For the construction industry, funding from the American Recovery and Reinvestment Act (ARRA) has been a much-needed boost to their bottom line. Mississippi roadbuilders alone have been granted approximately $248 million, roughly equal to a year’s worth of state appropriations for road work.
However, in order to take advantage of ARRA funding, contractors must meet compliance issues such as internal controls and ethics policies and reporting and prevailing wage rate requirements, among others. Concerns are that some contractors might have missed some of the Act’s fine print and could find themselves in trouble with the federal government.
“We have not seen a lot of this yet, but the money is just now coming down the pipe,” said Jeff Aucoin, senior manager at HORNE LLP whose focus is on ARRA fraud. With the checks in the mail, grantees can expect federal auditors to be close behind, Aucoin added.
So far, so good with Mississippi’s builders. The federal government’s website dedicated to ARRA accountability and transparency, www.recovery.gov, includes a list of all firms and entities that have not met the quarterly reporting requirement stipulated by the Act. Not a single Mississippi-based builder was on the “non-compliers” list.
However, reporting is just one of the requirements that contractors must meet. There are other issues, particularly in the area of employee compensation, which might have firms in trouble.
Dan Holliday, CPA, CVA, is managing partner of the Mississippi office of the accounting firm Carr, Riggs & Ingram as well as construction leader for the entire firm. He said perhaps a third of the firm’s clients are heavy highway contractors. These are generally large concerns with experience dealing with federal regulations and internal assets to insure ARRA compliance.
“Honestly, it has not been an issue with these folks,” Holliday said. “Other contractors might have problems, though.”
Both Holliday and Aucoin agreed that it was the smaller firms with less federal funding savvy and fewer internal resources to utilize that are in more jeopardy of non-compliance.
Unionized firms might also have an advantage, particularly in the area of compensation requirements. Firms with organized labor are already paying their employees the prevailing federal wage rate. Merit shop firms, however, are not required to meet federal wage standards.
This is reflected in the efforts by Mississippi’s chapters of the Associated General Contractors (AGC) and Associated Builders and Contractors (ABC). Perry Nations, head of the local chapter of the AGC, whose workers are organized, reports no problems or concerns among his members in complying with ARRA’s requirements, and the group has not had to offer members education and guidance as to compliance.
On the other hand, C.J. “Buddy” Edens, head of the local chapter of the ABC, a merit shop trade association, said his group has concerns about members remaining compliant, and the chapter has conducted a series of workshops to educate its members.
If federal auditors do coming calling, firms could have little or no warning. The Act gives federal investigators the right “to make site inspections at any time and with reasonable notice; to bring experts and consultants on site to examine or evaluate completed work or work in progress; to examine the books, ledgers, documents, papers and records pertinent to this agreement; and, to observe personnel in every phase of performance of the related work.
“(Grantees) shall permit the comptroller general and/or the inspector general of any federal agency through which the Act’s funding originated to examine any records of the (grantee) or any of its subcontractors, or any state or local agency administering such contract, that directly pertain to, and involve transactions relating to, the contract or subcontract; and to interview any officer or employee of the (grantee) or any of its subcontractors, or of any state or local government agency administering the contract, regarding such transactions.”
For grant awards only, grantees must agree that “if it expends an aggregate amount of $500,000 or more in federal funds during its fiscal year, it must undergo an organization-wide financial and compliance single audit.”
Not reporting fraud can also put firms in jeopardy with the federal government. The Act stipulates that “each grantee or sub-grantee awarded funds made available under the Recovery Act shall promptly refer to an appropriate inspector general any credible evidence that a principal, employee, agent, contractor, sub-grantee, subcontractor or other person has submitted a false claim under the False Claims Act or has committed a criminal or civil violation of laws pertaining to fraud, conflict of interest, bribery, gratuity, or similar misconduct involving those funds.”
For more information on ARRA requirements, visit www.recovery.gov.
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