Sunday, July 13, 2014

Washington State Plans to Audit On-Call Public Works Contracts

The Washington State Auditor's Office has announced that one of the areas they intend to focus on when they audit public agencies relates to On-Call Public Works contracts.  

Controversial topic:  This has been a controversial topic given that the Auditor's Office statements on the subject have not recognized the critical operational importance for many agencies to use On-Call Public Works contracts in order to provide basic services.  In addition, the Auditor's Office has not been forthcoming with specifics of what their concerns are and what they will be looking for in their audits.

Previous Auditor position: Almost two years ago, the Auditor's office issued a statement expressing their concerns about On-Call Public Works contracts.  Click here to read my earlier blog post when their initial statement came out.

Heads-up on audit topics:  In their newly issued edition of The Audit Connection, dated Summer 2014, the Auditor's Office wrote the following introductory statement providing a "heads-up" to agencies about their upcoming focus on audits:
"Local governments have asked the State Auditor’s Office to let them know in advance the areas they can expect auditors to emphasize in upcoming audits. To help them be proactive in preparing for their audits, we have provided this list of areas for focused assessment during the next series of county and city audits. The level of focus on the areas may vary, depending on the applicability and significance to the county or city."
Which agencies will be audited? Based on the Auditor's statement above, it appears they may only be focusing on cities and counties with respect to On-Call Public Works contracts.  However, it is unclear whether their audit activities relating to On-Call Public Works contracts will extend to other types of agencies such as port districts, school districts, water-sewer districts, public utility districts, etc.

What will be audited?  Using very similar language to their statement from almost two years ago, the Auditor's Office included the following paragraph in their Summer 2014 edition of The Audit Connection, identifying "Using on-call contracts for public works" as one of a number of topics they plan to focus on for upcoming audits:
"On-call contracts are not specifically authorized in state law. These contracts can result in noncompliance with statutes concerning public works contracting and prevailing wages. Auditors will be evaluating county and city use of these contracts to determine if there are established policies, procedures and internal controls to ensure their contracting process is in compliance with public works contracting statutes (Chapters 39.04, 39.06, 39.08, and 60.28 RCW) as well as prevailing wage statutes (Chapter 39.12 RCW)." 
Lack of clarity:  It is not clear from the Auditor's Office statement whether they intend to issue audit findings for all agencies using On-Call Public Works contracts, or if they will be looking to see whether agencies have established policies, procedures, and internal controls to ensure compliance with various laws.  The Auditor's Office has not been clear in any of their statements specifically what their areas of concern are with respect to On-Call Public Works contracts, other than their broad statement of "public works contracting statues" and "prevailing wage statues."

Moving forward:  Public agencies should carefully evaluate their practices and policies regarding On-Call Public Works contracts, and should consult with their attorneys in evaluating the risks to their agencies.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

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