Reference Number: 2023-002
Category of Finding: Special Tests and Provisions – Wage
Rate Requirements
Type of Finding: Significant Deficiency and Instance of
Noncompliance
Federal Agency: U.S. Department of Transportation
Pass-through Entity: California Department of Transportation
City Administering Department: Transportation and Public Works
Federal Program Title: Highway Planning and Construction
Assistance Listing Number: 20.205
Federal Award Number and Year: 04-5028F15; 2022
Criteria:
Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 - Internal controls. (2 CFR 200.303):
The non-Federal entity must:
(a) 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. These internal controls should be in compliance with 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).
Title 29 - Labor. Subtitle A - Office of the Secretary of Labor. Part 5 - Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction (Also Labor Standards Provisions Applicable to Nonconstruction Contracts Subject to the Contract Work Hours and Safety Standards Act). Subpart A - Davis-Bacon and Related Acts Provisions and Procedures. §5.5 - Contract provisions and related matters. (29 CFR 5.5):
(a) The Agency head shall cause or require 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 from Federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution (except where a different meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts listed in §5.1, the following clauses (or any modifications thereof to meet the particular needs of the agency, Provided, That such modifications are first approved by the Department of Labor): (3) Payrolls and basic records
(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on weekly transmittals. Instead the payrolls shall only need to include an individually identifying number for each employee (e.g., the last four digits of the employee's social security number). The required weekly payroll information may be submitted in any form desired. Optional Form WH–347 is available for this purpose from the Wage and Hour Division Web site at: http://www.dol.gov/esa/whd/forms/wh347instr.htm or its successor site. The prime contractor is responsible for the submission of copies of payrolls by all subcontractors. Contractors and subcontractors shall maintain the full social security number and current address of each covered worker, and shall provide them upon request to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit them to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency), the contractor, or the Wage and Hour Division of the Department of Labor for purposes of an investigation or audit of compliance with prevailing wage requirements. It is not a violation of this section for a prime contractor to require a subcontractor to provide addresses and social security numbers to the prime contractor for its own records, without weekly submission to the sponsoring government agency (or the applicant, sponsor, or owner).
(ii)(B) Each payroll submitted shall be accompanied by a “Statement of Compliance,” signed by the contractor or subcontractor or his or her agent who pays or supervises the payment of the persons employed under the contract and shall certify the following:
(1) That the payroll for the payroll period contains the information required to be provided under § 5.5 (a)(3)(ii) of Regulations, 29 CFR part 5, the appropriate information is being maintained under § 5.5 (a)(3)(i) of Regulations, 29 CFR part 5, and that such information is correct and complete;
(2) That each laborer or mechanic (including each helper, apprentice, and trainee) employed on the contract during the payroll period has been paid the full weekly wages earned, without rebate, either directly or indirectly, and that no deductions have been made either directly or indirectly from the full wages earned, other than permissible deductions as set forth in Regulations, 29 CFR part 3;
(3) That each laborer or mechanic has been paid not less than the applicable wage rates and fringe benefits or cash equivalents for the classification of work performed, as specified in the applicable wage determination incorporated into the contract. Title 29 - Labor. Subtitle A - Office of the Secretary of Labor. Part 5 - Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction (Also Labor Standards Provisions Applicable to Nonconstruction Contracts Subject to the Contract Work Hours and Safety Standards). Subpart A - Davis-Bacon and Related Acts Provisions and Procedures. §5.6 - Enforcement. (29 CFR 5.6):
(a) Agency responsibilities
(2)(i) Certified payrolls submitted pursuant to § 5.5(a)(3)(ii) must be preserved by the Federal agency for a period of 3 years after all the work on the prime contract is completed, and must be produced at the request of the Department of Labor at any time during the 3-year period, regardless of whether the Department of Labor has initiated an investigation or other compliance action.
Condition:
The City had one of three federally funded projects, STPL-5028(085), with an active construction contract during fiscal year 2022-2023, for which the contractor was required to submit weekly certified payrolls to the City. The City was unable to locate the weekly certified payroll records submitted by the contractor for inspection. In addition, the City does not have a formally established written process and/or policy concerning the collection, review, and retention of certified weekly payroll records.
Cause:
Because there was a change in personnel responsible for the secure storage of the weekly certified payroll records during the fiscal year, and the recipient of the contractors weekly certified payroll records did not maintain a log or record of the information, it is possible that the records were misplaced.
Effect:
The City’s contractor could be out of compliance with the requirement to pay prevailing wages and the City would not detect the potential noncompliance. Also, with the misplacement of the weekly certified payroll records, the City would not be able to preserve the information for a period of 3 years.
Questioned Costs:
No questioned costs were identified.
Context:
The federally funded ratio for project STPL-5028(085) is 59.74%. Total payments made to the contractor for the audit period were $2,531,939, and the federal portion was approximately $1,512,580.
The sample was not a statistically valid sample.
Identification as a Repeat Finding:
This was not a repeat finding from the immediate prior year. Recommendation:
While the City lacks a formal written process and policy concerning administering weekly certified payroll records submitted by contractors, the City does have an informal process established, and personnel involved with the federal requirement concerning contractor weekly certified payroll submission are aware and knowledgeable of the requirements. The City should develop a formal written policy and procedure regarding receiving, reviewing, and maintaining certified weekly payroll records and certifications submitted by contractors to mitigate the potential for misplacing information when there are changes in personnel.
Views of Responsible Officials and Corrective Action Plan
Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.