In the construction industry, supplemental schedules are not required by GAAP but many times can be requested, especially by a bonding agent.

Supplemental schedules give more details and provide necessary information for management’s decision-making, helping bonding companies to evaluate their jobs and providing necessary data for benchmarking. These schedules include, but are not limited to, schedule of contracts in progress, schedule of completed contracts, schedule of contract revenues and cost of revenues earned, schedule of general and administrative expenses, and schedule of financial ratios and statistics.

Each of these supplemental schedules should reconcile back up to your income statement and tie back to your general ledger, as far as your job cost and revenue.

Schedule of Contracts In Progress

Job schedules provide a story of how the company has most recently performed and estimate its performance in the immediate future.

The main objective of the schedule of contracts in progress is to provide the user with a snapshot of how each job is expected to perform. It can also be used to identify any outlying jobs that management or the user may want to gather a further understanding about. Additionally, further analysis of the schedule could lead to important information for:

1. Potentially turning expected loss jobs around or mitigating the expected loss – as the Company has a better chance of turning around a job if it is identified before being 20% complete.
2. Reasoning for current profitable jobs.
3. And/or information for future jobs.
   
   

Schedule of Completed Contracts

The objective of the schedule of completed contracts is to show how each individual contract performed. Many times, a comparative statement would be issued, which includes two years of contracts in progress and completed contracts. This allows the user to complete a gain fade analysis by comparing how jobs were estimated to be completed in the prior year and how they ended up completing in the current year. Also similarly to the previous schedule, the user can identify certain projects and question further to determine valuable information for future opportunities and reflect on what contributed to current successes or failures.  When this historical information is utilized for future projects, you should also consider how the future job compares in size or nature.

Schedule of Contract Revenues and Cost of Revenues Earned

This schedule breaks out where the costs are going and is more useful to compare the percentage of the cost of revenue to the contract revenue earned over a trend period. Depending on the type of contractor you are, these costs will be different. For example, a general contractor is going to have a lot more subcontractor expenses whereas a heavy highway civil is going to have a lot more equipment expenses and specialty contractors will have more labor expenses.

A best-in-class contractor will review and critique the schedules of jobs in progress and schedules of completed contracts. When performing a job overview, which includes a gain/fade analysis, it is imperative to have all of the key players together when determining what happened on the job, whether it was good or bad, as this contributes to minimizing the ability for individuals to “point the finger.”

Schedule of General and Administrative Expenses

This schedule is very similar to the previous except it provides information on overhead expenses. When evaluating this document you want to see that the total is comparable to industry averages and to evaluate each line item. Larger amounts than expected could throw red flags and warrant further inquiry. For example, high professional fees could indicate a claim against the company. If there have been large increases or decreases in certain categories, do we understand why or should we be planning for increases or decreases in future periods? This will be a schedule that management will want to look at over a certain period of time rather than a single year.

Schedule of Financial Ratios and Statistics

The financial ratios and statistics can benchmark a company and identify areas for improvement. Generally, this schedule is included in the supplementary information; however, the ratios can be calculated from the information presented in the financial statements. At Brown Edwards, we tend to benchmark these ratios against the CFMA.

You can watch David’s entire presentation and walk through examples of these supplemental schedules in more detail on the Brown Edwards YouTube channel.