oversight

The Department of Hawaiian Home lands Generally Had Capacity To Manage; However, it Needs To Improve Controls Over Its Administration of Recovery

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-01-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                                  Issue Date
                                                                          January 19, 2010
                                                                  Audit Report Number
                                                                           2010-LA-1005




TO:         Rodger J. Boyd, Deputy Assistant Secretary, Office of Native American
            Programs, PN



FROM:       Joan S. Hobbs, Regional Inspector General for Audit, Region IX, 9DGA

SUBJECT: The Department of Hawaiian Home Lands Generally Had Capacity To Manage;
         However, It Needs To Improve Controls Over Its Administration of Recovery
         Act Funds

                                    HIGHLIGHTS

 What We Audited and Why

      As part of the Office of Inspector General’s annual audit plan, we completed a capacity
      review of the Department of Hawaiian Home Lands’ (Department) American Recovery
      and Reinvestment Act of 2009 (Recovery Act) funding.

      Our objective was to determine whether the Department had sufficient capacity to
      manage and administer its Recovery Act funding. Specifically, we reviewed and
      assessed the Department’s capacity in the following areas: internal controls, financial
      operations, and procurement.

 What We Found


      The Department generally had sufficient capacity to manage its Recovery Act funding. It
      had a plan for and had begun the use of program funds and had adequate records to
      support accounting transactions as well as a majority of its procurement activities.
      However, the Department could improve its controls by (1) developing a more
      comprehensive set of written policies and procedures to describe its drawdown and
      disbursement process, (2) ensuring that its contractors had not been debarred or
      suspended before awarding federally funded contracts, (3) obtaining the tax clearance
     certificates from its subcontractors, and (4) performing adequate reviews of weekly
     certified payrolls to ensure that its contractors and subcontractors paid their employees
     proper wages and fringe benefits in accordance with the Davis-Bacon Act and Hawaii
     Revised Statutes. In general, the Department attributed its weaknesses to staff oversight.


What We Recommend

     We recommend that the Deputy Assistant Secretary, Office of Native American
     Programs, require the Department to ensure that it (1) develops detailed written policies
     and procedures regarding its drawdown and disbursement process, (2) performs a search
     on the General Services Administration’s Excluded Parties List System and the State of
     Hawaii’s List of Debarred and Suspended Persons before it awards its federally funded
     contracts, (3) obtains tax clearance forms to show that all delinquent taxes against the
     contractor’s subcontractor have been paid, and (4) performs adequate reviews of the
     weekly certified payrolls in compliance with the Davis-Bacon Act and Hawaii Revised
     Statutes.

     For each recommendation without a management decision, please respond and provide
     status reports in accordance with U.S. Department of Housing and Urban Development
     (HUD) Handbook 2000.06, REV-3. Please furnish us copies of any correspondence or
     directives issued because of the audit.

Auditee’s Response


     We provided the Department a discussion draft report on December 22, 2009, and held an
     exit conference with the Department’s officials on January 13, 2010. The Department
     provided written comments on January 14, 2010, and generally agreed with our finding.

     The complete text of the auditee’s response can be found in appendix A of this report.




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                           TABLE OF CONTENTS

Background and Objective                                                       4

Results of Audit                                                               6
      Finding: The Department Generally Had Sufficient Capacity To Manage;
               However, Controls Over the Administration of Its Recovery Act
               Funds Had Weaknesses

Scope and Methodology                                                          11

Internal Controls                                                              13

Appendices

   A. Auditee Comments                                                         14
   B. Criteria                                                                 16




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                      BACKGROUND AND OBJECTIVE

On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (Recovery Act)
was enacted to make supplemental appropriations for job preservation and creation,
infrastructure investment, energy efficiency and science, assistance to the unemployed, State and
local fiscal stabilization for the fiscal year ending September 30, 2009, and other purposes.

The Recovery Act funds, awarded for the Native Hawaiian Housing Block Grants, shall be used
for new construction, acquisition, rehabilitation including energy efficiency and conservation,
and infrastructure development. All funds must be obligated within 1 year of the date the funds
are made available in the Line of Credit Control System. In addition, at least 50 percent of the
funds must be expended within 2 years, and funds must be fully expended within 3 years of the
date that funds are available. Failure to comply with either the 2- or 3-year expenditure
requirements will result in the recapture of all remaining funds originally awarded. The
Recovery Act funds were made available to the Department of Hawaiian Home Lands
(Department) on May 7, 2009. Accordingly, funds must be obligated and expended by the dates
listed below.


