Independent Accountant s Report On Applying Agreed-Upon Procedures. Rock Springs Elementary School Replacement June 4, 2014

Transcription

1 Independent Accountant s Report On Applying Agreed-Upon Procedures Rock Springs Elementary School Replacement June 4, 2014 The School Board of Orange County, Florida Orlando, Florida We have performed the procedures enumerated below, which were agreed to by The School Board of Orange County, Florida ( OCPS ), solely to assist you in certifying the final contract value (contract dated March 28, 2011) to Turner Company (the Manager ), based upon the total costs of construction for the Rock Springs Elementary School Replacement (the Project ) and to certify certain other Project costs. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the party specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures applied and the related findings are as follows: 1. We obtained copies of the contract documents between OCPS and the Manager and read the documents noting items of financial and attestation significance, including provisions relative to the cost of work, fee arrangements, bonds and insurance, owner direct purchases, and the owner controlled insurance program ( OCIP ). 2. We inquired of the contracting parties to determine if there were any disputed provisions relative to the Project, or if there were any other unresolved disputes, including disputes between the Manager and their subcontractors. There were none noted. 3. We requested from the Manager a reconciliation of the final pay application to the job cost detail; however, despite repeated attempts, none was provided. As a result, no evaluation could be performed on the differences between the job cost detail provided by the Manager and the amounts contained in the final pay application. As a result, we reduced the job costs to reflect agreement with the final pay application. Please see Exhibit A.

2 4. We reviewed the construction costs, as documented by the Manager for compliance with the contract documents, including the following: a. vouched all costs in excess of $50,000 (as determined by phase totals on the Manager s job cost). for subcontract costs that qualify, we examined the subcontract and all the change orders to the subcontract, comparing the adjusted contract amount to the amount in the Manager s job cost and the total of the Manager s payments to the subcontractor. We noted approximately $13,000 of executed subcontractor change orders for which there was no supporting pricing documentation retained by the Manager. Additionally, we traced owner direct purchase amounts per OCPS to deductive change orders to the subcontractor to ensure that such subcontracts had been reduced for the purchases. The owner direct purchase log submitted by OCPS did not properly categorize all invoices to the respective subcontractor correctly. Therefore, CRI reviewed the owner direct purchase detail, determined the proper categorization to the subcontractors, and reconciled this list to the subcontractor deductive change orders without exception. for reimbursable labor costs, we chose a sample from the payroll line items in the Manager s job cost and traced each line item selected to time sheets and pay rate authorizations. CRI noted that Manager personnel, performing rough carpentry work, were paid between $30.61 and $37.82 per hour, excluding labor burden. for other items that qualified, we traced the charge to vendor invoices and evidence of payment. We examined supporting documentation for bond and subguard charges. b. reviewed the costing of change orders between OCPS and the Manager for conformity to the contract documents. We reconciled the owner direct purchases, per the ODP Log to deductive change orders to the guaranteed maximum price. Also, obtained the summary of OCIP results from the insurance carrier and traced the OCIP credits to deductive change orders. c. reviewed Manager labor burden percentage, if applicable, for appropriateness as well as conformity to the contract documents. The labor burden was established in the contract documents at 35%, we noted the Manager charged burden in excess of this percentage for its selfperformed labor. Please see Exhibit A. d. reviewed and inquired of the Manager regarding related party charges to the Project. The Manager self-performed approximately $35,000 of rough carpentry work, and $10,500 of IT service. Both of these scopes of work were originally to be performed by others, and neither was approved in writing by the Owner prior to the commencement of the work, as is required by the Agreement in paragraph The Manager also utilized a related entity, Turner Surety and Insurance Brokerage, Inc., as the broker for the subguard policy. CRI removed the fees associated with this transaction, please see the subguard adjustment on Exhibit A. e. reviewed posting dates in the job cost for charges incurred prior to the commencement date set forth in the contract amendments.

