One area of contract administration that repeatedly encounters audit findings is the lack of an audit trail for reimbursements of construction costs. Since August 2020 through the date of this Caltrans Oversight Information Notice (COIN), four audits have questioned $1.32 million due to a lack of an audit trail for construction costs.
Local Public Agencies (LPAs) must review the guidance in Chapter 16.13 Progress Payments, Accounting Procedures and Payment Records of the Local Assistance Procedures Manual (LAPM) and ensure their own processes and procedures meet or exceed these minimum requirements. Projects on the State Highway System must follow the procedures outlined in the Caltrans Construction Manual.
LPAs should encourage their staff to attend the Resident Engineer Academy (REA). REA Tab 8 – Payment, contains instructions on payment. LPAs can also request their District Construction Oversight Engineer to provide in-house training for staff with no experience in Payment or for those that have not attended the REA.
Procedures and best practice to create an audit trail for construction costs:
• A Quantity sheet (Q sheet) must be developed for each bid item paid in the monthly progress payment. For example: if 15 bid items out of the total 25 bid items is paid in one month, there should be 15 quantity sheets developed indicating how the quantity was measured/calculated. This includes lump sum items with an explanation on how the lump sum payment was determined.
• Weight tickets must be on file for payments made by weight.
• Record work performed on each item on daily reports. Daily reports are required to support Q sheets.
• Q sheets must be produced by the LPA not by the contractor.
• Best practice: It is highly recommended to have the Q sheet prepared by the inspector who inspected the item, and it must be checked independently by the resident engineer or another qualified person who is familiar with the project. Avoid having non-qualified preparers and checkers.
Please click on COIN 22-02 link to view full document.
View historical COINs on the Caltrans Oversight Information Notices website.
Construction administration questions or comments may be emailed to Girmay.Beyene@dot.ca.gov.
Audit process questions or comments may be emailed to Daniel.Burke@dot.ca.gov.
