Authority audit finds billing and invoicing errors in Merced–Madera work; recommends stronger oversight

The chief auditor reported to the California High-Speed Rail Authority Audit & Finance Committee on March 4 that audits of recent procurements and a contract with Stantec Consulting found mostly compliant billing but a set of accounting and administrative errors that the office recommended be corrected before final contract execution.

The auditor said the pre-award review of a request-for-qualifications for right-of-way engineering and surveying for the Merced–Bakersfield section revealed miscalculated loaded hourly billing rates and misstated proposed rates for the prime and several subconsultants. "The cost proposal had some miscalculated loaded hourly billing rates," the auditor said, and noted that fee proposals ranged from about 10–15% while the agreement specified a 9.5% fee. The auditor told the committee those items were provided to the contract manager and procurement team and adjustments were made before executing the contract.

The office also presented an in-contract compliance audit of the Stantec agreement for the Merced–Madera project, covering 10/04/2022 through 03/06/2025. The auditor said roughly $63,000,000 had been reimbursed on the contract and the audit sampled about $61,000,000. "We found that the costs were supported, except for $731,436," the auditor said.

The audit detailed several administrative weaknesses: invoices were not always submitted within the 30-day window required by the agreement, some subconsultants were not consistently paid within the seven-day period the prime was expected to adhere to, and some subconsultant agreements lacked explicit language clarifying reimbursement of actual costs. The auditor said some subconsultants did not bill their actual indirect costs (about $700,386 in total) because of a COVID-era federal loan forgiveness accounting issue that caused duplicate reimbursement, and one firm lacked time sheets supporting hours, which led auditors to identify $30,202 of overbilled direct labor costs.

Auditors recommended the authority expand oversight and clarify subconsultant payment clauses; Stantec submitted a draft agreement change during the audit intended to address those concerns. Committee members characterized the findings as relatively minor in the context of the multiyear, multimillion-dollar contracts but noted the cash-flow importance of timely payments for smaller firms. One member said the questioned amounts "may be a small amount in the total scheme of things, but to a firm that’s a lot of math." The auditor responded that the overpayments did not appear intentional and that the audit team will work with subconsultants and staff on future audits to ease information requests.

No formal committee action was taken at the meeting on the audit report; staff said adjustments had already been communicated to procurement before contract execution and that contract managers will follow up with the prime and subcontractors on payment and documentation issues.