Construction projects are one of the most visible and complex financial expenditures an organization can undertake. Before taking on a project of such magnitude, it is important to find a business partner you can lean on throughout the project’s lifecycle, from pre-construction planning to close-out documentation.
Our team of Certified Construction Auditors provides a unique combination of project management and fiscal analysis, adding a greater level of accountability for the project team and serving to increase potential savings. We have demonstrated experience in fast-paced environments and corporate cultures, providing you cost avoidance and recovery for the project.
We Support and Impact Growth
We recognize and understand the positive impact our role can have on an organization. Here is how we can support and impact your growth:
- The Right Experience – Our team brings substantial experience in construction and contract auditing, forensic accounting and data analysis.
- The Right Mix – We have over 20 St. Louis-based professionals on our Real Estate Advisory team. The team consists of highly credentialed professionals with designations such as: CCA, CCP, CPA, PE, Licensed Architect, LEED Green Associate, MBA and JD.
- The Right Focus – We understand and appreciate the accountability and responsibility that management has for overseeing and controlling the expenditure of its funds. As such, our procedures are designed to focus on what is important to your construction project. Brown Smith Wallace has a proven track record of construction audits that produce a return on our clients’ investments and, just as important, help them feel confident in the integrity of their construction spending.
- The Right Results – Typically, the recoverable costs we identify far exceed our fees. We average an ROI of $8:$1 – some project ROIs exceed $15:$1. We differentiate ourselves from our competitors by assisting in: reviewing contracts for language impacting the project financials; change order review and verification; and scope versus cost clarifications. These interventions can have a substantial impact on actual costs avoided and recovered.
- The Right Choice – Throughout the engagement, we will check in with you to continually refine our understanding and to confirm that our services are appropriately focused. We pride ourselves on our ability to adjust our priorities to help Owners not just with issue identification at project commencement, but also with resolution throughout the course of the project.
An Industry Leader
Brown Smith Wallace has substantial experience providing construction auditing services to hospitals, healthcare systems, colleges and universities, mixed-use industrial spaces, retail, major league sports facilities and manufacturing organizations. Our collaboration with such industry leaders as RGA and Mercy has brought about substantial results.
We understand that embarking on a major construction or capital project represents a tremendous growth opportunity for your organization, stretching your management team into uncharted territory. Our team is dedicated to ensuring the financial aspects of the project are monitored as closely as the structural aspects. Partnering with an expert like Brown Smith Wallace can make the difference between extensive cost overruns and delivering a project on time and within budget.
The life cycle of a development project
Our real estate professionals help owners and developers before construction begins. We work closely with management to look at the feasibility of the project and use our experience to identify associated risks and opportunities. We work with the project team to analyze financial risks, economic feasibility, entity structure concerns, tax issues and exit strategies.
We assist our clients in uncovering the various credits and incentives available at the federal, state and local levels to enhance the viability of a project. We focus on multi-state credit reviews and we help clients obtain the available credits as well as assist in structuring and negotiating incentive packages. These may include tax abatements, training grants, energy incentives or historic credits.
We work closely with the owner, project architects and engineers to help identify alternate approaches that can maximize tax attributes, such as depreciable lives and 179D energy tax incentives, for which we provide the required certifications.
Our engineers also provide software modeling of building energy use and consult on the cost effectiveness of various “green initiatives” to help management evaluate payback and ROI. In addition, we can work as an integral part of the construction team, assisting with the application of lean methodologies.
Our construction and finance professionals work with the building owner to analyze and fine tune the construction budget and the legal advisors to help craft a contract that meets the expectations of both the owner and contractor. Our team assists in the negotiation process to develop a favorable contract and identify critical tasks and areas of potential risk. Early involvement in a project often leads to a greater ROI for our clients. Our services include:
- Pre-execution review of contract language
- Pre-construction review of labor billing rates
- Comparison of labor billing rates to industry and regional standards
- Estimation of appropriate uplifts for tax burden and labor fringe costs
- Estimation of appropriate uplifts for insurance, small tools, etc.
