CPA Compilation Report for Construction Companies
CPA compilation reports built specifically for Ontario construction companies. Surety bonding support, government tender pre-qualification, WIP accounting, percentage of completion, holdback tracking, T5018 compliance, equipment CCA schedules. From $600. 900+ five-star reviews.
Why Construction Companies Need a CPA Compilation Report
Construction companies face more financial reporting requirements than almost any other industry. Surety bonding companies require CPA-prepared financial statements to assess bonding capacity. Government agencies and institutional clients require financial statements for pre-qualification on public tenders. Banks and lenders require annual financial statements as a condition of operating lines and equipment loans. WSIB requires financial information for premium assessment. CRA requires T5018 reconciliation against reported revenue. Insurance companies review financial statements for policy renewals.
A construction company without CPA-prepared financial statements cannot get bonded, cannot bid on government projects, cannot renew equipment financing and cannot demonstrate financial capacity to general contractors who require pre-qualification from subcontractors. The compilation report under CSRS 4200 is the minimum standard that satisfies all of these requirements. For a full overview of our compilation report services, see our CPA compilation report page.
Who Requires a CPA Compilation Report from Construction Companies?
| Who Requires It | Why | What They Review |
|---|---|---|
| Surety bonding company | Surety companies issue bid bonds, performance bonds and labour/material payment bonds. They underwrite the contractor's financial capacity to complete the project. Without CPA-prepared financial statements, the surety cannot assess bonding capacity and will not issue bonds. | Working capital, net worth, debt-to-equity, backlog (uncompleted contracts), WIP schedule, equipment value, accounts receivable aging, line of credit availability. |
| Government / institutional client (pre-qualification) | Federal, provincial and municipal governments require pre-qualification for public tenders. Infrastructure Ontario, Metrolinx, municipal public works, school boards and hospitals require CPA-prepared financial statements as part of the pre-qualification package. | Financial capacity to take on the project size. Working capital sufficient to fund operations between progress draws. Bonding capacity. Insurance coverage. Safety record (separate from financials). |
| General contractor (sub pre-qualification) | General contractors on large projects require their subcontractors to pre-qualify financially. A GC bidding a $20 million hospital project needs assurance that the $3 million electrical sub will not go bankrupt mid-project. | Net worth, WIP schedule, current project backlog, bonding capacity, WSIB clearance, insurance certificates. |
| Bank / lender | Operating lines of credit, equipment loans and construction financing require annual CPA-prepared financial statements. Covenant testing (working capital ratio, debt service coverage, leverage) performed against the compilation financial statements. | Working capital ratio (current assets / current liabilities). Debt service coverage. Revenue trend. WIP schedule. Equipment CCA schedule (asset backing for equipment loans). |
| CRA | CRA audits construction companies at a higher rate than most industries. Focus areas: T5018 subcontractor payments, worker classification (employee vs. contractor), revenue recognition timing, HST on progress billing. | Revenue per financial statements matched against T5018 total (subcontractor payments should reconcile against total revenue). Equipment CCA claims. HST collected vs. reported. |
| Insurance company | Annual policy renewals for CGL, umbrella, equipment, professional liability and builders risk require financial statements. The insurer uses revenue and payroll data to set premium rates. Actual revenue/payroll is reconciled against the estimated amounts at year-end. | Annual revenue (CGL and umbrella premiums are revenue-based). Annual payroll (WSIB and some liability premiums are payroll-based). Equipment schedule (inland marine / equipment insurance). |
Surety Bonding: Why Your Financial Statements Determine Your Bonding Capacity
Surety bonding is the gateway to larger projects. Without bonds, a construction company is limited to small private contracts. With bonds, the company can bid on government projects, institutional work, large commercial contracts and any project where the owner requires performance and payment security.
