Construction Financial Management Association. Jeremy Weller & Mike Michelsen

Transcription

1 Construction Financial Management Association Jeremy Weller & Mike Michelsen

2 Jeremy Weller Audit Associate McGladrey, LLP LOOSE WILES BUILDING RECENT CLIENT

3 My Background: Bookkeeper at B&J Evergreen Jan Apr 2012 AP Clerk at Granite City Roofing Fall 2013 Received scholarship from CFMA Jan Apr 2014 Audit internship with McGladrey 2014 Saint Cloud State University, BS in Accounting; Finance minor Oct 2014 Present Audit Associate at McGladrey, LLP with a focus on the construction and real estate industries Century Jr High

4 Mike Michelsen Controller Stahl Construction Company Century Junior High School

5 My Background: BS in Business Administration, San Diego State University Auditor with McGladrey Hendrickson & Pullen 1984 CPA Certificate Assistant Controller, PIC Construction, Anaheim, CA 1989 MBA, California State at Fullerton Project Accountant, Sammis Company, Irvine, CA Financial Analyst, Trident Group, Los Angeles, CA 1992 Certificate in Real Estate Finance, UCLA Controller, Adolfson & Peterson Construction, St Louis Park, MN 2002 Present Controller, Stahl Construction Company, St Louis Park, MN 2010 Certificate in Construction Management, University of Minnesota 2015 Construction Risk and Insurance Specialist (CRIS) certificate

6 Construction Financial Management Association Founded in 1981, CFMA is the only organization dedicated to bring together over 7,000 construction financial professionals (general contractors, specialty contractors, suppliers) with their business partners (CPAs, insurance agents, surety brokers, bankers & lawyers) in over 88 chapters throughout the US and Canada.

7 Construction Spending Internationally, construction spending is expected to reach $4.6 trillion in 2015, of which the U.S. market equals about 21%. China represents about 28% ($1.3T), Japan & India (10% each) GDP from total U.S. construction spending = $967 billion, more than 5.7% of the total U.S. GDP of $17.7 trillion. This is up from 3.73% of GDP in Of this $606 billion (63%) was for nonresidential construction in In Minnesota, direct construction spending added 7 billion (2%) ($4B residential & $3B non-residential) to the state s GDP of $312 billion in 2014.

8 Types of Non-Residential Projects: Transportation (21%) highways, streets, rail, subways, marine (dams & causeways), airports, bus stations, parking garages Power (17%) atomic, nuclear & geothermal power plants, oil & gas structures Educational (13%) primary & secondary schools, colleges & universities Commercial (9%) retail centers, warehouses, supermarkets Manufacturing (9%) factories & mills Health Care (6%) hospitals & clinics Others (25%) lodging, office, religion, public safety, amusement & recreation, communication, sewage & waste disposal

9 Construction Employment The U.S. construction industry (residential plus nonresidential) employed 6.3 million workers in February 2015, an increase of 321,000 (5.3%) from February UMD Swenson Engineering Building In Minnesota, 106,000 workers were employed in February 2015, an increase of 1.2% from February Minnesota is rated 23rd in the number of construction workers employed. California is largest with 708,300 workers. Construction Pay In 2013, annual pay for all construction workers in the U.S. averaged $53,200, 7% more than the average for all private sector employees. In Minnesota, the annual pay of all construction workers averaged $57,320, 14% more than the average for all private sector employees.

10 From the Bureau of Labor Statistics Employment Projections: Summary Employment in the construction sector is projected to grow 2.6% annually. This equates to 1.6 million new jobs over the decade, the most among goods-producing sectors and third most among all major industry sectors. Of the 30 occupations projected to have the largest percentage increase between 2012 and 2022, 14 are related to healthcare and 5 are related to construction. Ave Maria Academy

11 CH Robinson Four major occupational groups are projected to grow more than 20% (nearly double the overall growth) from 2012 to 2022: Construction & extraction occupations (21.4%) For the same period, bookkeeping, accounting and auditing clerks are expected to see a 11.4% growth rate. Accountants & auditors (13.1%) The overall growth rate for all occupations is 10.8%

12 Accounting Occupational Employment Statistics May 2014 Nationally: Mean annual wage is $73,370; Median (50% percentile) annual wage is $65,940. Crossroads Commons Minneapolis/St Paul/Bloomington, MN-WI: Mean annual wage is $70,010. For the Nonresidential Building Construction segment of the construction industry, employment of accounting related professions is expected as follows: Change Bookkeeping, accounting & auditing 11.6k 14.2k 22.8%

13 Construction Auditing Much smaller team size at McGladrey Beginning to merge with manufacturing team Length of audits range from 1 week 5 weeks Additional challenges and learning opportunities Contract section is the core of the audit Retention Opportunity to reach out and talk with more people within a company, such as project managers Higher degree of estimation uncertainty Army National Guard Arden Hills

14 Typical Job Pathways for Accountants and Auditors: Starting Level: Project Accountant/Cost Accountant Junior Internal Auditor Payroll Specialist, Accounts Payable Specialist, Accounts Receivable Specialist, Credit Analyst Mid-Level: Senior Project Accountant/Cost Accountant Senior Internal Auditor Accounting Manager; Payroll Manager Financial Analyst Credit Manager Assistant Controller Regional/Divisional Controller Mid-Level Manager: Corporate Controller Chief Cost Accountant Senior Credit Manager Senior Financial Analyst Budget Manager Manager of Internal Auditing Senior Level Manager: Treasurer Chief Financial Officer Financial Vice-President President Hennepin County Emergency Call Facility

15 Small Business: The U.S. had 652,900 construction firms in 2012, of which 92% were small businesses employing fewer than 20 workers. In Minnesota, there were 16,000 construction firms, of which 95% were small businesses employing fewer than 20 workers.

