Thoughtware

Article 12/13/2018

Think Your Owner’s Representative Is Auditing? Think Again.

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Many owner’s representative firms may indicate to an owner that they serve in an audit capacity and perform actual audit functions. The owner’s representative may perform reviews and approve change orders, payment applications, project schedules and so on. Because of this, owners may not engage outside, i.e., independent, audit firms to review financial aspects of construction projects. However, the procedures performed by the owner’s representative could be limited and may not look deep enough to find some systemic (financial) issues.

It’s important to note owner’s representatives, like other construction contractors and oversight consultants, are part of the construction process itself, and therefore aren’t independent. In fact, some might argue project management staff put their best interests first and the owner’s second, because the owner’s representatives and other oversight staff don’t want to upset the contractors they might work with again. Hiring an owner’s representative often makes sense due to its ability to manage and execute a construction project on behalf of the owner, particularly when an owner doesn’t have certain in-house industry knowledge, time or resources to perform construction management tasks.

One consideration, however, is that some owner’s representative’s staff members may not have received training on audits and internal controls. Some also may have limited experience with evaluating processes in accordance with the Institute of Internal Auditors (IIA) International Professional Practices Framework (IPPF).

To help make the right decision for your company, consider hiring an independent third party to assess the financial aspects of your construction project while leaving the project management responsibilities to the owner’s representative. Benefits of having an independent third party include:

  • Independence from the project (not biased)
  • Prioritized owner's best interest (not the interest of the owner’s representative)
  • Knowledgeable subject matter experts
  • Fully trained staff who understand construction procedures and controls
  • Fewer conflicts and litigation due to a well-managed and monitored project

For more information, contact Adam or your trusted BKD advisor.


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