Finding Text
2023-003 – Internal Controls over Compliance and Non-Compliance with Wage Rate Requirements
Finding Type: Material Weakness in Internal Control over Compliance / Material Non-Compliance
Program: Education Stabilization Fund (ALN #84.425)
Compliance Area: Special Tests and Provisions
Criteria: 29 CFR Part 5, Labor Standards Provisions Applicable to Contracts Governing Federally Financed and Assisted Construction requires that nonfederal entities include in their federally funded construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with those requirements and the related DOL regulations. 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.
Condition: Certain District federally funded construction contracts did not contain the appropriate contract provisions for contractor compliance with wage rate requirements, nor were weekly certified payrolls obtained from contractors prior to payment.
Cause: The District’s design of the internal control procedures surrounding wage rate requirements for federally funded construction contracts was not properly designed so that it failed to appropriately meet the control objectives of identifying and complying with federal requirements. The District, at the time these contracts were signed and approved, was unaware of the federal wage rate requirements.
Effect: Failure to comply with federal Wage Rate Requirements could result in non-compliance and dis-allowed costs, resulting in the loss of federal funds.
Recommendation: The District should implement standard procedures to ensure all construction contracts funded with federal dollars contain the appropriate contract provisions as well as ensure that certified payrolls are received with each request for payment.