Ensuring Compliance with Economic Benefit Reporting on Publicly Funded Construction Projects
In the business of publicly funded construction projects, accurate reporting of economic benefits is crucial to ensuring compliance with the requirements outlined by funding agencies. Whether it’s a federal, state, or local government entity, these agencies often require an independent Certified Public Accountant (CPA) to review and verify the economic benefits of a project. This process is essential for confirming that claimed expenses align with the funding agency’s guidelines for eligible economic benefits.
What is an Economic Benefit Report?
An economic benefit report is a document that outlines the financial impact of a construction project, specifically identifying how the project has contributed to the local or broader economy in terms of job creation, wages, and other quantifiable benefits. When a project is funded by public money, there is a need for transparency and accountability to ensure that funds are used as intended, and that the project is providing the promised economic benefits.
The agreement between the funding agency and the contractor will often include specific provisions that define what constitutes an eligible economic benefit. These benefits may include direct spending on materials, wages, and subcontracted services, as well as indirect impacts such as local employment.
The Role of the Independent CPA
A significant part of ensuring that a construction project meets the requirements of the funding agency is the independent review of claimed economic benefits by a CPA. As a third-party entity, the CPA’s role is to objectively assess whether the claimed expenses are consistent with the contractual definitions of eligible economic benefits. This independent review is not only a requirement but also a safeguard to ensure that taxpayer dollars are being used responsibly.
To perform this review, the CPA follows specific guidelines outlined in the agreement between the funding agency and the contractor. The independent CPA must review a sample of the expenses that have been submitted, ensuring the sample is statistically significant to efficiently test the data provided. The CPA also adheres to AICPA (American Institute of Certified Public Accountants) standards for performing such reviews, ensuring that the testing is thorough, appropriate, and compliant with best practices.
Eligible Economic Benefits and Testing Requirements
The eligible economic benefits of a project are clearly defined in the agreement between the funding agency and the contractor. These typically include the direct financial impacts such as wages paid to workers, local business spending, and other measurable aspects of the project. The CPA must ensure that these claims are backed by sufficient documentation and that all expenses classified as economic benefits fall within the guidelines of the funding agreement.
The CPA will generally use sampling techniques to select a statistically significant sample of expenses for review. They will then verify whether these expenses are supported by adequate documentation such as invoices, payroll records, and other relevant financial statements. The goal is to determine if the claimed expenses align with the definitions and requirements outlined in the agreement, ensuring that only eligible economic benefits are considered.
How FAZ Forensics Can Help
At FAZ Forensics, we specialize in providing independent CPA reviews for publicly funded construction projects. This specialization is demonstrated by our team’s experience supporting the project owner of a multi-billion-dollar renewable energy project in New York State. In this case, we helped the project owner meet the compliance requirements set forth in the project owner’s agreement with the New York State Energy Research and Development Authority’s (NYSERDA). Our team of experts is well-versed in the complexities of economic benefit reporting and other compliance requirements, such as prevailing wage compliance, set by public funding agencies. We work closely with contractors, government agencies, and other stakeholders to ensure that all expenses related to economic benefits are accurately documented, tested, and compliant with contractual agreements.
With our extensive experience in forensic accounting and compliance reviews, we provide the necessary assurances that the claimed economic benefits are valid, and that public funds are being used as intended.
Conclusion
The completion of an economic benefit report is a critical component of publicly funded construction projects. By hiring an independent CPA firm, contractors and funding agencies can ensure that all claimed economic benefits are properly accounted for and in line with the requirements of the funding agreement. At FAZ Forensics, we pride ourselves on our ability to deliver thorough, unbiased, and reliable reviews that meet the high standards set by public funding agencies. Contact us today to learn more about how we can assist you with your economic benefit reporting needs.