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Building a Stronger Construction Industry: 2023 CFMA Annual Conference Highlights

August 29, 2023

The 2023 Construction Financial Management Association (CFMA) Annual Conference brought together construction financial professionals from around the country. Held in Denver, CO July 15-19, the conference served as a premier gathering place for knowledge exchange and networking. Below are key takeaways that will impact the construction industry in the coming months.

Fraud and Internal Controls

Fraud prevention and implementing robust internal controls tailored to the needs of construction contractors is critical in our current environment. With the rise of fraudulent activities and their detrimental effects on business operations, it’s imperative for contractors to employ effective strategies to safeguard their financial and operational integrity.

The following suggestions should be considered to add extra precautions:

  • Limit who is involved with ACH payments.
  • Run personal credit checks on individuals with access to financial information.
  • Implement email notifications when there is a new vendor added to the system or when a change to an existing vendor is made.
  • Utilize positive pay with a pay e-match feature. This will match check number, amount, and date.
  • Develop a fraud and ethics policy, including a hotline for employees to anonymously express concerns.
  • During an acquisition, put the acquiree on your accounting system so that you have unrestricted access to their system.

Compliance Audits

If the DOL, ICE, EEOC, OSHA or another agency wanted to audit your company, are you prepared? Penalties for I-9 errors can be hefty and time-consuming and exceed $2,700 for each instance identified. The following tips and best practices can help identify issues and ensure your company is complying with requirements.

Policies and best practices for I-9 completion, updates, and verification of identity include:

  • The temporary policy allowing for remote completion of I-9 forms without physical inspection of documents ended July 31, 2023. Before Aug. 30, 2023, employers must physically inspect the documents for employees whose I-9 was completed during COVID-19 protocols.
  • I-9 forms should always be separately maintained from personnel files according to the USCIS. All current employees should have an I-9 form maintained and, after termination, the employee’s form should be retained for three years after the employee started work, or one year after their termination date.

Income Tax Strategies and Updates

Staying informed about the latest tax regulations and crafting effective tax strategies can mean the difference between financial stability and stress. It’s imperative for companies and individuals to navigate this complex terrain with precision and foresight.

Key tax strategies and updates to consider before year-end include:

  • Employee retention credit: Take caution if applying under the partial suspension test as it will increase the likelihood your company will be chosen for an audit. The ERC has been added to the IRS’ “Dirty Dozen” list of scams and fraudulent schemes.
  • Research and development: Under current law, R&D costs (Section 174 costs) incurred after Dec. 31, 2021 must be capitalized and amortized over five years, and over 15 years for foreign activities. While not beneficial for the individual taxpayer, this strategy will initially cause a tax deferral on a long-term contract.
  • Bonus depreciation: Only 80% of purchases are eligible for bonus depreciation in 2023. This continues to decrease by 20% every year until fully phasing out by 2027.
  • Year-end tax planning: Allocate year-end bonuses to completed jobs. This strategy could potentially reduce the liability related to lookback calculations.

WIP Schedule Best Practices

A WIP schedule is not just a project management tool; it’s the backbone of a contractor’s ability to execute projects efficiently, meet deadlines, control costs, ensure quality, and build strong relationships with clients and stakeholders.

Best practices contractors can employ to gain a more accurate picture of their WIP include:

  • In project documentation, include the names of the estimator and project manager. This information could provide useful insight into how a project manager and estimator work together.
  • When building the WIP, know how the contract was bid. Was it bid tight, or did the company win by a significant margin and potentially miss something? Make sure to have constant communication with the estimation department.
  • The WIP schedule can show leading indicators of distressed projects such as cost overruns, underbillings, outstanding change orders, out-of-scope work or claims, stored materials not billed, etc. Consider identifying and tracking these costs if they are not currently highlighted.

Economic Update

An in-depth look at the prevailing economic landscape offers predictions and analyses that prove instructive for decision-makers across the construction industry. Although there are indications that the U.S. is heading toward recession, the current strength and resilience of the economy has pleasantly surprised economists.

Borrowing costs are higher due to rising interest rates and excess inflation. Both the global and U.S. economy are weakening, and it is believed that recessionary conditions will continue for at least the next 12 months. However, certain segments are performing better than others, including public/governmental construction, grocery stores, and multifamily housing.

The State of U.S. Infrastructure

Significant current and planned infrastructure investments by the Biden administration prompted discussion about the vast amount of road construction happening in metropolitan areas. This observation led to some interesting and educational data including:

  • The U.S. spends less on infrastructure as a share of GDP than other developed countries.
  • Only about 25% of U.S. public infrastructure comes from the federal government, while European countries fund the bulk of infrastructure development at a national level.
  • The American Rescue Plan Act includes $1.9 trillion of funding planned, with $350 billion directly sent to state and local governments. This includes $30.5 billion for transit infrastructure grants, $8 billion for airport relief, and $1.7 billion for Amtrak.
  • The Infrastructure Investment and Jobs Act contains $973 billion of total funding over five years, including $550 billion for new investments in transportation, water, broadband, energy, environmental remediation, Western water infrastructure, and resiliency.
  • Overall, contractors specializing in infrastructure build-out and maintenance will be well positioned for years to come. Employing a stable workforce will remain the leading challenge.

Crafting a Solid Foundation for Your Financial Future

The topics covered during the 2023 CFMA Annual Conference provided construction financial professionals with a unique perspective on opportunities, challenges, and ideas for improvement to further enhance the future of the construction industry.

To discuss your thoughts and questions about the conference or any of the information shared, please contact a KSM advisor or compete this form.


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