Finding Text
Program: HOME Investment Partnerships Program Federal Financial Assistance Listing Number: 14.239 Federal Grantor: U.S. Department of Housing and Urban Development Award Number and Year: M16-MC060227; M17-MC060227; M20-MC060227; M21-MC060227; M23-MC060227; M24-MC060227 Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance 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: During our audit procedures, we noted that the City was unable to provide a schedule of weeks of performance for construction projects active during fiscal year 2025. As a result, we were unable to determine the applicable periods subject to Davis-Bacon requirements. Additionally, the City was unable to provide certified payroll reports for the project selected for testing. As such, we were unable to verify that contractors complied with applicable prevailing wage rate requirements. Cause: The City has not established and implemented adequate procedures to track construction project activity and maintain required documentation, including certified payroll reports, to support compliance with Davis-Bacon wage rate requirements. Effect: The lack of documentation and monitoring procedures increases the risk that contractors may not comply with prevailing wage requirements and that noncompliance would not be identified or corrected in a timely manner. Additionally, the absence of sufficient audit evidence resulted in a scope limitation over compliance with wage rate requirements. Questioned Costs: None identified. However, due to the lack of supporting documentation, we were unable to determine whether questioned costs may exist. Context/Sampling: Our procedures included selecting one construction project subject to Davis-Bacon requirements for testing. We requested supporting documentation, including a schedule of weeks of performance and certified payroll reports. However, the City was unable to provide the requested documentation. Repeat Finding from Prior Year: No. Recommendation: The City should implement formal written policies and procedures to ensure compliance with Davis-Bacon wage rate requirements. This should include maintaining a complete schedule of construction project activity, obtaining and retaining certified payroll reports, and performing documented reviews to verify compliance with prevailing wage requirements. Views of Responsible Officials and Planned Corrective Action: Management agrees. See separately issued Corrective Action Plan.