Audit Report

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Prevailing Wage Rate Determination Process

The objectives of the examination were to review the following:

  • The City and County of Denver’s Office of Human Resources compliance with the City and County’s Revised Municipal Code §20-76(c)
  • The City and County of Denver’s Office of Human Resources procedures and processes in setting the prevailing wage within the City and County of Denver
  • Whether the City and County of Denver’s Office of Human Resources complies with their duty and obligation to follow the Federal Department of Labor’s processes

    The objectives of the examination were to review the following:

    • The City and County of Denver’s Office of Human Resources compliance with the City and County’s Revised Municipal Code §20-76(c)
    • The City and County of Denver’s Office of Human Resources procedures and processes in setting the prevailing wage within the City and County of Denver
    • Whether the City and County of Denver’s Office of Human Resources complies with their duty and obligation to follow the Federal Department of Labor’s processes

    During this examination, we observed internal control processes appearing to operate effectively throughout many of the City and County of Denver’s Office of Human Resources processes. By strengthening internal controls and implementing the recommendations provided, the City and County of Denver’s Office of Human Resources can more effectively monitor compliance with the City and County of Denver’s prevailing wage ordinance.

      1. We recommend the City and County of Denver’s Office of Human Resources implement an additional review procedure to ensure the benefit rates used for setting prevailing wages are accurate based on the most recent Service Contract Act information.

      As a result of the finding, the City and County of Denver’s Office of Human Resources has implemented additional controls and segregation of duties. This includes additional review over Service Contract Act changes. During the April 16, 2020 Career Service Board Meeting, the City and County of Denver’s Office of Human Resources presented the updated wages to the Career Services Board as a result of this finding. The Career Service Board approved the increase to the prevailing wage during this meeting. The City and County of Denver’s Office of Human Resources has taken corrective action and has taken the necessary changes to the Career Services Board.

      2. We recommend the City and County of Denver perform an evaluation as to whether the City and County of Denver’s Office of Human Resources is best suited for setting the prevailing wages for external job classifications. This evaluation should include:

      1. Collection of input from current City and County of Denver Office of Human Resource employees centered around current procedures and job functions over the setting of the prevailing wage;
      2. An analysis of other City and County of Denver departments in assessing whether other departments are performing similar job functions; and
      3. A cost benefit analysis of utilizing an external organization for setting the prevailing wage an example of which would be a compensation committee whose sole responsibility is the setting of prevailing wages under prevailing wage ordinance.

      3. We recommend the City and County of Denver’s Office of Human Resources prepare a formal prevailing wage guideline manual and information tracking document to be used for all aspects covering their responsibilities for setting the prevailing wage under the City and County of Denver’s Revised Municipal Code §20-76(c). The manual should outline each step in the prevailing wage process which would include:

      1. Specific job titles of those employees who are responsible for modifications or changes to the current City and County of Denver’s Office of Human Resources laws, rules and regulations governing the City and County of Denver’s Revised Municipal Code §20-76(c). This will ensure the City and County of Denver’s manual is set up for succession and turnover within the City and County of Denver’s Office of Human Resources.
      2. The manual should include documented dates of meetings with Union representatives or external parties covering the prevailing wage ordinance, including action steps taken and conclusions reached. This guideline manual should be a formal document and approved by the Career Services Board.

      4. We recommend the City and County of Denver Office of Human Resources evaluate the current role of the Career Service Board under the City and County of Denver’s Revised Municipal Code §20-76(c) and work with the appropriate parties to determine if the Career Services Board’s or another existing/created Board’s authority be expanded to include the following:

      1. The rates determined for classes not covered by the Davis-Bacon Act shall be determined using the same method as used for classes which are covered by the Davis-Bacon Act. As noted above, the City and County of Denver’s Office of Human Resources uses the Employers Council Compensation Survey Denver/Boulder geographic location. The City and County of Denver’s Office of Human Resources should work with the appropriate parties to determine the appropriateness of using a third-party survey. The Davis- Bacon Act prevailing wages are not established by a third-party compensation survey. The appropriate parties should work to clarify the ordinance of the methodology utilized for prevailing wages not covered by the Davis-Bacon Act.
      2. Expanding the right to appeal job wages by third party individuals whose wage rate is established by the Davis-Bacon Act. The appeal would allow for a review over stagnant wages in the City and County of Denver and a course of action for modifying the prevailing wage to ensure competitive wages are paid to third party individuals. The City and County of Denver’s Office of Human Resources should work with the appropriate parties to evaluate an expanded oversight Board to review stagnant wages that prevail under the Davis-Bacon Act.

      The objective of our examination of the city’s prevailing wage rate determination process was to determine the Office of Human Resources’ compliance with:

      • Its duties to set the city’s prevailing wage;
      • City ordinance and the office’s duty to comply with the U.S. Department of Labor’s processes in setting prevailing wage;
      • Statutorily prescribed schedules for updating or amending set wages;
      • Internal processes, policies, and standards; and
      • Policies addressing conflicts, objections, and requests for hearings related to set or established prevailing wages.
      • CliftonLarsonAllen conducted this examination on behalf of the Auditor’s Office. I am pleased to present the results of this examination.

      By implementing recommendations for stronger controls to update prevailing wages, reorganize the responsibility of determining prevailing wages, better document policies and procedures governing the setting of prevailing wage, and refine and clarify the prevailing wage establishment process, the Office of Human Resources will be better equipped to ensure the city’s prevailing wages are set and monitored properly and that a process exists to ensure wages remain competitive in the City and County of Denver.

      This examination is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, “General Powers and Duties of Auditor.”

      We extend our appreciation to the personnel in the Office of Human Resources who assisted and cooperated with us and CliftonLarsonAllen during the examination. For any questions, please feel free to contact me at 720-913-5000.

      Follow-up report

      A follow-up report is forthcoming. 

      Audit Team: Katja E. V. Freeman, Todd Green

      Contractors: CliftonLarsonAllen (Paul Niedermuller, Eric Miller, Nykki Milhaupt)