- Creation and implementation of a contract audit process
- Implementation of a contract payment application structure, enabling efficient and effective periodic reviews
Our professionals work closely with the owners, as their advocate, assisting with financial oversight of the construction process. In this role, we provide an ongoing assessment of the financial and cost components of the project, including:
- Validation of labor cost billings and identification of non-compliant charges
- Validation of material purchases and identification of non-compliant charges
- Reconciliation of subcontractor bid process with the contract
- Analysis of equipment lease billings for non-compliant charges
- Review of general liability, contractor default insurance, and other applicable insurance and bond charges
- Validation of lien waivers in accordance with contract requirements
- Review of total billings for duplicate payments
- Reconciliation of actual costs to estimated costs
In the closeout phase, we work to ascertain whether contract requirements are fulfilled, and help to streamline the final closeout process. We focus on:
- Appropriate release of liens and satisfaction of contract conditions
- Acceptability of closeout reporting and accounting items
- Appropriate disposition of contingency and allowance funds
- Reconciliation of overhead charges and labor burdens
- Accounting for materials and properties to be provided to or returned to the owner
- Reconciliation of the final billing to actual costs
- Assistance with the recovery process of monies owed to the owner from the contractor
The closeout period is also when we perform cost segregation analyses and 179D energy efficiency certification studies. Should events arise where there is a dispute, our team of construction professionals, along with our team of experienced litigation support specialists, are ready to assist in working toward an amicable settlement.
On-going Tax and Audit Services
Our deep expertise in the real estate industry includes proven results for many satisfied clients in the following areas:
- Entity planning and implementation
- Credits and incentives, including historic rehabilitation tax credit planning and audits
- Real estate tax; international and US tax; and federal and multi-state tax reporting, including sales and use taxes
- Like-kind and involuntary conversion tax deferred transactions – Section 1031 and 1033
- Outsourced accounting needs
- Divestiture planning
- IRS audit representation
- Financial statement audits
In the justification of any capital expenditure, there are assumptions regarding the costs and benefits that will be realized. An ROI lookback compares those assumptions to what is later realized. These analyses are typically performed to help management:
- Improve the capital project justification and approval process, identifying areas where the process may be improved – or pitfalls may be avoided – for future projects
- Identify opportunities where benefits are not being fully realized to help improve the overall ROI on the project
- Update the performance projections of the audited project to aid in making management decisions or budget projections for the audited project
- Improve procedures, methods, controls and resource utilization for the implementation of future projects
These analyses focus on the financial and operational aspects of the project, but also encompass a broad-based review of the relevant business assumptions, tactics and ramifications. The analyses attempt to identify the root cause of problems identified.
Analyses may be performed at any time after the project performance has stabilized. For larger projects, this is generally after one full year of operations. Follow-up evaluations may be warranted for projects that experience changing performance over time.
Brown Smith Wallace has assisted the Internal Audit Section of the City of St. Louis with various construction audit projects. These projects have focused on reviews of contracts, payment applications and change orders. These construction audits have improved internal controls within the city, and have subsequently helped save taxpayer dollars. We value the expertise and personalized service the Brown Smith Wallace team has provided us.
City of St. Louis, Internal Audit Section
Mohammad Adil, Audit Supervisor
In addition to finding significant savings on Mercy construction projects, the Brown Smith Wallace Construction Audit team understands our values and culture – treating vendors as Mercy would. The team members have broad skillsets and deep industry experience, bringing us a concentration of industry best practices.
Geralyn Lynch, Director Facilities Finance
Since 2011, Brown Smith Wallace has assisted the St. Louis Metropolitan Sewer District (the District) with performing its ongoing internal audit function, which includes procedures to monitor, review, and test the activities of a $4.7 billion system improvement initiative to improve water quality and alleviate wastewater concerns that were identified and addressed by the EPA through a Consent Decree that went into effect in April of 2012. Their team has provided significant expertise in the areas of construction auditing that include engagements addressing construction and design contracts, payment applications, change orders, overhead rates, and safety programs. Their firm's assistance and expertise has greatly helped the District improve and strengthen the processes and controls over this very large system construction and improvement initiative. These efforts have been very effective in assisting Management in their efforts to adequately protect the assets of the District, thereby protecting the interests of the District’s stakeholders, which is vitally important. Brown Smith Wallace is a valuable partner and expert in construction audit services, and the District greatly values the services they have provided.
St. Louis Metropolitan Sewer District
Todd Loretta, Internal Audit Administrator