Construction Auditing

Construction Audit Preparation: What You Need to Know

Curt Plyler, CFA, CCA, Principal

Construction Audit Preparation: What You Need to Know

When undertaking a construction audit, utilizing a consistent approach will enable a more effective and efficient review. Before engaging a CM/Contractor, the first step should be obtaining the complete construction contract. The construction contract will be comprised of the agreement, exhibits,
workbooks, amendments, and other items. The agreement, itself, should note which documents comprise the contract agreement and their corresponding priority in the event of an inconsistency.

While the entire contract should be reviewed, specific focus should be on the sections relating to reimbursable and non-reimbursable costs. Understanding these terms will enable you to customize a standard, initial documentation request to a specific project. Obtaining a copy of the CM/Contractor’s
technical proposal and/or GMP is also recommended. While often not being an official contract document (though it can be, if specified), this proposal can be useful in providing background information and further clarifying detail around the CM/Contractor’s billing methodologies and intentions.

Once your documentation request is ready, you should prepare a timeline for completion to meet your
organization’s (i.e., the Owner) objectives. The key events are as follows:

 Receipt of documentation from CM/Contractor
 Field Audit with CM/Contractor
 Receipt of follow-up documentation from CM/Contractor
 Publication of an initial draft report to share with the Owner

Obtaining the documentation from your CM/Contractor (as opposed to the Owner) is preferred, as their records are often more extensive than records available from the Owner. The intent should be to utilize the CM/Contractor’s existing support to fulfill the documentation request. Not only is this approach
faster, it also eliminates some of the skepticism that results from receiving documents created specifically for the audit. A kickoff meeting should then be scheduled with the CM/Contractor to review the documentation request and confirm their agreement with the timeline for completion. The Owner’s
presence at this meeting is recommended, as it will signal their support for the engagement.

At this point, the audit will now be underway. Going forward, alert both the Owner and CM/Contractor to any findings and/or other issues inhibiting the audit’s progress. While each project is unique, the more this process can be collaborative, with open dialogue, the greater the chance the audit will be
completed efficiently.