        100 percent obligation due date                            May 6, 2010
         50 percent expended due date                              May 6, 2011
        100 percent expended due date                              May 6, 2012


The Department was created by the Hawaii State Legislature in 1960 to administer the Hawaiian
Homes Commission Act of 1920 (Act). The Act designated certain public lands as Hawaiian
home lands, which are used to serve Hawaiians or individuals of at least 50 percent Hawaiian
blood.

Based on its amended fiscal year 2008-2009 Native Hawaiian housing plan, the Department
planned to use the $10.2 million it was awarded under the Recovery Act for these projects:


           Project                          Used for                         Amount
       Kaupuni Village             Infrastructure development              $1.7 million
 East Kapolei II, increments
                                   Infrastructure development              $8.5 million
         B and C


Although the Department had not been able to contract the entire $10.2 million immediately after
the funds were awarded due to unforeseen circumstances, it provided us with information
throughout our review of its progress and plans to expedite its obligation of those funds.

As of October 2009, $1.7 million of the Recovery Act funds had been obligated and nearly $1
million had been expended for Kaupuni Village. While the Department anticipated completing


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the infrastructure development on the Kaupuni Village project by December 31, 2009, it had
encountered delays with the East Kapolei II mass grading project, which it attributed to the
enactment of a new State law that resulted in the suspension of all of its solicitation for bids.
Further, the U.S. Department of Housing and Urban Development (HUD) had questions and
concerns regarding the environmental assessment that contributed to the delay in awarding the
contract. While drafting this report, HUD stated that all questions and concerns had been
resolved.

Because the lowest bid ($4.1 million) for the East Kapolei II mass grading contract was
significantly lower than the estimated cost of $8.5 million, the Department plans to reallocate
$4.4 million of the Recovery Act funds to other potential projects. It is considering using $3
million to build a detention basin on East Kapolei I and $1.4 million on house construction at
Kaupuni Village or Kumuhau Subdivision or the Kaupuni Village retention wall. HUD also has
concerns regarding environmental issues with the East Kapolei I detention basin project. The
Department anticipates resolving this issue in the coming weeks.

Our objective was to determine whether the Department had sufficient capacity to manage and
administer its Recovery Act funding. Specifically, we reviewed and assessed the Department’s
capacity in the following areas: internal controls, financial operations, and procurement.




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                                RESULTS OF AUDIT

Finding:       The Department Generally Had Sufficient Capacity To
               Manage; However, Controls Over the Administration of Its
               Recovery Act Funds Had Weaknesses
Although the Department demonstrated that it generally had sufficient capacity to manage its
Recovery Act funds, we found control weaknesses that could be detrimental to its administration
and management of HUD funds. Based on our review, the Department did not (1) develop
sufficient written policies and procedures for its disbursement process, (2) ensure that its
contractors had not been debarred or suspended, (3) obtain the tax clearance certificates from its
subcontractors, and (4) ensure that its contractors and subcontractors paid their employees proper
wages and fringe benefits in accordance with the Davis-Bacon Act and Hawaii Revised Statutes.
In general, the Department attributed its weaknesses to staff oversight. Although the outcome of
our review did not result in a material effect to HUD, failure to perform these steps could
increase the risk of fraud, waste, and abuse.



 Program Expenditures Were
 Eligible and Supported With
 Adequate Documentation

       We tested program expenditures by reviewing the entire grant draws related to the
       Recovery Act (totaling almost $1 million) and HUD Native Hawaiian Housing Block
       Grant (totaling more than $1 million) for both the Kaupuni Village and Kumuhau
       Subdivision projects, respectively, to review for eligibility and supporting documentation.
       We determined that (1) there were no unusual charges included in the contract, (2)
       expenditures were allocated properly between the original and supplemental contracts,
       (3) accounting mischarges were properly identified and corrected, (4) voucher payment
       records were reviewed by appropriate personnel, and (5) the Department followed its
       internal policies and procedures during its drawdown of Recovery Act grant funds.

  The Department Did Not
  Develop Comprehensive
  Drawdown and Disbursement
  Policies and Procedures

       The Department lacked detailed written policies and procedures for its drawdown of
       grant funds and disbursement process. The Department provided us with written policies
       and procedures that described the drawdown of a lump-sum grant and the return of
       unexpended Native Hawaiian Housing Block Grant funds to the Line of Credit Control
       System after 2 years. However, they did not describe in detail, how funds were drawn


                                                6
    down from the system to pay a contractor from Native Hawaiian Housing Block Grant
    and Recovery Act funds.

