Explaining Prevailing Wage Payroll Audits and Why You Should Care
In the construction industry, particularly on publicly funded projects, prevailing wage laws ensure that workers are paid according to regional standards. A prevailing wage payroll audit is a formal review conducted to verify that a contractor has complied with these wage requirements. These audits are more than just paperwork as they help protect workers, ensure contractors follow through on their obligations, and make sure public funds are being used the right way.
A prevailing wage payroll audit typically involves examining certified payroll reports, timesheets, job classifications, fringe benefit contributions, and supporting documentation. The goal is to determine whether the wages paid match what is required under federal, state, or local prevailing wage regulations. According to the U.S. Department of Labor, these standards are established through the Davis-Bacon and Related Acts, which apply to contractors and subcontractors performing on federally funded or assisted contracts over $2,000 for the construction, alteration, or repair of public buildings or public works.
When performed by a forensic accounting firm, these audits offer an additional layer of assurance. Independent verification from a licensed professional carries weight with public agencies, prime contractors, and labor unions. It also gives contractors peace of mind that they are meeting their obligations and protecting themselves from potential penalties. Moreover, prevailing wage audits conducted by forensic accounting firms can serve as a critical tool for contract compliance and defense during Department of Labor investigations.
FAZ Forensics has conducted several prevailing wage audits on behalf of contract owners to verify compliance with wage laws. In our reviews, we have been the primary communicators with contractors and typically perform randomized sampling procedures and detailed reconciliations to confirm whether reported wage rates meet or exceed required thresholds. We have also served as a liaison between contractors and the Department of Labor when questions or issues have arisen, helping to clarify documentation and resolve concerns efficiently.
Such proactive audits not only help contractors avoid costly penalties and reputational damage but also serve as a defensible record in the event of a government audit or litigation. Ensuring transparency and accuracy in certified payroll submissions strengthens credibility with regulators and positions contractors/contract owners as trustworthy stewards of public funds.