| Bond Type | Purpose | Financial Statement Impact |
|---|---|---|
| Bid bond (typically 10% of bid price) | Guarantees that the contractor will enter into the contract if awarded and will provide the required performance and payment bonds. | The surety assesses whether the contractor has the financial capacity to take on the project. A weak balance sheet = no bid bond = cannot submit a tender. |
| Performance bond (typically 50% of contract price) | Guarantees that the contractor will complete the project according to the contract terms. If the contractor defaults, the surety pays for completion. | The surety's exposure is 50% of the contract price. On a $5 million contract, the surety's exposure is $2.5 million. The surety will not accept this exposure without strong financial statements showing adequate working capital, net worth and project management capacity. |
| Labour and material payment bond (typically 50% of contract price) | Guarantees that the contractor will pay all subcontractors, suppliers and labourers on the project. | The surety reviews accounts payable, WIP schedule and cash flow to confirm the contractor can meet payment obligations. Slow-paying contractors with aged payables do not get bonded. |
Bonding Capacity Is Directly Tied to Working Capital: A general rule: bonding capacity is approximately 10x to 15x working capital. A construction company with $500,000 in working capital (current assets minus current liabilities) can typically get bonded for $5 million to $7.5 million in aggregate work program. Increasing working capital by $100,000 increases bonding capacity by $1 million to $1.5 million. Every dollar of working capital matters. We prepare financial statements that present working capital accurately and in the most favourable light the numbers support.
Revenue Recognition for Construction Companies
| Method | When Revenue Is Recognized | Best For |
|---|---|---|
| Percentage of completion | Revenue recognized proportionally as work progresses. Revenue = (costs incurred to date / total estimated costs) x contract price. Requires reliable cost estimates and progress measurement. Most sureties and lenders prefer this method because it shows revenue during the construction period rather than lumping it at completion. | General contractors on fixed-price contracts above $500,000. Government and institutional contracts with progress billing milestones. Required by most surety companies for bonding pre-qualification. |
| Completed contract | Revenue recognized only when the project is substantially complete. All costs accumulated as WIP until completion. Revenue and costs matched at project end. | Small contractors with short-duration projects (under 3 months). Subcontractors on smaller scopes where percentage of completion tracking is impractical. Some residential renovation contractors. |
Surety Companies Prefer Percentage of Completion: A construction company using completed contract that finishes 3 large projects in March of the next fiscal year shows $0 revenue on the year-end financial statements (the projects were WIP at year-end). The surety sees a company with $0 revenue and a large WIP balance, which looks weaker than the same company under percentage of completion showing $8 million in recognized revenue. Most surety underwriters prefer percentage of completion because it reflects the economic reality of the work performed. We advise every bonded contractor to use percentage of completion. Compilation Report Services →
WIP Schedule and Holdback Accounting
| Component | What It Contains | Balance Sheet Treatment |
|---|---|---|
| Contract receivables (progress billing) | Amounts billed to the project owner or GC for work completed. Invoiced per the progress billing schedule (typically monthly based on percentage complete certified by the architect or engineer). | Current asset. Aged receivables (60+ days) weaken the balance sheet and reduce bonding capacity. We reconcile every progress billing to the contract and certification. |
| Holdback receivable | 10% of each progress billing held back by the owner or GC under the Ontario Construction Act. Released 60 days after substantial completion (or later if liens are registered). | Current asset (if release expected within 12 months). Shown separately from regular receivables because holdbacks are not collectible until the holdback period expires. Surety underwriters review holdback aging carefully. |
| Costs in excess of billings (underbilling) | Work performed but not yet billed. Arises when costs incurred exceed progress billings received. Common early in a project before the first progress draw is certified. | Current asset. Represents revenue earned but not yet invoiced. If this number is large relative to contract size, it may indicate billing delays or certification disputes. |
| Billings in excess of costs (overbilling) | Progress billings received in advance of costs incurred. The contractor has billed more than the work performed to date. Common late in a project when the final costs are less than estimated. | Current liability. Represents unearned revenue. Must be shown as a liability, not netted against underbillings. Surety companies review overbillings to ensure the contractor is not front-loading bills. |
| Holdback payable (to subcontractors) | 10% of each subcontractor payment held back by the GC under the Construction Act. Released 60 days after subcontractor's scope is substantially complete. | Current liability. Must be tracked separately per subcontractor. Releasing holdbacks early violates the Construction Act and exposes the GC to lien claims from sub-tier suppliers. |
Construction Company Compilation Report from $600. Bond-Ready.
WIP schedules, percentage of completion, holdback tracking, T5018, equipment CCA. Built for Ontario contractors.
