Area Office Responsibility for MOH

Contract MOH payments are monitored or audited as follows:
  • cursory reviews,
  • quarterly audits,
  • process reviews, and
  • contractor record audits.
The Contractor must allow Department personnel immediate access to MOH records for all spot checks and process reviews.
Cursory Reviews
. Review MOH payment requests received from the Contractor to ensure that materials are eligible for MOH payment. Request an explanation from the Contractor for any apparent discrepancies, such as quantity or price irregularities. The monthly MOH payment request must be reviewed and initialed by the Project Manager, Project Engineer, Assistant Area Engineer, or Area Engineer.
Quarterly Audits
. Audit one material item per quarter that has reached the 60-day threshold. If issues are found, increase the number of items verified. On the monthly MOH payment request, indicate which item was checked and initial the document to show that the audit was completed and document the reviewer. In addition to these random audits, conduct audits for cause or as directed by authorized personnel.
If an audit indicates the need for corrective action, the affected Contractor request for MOH payment may be corrected. Notify the Contractor in writing of any corrections made.
If an audit indicates that the Department overpaid the Contractor for MOH, correct the overpayment with a supplemental progress estimate or with the next monthly estimate. Make this correction before making any additional payments to the Contractor.
Use the guidelines listed in the following to conduct audits:
  1. The engineer or their representative performs audit at the Contractor's office.
  2. Check eligibility of requested material: nonperishable, test report issued (when required)
  3. Review documentation to verify quantity and manufacturer
  4. Review Contractor's producer for determining plan quantity for material
  5. Review Contractor's procedure for determining how much material was used each month
  6. Verify Contractor has paid invoices (for all material request for payment) dated within 60 days of receiving MOH payment as part of the quarterly audits.
  7. Verify material are properly stored in approved stockpiles.
Process Reviews.
Conduct process reviews to ensure that the Contractor’s internal process satisfies contract MOH requirements (e.g., record-keeping system, site reviews, or measuring procedures.) The Contractor must have sufficient checks and balances in place to ensure the accuracy of requests for MOH payment. These reviews may be initiated at any time by any appropriate Department personnel, the Federal Highway Administration (FHWA), or any other party with a vested interest in the Department’s financial dealings.
If a process review indicates the need for corrective action, notify the Contractor in writing of corrective actions needed. Consider conducting a complete audit of the Contractor’s records and record-keeping system if the process review indicates serious concerns or possible noncompliance with contract MOH requirements. (Refer to “Contractor Record Audits” for additional information.)
Contractor Record Audits.
 Normally, the Department audits Contractor records for cause only; however, the Department retains the right to audit Contractor records at any time to ensure contract compliance. The following table lists examples of possible causes for initiating an audit of the Contractor’s records.
Possible Causes for Auditing a Contractor's Records:
  • the Contractor is suspected of submitting erroneous, inflated, deceptive, or fraudulent requests for MOH payment.
  • an audit of the Contractor's MOH quantities indicates the possibility of a large-scale error.
  • a process review indicates a major flaw in the Contractor's record-keeping system.
  • the Contractor is suspected of willfully neglecting to comply with any of the MOH contract requirements.
  • the Contractor has indicated, or it is suspected, that the Contractor will file for compensation and use MOH records to support the claim.
Once approved, send a written notice via email or certified mail advising the Contractor of the impending audit. Specify in the notice that the Contractor must allow the Department access to conduct the audit within 7 days of receipt of the notice.
The district office will coordinate the audit with all parties involved. Parties involved may include other Department personnel, the FHWA, or any other party with a vested interest in the Department’s financial dealings.
Ensure that all parties involved in the audit are provided with copies of the audit findings. The district office is responsible for ensuring that any corrective actions identified are implemented.