16 NATURE AND SIZE OF COMPANIES International (Largest 250 revenue - $1.4T in 2013) #3 Bechtel Group (San Francisco, CA) $23B #5 Fluor Corp (Irving, TX) $17B #22 PCL Construction (Denver, CO) $5.5B #37 Kiewit Corp (Omaha, NE) $3.8B #120 Black & Veatch (Overland Park, KA) $654M #220 Mortenson Construction (Mpls, MN) $198M National Mortenson Co, JE Dunn, Ryan Companies, Turner Construction, Kraus-Anderson, Adolfson & Peterson. Local Mortenson, Ryan, Ames Construction, A&P, KA, McGough, Weis, Frana, RJM, Greiner, Morcon, Stahl Hyatt Place Small/Mid-Sized Family Owned; Locally Owned & Community Based Joint Ventures $234 million I-35W Mississippi River bridge replacement (Flatiron Constructors and Manson Construction Company)

17 Size (based upon annual revenue & number of employees): The construction industry is dominated by small companies (about 75%) Larger companies are responsible for 80% of the annual volume of work completed. Typical general contractor profit margin is between 5% and 7% annually. There are over 70 contractor associations like CFMA. Others include the Associated General Contractors and Association of Builders & Contractors.

18 NATURE OF THE CONSTRUCTION INDUSTRY High risk / low return compared to other industries Every project is unique, a new project team every time (owner, architect, GC & subcontractors) Project durations are short (penalties/liquidated damages are levied for delays) Operations typically take place outside, subject to the weather Labor & material resources are uncertain & subject to price fluctuations Low profit margins (5-7% for GC, 20-25% for subcontractors). Lakeville South High School

19 Very Competitive - High number of quality contractors globally, nationally and in Minnesota (Mortenson, Ryan, A&P, KA) Construction services viewed as a commodity Owners look at some types of construction services as a commodity (i.e. all contractors are viewed as the same. Differentiated based upon price). Ease of entry MN does not require that larger commercial general contractors be licensed, only registered. Some specialty subcontractors must be licensed. Not very capital intensive (trunk slammers). Risk takers & eternal optimists -

20 Inver Hills Community College Additional Challenges & Opportunities Global Climate Change Buildings currently consume 39% of total energy use, 68% of total energy consumption and 38% of total carbon dioxide emissions. They need to become more energy efficient yet earn a respectable financial return. Aging Infrastructure American Society of Civil Engineers 2013 Report Card rated the nation s public infrastructure at a D+ and estimated that $3.6T needs to be invested by 2020.

21 Aging construction workforce - Average age of workers in some sectors of construction is nearing 50 Recent studies predict that as many as 60% of current workers will retire in the next decade Holiday Inn Express San Francisco Declining productivity - Declining productivity in many areas of the industry over the last 40 years while non-farm productivity has increase by over 200%.

22 Islands of Information Each project is unique. Entirely new project team: Owner Architects & engineers General contractor(s) Subcontractors & material suppliers Each team member brings together their own knowledge base, skills and tools. Differing technology platforms that don t allow for the consolidation, coordination and collaboration of the varied knowledge, skills and tools. Hyatt Place Centre Village

23 EMERGING TRENDS: Green building LEED (Leadership in Energy and Environmental Design). Buildings are rated and certified as to their energy efficiency and contributions toward energy/environmental conservation. Lean Construction similar to lean manufacturing. Tries to manage and improve construction processes with minimum cost and maximum value by considering customer needs. Building Information Modeling the process of generating and managing building data during its entire life cycle. Typically uses a three-dimensional, real-time, dynamic building modeling software to increase productivity in building design, construction and operation.

24 Virtual / Augmented Reality Heads up displays in construction equipment or on construction workers (i.e. Google safety Glasses) showing building plans and specifications. Building walk-throughs before design is complete and construction starts. Aerial Drones used for site inspection and safety monitoring.

25 FURTHER THINGS TO CONSIDER Construction is a growth industry A study by the Brookings Institute noted that residential and commercial development in the next 25 years will eclipse anything seen in previous generations, and that nearly half of what will be the build environment in 2030 doesn t exist yet. Over the next 10 years, construction employment in the U.S. will experience a 2.6% annual growth rate, the most among goods-producing sectors and 3 rd most among all major industry sectors. outstripping the overall rate of growth (1%) for the U.S. economy. Lakeville North High School

26 Takeaways: Construction is a growth industry The construction industry needs new workers with fresh/innovative ideas Working in construction has an important impact on the economy and leaves a lasting legacy for years to come Crossroads Commons Senior Housing

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28 MCTC Lakeville South Questions?

29 Thank You White Bear Lake Spring Hill Suites