CPAs play an integral role in bonding for construction contractors

By Martha L. Perkins posted 09-06-2016 02:08 PM

  

Selecting an accounting firm is a critical decision for construction firms, particularly those looking to qualify for bonding for a contract. Certified Public Accountants (CPAs) and other trusted advisers play an integral function to a construction firm seeking bonding, says Jack Callahan, CPA, Partner and Construction Industry Practice Leader at CohnReznick and a participant on the NASBP CPA Advisory Council

 

Callahan says his firm takes its role as an independent CPA for its contractor clients incredibly seriously. A key focus of the CPA is presenting financial information in an appropriate format that is in accordance with generally accepted accounting principles, Callahan says.

 

The information must be part of an accurate, appropriate disclosure with the right form and content to be a reliable source for the surety and for the bank, he says.

 

The contractor benefits from using accounting firms with reputations for accuracy and strong customer service, which provides a "comfort zone" even when working on a project that might be outside a contractor's typical comfort zone, Callahan says. Timely and accurate work by the CPA makes the entire bonding process more seamless, he says.

 

Before the first meeting with a CPA, a contractor should consider whether the accounting firm is a member of the same industry associations and has otherwise made a commitment to understanding the sector, Callahan says.

 

"When selecting a new firm, do some due diligence and go with a firm that's a true construction accounting professional," he says.

 

A CPA firm also needs open lines of communication and a good working relationship with other trusted advisers--the accountant, attorney, bond producer, and banker--in order to work with those professionals for the contractor's long-term best interests, he says.

The CPA also should focus on a contractor's specific needs and set appropriate timelines for providing the necessary financial information, he says.

 

Compliance has become a crucial factor in construction, with governmental agencies increasingly targeting contractors for violations of requirements for minority and women-owned business enterprises, Buy American Act provisions, and a range of other issues, he says.

 

Callahan further says that sureties should ask contractors working for the first time on a federal contract or other large public project whether they are up to the challenge.

 

Sureties should ask what requirements must be met under the contract. They also should examine whether the contractor has the corporate structure and capital necessary to satisfy the requirements and defend against any challenges to their compliance mechanisms. For example, contracts of a certain size require a contractor to have an ethics compliance officer.

 

Doing due diligence before the first meeting and having a list of requirements will help get the working relationship off to a good start.

 

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