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.