What Our Construction Compilation Service Includes
| Service | What We Do |
|---|---|
| Year-end bookkeeping review | We reconcile all project costs, verify subcontractor invoices against payments, confirm holdback balances (receivable and payable), reconcile progress billings against certifications and verify that WIP is correctly classified. |
| Financial statement preparation (ASPE) | Balance sheet with WIP, holdback receivable, holdback payable, equipment at net book value, line of credit and long-term debt. Income statement with revenue by percentage of completion, COGS matched to recognized revenue and operating expenses. Notes with accounting policies, contract details and contingencies. |
| CPA compilation report (CSRS 4200) | The formal compilation report letter signed by a licensed CPA. Accepted by surety companies, government pre-qualification agencies, GCs, lenders and CRA. |
| WIP schedule (project-by-project) | Each active project listed with: contract price, total estimated costs, costs incurred to date, percentage complete, revenue recognized to date, billings to date, costs in excess of billings (or billings in excess of costs), holdback receivable and remaining backlog. This is the schedule every surety underwriter and lender reviews. |
| Equipment CCA schedule | Every piece of owned equipment listed with original cost, CCA class, accumulated depreciation, net book value and Immediate Expensing claimed. This schedule supports equipment loan values and insurance replacement cost coverage. |
| T5018 preparation and reconciliation | T5018 slips prepared for every subcontractor paid $500 or more. Subcontractor payments reconciled against the WIP schedule and project cost ledgers. Filed by the 6-month deadline. T5018 compliance is a condition of CRA acceptance of the financial statements. |
| Surety bonding support package | Financial statements formatted for surety underwriting: working capital calculation, net worth, backlog schedule (uncompleted contracts), WIP schedule, largest completed projects (3-year history), bank reference letter coordination. We work directly with your surety broker to provide the information the underwriter requests. |
| Government pre-qualification support | Financial statements and supplementary schedules formatted for government pre-qualification applications: Infrastructure Ontario, Metrolinx, municipal public works, school boards, hospital corporations. We know what each agency requires. |
| T2 corporate tax return | Corporate tax return reconciled to the compilation financial statements. Revenue recognition timing verified. Equipment CCA claimed. M&P rate applied for eligible contractors. T2 included FREE for bookkeeping clients. |
| CRA audit support (FREE) | If CRA audits your construction company's T2, HST or T5018 filings, we represent you at no additional charge. Revenue recognition disputes, subcontractor classification queries and HST on progress billing all handled. FREE for every client. |
Ontario Construction Company Compilation Report: Real Client Results
General Contractor, Brampton ($8M Annual Revenue)
A Brampton GC with $8 million in annual revenue needed to increase bonding capacity from $5 million to $10 million aggregate. The previous accountant was using completed contract method, showing only $3.2 million in recognized revenue at year-end (the remaining $4.8 million was in WIP). We switched to percentage of completion, recognized $7.6 million in revenue, presented the WIP schedule in surety-friendly format, optimized working capital presentation and coordinated with the surety broker. Bonding capacity increased to $12 million. The GC won a $4.2 million municipal infrastructure contract that required a $2.1 million performance bond.
Electrical Subcontractor, Mississauga ($3.5M Revenue)
A Mississauga electrical subcontractor needed CPA-prepared financial statements for GC pre-qualification on a hospital project. The previous accountant had not prepared a WIP schedule and the financial statements did not show project-level detail. We prepared the compilation report with a 6-project WIP schedule, holdback receivable and payable tracking, equipment CCA schedule and T5018 reconciliation for 14 subcontractors. The GC accepted the pre-qualification package and awarded a $1.8 million electrical scope.
Civil Contractor, Hamilton ($6M Revenue, Government Tenders)
A Hamilton civil contractor bidding on municipal road and sewer projects needed Infrastructure Ontario pre-qualification. We prepared 3 years of compilation reports (2 prior years reconstructed from incomplete records), formatted the financial statements per IO requirements, prepared the backlog schedule showing completed and current projects, coordinated with the surety for the required bonding letter and submitted the pre-qualification package. IO pre-qualification was approved at the $10 million project ceiling. Compilation Report Services →
Residential Renovation Contractor, Toronto ($1.8M Revenue)
A Toronto renovation contractor had been operating without CPA-prepared financial statements for 4 years. The bank required annual statements for the $300,000 operating line renewal. CRA had also requested financial statements for a T5018 audit. We prepared 4 years of compilation reports, filed 4 T2 returns, prepared T5018 slips for 22 subcontractors across all 4 years, reconciled HST and negotiated the CRA T5018 penalties (reduced from $8,200 to $2,400 by demonstrating reasonable filing effort). The bank renewed the operating line.
