Contract Audit Report

Transcription

1 Los Angeles Unified School District Office of the Inspector General Contract Audit Unit Contract Audit Report Incurred Cost Audit C&P Plumbing Contract No CA July 30, 2008

2 July 30, 2008 Mr. Gregory Garcia Director, Facilities Contracts Facilities Services Division Los Angeles Unified School District 333 S. Beaudry Avenue, 23 rd Floor Los Angeles, CA Dear Mr. Garcia: This is our report of the incurred cost audit of C&P Plumbing under Contract No The report addresses whether the costs claimed by the contractor were allowable and adequately supported. The report also addresses the contractor s compliance with the terms of the contract and whether the scope of work was performed. I appreciate your continued support of our contract audit services. Sincerely, /s/ Austin E. Onwualu, CPA, CIG Deputy Inspector General, Contract Audit

3 EXECUTIVE SUMMARY We have audited the costs claimed by C&P Plumbing (C&P) for construction services provided to the Los Angeles Unified School District (LAUSD) under Contract No (Contract). The purpose of the audit was to determine whether the costs claimed by C&P were allowable and adequately supported, C&P complied with the terms and conditions of the Contract, and the scope of work was performed. Our audit disclosed that: The costs billed by C&P were incurred, allowable, adequately supported and in compliance with the terms and conditions of the Contract. C&P maintained the required insurance and bonding coverage. C&P complied with the requirement to submit certified payroll and complied with the prevailing wage and apprentice requirements. C&P performed the scope of work on the Contract. INTRODUCTION C&P entered into a Contract with the LAUSD to renovate the site water distribution system for the Washington Preparatory Senior High School. The Contract was executed on December 5, 2005, with a start date of December 27, 2005 and an estimated final completion date of December 11, The actual completion date was November 17, The Contract was for a lump sum base amount of $1,389,000. One change order was issued for $36,308 that increased the total Contract amount to $1,425,308. Cost invoiced and paid through Pay Application No. 4 was $1,425,308. C&P was founded as a partnership in 1998 and incorporated as a closed California corporation in The company had one principal stockholder and six full-time employees. C&P specializes in plumbing upgrade work for school districts, and its office is located in Los Angeles, California, SCOPE AND OBJECTIVE Our audit objectives were to determine whether the costs claimed by C&P were allowable and adequately supported, C&P complied with the terms and conditions of the Contract, and the scope of work was performed. Our examination was made in accordance with Generally Accepted Government Auditing Standards (GAGAS) and included tests of the contractor s records and other auditing procedures we considered necessary in the circumstances. The provisions of the Contract were used as criteria in analyzing C&P s compliance with the Contract requirements. 1

4 We conducted our audit from November 26, 2007 through June 6, METHODOLOGY To accomplish our audit objectives, we (i) briefed the Contract to obtain an understanding of the Contract requirements, (ii) interviewed LAUSD personnel to obtain an understanding of the Contracting process, compensation requirements, and other non-cost provisions of the Contract, (iii) visited C&P s office to collect information and obtain an understanding of Contract compliance procedures and Contract services performed, (iv) tested all 4 application of payments submitted by the contractor and verified their mathematical accuracy, (v) examined the contractor s bonding documentation, (vi) examined insurance certificates, (vii) tested contractor payroll records to determine compliance with prevailing wage and apprentice utilization requirements, (viii) examined contractor s license to verify proper and current licensing by the Contractor License Board, and (ix) compared LAUSD s payment records with the total Contract amount to determine whether the payments were within the total value of the Contract. EVALUATION OF INTERNAL CONTROLS In planning this audit, we obtained an understanding of internal controls that are material to the Contractor s compliance with the terms and conditions of the Contract. In so doing, we did not note any significant deficiencies in internal controls that are reportable under Government Auditing Standards. PRIOR AUDIT COVERAGE The Office of the Inspector General has not issued any prior audit report on C&P Plumbing. Billings RESULTS OF AUDIT We reviewed each of the applications for payments. We (i) verified that billings were not more frequent that once per month (ii) determined that the Application for Payment was approved by the Owner s Authorized Representative (OAR), (iii) verified that the amount billed was consistent with the Contract value, (iv) checked the mathematical accuracy, and (v) reconciled total billings with payments by LAUSD. Our review disclosed no questioned costs. OCIP and Other Insurances We obtained and reviewed the OCIP and other insurance certificates. We (i) verified that the Contractor had OCIP and other insurances required during the contract period, (ii) verified that the Contractor obtained insurance coverages and met the minimum amount of those coverages provided in the Contract, (iii) verified that the insurance shall cover enrolled parties provided in Article 5.2 and additional insured required under Article 5.8 of the Contract, and (iv) verified that the insurances had a 30-day non-renewal/cancellation clause. We determined that the Contractor complied with the insurance requirements of the Contract. 2

