Audit of Contractor Compliance with the Chicago Base Wage Ordinance

The Office of the Inspector General (OIG) conducted an audit to determine if contractors and subcontractors complied with the Chicago Base Wage Ordinance. Similar to living wage laws adopted by cities nationwide, the purpose of the Ordinance is to ensure that City contractors and related subcontractors pay their employees in excess of poverty-level wages, both as a matter of principle and as a means of stimulating the local economy.

Specifically, we reviewed wages paid by four security guard and janitorial service prime contractors identified by the Department of Procurement Services (DPS), as well as those contractors’ subcontractors. OIG found that while seven of the eight contractors and subcontractors consistently paid their employees the hourly base wage rate required by the Municipal Code of Chicago (MCC) § 2-92-610, one subcontractors paid 12 employees between $0.02 and $0.03 less per hour. Those underpayments, however, were retroactively paid.

OIG also found, however, that the City lacked a standardized process with sufficient controls to provide reasonable assurance that prime contractors and subcontractors comply with the Chicago Base Wage Ordinance. DPS stated it relies on contracting departments to ensure base wage compliance as part of their contract management and monitoring practices. DPS acknowledged, however, that managing departments do not generally collect certified payroll records from contractors and that, in fact, information collected varies widely from department to department. DPS also acknowledged that managing departments may approve annual price increase requests without inquiring about wages or receiving confirmation that the contractor is in compliance with the Ordinance. Therefore, OIG recommended that DPS move the City to adopt a more proactive approach to promoting wage rate compliance and that DPS provide guidance on monitoring wage rate compliance to all departments that manage contracts with wage requirements. Such guidance should include specific procedures that departments should use to confirm proper base, overtime, and training wages paid by both prime contractors and subcontractors. Finally, OIG recommended that DPS should implement procedures to determine whether departments are effectively monitoring wage rate compliance.

In response, DPS promptly sent a memorandum to City department heads reminding them of their role in monitoring contractor compliance and requesting that departments alert DPS to any irregularities discovered. DPS also met with the Mayor’s Office, Department of Finance, Department of Law, and user departments to discuss methods for actively monitoring contractors’ wage rate compliance from which DPS advanced a recommendation to standardize invoicing requirements and review procedures across user departments.

*originally issued November 2017, but retracted and replaced in July 2018 with this corrected report.