Key Financial Metrics Surety Companies and Lenders Review
| Metric | Formula | Benchmark |
|---|---|---|
| Working capital | Current assets minus current liabilities | Bonding capacity = approximately 10x to 15x working capital. $500,000 working capital = $5M to $7.5M bonding capacity. |
| Working capital ratio | Current assets / current liabilities | 1.3:1 or higher. Below 1.0 = technically insolvent. Sureties prefer 1.5:1+. Lenders require minimum 1.2:1 for most construction facilities. |
| Debt-to-equity | Total liabilities / shareholder equity | Below 3:1 for surety approval. Below 4:1 for lender comfort. Above 5:1 = overleveraged and difficult to bond. |
| Backlog | Total value of uncompleted contracts (contract price minus revenue recognized to date) | Backlog should not exceed 12 to 18 months of capacity. A company with $8M annual revenue and $20M in backlog may be overcommitted, raising surety concerns about capacity to complete all projects. |
| Gross profit margin | (Revenue minus COGS) / Revenue | 10% to 20% for GCs. 15% to 30% for specialty subs. Below 10% indicates underbidding or cost overruns. Surety underwriters expect consistent margins year over year. |
| Accounts receivable aging | Percentage of receivables over 60 days | Under 15% is healthy. Over 25% indicates collection problems. Sureties reduce bonding capacity for companies with aged receivables. Progress billing disputes should be disclosed in the notes. |
10 Common Compilation Report Mistakes Construction Companies Make
| # | Mistake | Consequence |
|---|---|---|
| 1 | Using completed contract when the surety expects percentage of completion | Revenue appears lower than economic reality. Working capital is understated because WIP is in inventory rather than recognized as revenue. Bonding capacity is reduced. The surety may deny or reduce the bond. |
| 2 | No WIP schedule in the financial statements | Surety underwriters cannot assess bonding capacity without a project-by-project WIP schedule. GCs cannot pre-qualify subcontractors. Lenders cannot evaluate project-level risk. The compilation report is incomplete without a WIP schedule for any construction company with active contracts. |
| 3 | Not separating holdback receivable from regular receivables | Holdbacks are not collectible until 60 days after substantial completion. Lumping them with regular receivables overstates the contractor's immediate liquidity. Surety underwriters and lenders adjust working capital by removing holdbacks from current assets if they are not shown separately. |
| 4 | Not tracking holdback payable as a separate liability | Holdbacks payable to subcontractors must be shown as a liability. Releasing holdbacks before the 60-day period violates the Construction Act. Not tracking them creates lien exposure and balance sheet errors. |
| 5 | Not filing T5018 slips for subcontractors | Construction companies must file T5018 for every subcontractor paid $500+. Penalties: $25/day per slip. CRA cross-references T5018 against the sub's reported income. Missing filings trigger deeper audits. T5018 compliance is expected in every construction company compilation report. |
| 6 | Mixing costs across projects | Each project must have its own cost tracking. If Project A materials are charged to Project B, the percentage of completion calculation is wrong for both projects. Progress billing amounts will not match costs incurred, creating over/underbilling discrepancies that sureties and lenders flag. |
| 7 | Not showing overbillings as a liability | Billings in excess of costs (overbilling) is a current liability. Some contractors net overbillings against underbillings. This is incorrect. Each must be shown separately on the balance sheet. Surety underwriters specifically look for overbilling patterns that indicate front-loading. |
| 8 | Outdated equipment CCA schedule | Equipment sold, traded or scrapped during the year must be removed from the CCA schedule. New equipment must be added. An outdated schedule overstates or understates asset values, affecting working capital, net worth and equipment loan compliance. Insurance coverage may also be incorrect. |
| 9 | Using a CPA who does not understand construction accounting | Generic CPAs who do not understand WIP, percentage of completion, overbilling/underbilling, holdbacks and construction-specific presentation produce financial statements that sureties reject, lenders question and CRA challenges. Construction accounting is specialized. Use a CPA who prepares construction financials regularly. |
| 10 | Late submission to the surety (delaying bond issuance and project bidding) | If the compilation report is late, the surety cannot update bonding capacity. The contractor cannot get bonds issued. Bids are missed. Contracts are lost. We deliver construction compilation reports within 30 days of receiving complete information. Compilation Report Services → |
Frequently Asked Questions: Compilation Reports for Construction Companies
What Our Clients Say
900+ five-star reviews from business owners and contractors across Ontario.
Construction Compilation Report. From $600. Bond-Ready.
WIP schedules, percentage of completion, holdback tracking, T5018, surety support, government pre-qualification. Built for Ontario construction companies. 900+ five-star reviews.