Construction audit of a $325M healthcare bed tower program
Representative and anonymized experience completed prior to joining HKA
A confidential healthcare provider engaged the team to independently assess costs associated with the construction of a new $325 million bed tower and determine whether contractor billings complied with contractual requirements and were properly supported.
The audit reviewed project expenditures, markups, taxes, and reimbursable costs, identifying approximately $550,000 in recoverable amounts from billing inaccuracies while providing recommendations to enhance cost controls, contract compliance, and oversight of future capital projects.
Brief
A confidential healthcare provider in Texas engaged the team to perform a construction audit of a newly constructed bed tower with a total project value of approximately $325 million. The client sought an independent assessment of project costs and contractor billings to validate compliance with contract requirements, identify recoverable costs, and strengthen oversight of significant capital expenditures. The engagement focused on evaluating the accuracy and allowability of project charges, including markups, taxes, and reimbursable costs. Through a detailed review of project financial documentation, invoices, payment applications, and contract provisions, the audit provided the client with enhanced visibility into project expenditures. It also identified opportunities to recover costs and improve billing controls on future capital programs.
What we did
The audit team conducted a comprehensive review of project contracts, change orders, payment applications, supporting invoices, cost records, and related financial documentation. Audit procedures were designed to assess compliance with contractual requirements and identify billing inaccuracies throughout the project lifecycle. Particular attention was focused on markup calculations, duplicate billings, and the application of taxes charged to the project. The team compared billed costs against contract provisions, validated supporting documentation, tested selected transactions, and quantified identified exceptions. Detailed analyses were developed to support each finding and facilitate discussions with project stakeholders regarding the nature and financial impact of the identified issues. The review resulted in a clear inventory of recoverable amounts and opportunities to strengthen project cost controls. The engagement identified approximately $550,000 in recoverable costs associated with non-compliant billing practices. Significant findings included markup miscalculations, duplicate billings, and the inappropriate application of taxes to a tax-exempt healthcare organization. In addition to the financial recovery opportunities, the audit provided management with greater transparency into contractor billing practices and project cost administration. The findings enabled the client to pursue recovery of identified amounts, enhance oversight procedures, and strengthen controls surrounding invoice review and contract compliance. The engagement also highlighted process improvements that could be applied to future capital projects to reduce risk, improve financial stewardship, and support more consistent administration of construction expenditures.
Outcome
The engagement identified approximately $550,000 in recoverable costs associated with non-compliant billing practices. Significant findings included markup miscalculations, duplicate billings, and the inappropriate application of taxes to a tax-exempt healthcare organization. In addition to the financial recovery opportunities, the audit provided management with greater transparency into contractor billing practices and project cost administration. The findings enabled the client to pursue recovery of identified amounts, enhance oversight procedures, and strengthen controls surrounding invoice review and contract compliance. The engagement also highlighted process improvements that could be applied to future capital projects to reduce risk, improve financial stewardship, and support more consistent administration of construction expenditures.
