Our Surety Funds Control/Escrow Services
Failed construction projects often stem from cash flow problems, mismanagement of project funds, and diversion of project funds to non-project purposes. To help mitigate risk on a bonded project, surety companies utilize NACS’ funds control services. We closely monitor project costs and ensure that subs and suppliers who performed work or provided materials on the project are paid in a timely fashion.
Our Surety Funds Control/Escrow Services
Failed construction projects often stem from cash flow problems, mismanagement of project funds, and diversion of project funds to non-project purposes. To help mitigate risk on a bonded project, surety companies utilize NACS’ funds control services. We closely monitor project costs and ensure that subs and suppliers who performed work or provided materials on the project are paid in a timely fashion.
How Our Surety Funds Control Process Works
We work with the contractor to collect the schedule of values for the project.
The obligee/owner sends us the funds through a Letter of Funds Directive.
Funds are deposited into specific escrow accounts for each job in the contractor’s name and Tax ID.
There is absolutely no co-mingling of funds. If a contractor has ten different projects, ten different accounts will be established with the appropriate funds per project.
We closely monitor the schedule of values ensuring that funds are used specifically for each project.
Profit and overhead are carefully calculated based on completion and funds received on the project, eliminating front loading and the ability to rob Peter to pay Paul.
NACS will make payments to all subs and suppliers for their job-specific invoices or payment applications as well as payment to the contractor for any overhead, profit, labor, etc. All of the individual sub, supplier, and contractor checks cut for the particular progress payment will be sent directly to the contractor for distribution to their subs and suppliers so as to not impose on the contractor’s relationships.
Unconditional lien waivers accompany each check and are tracked to ensure subs and suppliers are paid up to date. These waivers are critical as proof of receipt of payment and to avoid any potential issues in the future.
Integrity. Dependability. Expertise.
NACS has decades of experience as a funds control/escrow company in the contract surety industry.
Advantages of Surety Funds Control for All Parties
- Oversight of funds distribution reduces the primary risk associated with a construction project and provides fund security to sureties
- Ability to provide surety underwriters with an early warning of any fund shortages during a project to mitigate potential losses
- Underwriters can call us to get project status and insight into the contractor’s operation
- Funds control utilization can assist sureties in expanding their bonding capacity
- Flexibility and funding options to contractors help them get bonded for projects
- A tool that assists contractors with Work-In-Progress (WIP) reports–it can include a summation of all jobs as well as the statuses on builds and payments
- Additional protection and security for obligee/owner; if subs and suppliers are not paid on a bond job, the obligee/owner could face a lien on a project
Contact the Funds Control Experts at NCAS
We ensure that money set aside for a construction job will be used for its intended expenses, protecting sureties from payment bond-related claims. Funds control is also a great tool for contractors who may not have robust internal cost accounting or those looking to take on larger projects.
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