Audit Report
Received by Audit
Committee
Audit Report
Received by City
Council
Moss Adams Observations Moss Adams Recommendations Did the City Agree?
Status Completion Date/
Estimated Completion Date
Questioned Non‐Compliant Change Order, Foreman
Rate
The City should implement change order management controls to prevent charging change order labor rates in excess of contractually allowable amounts, as required by the Contract terms. The City should consider seeking credit for excess labor charges.
Yes Completed The City implemented change order
cost management controls that align
with the City’s assessment of risk.
September 2023.
Contract Compliance – Excessive Change Order
Markups
The City should review change order management controls and associated contract language to prevent incurring excessive fee markups. The City should consider whether it is worthwhile to pursue cost recovery of markups associated with the PCOs identified.
No City not in
agreement
The change orders expenses were in
alignment with the agreement
between the contractor and the City
and thus no additional exchange of
funds is warranted.
Contract Compliance – Skilled Labor Documentation
Control
The design build entity should implement billing controls to ensure adequate skilled labor documentation, as required by the Contract terms. For example, the City should ensure that all Skilled and Trained Workforce documentation is consistently reported in the monthly application for payment with the appropriate level of detail required to ensure compliance with Public Contract Code. Compliance with this requirement should be tracked by the City and Project Management for compliance.
Yes Completed Compliance with California
Department of Industrial Relations
requirements lies with the design
build entity. CIP has implemented
the practice of requesting/filing the
monthly certified payroll throughout
the life of the project to confirm
compliance. (ongoing item)
Contract Compliance – Select payment applications
reviewed were not fully executed
The design build entity should implement billing controls to ensure adequate sign‐offs, as required by the Contract terms. The City and its project managers should require the design build entity to fully execute all payment applications prior to submission.
Yes Completed All payment applications are fully
executed with signatures by
Construction Manager and City
(Capital Improvement Program
Manager or Director of Public
Works). (ongoing item)
Contract Compliance – Inadequate Conditional
Waiver Controls
As a best practice and consistent with contractual language, the design build entity should obtain and provide to the City conditional waivers from each subcontractor and material supplier once payment is made to support the City ensuring all parties are being paid timely and there are payment issues which may be an indicator of performance issues. At the end of a subcontractor’s work, or at the Project’s completion, conditional waivers for all subcontractors should be obtained to validate full payment for performance of the Contract and mitigate potential exposures for the City. Additionally, the City should consider updating policies and procedures to develop a methodology with project management personnel to determine which subcontractors are required to provide conditional waivers based on initial subcontracting plan including attributes such as contract size and or scope complexity.
Yes Completed As part of CIP's payment approval
procedure, CIP requests conditional
waiver releases and final waiver
releases throughout the payment
process. (ongoing item)
Contract Compliance – Flow Down Contract
Provisions Not Included in Subcontracts
The City should consider implementing contract administration controls to ensure flow down contract provisions, are included within contracts, as required by the Contract terms. For example, the City should request a copy of a typical subcontract agreement template ahead of the design build entity’s buyout process to confirm compliance with flow down requirements.
Yes Completed As part of CIP procedures, City
requests a copy of design build
entity's typical subcontract
agreement template to confirm
compliance with flow down
requirements. (ongoing item)
Contract Compliance Self‐Performed Work Change
Order Delivery Method
The City should evaluate the time and materials and allowance use within the change orders identified for cost substantiation and reasonableness as required by the Contract. The City should consider developing change order forms and update as needed to include information such as change type (e.g., cost plus not to exceed, time and materials, lump sum, unit price, etc.), itemized change amounts, percentages, descriptions, change responsibilities, schedule impacts, dates of approval, subtotals, and totals to enhance internal change order controls and to support contract compliance.
Yes Completed The City implemented change order
cost management control
procedures that align with the City’s
assessment of risk. September 2023.
Contract Compliance – Drawing Rights Secured
Confirmation
The City should consider including more specific contract language regarding the right of use and ensuring that all parties involved in the Project’s design understand their responsibilities regarding their design documents. If deemed necessary at this point in the Project, the City should request that the design build entity obtain the necessary documentation from its subcontractors and subconsultants to secure the rights of use for the City.
No City not in
agreement
Section 2.3(D) of the General
Conditions broadly confers that all
ownership rights, including
copyrights and possessory rights, in
the Design Documents as well as
additional documents accrue to the
City.
Contract Compliance – Incorrect Payment
Application Calculations
Billing controls should be implemented to ensure accurate calculations within payment application submissions, as required by the Contract terms payment applications with material calculation errors should be revised prior to finalization and processing to avoid overbillings and overpayment.
Yes Completed The City implemented cost
management controls that align with
the City’s assessment of risk.
September 2023.
2023 Library Expansion Construction Audit
This Capital Improvement Project was a design build project which is not a typical approach for the City.
Update as of 6/2024As of 5/16/2023
5/16/20234/24/2023