    Although the Department had a systematic process in place, it should have established
    and continually revised its procedures to help ensure uninterrupted operation during
    employee absences or turnover and guide staff in accomplishing their roles and
    responsibilities.

The Department Did Not
Ensure That Contractors Were
Not Debarred or Suspended

    According to 24 CFR (Code of Federal Regulations) 85.35 and Hawaii Administrative
    Rules, sections 3-126-17 and 3-126-18, agencies are prohibited from awarding federally
    funded contracts to debarred or suspended persons. The Department’s staff confirmed
    that it did not perform a search on the United States General Services Administration’s
    Excluded Parties List System or the State of Hawaii’s List of Debarred and Suspended
    Persons to ensure that the contractors to be awarded the contracts selected in our review
    had not been debarred or suspended. Department staff members stated that they failed to
    perform this step due to staff oversight and the Department’s established relationship
    with the contractor, which reportedly had a solid reputation in the industry. Moreover,
    the staff members stated that they were not aware of the Web address to access either the
    Federal or State debarred and suspended listings. Although the contractors were not
    debarred or suspended at the time the contract was awarded or during our fieldwork, the
    Department placed itself at serious risk of awarding contracts to contractors that might
    not have been eligible to receive a federally funded contract. We provided Department
    staff with the General Services Administration’s Excluded Parties List System link,
    which was disseminated to appropriate persons throughout the Department, along with a
    message informing them of the need to verify that contractors awarded contracts are not
    on the State and/or Federal debarred lists.

The Department Did Not
Obtain Required Tax Clearance
Certificates From
Subcontractors

    Contrary to the general conditions of the invitation for bids for the Kaupuni Village and
    Kumuhau Subdivision projects, the Department failed to obtain the tax clearance
    certificates from the contractors’ subcontractors. Details regarding each project are listed
    below.




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    Kaupuni Village Project Contractor - Royal Contracting

    Royal Contracting listed nine subcontractors on its bid; however, the Department did not
    obtain any of the tax clearance certificates at the time it awarded the contract. After we
    inquired about the certificates, the Department provided the certificate of vendor
    compliance or tax clearance certificates for all nine subcontractors. The certificates
    showed that they were in compliance with the general conditions of the invitation for
    bids.

    Kumuhau Subdivision Project Contractor - Elite Pacific Construction

    Elite Pacific Construction listed eight subcontractors on its bid; however, the Department
    did not obtain any tax clearance certificates at the time it awarded the contract. After we
    inquired about the certificates, the Department provided the certificate of vendor
    compliance or tax clearance certificates for six of the eight subcontractors. The
    certificates showed that they were in compliance with the general conditions of the
    invitation for bids. Based on a December 10, 2009, memorandum, Elite Pacific
    Construction stated that it did not use two of the subcontractors that were originally listed
    on its bid due to changes that occurred during construction. As a result, tax clearance
    certificates were not obtained for these two subcontractors (Island Heavy Equipment and
    RJA Precast).

    The Department confirmed that it overlooked this requirement. Although the Department
    supplied the certificate of vendor compliance or tax clearance certificates for some of the
    subcontractors, these certificates could not determine that the subcontractors were
    compliant with the tax clearance requirements when the Department awarded the
    contracts to Royal Contracting and Elite Pacific Construction on February 10, 2009, and
    February 28, 2008, respectively. Further, had we not informed the Department of this
    requirement, it would not have requested certificates for any of the subcontractors.

The Department Did Not
Perform Adequate Davis-Bacon
Act Reviews

    The Department did not perform adequate reviews of the weekly certified payrolls to
    ensure that the contractors and subcontractors paid their employees the correct wages and
    fringe benefits in accordance with the Davis-Bacon Act and Hawaii Revised Statutes.
    These deficiencies occurred because the Department did not follow proper procedures as
    required. Based on our sample payroll for Royal Contracting and Elite Pacific
    Construction, we determined that

           One employee of RHS Lee, a Royal Contracting subcontractor, was classified as a
           mason and was paid less than the Davis-Bacon rate. However, the employee
           could have been an apprentice since “apprentice” was handwritten on the payroll.
           As a result, the employee was paid at a lower rate. The labor compliance



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             specialist did not obtain proof from RHS Lee to confirm that the employee was an
             apprentice. Although the Davis-Bacon Act does not contain a wage determination
             schedule for apprentices, the State of Hawaii does, and apprentices earn higher
             wages as they accumulate more experience. The labor compliance specialist did
             not have information to show in which pay step the employee belonged and,
             therefore, could not confirm whether RHS Lee paid the proper wage rate and
             fringe benefits as required by the State of Hawaii.