3 f. reviewed Manager fees and general conditions for conformity to the contract documents. Additionally, we reviewed the Manager s actual compensation for a sample of general conditions labor (included in the lump sum general conditions) for accuracy of base salary, application of contracted labor burden percentage, and personnel appropriateness to the Project. We found instances where the base rates included in the general conditions were higher than the actual compensation, however, overall the rates in the contract were higher than the actual rates by approximately.5% for the sample. g. reviewed actual contingency costs, and reviewed the contingency log for proper authorization and resolution of final balances. h. recalculated the contract guaranteed maximum price and actual costs of construction based upon the Manager s records. The results are shown in Exhibit A Project Costs. 5. Regarding the completion of the Project, we performed the following: a. we inquired and examined support that the Project was completed within the time constraints stated in the contract. b. we examined the Certificate of Substantial Completion and the Certificate of Final Inspection, signed by the Architect, verifying that the Project was completed in accordance with the contract. We noted that the date of the Architect s sign off on the Certificate of Final Completion was May 1, 2013, which is 25 days after the contractually required date of final completion (120 days after the date of substantial completion). No provision was noted stating liquidated damages for non-compliance with the date of final completion. 6. We obtained evidence of the SAP/Purchase order reconciliation from OCPS and ensured the final contract value to the Manager was accurate and reflected final pre-attestation adjustments. 7. We obtained a representation from the Manager that the job cost is complete and represents properly reimbursable and paid costs under the terms of the contract. The Manager also represented that all related party transactions have been disclosed to us. We were not engaged to, and did not, conduct an audit, the objective of which would be the expression of an opinion on the specified elements, accounts, or items. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of The School Board of Orange County, Florida, and is not intended to be and should not be used by anyone other than the specified party. Orlando, Florida June 4, 2014

4 Orange County Public Schools Rock Springs Elementary School Replacement Exhibit A - Project Costs Calculation of the construction cost plus fee: Manager job costs - Amendment #1 $ 8,136,507 Remove payments to associate partner (177,658) Remove non-billable items (27,802) Remove overage in self-performed rough carpentry work (10,522) Remove overage in general requirements (11,010) Subcontractor acceleration costs (15,000) Adjust labor burden to fixed rate on self performed labor (8,895) Adjust subguard calculation (13,388) Adjust subcontractor charges (3,488) Improper subcontractor charges (3,215) Subcontractor markups in excess of contractual limits (1,291) Remove repair items not properly backcharged (3,912) 7,860,326 Original lump sum general conditions - Amendment #1 540,000 Calculation of construction management fee: Original construction management fee - Amendment #1 569,996 Additional construction management fee through contingency 3,564 Reduction for material test failure and standby time (2,611) 570,949 cost plus fee $ 8,971,275 Calculation of adjusted guaranteed maximum price: Amendment #1 $ 13,449,810 Adjustments from change orders per the Manager (4,434,773) Adjusted guaranteed maximum price $ 9,015,037 cost, lesser of construction cost plus fee and adjusted guaranteed maximum price $ 8,971,275 Owner direct purchases 3,866,489 $ 12,837,764

5 Management Response to Audit Report for the Rock Spring ES Project ISSUES NOTED AREA MANAGEMENT RESPONSE Approximately $13,000 of executed subcontractor change orders for which there was no supporting pricing documentation retained by the construction manager. The $13,000 reference appears to be for changes between the CM and their subcontractors which were not presented to the owner for review and consideration. It will be stressed with all Contractors that their responsibility per their agreement is to maintain accurate and complete backup documentation of all invoicing from their sub-contractors. The owner direct purchase log submitted by OCPS did not properly categorize all invoices to the respective subcontractor. Manager personnel performing rough carpentry work were paid between $30.61 and $37.82 per hour, excluding labor burden. The labor burden was established in the contract documents at 35%, we noted the construction manager charged burden in excess of this percentage for its self-performed work. The construction manager selfperformed approximately $35,000 of rough carpentry work and $10,500 of IT service. Both of these scopes of work were originally to be performed by others and neither was approved in writing by the Owner prior to compliance will be summarized on an audit findings memo to Historically, the ODP information provided for project audit lists purchase order information by vendor with corresponding subcontractor name only. Comment noted. It is to be verified that selfperformed work is being performed by tradesman who are not over qualified for the task and thus avoiding labor rates that are higher than the norm for an item of work. compliance will be summarized in an audit findings memo to compliance will be summarized in an audit findings memo to In addition to what is stated in the contract agreement (Exhibit A Section 36.3), request for payment for self-performed work will be checked and verified against the allowed contract limits prior to approval of the relevant application for payment. 1

6 Management Response to Audit Report for the Rock Spring ES Project commencement of the work. The date of the Architect s sign off on the Certificate of Final Completion was May 1, 2013, which is 25 days after the contractually required date of final completion. Request for substituting subcontractors are to be vetted per Exhibit A Section 36.3 of the contract (per extract below). compliance will be summarized in an audit findings memo to The CM Agreement for Rock Springs ES does not allow for assessing liquidated damages relating to work during the final completion phase. Recent revisions to the agreement include the assessment of liquidated damages to the Management firm when failing to achieve final completion on the stipulated date. 2