Construction Auditing

Question Your Contractor

· Who qualifies subcontractors and suppliers as vendors, and who reviews pertinent financial information from them in order to determine financial and performance viability in lieu of requiring performance and payment bonds?

· When was the last time the subcontract agreement was reviewed by counsel for proper terms regarding Prompt Pay acts, pay when paid clauses, builders risk and subcontractor insurance requirements, claims notification and settlement options, and indemnification provisions.

· Does anyone review subcontractor performance and payment bonds in order to determine the type of bond they have legally, who the bond covers, and the financial strength of the surety?

· Does anyone know what to look for on insurance forms received from the subcontractor's or supplier's insurance agency or carrier?

· What does one look for when they get a copy of the owner's builders risk policy? Does the contractor need DIC or DOC coverage? When do they decide to look at the policy (i.e., when the hurricane is located just days or hours away?)

· What are the provisions of the owner's contract, and which can get my organization in trouble by non-compliance?

· What are the operational procedures and guidelines for closing out each month's job cost and communicating cost information to the field for estimating cost to complete?

· Are accounting and operations singing the same hymn out of the same hymnbook (i.e., is there an accounting calendar in place for closing, updating and publishing financial information and do accounting and operations understand it?)

· What is the process by which the cost to complete information is reviewed by accounting once it has been updated by field operations?

· When was the last time an accountant went through a cost report with a project manager?

· Does accounting review under and overbillings with project management in order to determine whether gross profit is properly stated?

For some internal audit concerns when performing construction audits, click here. Let us know if you need some assistance in performing construction audits.