How to Survive a Prevailing Wage Audit: Preparation Checklist for Contractors

How to Survive a Prevailing Wage Audit: Preparation Checklist for Contractors

The call comes on a Tuesday afternoon. "This is [name] from the Department of Labor. We're conducting a prevailing wage investigation on [project name]. We'll need your payroll records for the past 18 months."

Your stomach drops. But here's the truth: if you've been maintaining proper records and paying correctly, an audit is just a paperwork exercise. It's the contractors who haven't been doing things right who should worry.

What Triggers an Audit

Understanding why you're being audited helps you prepare:

1. Employee complaint (most common). A current or former worker claims they weren't paid prevailing wage
2. Random selection. The DOL conducts routine audits on active public projects
3. GC-initiated. The general contractor noticed discrepancies in your certified payroll
4. Competitor tip. Another contractor reported suspected violations
5. Pattern recognition. Your certified payroll shows unusual patterns (all workers at apprentice rates, no overtime, etc.)

The Documents You'll Need

When the DOL comes calling, they want:

Payroll Records

• Weekly payroll registers for the audit period
• Certified payroll reports (WH-347 or state equivalent) as submitted
• Time cards or daily time sheets (originals, not recreated)
• Cancelled checks or direct deposit records
• Pay stubs issued to employees

Employee Records

• Employee classification documentation (journeyman cards, apprentice registrations)
• Apprenticeship agreements (if applicable)
• I-9 forms
• W-4 forms

Benefit Records

• Health insurance plan documents and enrollment records
• Pension/annuity contribution records
• Training fund contribution records
• Proof of payment to benefit plans (bank statements, cancelled checks)

Project Records

• Subcontract agreement
• Prevailing wage schedule (PRC) for the project
• Daily logs showing workers on site
• Change orders (if they affected scope or duration)

The Audit Process

Step 1: Document Request

The investigator sends a letter requesting specific records. You typically have 10-14 days to respond. Don't ignore it, that escalates things quickly.

Step 2: Record Review

The investigator compares your certified payroll to your actual payroll records. They're looking for:

• Workers on certified payroll who aren't in your payroll system (ghost employees or misclassified subs)
• Hours on certified payroll that don't match time records
• Rates paid that are below the prevailing rate
• Missing fringe benefit payments

Step 3: Employee Interviews

The investigator may interview your workers (current and former) on site or by phone. They'll ask:

• What work do you perform?
• How many hours do you work per day/week?
• What is your hourly rate?
• Do you receive benefits?

Step 4: Findings

The investigator issues findings. If violations are found, you'll receive a notice of underpayment with a specific dollar amount owed.

Step 5: Resolution

You can:

• Pay the underpayment (plus penalties if applicable)
• Contest the findings through an administrative hearing
• Negotiate a settlement

How to Prepare Before an Audit Happens

The best time to prepare for an audit is before you get the call:

1. Reconcile monthly. Compare your certified payroll submissions to your actual payroll records. Fix discrepancies immediately.
2. Keep originals. Original time cards, not photocopies. Original certified payroll submissions with wet signatures.
3. Organize by project. All records for a specific project should be in one place (physical or digital folder).
4. Document classifications. When a worker's classification changes, document it. Keep apprentice registration cards on file.
5. Track fringe separately. Maintain a clear record showing fringe benefit contributions by employee, by pay period.

Common Audit Outcomes

In my experience with contractor clients:

• Clean audit (no findings): ~30% of cases. You did everything right. The investigator closes the file.
• Minor findings: ~50% of cases. Small calculation errors, missing documentation. Usually resolved with minimal back-pay.
• Significant findings: ~15% of cases. Systematic underpayment, misclassification, or missing records. Can result in substantial back-pay and penalties.
• Willful violations: ~5% of cases. Intentional fraud (fake certified payrolls, paying cash under the table). Criminal referral possible.

Don't Wait for the Call

Proactive compliance is always cheaper than reactive remediation. A monthly certified payroll review catches errors before they become audit findings.

Learn about our certified payroll compliance services →

Related reading:

• Certified Payroll: The Complete Compliance Guide →
• NY Prevailing Wage Rates for Long Island Contractors →
• Our fractional controller services →
• Schedule a consultation →

For help organizing payroll classifications, job assignments and certified reports, see my certified payroll support. The payroll records and submitted reports need to agree before an audit request arrives.