5 Apprenticeship Program We summarized hours worked by the journeymen and the apprentices for the duration of the project and calculated the ratio to determine compliance of the California Labor Code Section (Code). The journeymen were plumbers, painters, laborers and operating engineers and had a total combined hours worked of 1,528 while apprentices had 312 hours of labor or a ratio of 5 to 1 hours, as required by the Code. The Code requires Contractor to employ apprentices in a particular trade or craft on an annual average of not less than one hour of apprentice work of every 5 hours of labor performed by journeymen. Certified Payroll Records Submission, Prevailing Wage and Project Stabilization Agreement(PSA) We obtained information from the Labor Compliance Department (LCD) that C&P Plumbing complied with the submission of the certified payroll records. LCD did not audit or plan to audit the Contractor s actual wage rates. We tested four randomly selected certified payroll records to determine compliance with the contract. We verified the apprentices and journeymen s wage rates to the General Prevailing Wage Determination made by the Director of Industrial Relations covering for the contract period. Our audit disclosed that the Contractor complied with the Certified Payroll Records submissions and payment of prevailing wages as required by the Contract. PSA requirements were not applicable to this Contract. Site Inspection We inspected the boiler room and the paths where the pipes were buried underground and leading to various water and restrooms facilities. We (i) verified that four (4) main pumps were installed in the boiler room, (ii) verified that the control panel was connected to the pumps, (iii) observed that the pumps and control panel were working, (iv) verified the presence of the water pressure regulators outside the boiler room, properly and securely fenced, (v) physically inspected heavy duty pipes which were attached to the pumps, and (vi) tested some water facilities whether water supply was adequate. We concluded that the Contractor performed the renovation of the water supply system as required by the Contract. Based on our audit, we found that: CONCLUSIONS The costs billed by C&P were incurred, allowable, adequately supported and in compliance with the terms and conditions of the Contract. C&P maintained the required insurance and bonding coverage. C&P complied with the requirement to submit certified payroll and complied with the prevailing wage and apprentice requirements. 3

6 C&P performed the scope of work on the Contract. REPORT DISTRIBUTION This report is privileged, confidential and prepared solely for Facilities Contracts. This report may not be released, in full or in part, to any entity outside LAUSD or to any internal department without the prior approval of the Office of the Inspector General. AUDIT TEAM This audit was conducted by the Office of the Inspector General Contract Audit Team: Nicolas Hoogendyk Richard Kuchinskas Alberto Abrot 4

7 Know about fraud, waste or abuse? Tell us about it. Maybe you are a School District Call the Hotline: employee, or maybe you are a private citizen. Either way, you (213) are a taxpayer. or LAUSD-OIG Maybe you know something about fraud, or waste, or some Write to us: other type of abuse in the School District. Fraud Hotline Center 333 S. Beaudry Ave., 12 th Fl. The Office of the Inspector General Los Angeles, CA has a hotline for you to call. You can also write to us. If you wish, we will keep your identity confidential. You can remain anonymous, if you prefer. And you are protected by law from reprisal by your employer. Website: