G702 / G703 Audit Report
Riverside Office Complex — Phase 2
Pay Application #7 · Summit Construction Group · GC Contact: Michael Torres, PM
Total Exposure
$330,830
7 findings · HIGH risk
Executive Summary
Pay Application #7 from Summit Construction Group contains 7 findings with a combined dollar exposure of $330,830. The most significant issue is a retainage calculation error that has released $40,180 in excess of contractual entitlement. A structural steel overbilling of $75,500 — exceeding the approved change order value — represents the highest-dollar discrepancy. Additionally, $124,000 in stored materials has been billed without the required conditional lien waivers, creating double-payment exposure. Do not certify this pay application until findings F001–F003 are resolved.
Findings — 3 of 7 shown free
Retainage Release Discrepancy
Scheduled value: $2,450,000. Percent complete certified at 94%. Per contract, retainage should be held at 6% of certified amount = $138,180. Amount withheld on Pay App #7: $98,000. Discrepancy: retainage is under-withheld by $40,180, meaning contractor is receiving $40,180 in excess of contractual entitlement this period.
Recommendation
Request updated Schedule of Values with corrected retainage calculation for line items 01 through 06. Do not certify payment until retainage is reconciled. Review prior pay applications for cumulative retainage shortfall.
Material Overbilling — Structural Steel
Line item 03 (Structural Steel Installation): $387,500 billed to date. Cross-reference against approved change order CO-14 shows revised contract value for this line is $312,000. Cumulative overbilling: $75,500. No supporting documentation provided for the excess billing. Change order CO-14 was signed April 2, 2026.
Recommendation
Request lump-sum breakdown and supporting delivery invoices for line 03. Withhold $75,500 from certification pending documentation. Confirm CO-14 is the most recent approved change to this line item.
Stored Materials Without Conditional Lien Waiver
Line items 07, 08, and 09 bill $124,000 for materials stored off-site (mechanical equipment, HVAC units). Per AIA G702 guidelines and the project contract §9.3, payment for stored materials requires a conditional lien waiver and proof of insurance for the storage location. Neither was submitted with Pay App #7. Risk: payment creates double-payment exposure — if materials are not subsequently installed, owner has paid for goods without lien protection.
Recommendation
Require conditional lien waiver for all stored materials before certifying payment on lines 07–09. Request certificate of insurance naming the project owner for the off-site storage location.
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