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Funds Management

FUNDS MANAGEMENT:

Forcon Funds Management, Inc. (FFM) is a disbursement control provider to the Surety and
construction industries. Funds Management is a tool available for contractors to increase their
bonding capacity/limit by independently matching contract proceeds (billings/receivables) with
corresponding contract disbursements (obligations/payables) on a project by project basis.


HOW DOES THE CONTRACTOR BENEFIT?

At a minimum, the contractor is given an opportunity to pursue contracts for which they would
not ordinarily qualify due to lack of bonding capacity. The contractor may also be in a position
to negotiate better credit terms or discounts from suppliers and subcontractors. In addition,
the contractor will have access to FFM’s experienced financial and construction personnel
and tested systems to monitor and control the contract funds.


HOW DOES THE SURETY BENEFIT?

The benefits to the Surety are numerous. They include compliance with the intent of "trust fund"
regulations by segregating funds, independent application of construction contract revenues
towards the cost of the work performed, and the ability to increase the size of their
underwriting program while mitigating their risk.

FFM assists the Surety by controlling certain high risks associated with the construction
industry by monitoring project funds from project inception to completion, reducing the Surety's
anxiety of the contractor possibly "robbing Peter to pay Paul." In this manner, the financial risk
of unpaid subcontractors and suppliers associated with a construction contract may be
substantially reduced or eliminated.

HOW DOES THE AGENT BENEFIT?

This program provides accessibility to bonding capacity for the agent's small, start up or
financially marginal clients providing a platform for the contractor to graduate to the next level
of bonding capacity. This accessibility also provides opportunity for new or increased
business in the agent's other lines of insurance.

WHAT ABOUT THE COST?

The fee associated with FFM’s Disbursement Control Program is usually borne by the
contractor and in many cases, can be built into the general and administrative costs of a
project. The fee for the Funds Control Program is a fixed percent of the total contract dollar
amount, paid over the life of the project as contract proceeds are received. The fee rates are
based upon the nature, size and scope of the specific construction contract. When the
potential benefits to the contractor, such as reduced bond cost, better credit terms, increased
sales volume, discounted pricing from subcontractors and suppliers, and fewer disputes are
compared with the fee resulting in possible reductions in home office overhead and increases
in project profitability.

WHAT DOES THE PROGRAM INCLUDE?

With the execution of the Funds Control Agreement, the Contractor forwards the original
project budget to FFM and the financial control of the project begins. As contract proceeds
are received, the Contractor submits pay requests for subcontractors, suppliers, direct labor
and overhead. FFM performs its due diligence by reviewing the requests and associated
support to confirm the requested payments appear proper, reasonable and project related.
Next, FFM issues and signs the related checks which are then forwarded to the Contractor
for final review and disbursement.

The payments are posted to FFM’s tracking system, from which historical project data is
generated. With this significant information available, control remains ongoing. Historical data
is compared to budgeted data and "red flags" are generated if actual activity deviates from
the budget ( adjusted for change orders).

Major topics covered by the financial control are:

ACCOUNTING/BOOKKEEPING:

Project funds are accounted for in FFM’s internal tracking system and project specific bank
disbursement (checking) accounts. Historical data related to subcontractors and suppliers is
maintained throughout the life of the project.

DIRECT DRAW ARRANGEMENT:

Basic to risk management is the absolute control of all project funds. This control is initiated
with the assignment of draw proceeds to a project specific disbursement account.

PARTIAL/FULL LIEN WAIVERS:

Consistent throughout our standard payable activity is the completion of partial and full lien
waivers. These controls are put in place prior to any payments being made to subcontractors
and suppliers. Through this mechanism, the Surety obtains a level of comfort the project will
be completed without liens or payment bond claims. Consequently, timely project completions
are enhanced and disputes are minimized.

PAYROLL/PAYROLL TAX COMPLIANCE:

Unpaid payroll taxes constitute one of the largest threats to any construction project. To
minimize the possibility of this problem, strict adherence to certified payrolls and tax receipts
is required. This process is automatic within our system and is project specific.

PROMPT PAYMENT OF SUBCONTRACTORS AND SUPPLIERS:

As the proceeds from each draw request is received, funds are utilized to pay subcontractors,
suppliers and overhead according to the original budget adjusted for any change orders. With
this system in place, a comfort level is established and maintained throughout the project for
all parties concerned.


WHO IS FORCON FUNDS MANAGEMENT, INC. ?

Forcon Funds Management, Inc. (FFM) is a wholly owned subsidiary of Forcon Holding Company.
Forcon Holding Company owns the Forcon family of companies with offices in the Tampa, Atlanta,
Philadelphia, Richmond (VA), Raleigh (NC), and Grand Rapids (MI) areas.

The Forcon companies are multi-discipline consulting firms with extensive expertise and
experience in the areas of surety, funds management, fidelity, property and casualty and
accident reconstruction. Forcon has trained and experienced professionals in construction,
engineering, architecture, accident reconstruction, accounting, construction law and the bond
claims industry.

FFM is dedicated to minimizing financial losses in the construction industry, while maximizing
prime contractor and subcontractor performance through the utilization of its Funds Control
Program and management expertise.

 


FOR INFORMATION REGARDING FUNDS MANAGEMENT
CONTACT MARK WOODBURY OR LIZ SPIKER AT
813-684-7686


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