Financial Management, Labor, and Environmental Compliance
Financial Management, Labor, and Environmental Compliance
This domain tests job-cost control, cash flow, payroll compliance, and environmental permits. Expect overbilling and underbilling, workers' comp, wage records, stormwater, and waste questions.
Financial management
- Job cost codes track labor, material, equipment, and subcontract cost against the estimate.
- Work-in-progress compares revenue earned to billings: overbilling is a liability, underbilling is an asset but strains cash.
- Retainage and slow payment affect cash; lien waivers should match payments.
Labor and environment
- Pay correct wages, keep time records, classify employees properly, and carry workers' comp and unemployment coverage.
- Construction disturbing one acre or more generally needs NPDES stormwater coverage and a SWPPP with erosion and sediment controls.
- Manage hazardous waste, asbestos and lead before renovation, and concrete washout.
Worked example. Contract $1,000,000; costs incurred $300,000; estimated total cost $800,000; billed $350,000. Revenue earned = ($300,000 / $800,000) x $1,000,000 = $375,000. Billed $350,000 is $25,000 underbilled. Reasoning: percentage of completion drives earned revenue; the difference is a cash-flow warning, not automatically a profit.
Traps. Treating billings as profit; missing the SWPPP before grading; misclassifying employees as independent contractors; ignoring retainage in cash forecasts.