Butkovitz: Construction Company Overcharged City for Questionable Employee Time

Audit Date: February 3, 2010
Audit Categories
  • Investigation
Controller: Alan Butkovitz

Executive Summary

For Immediate Release:
Feb. 3, 2010

Contact: Harvey Rice

Butkovitz: Construction Company Overcharged City
for Questionable Employee Time

Billed for numerous employees working simultaneously at different locations


PHILADELPHIA – City Controller Alan Butkovitz today released a special audit of City contracts for the Pannulla Construction Co., Inc. which found the company overcharged the City $167,815 for unsupported labor costs — including employee time that could not be substantiated or documented.

“After we found a number of billing discrepancies during a routine review of the company’s contracts with the city, enough suspicion was aroused to dictate an expanded review of the company’s practices,” said Butkovitz, in referring to the Philadelphia construction company that has been doing business with the City since 1997.

The Controller’s Office found Pannulla had submitted payment requests for employees who did not perform work on City projects. This resulted in Pannulla overcharging the City $75,892.

“All public works contract vendors are required to submit copies of certified payroll documents to the City supporting labor charges in compliance with prevailing rate requirements,” said Butkovitz.

Pannulla charged the City for labor by positions, but the information provided on numerous payment requests did not match employee names and positions submitted to the City on certified payrolls.

“The City was charged for a worker at a much higher pay scale, and the work was performed by a person making much less,” said Butkovitz. “We also found Pannulla had billed the City for work supposedly performed by employees who were reported to be simultaneously working on a number of jobs at different locations, all at the same time.”

“These discrepancies occurred because of insufficient oversight within the Capital Program Office and a lack of daily site inspections by the City’s Department of Public Property.”

Other findings in the audit include overcharges for direct and indirect labor costs. This included Pannulla improperly calculating total labor costs.

“Under City Code, these findings should preclude Pannulla from bidding on and participating in City projects for three years from the date of the determination of contractual violations,” said Butkovitz.

Since 1997 until May 2008, the City has paid Pannulla $10.5 million for services performed. The special audit was limited to two contracts between Panulla Construction and the City.