             The weekly certified payrolls from Elite Pacific Construction showed that it did
             not pay the proper Davis-Bacon wages, and the Department was aware of the
             deficiency but did nothing about it until the auditors pointed it out. Our sample
             results showed that Elite Pacific Construction had been underpaying its carpenters
             by $.02 per hour since at least February of 2009. Moreover, the State of Hawaii
             increased the prevailing hourly wages for carpenter from $55.22 to $55.42 in the
             wage rate schedule, dated September 21, 2009. Because of the timing of our
             sample selection and availability of the weekly certified payroll, we were not able
             to review a certified payroll for a pay period after the new wage rate schedule
             came into effect to determine whether Elite Pacific continued to pay the same
             wage rate or a new wage rate to match the updated wage rate schedule. The
             increase in the wage rate schedule may have increased the underpayment rate of
             $.02. The labor compliance specialist notified Elite Pacific Construction of the
             $.02 rate mistake and informed the company to expect an adjustment.

             Two Elite Pacific Construction contracted employees did not have job
             classifications shown on the payrolls. Without the job classifications, the proper
             Davis-Bacon wage rates could not be determined. We asked the labor compliance
             specialist about this issue, and she said that since the contractor’s other employees
             were carpenters, she assumed that the two employees without job classifications
             were also carpenters. Upon our request, she obtained from the contractor a
             revised payroll showing that the two employees were carpenters.

             Keeno Farms, an Elite Pacific Construction subcontractor, had payrolls showing two
             wage rates for each employee. The labor compliance specialist could not explain
             why two wage rates were shown and whether they included the correct fringe
             benefits for the job classifications. She needed to discuss the wage rates with Keeno
             Farms several times before she could explain Keeno Farms’ payroll. Had she been
             verifying that the proper wages were paid on a weekly basis, she would have been
             able to show the auditors how she “audited” Keeno Farms’ payroll and conclude
             immediately that there were no issues.

Conclusion

    The Department generally had sufficient capacity to manage its Recovery Act funds.
    However, it needs to strengthen its controls to fulfill the requirements under the Recovery
    Act program. It can do so by (1) developing detailed written policies and procedures for


                                               9
  its drawdown and disbursement process, (2) ensuring that its contractors have not been
  debarred or suspended, (3) obtaining the tax clearance certificates from subcontractors,
  and (4) ensuring that its contractors and subcontractors paid their employees proper
  wages and fringe benefits in accordance with the Davis-Bacon Act and Hawaii Revised
  Statutes. Although the outcome of our review did not result in a material effect to HUD,
  failure to perform these steps could increase the risk of fraud, waste, and abuse.


Recommendations


  We recommend that the Deputy Assistant Secretary, Office of Native American
  Programs, require the Department to

         1A. Develop and maintain comprehensive written policies and procedures that
             describe its drawdown of grant funds and disbursement process in more
             detail.

         1B. Perform a search on the General Services Administration’s Excluded Parties
             List System and the State of Hawaii’s List of Debarred and Suspended
             Persons to ensure that current and future contractors have not been debarred
             or suspended before being awarded federally funded contracts.

         1C. Obtain tax clearance forms to show that all delinquent taxes levied or
             accrued against current and future subcontractors have been paid.

         1D. Perform adequate reviews of certified payrolls to ensure that contractors and
             subcontractors paid their employees the correct wages and fringe benefits.




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                        SCOPE AND METHODOLOGY

We performed our on-site work at the Department, located on the island of Oahu, HI, in the city
of Kapolei, between August and November 2009. Our review generally covered the period July
1, 2007, through June 30, 2009. We expanded our scope as necessary.

To accomplish our objective, we

       Reviewed and obtained an understanding of the Recovery Act, the Department’s grant
       agreements with HUD, and its planned activities under the Recovery Act.

       Reviewed applicable financial management and procurement criteria.

       Reviewed relevant Department policies and procedures.

       Reviewed the Davis-Bacon Act and Hawaii Revised Statutes.

       Interviewed HUD and Department employees regarding the Department’s operations.

