City Fails to Monitor Federal Prevailing Wages

On a federally funded construction project, the City of Washougal, Washington recently received an audit finding from the Washington State Auditor's Office for failure to "have adequate internal controls in place to ensure that certified payrolls were collected and reviewed by the project administrator within seven days of the payroll payment date."

Payrolls Not Collected Every Week:  The City relied on the engineering firm it hired to manage the collection and review of payrolls.  However, the engineering firm did not ensure that all payrolls were received from the contractor and all subcontractors on an ongoing basis, and assumed they could wait until the end of the project to collect all of the payrolls, using retainage as leverage with the contractor.

Tips for Reviewing Payrolls:  Collection and review of weekly payrolls from the contractor and all subcontractors on federally funded projects requires experienced staff and dedicated resources.  Key subjects to pay attention to in the review of certified payrolls include the following:

1. Classification:  Do the payrolls reflect the correct classification of labor for the type of work being performed?
2. Wage Rate:  Has the contractor paid the correct prevailing wage rate for the classification used?  On most federally funded projects, the contractor must compare the federal prevailing wages with the applicable state prevailing wages and pay the higher of the two wages.
3. Overtime:  Has the contractor paid the correct overtime rates?
4. Apprentices:  If any apprentices are used, are the apprentices registered in an approved apprenticeship training program, authorized by either the federal Bureau of Apprenticeship and Training (BAT) or an authorized state apprenticeship program?
5. Fringe Benefits:  Has the contractor paid the required fringe benefits either directly to the workers as part of their hourly pay or to an approved plan, fund, or program?
6. Interviews:  Has the public agency conducted on-site interviews with workers?  Some federally funded projects require that on-site interviews with workers be conducted to validate that the information provided on the payroll reports is consistent with what the workers indicate they are being paid.
7. Payroll Signature:  Has the payroll report been signed by an authorized representative of the contractor or subcontractor?  Some federal agencies require that an officer of the firm sign a statement indicating what employees are authorized to sign the payrolls on their behalf.
8. No Work Performed:  Did the contractor submit all of the payrolls?  If a firm did not work for a particular week, payroll reports should reflect this either by numbering the payrolls consecutively or by submitting a "no work performed" statement for the week they were not working on the project.
9. All Subcontractors:  Do you have a process for knowing what subcontractors worked on the project so you can ensure you collect payrolls from all subcontractors, of any tier?

Contract Language Required:  The federal Davis-Bacon prevailing wage requirements apply to public works construction contracts of $2,000 or more.  Public agencies receiving federal funding for their construction projects must also ensure they include language in their bidding and contract documents notifying the contractor that compliance with federal prevailing wage provisions is required.