Finding Text
2023-004 – Absence of Prevailing Wage Rate Clauses in Contract – Significant Deficiency in
Internal Controls over Compliance and Noncompliance
Federal Program Information
Federal Award Title and ALN: 14.872 Public Housing Capital Fund
Federal Awarding Agency: U.S. Department of Housing and Urban Development
Federal Award ID Number: FW-5439; FW-5436; FW-5438
Federal Award Year: 2023
Condition – During the review of the contract for the Housing Authority’s HVAC project, it was
noted that the contract did not include clauses mandating the payment of prevailing wage rates to
workers.
Criteria – Per Title 2 US Code of Federal Regulations Part 200.303a, non-federal entities must
establish and maintain effective internal control over Federal awards that provides reasonable
assurance that the non-Federal entities 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).
Per Title 2 US Code of Federal Regulations Appendix II to Part 200, contracts for construction
funded by Federal awards in excess of $2,000 must contain provisions incorporating the Davis-
Bacon Act, which requires contractors and subcontractors to pay prevailing wages for the work
performed under the contract.
Questioned Costs – None.
Effect – The absence of these clauses may result in non-compliance with federal or state labor laws,
potentially leading to legal penalties, financial liabilities, and reputational damage for the City.
Additionally, workers may not receive fair compensation for their labor.
Cause – The omission of prevailing wage rate clauses appears to be due to an oversight by the
Housing Authority personnel during the contract drafting and approval process.