       Reviewed Department financial records and procurement files for the Kaupuni Village
       (Recovery Act contract) and Kumuhau Subdivision (Native Hawaiian Housing Block
       Grant contract) projects. Because the Department spent less than $1 million (9.6 percent)
       of its Recovery Act funds, we determined that this amount would not provide a sufficient
       test to determine the Department’s ability to administer its grant funds. Moreover, no
       new activities had occurred with respect to the second Recovery Act project. Therefore,
       we expanded our scope to include a review of the Kumuhau Subdivision contract. We
       based our selection on the following factors:

           o The sum of the original and supplemental contracts exceeded $100,000.
           o The original contract was executed during our review period.
           o Factors such as time constraints, number of supplemental contracts, and contract
             amount already expended were also considered.

       Although our selection was not based on a statistical sample, we expect it to be
       representative of the Department’s most recent expenditure and procurement activities,
       which closely resemble the activities of the Recovery Act contract at Kaupuni Village.

       Tested payroll for Royal Contracting (Kaupuni Village project’s contractor), Elite Pacific
       Construction (Kumuhau Subdivision project’s contractor), and their subcontractors. We
       selected sample payroll periods between November 2007, through the present. There
       were two payroll periods for Royal Contracting which included April 24 and August 7,
       2009. There were also three payroll periods for Elite Pacific Construction (June 23,
       2008, February 2, 2009, and May 11, 2009). Our objective was to determine whether
       there were any uncorrected systemic deficiencies.



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       Reviewed the HUD environmental assessment report as well as other reports that
       describe the planned remediation efforts for the contaminated area on East Kapolei II.

       Reviewed job descriptions and the organizational chart.

       Reviewed the Department’s most current annual plan.

       Conducted site visits at Kaupuni Village to observe the progress of infrastructure work.


We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




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                              INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are achieved:

       Program operations,
       Relevance and reliability of information,
       Compliance with applicable laws and regulations, and
       Safeguarding of assets and resources.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. They include the processes and procedures for planning,
organizing, directing, and controlling program operations as well as the systems for measuring,
reporting, and monitoring program performance.



 Relevant Internal Controls


       We determined that the following internal controls were relevant to our audit objective:

              Policies and procedures to ensure that internal controls, financial management,
              and procurement activities are adequate.

              Policies and procedures to ensure that grant expenditures are eligible and
              adequately supported.

       We assessed the relevant controls identified above.

       A significant weakness exists if internal controls do not provide reasonable assurance that
       the process for planning, organizing, directing, and controlling program operations will meet
       the organization’s objectives.

 Significant Weaknesses

       Based on our review, we believe that the following item is a significant weakness:

              The Department needs to improve controls over the administration of its
              Recovery Act funding.




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                           APPENDICES

Appendix A

                        AUDITEE COMMENTS


Ref to OIG Evaluation         Auditee Comments




                               14
15
Appendix B

                                         CRITERIA
24 CFR 85.35. Subawards to debarred and suspended parties.
Grantees and subgrantees must not make any award or permit any award (subgrant or contract) at
any tier to any party which is debarred or suspended or is otherwise excluded from or ineligible
for participation in Federal assistance programs under Executive Order 12549, “Debarment and
Suspension.”

Hawaii Administrative Rules, section 3-126-17. Effect of debarment decision.
A debarment decision will take effect upon issuance and receipt by the debarred person. After
the debarment decision takes effect, that person shall remain debarred until a court or the chief
procurement officer, or designee who issued the decision, orders otherwise or until the
debarment period specified in the decision expires.

Hawaii Administrative Rules, section 3-126-18(b). List of debarred and suspended persons.
Should a debarred or suspended person have a contract awarded prior to the effective date of the
list, the chief procurement officer shall make a written determination as to whether to allow a
debarred or suspended contractor to continue performance on that contract.

General Conditions, Invitation for Bid, part 6. Subcontracts and Assignments.
The contractor shall not assign or subcontract any of the contractor’s duties, obligations, or
interest under this contract and no such assignment or subcontract shall be effective unless i) the
contractor obtains the prior written consent of the state, and ii) the contractor’s assignee or
subcontractor submits to the state a tax clearance certificate from the Director of Taxation, State
of Hawaii, and the Internal Revenue Service, U.S. Department of Treasury, showing that all
delinquent taxes, if any, levied or accrued under state law and the Internal Revenue Code of
1986, as amended, against the contractor’s assignee or subcontractor have been paid.

Section 1606 of the Recovery Act.
Requires the payment of Davis-Bacon Act (40 U.S.C. (United States Code) 31) wage rates to
“laborers and mechanics employed by contractors and subcontractors on projects funded directly
by or assisted in whole or in part by and through the Federal Government” pursuant to the
Recovery Act.

