Full Audit Report — Pay App #3
Riverside Mixed-Use Development — Phase 2
Audited 5/15/2026, 2:32:00 PM
Total Exposure
$678,000
Risk Level
CRITICAL
Total Issues
7
Pay Application #3 for Riverside Mixed-Use Phase 2 presents critical overbilling risk totaling $678,000 across 7 findings. The most significant issues are an unsupported stored materials claim of $420,000 for structural steel with no documentation, and a fully front-loaded mobilization line billed at 100% while the project is only 28% complete. Arithmetic errors, round-number patterns, and sequencing inconsistencies on mechanical and plumbing lines indicate this pay application requires substantial correction before certification.
All 7 findings
Mobilization is claimed at 100% ($185,000) on Pay App #3 while the overall project is only 28% complete. Mobilization is typically spread across the project life — billing it out entirely in the first 3 pay apps extracts cash before the work is performed.
Action: Reduce mobilization to 40% complete ($74,000). Require contractor to provide a mobilization cost breakdown with receipts before certifying beyond 50%.
Stored materials claim of $420,000 for structural steel on a line item valued at $680,000 (62% stored, 0% installed). No stored materials certificate, delivery receipts, or insurance documentation was submitted. AIA G703 requires stored materials to be insured and stored on-site or in a bonded warehouse.
Action: Withhold the entire stored materials amount until contractor provides: (1) delivery receipts, (2) stored materials certificate, (3) proof of insurance naming owner as additional insured.
Retainage withheld on Mechanical line is $18,200 against a completed value of $242,000. At 10% retainage, the correct holdback is $24,200. The contractor has under-withheld by $6,000.
Action: Withhold an additional $6,000 on this pay app to bring retainage held to $24,200. Verify retainage calculation on all line items before certification.
Electrical Rough-In: Scheduled Value $310,000 × 65% complete = $201,500 + $0 stored − $110,000 previously billed = $91,500 this period. Contractor billed $103,000 this period — a $11,500 overstatement.
Action: Reduce this period payment for Electrical Rough-In by $11,500. Request contractor to resubmit corrected G703 with accurate arithmetic.
Sitework claimed at 95% complete ($342,000 of $360,000) on Pay App #3. However, foundation work is only 45% complete — sitework cannot be 95% done if foundation prep is still ongoing. Completion percentages are inconsistent with construction sequencing.
Action: Reduce sitework completion to 70% pending field verification. Request contractor to provide daily reports and site photos confirming claimed completion.
14 of 18 line items (78%) show exactly round completion percentages: 25%, 50%, 75%, or 100%. This pattern indicates estimated rather than field-measured completion and is a common indicator of front-loading or inflated billing.
Action: Require contractor to submit field measurement documentation (daily reports, photos, inspector sign-off) for any line item claiming a round-number completion percentage.
Plumbing Rough-In is claimed at 80% complete. Mechanical/HVAC rough-in (which plumbing rough-in depends on) is at 55% complete. Plumbing rough-in cannot logically exceed 55% if dependent work is still at that stage.
Action: Cap plumbing rough-in completion at 55% pending mechanical completion. Request sequential completion schedule from contractor.
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