorporated into executed contracts and that weekly certified payroll records were obtained and reviewed for all applicable contractors. While certain compliance activities were performed, they were not supported by a standardized control framework, documented procedures, or monitoring evidence sufficient to demonstrate full compliance. DWSD will improve contract provisional and certified payroll monitoring controls, as well as provide training on federal contract requirements. These improvements start with incorporating pre-execution compliance checklist and completing compliance reviews. In addition, formal standardized payroll submission process will be required weekly, where applicable. This process will include monitoring contractor payroll tracking logs, review and approvals, and payment controls for missing or inaccurate payroll documentation.