Volume 44, Issue 10 - October 2009


Webinar Examines Contract Terms to Mitigate Fraud During Payment

When it comes to financial review and auditing of construction documents, there are terms and clauses that can be included to help mitigate fraud. That was the message conveyed during a webinar hosted by Grant Thornton titled “Construction Contract Terms to Mitigate Fraud During the Payment Process.” Presenters were Jim Schmid, CPA, CFE with Grant Thornton, and attorney Dennis Schultz, Esq., with Dawda, Mann, Mulcahy & Sadler PLC.

In discussing payment application forms and supporting documents, Schmid said there are a number of common problems. These can include unusual, inconsistent or incomplete pay application forms; a lack of cost back up; a lack of field documentation; and missing attachments (such as a lien waivers). In order to mitigate such problems, presenters encouraged the use of payment forms such as the AIA G702 and G703. G702 allows the contractor to apply for payment and the architect to certify that payment is due, while G703 breaks the contract sum into portions of the work in accordance with a schedule of values required by the general conditions.

Schultz also suggested that contract terms specify daily construction reports. “In the event that there is suspicion that the building is improper … outside or inside auditors will need the daily construction reports to determine, for example, whether a piece of equipment for which a billing is being submitted is 1) on the project, and 2) that there is construction activity reported in the daily construction report that reasonably can be tied to the utilization of that piece of equipment,” Schultz said.

When it came to the discussion over some of the accounting problems related to change orders, Schmid said the number-one concern is work being performed before the price is negotiated.

“This is simply going to happen … no matter how adamant you are,” Schmid said. “While you need to have the scope defined before you can do any work, you can still be arguing over price while the work is being done. If this is happening make sure [you] are stipulating that [you are] collecting field information on that change order activity so that as you continue the negotiation of price … you can maybe settle on something related to cost and you’ve gotten all the cost documentation inplace that will give you an estimate of that actual cost.”


USGlass and AAMA Launch New Website for Contract Glaziers
USGlass Magazine, together with the American Architectural Manufacturers Association (AAMA), has launched a new website dedicated to providing news and information to contract glaziers: www.usglassmag.com/contractglazing.

The new site includes information ranging from business news to company announcements to coverage of industry events. The site also includes a selection of in-depth features from USGlass Magazine targeted specifically toward contract glaziers, as well as one-on-one video interviews with professionals in the industry. The site will be updated continuously, and the daily USGNN.com™ newsletter will announce the latest posts.

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