29 CFR 3.4(a) and (b). Submission of weekly statements and the preservation and inspection of
weekly payroll records.
(a) Each weekly statement required under section 3.3 shall be delivered by the contractor or
subcontractor, within seven days after the regular payment date of the payroll period, to a
representative of a Federal or State agency in charge at the site of the building or work, or, if
there is no representative of a Federal or State agency at the site of the building or work, the
statement shall be mailed by the contractor or subcontractor, within such time, to a Federal or
State agency contracting for or financing the building or work. After such examination and
check as may be made, such statement, or a copy thereof, shall be kept available, or shall be



                                                16
transmitted together with a report of any violation, in accordance with applicable procedures
prescribed by the United States Department of Labor.
(b) Each contractor or subcontractor shall preserve his weekly payroll records for a period of
three years from date of completion of the contract. The payroll records shall set out accurately
and completely the name and address of each laborer and mechanic, his correct classification,
rate of pay, daily and weekly number of hours worked, deductions made, and actual wages paid.
Such payroll records shall be made available at all times for inspection by the contracting officer
or his authorized representative, and by authorized representatives of the Department of Labor.

Hawaii Revised Statutes, section 104-2(b). Applicability; wages, hours, and other
requirements.
b) Every laborer and mechanic performing work on the job site for the construction of any
public work project shall be paid no less than prevailing wages; provided that:
       1) The prevailing wages shall be established by the director as the sum of the basic hourly
       rate and the cost to an employer of providing a laborer or mechanic with fringe benefits.
       In making prevailing wage determinations, the following shall apply:
               A) The director shall make separate findings of:
                       i) The basic hourly rate; and
                       ii) The rate of contribution or cost of fringe benefits paid by the employer
                       when the payment of the fringe benefits by the employer constitutes a
                       prevailing practice. The cost of fringe benefits shall be reflected in the
                       wage rate scheduled as an hourly rate; and
               B) The rates of wages which the director shall regard as prevailing in each
               corresponding classification of laborers and mechanics shall be the rate of wages
               paid to the greatest number of those employed in the State, the modal rate, in the
               corresponding classes of laborers or mechanics on projects that are similar to the
               contract work;
       2) The prevailing wages shall be not less than the wages payable under federal law to
       corresponding classes of laborers and mechanics employed on public works projects in
       the State that are prosecuted under contract or agreement with the government of the
       United States; and
       3) Notwithstanding the provisions of the original contract, the prevailing wages shall be
       periodically adjusted during the performance of the contract in an amount equal to the
       change in the prevailing wage as periodically determined by the director.

Hawaii Revised Statutes, section 104-3(a). Payrolls and payroll records.
Every contract subject to this chapter and the specifications for those contracts shall contain a
provision that a certified copy of all payrolls and a certified copy of a fringe benefit reporting
form supplied by the department or any certified form that contains all of the required fringe
benefit information shall be submitted weekly to the governmental contracting agency for
review. The fringe benefit reporting form shall itemize the cost of fringe benefits paid by the
general contractor or subcontractor for:

       Health and welfare benefits;
       Pension and annuity benefits;
       Vacation benefits;


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       Continuing education and training benefits; and
       Other fringe benefit costs paid by the general contractor or subcontractor.

The general contractor shall be responsible for the submission of certified copies of the payrolls
of all subcontractors. The certification shall affirm that the payrolls are correct and complete,
that the wage rates contained therein are not less than the applicable rates contained in the wage
determination decision of the director of labor and industrial relations attached to the contract,
and that the classifications set forth for each laborer or mechanic conform with the work the
laborer or mechanic performed. Any certification discrepancy found by the contracting agency
shall be reported to the general contractor and the director to effect compliance.

Hawaii Revised Statutes, section 104-21. Governmental contracting agency responsibilities.
The governmental contracting agency shall:
1) Pay or cause to be paid, within sixty days of a determination made by the director, directly to
laborers and mechanics or to the director, from any accrued payment withheld under the terms of
the contract, any wages or overtime compensation found to be due to laborers or mechanics
under the terms of the contract subject to this chapter, or any penalty assessed;
2) Order any contractor to pay, within sixty days of a determination made by the director, any
wages or overtime compensation which the contractor, or any of the contractor’s subcontractors,
should have paid to any laborer or mechanic under any contract subject to this chapter, or any
penalty assessed which the contractor, or any of the contractor’s subcontractors, should have
paid to the director; and
3) Report to the director any violation of this chapter, the rules adopted thereunder, or the terms
of the contract subject to this chapter.




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