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Construction Tools & Equipment

Here are examples from industry publications, CRW archives, and AMG archives

 

Recoveries   Savings

Defined as immediate monetary resolutions of audit issues by means of a cash refund, discount, credit memo, offset against a concurrent calim from the other party, or receipt of materials or services as compensation.

Appear in Green in the examples table

 

Defined as immediate monetary resolutuions of issues plus quantifiable, monetary savings arising from satisfactory resolution of the issue. Long term savings are generally reduced to net present value.

Appear in Blue in the examples table

     
Potential Savings   Losses

Issues for which savings likely occurred, or will occur, for which the ultimate resolution is undetermined or unsettled.

Appear in Black in the examples table

 

Issues for which avoidable losses were incurred.

Appear in Red in the examples table

 

Issue

Finding

Result

A crane rental agreement called for the rental of various cranes at hourly rates, inclusive of an operator. The cranes were not to be billed while idle.

Review of equipment billings and operator timecards indicated that cranes were billed for a weekly minimum, irrespective of hourly use and that the crane hours exceeded operator hours.

 

The client asked for, and received, credit for a portion of the excess billing

 

$101,000 Recovery

 

CRW Archives, 1998

Analytical review of small tools purchases indicated that tools expense was growing while capital spending was declining.

Auditors recommended inventory, utilization, and other internal controls adopted by management.

Annual costs of small tools fell by more than $1 MM.

 

$1 Million Savings

 

Source: Internal Auditor, 8/95, p.78 (contributed by San Diego Chapter of IIA)

A contractor called upon to perform emergency repairs after a fire converted the contract with the owner to a fixed price of $19 million.

The internal auditor reviewed the supporting documentation used to arrive at the fixed price and found inflated costs, including equipment charged out at 2000 miles when the actual round trip was only 100 miles

 

All payments to the contractor were suspended until the agreement was restructured.

 

Source: Internal Auditor, 4/99, p.75 (contributed by Mount Diablo Chapter of IIA)

While a maintenance contract contained hourly, weekly, and monthly amounts, it also required for the lowest rate to be applied to the rental period.

The auditor noted that in every instance the highest rate, the hourly rate, had been charged although lower weekly or monthly rates applied to the transactions.

 

The company was able to secure recovery from the contractor.

 

Source: Internal Auditor,10/96, p. 73 (contributed by the Tucson Chapter of IIA)

The equipment rental agreement called for the company to make routine repairs and maintenance. Major repairs were the lessor's responsibility.

The internal auditor found that the lessor had billed the company for engine rebuilds.

The company recovered $4 thousand.

 

$4,000 Savings

 

Source: Internal Auditor,p.64 (contributed by Dallas Chapter of IIA)

The contractor separately purchased and billed small tools covered by another contract.

The auditor reviewed the various contracts with the contractor and discovered the duplicated costs.

The owner recovered the duplicated tools cost that had been billed from the contractor.

 

$6,375 Recovery

 

Source: AMG archives

The basis for small tool and field consumable billings was overstated.

The auditor reviewed the contract provisions and determined that certain labor costs should have been eliminated from the rental base.

The contractor refunded the excess amount collected from the owner.

 

$45,880 Savings

 

Source: AMG archives

Equipment was rented from a major subcontractor who was performing a cost-plus subcontract. The rates charged were from the subcontractor's "standard' Hourly rate schedule.

The auditor performed a review of equipment rentals for the project. It was discovered that the rental rates charged by the subcontractor substantially exceeded those available from third party rental companies, allowing full cost recovery ion approximately 6 weeks.

 

The auditor recommended that the subcontractor be paid at market rates for equipment rental.

 

$15,425 Recovery

$45,000+ Savings

 

Source: AMG archives

The company purchased construction equipment to save rental costs, moving the equipment between project sites. In some instances the company would purchase equipment from contractors.

The auditor secured an equipment inventory and sought to account for all equipment purchases.

The results of the review were the discovery of duplicate purchase orders for the same equipment and incidences of missing equipment.

 

$7,650 Recovery

$35,000 Lost Equipment

 

Source: AMG archives

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