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Audit flags $3.7 million in questionable change orders; Godley ISD holds final payment to contractor
Summary
A construction audit presented to the Godley ISD board found roughly $18.4 million in change orders with insufficient backup and estimated $3.7 million that may be overstated; the district is withholding a $2.1 million retainage while it seeks documentation and next steps are pending.
An outside construction auditor told the Godley ISD Board that auditors found extensive gaps in backup documentation for pay applications on the district’s Phase 2 project and estimated about $3.7 million of the change-order costs may be overstated.
Klay Addison, a senior construction auditor with RL Townsen & Associates, told trustees the audit identified roughly $18.4 million in change orders lacking adequate subcontractor backup or documentation and said S&P’s job-cost reports and pay applications did not always provide the supporting detail auditors expected. Addison said a conservative modeling approach based on prior projects produced a $3.7 million estimate of potential overbilling.
"Of that $12.4 million (largest change-order package), based on our experience, we think it could be overstated by 15 percent—that's about $1.8 million," Addison said, then added that rolling the other items together leads to a $3.7 million estimate. He also flagged related-party subcontractor work and incomplete disclosures.
District finance staff told the board the district has not issued a final certified pay application to S&P and that about $2.1 million remains in retainage. Spencer, the district’s finance representative, said the district will hold that retainage pending the contractor’s submission of a certified final pay application and supporting backup, and that the audit report will be made public.
"We have not withheld payment arbitrarily; we are awaiting S&P's final pay application and the architect's certification," Spencer said in response to trustees’ questions.
Addison and the auditors recommended the district request full subcontractor backup, negotiate any substantiated overcharges, and consider remedies if documentation is not forthcoming. The audit also noted instances where change orders cited only a summary schedule of values (SOV) with limited sub-backup and questioned whether those SOVs were sufficient under the contract language.
What happens next: district staff said they will make the audit a public record, share workpapers with S&P to request additional backup, and return next month with a recommended path for negotiations or potential claims. Trustees did not vote on remedies at the meeting but were presented with the audit findings and the recommendation to pursue documentation and negotiation.
