Construction Billing and Payment Verification Flashcards
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Read the first 6 Construction Billing and Payment Verification flashcards as text
Which procedure helps a construction auditor verify that labor costs on a cost-plus project reflect actual hours worked on that project?
Answer: Reconciling certified payroll records to timesheets and field daily reports
Reconciling payroll records to independent timesheets and field daily reports confirms labor hours are genuine and attributable to the audited project.
A contractor bills the owner for equipment rental at rates higher than the contractor's actual internal rates. This is best identified by:
Answer: Comparing invoiced rates to industry standard equipment rate publications (e.g., AED Green Book)
Industry rate guides like the AED Green Book or Blue Book provide market benchmarks; rates significantly above these references signal potential overcharging.
When a construction contract includes a guaranteed maximum price (GMP), an auditor should verify that savings below the GMP are:
Answer: Shared or returned to the owner per the contract's savings clause
GMP contracts typically include a savings clause defining how underruns are split between contractor and owner; the auditor must confirm distributions follow this clause.
Which document provides a construction auditor with the most reliable evidence that a subcontractor was paid for work included in the general contractor's pay application?
Answer: Cancelled check or ACH payment confirmation to the subcontractor
A cancelled check or confirmed ACH transfer directly evidences that the general contractor actually transmitted payment to the subcontractor.
An auditor discovers that retainage was released to the general contractor for a subcontractor's scope before the subcontractor's work was substantially complete. This is:
Answer: A material control deficiency exposing the owner to financial risk
Releasing subcontractor retainage before substantial completion removes the owner's financial leverage to ensure defect correction and complete work.
In construction contract auditing, a 'pencil copy' of a pay application refers to:
Answer: A preliminary draft submitted for owner/architect review before formal submission
A pencil copy is an informal draft pay application submitted for review and comment before the contractor issues the formal, certified version.