If you bid bonded work, your year-end financial statement is your bond application. A surety isn't lending you money; it's guaranteeing to the owner that you'll finish the job and pay your subs and suppliers. The statement you hand the underwriter is how they judge that risk, and the quality of that statement shows up directly in your bonding capacity and the rate you pay.
For most growing contractors, the right move is a CPA-prepared Review.
Three levels of CPA statement
CPAs offer three levels of work, and sureties give each a different amount of weight.
| Level | What the CPA does | Assurance | Typical fit |
| Compilation | Puts your numbers into statement format without testing them | None | Smaller bonds and programs |
| Review | Runs analytical procedures and questions management about the numbers | Limited | Most mid-sized contractors; the most common statement sureties see |
| Audit | Tests balances, confirms with third parties, evaluates internal controls, issues an opinion | Highest | Large programs, often contractors with $100M+ in revenue |
A compilation simply takes your word for it. That's why underwriters lean on it lightly and cap the program to match.
Better statement, better rate
Surety pricing follows confidence. The more an underwriter can trust your numbers, the less risk they have to price in, and that shows up in three places:
- Lower bond rates. A credible, CPA-reviewed statement helps qualify you for a better rate tier. Contractors on internal or compiled statements are often priced as if the underwriter is guessing, because they are.
- More bonding capacity. Sureties set single-job and aggregate limits as multiples of your working capital and net worth. They apply those multiples more generously when an independent CPA stands behind the figures.
- Faster approvals. Footnotes and disclosures in a review answer questions before the underwriter has to ask them, so bonds get issued sooner.
A review costs more than a compilation. But on a bonded program, a small improvement in rate and a larger aggregate limit typically pay for the CPA fee many times over. Think of it as an investment in your bond program, not an accounting expense.
Getting the most from your review
Not every review is equal. The ones that earn the best terms share a few traits:
- A construction CPA. Use a firm that knows percentage-of-completion accounting and is known to the surety community.
- A WIP schedule that ties out. Your work-in-progress schedule should reconcile to the balance sheet to the dollar. Underwriters study it for profit fade and billing problems.
- Clean working capital. Collect receivables past 90 days, clear officer loans, and keep retainage documented before year-end. Underwriters discount assets that are hard to turn into cash.
- Retained earnings. Equity built by leaving profit in the business grows your capacity year over year.
- Timeliness. Close the books promptly after year-end, and share interim WIP updates during the year.
Talk to Kernan before your next year-end
The best time to upgrade your statement is before the fiscal year closes, not after the surety asks for it. Kernan Insurance Agency's surety team works with contractors and their CPAs to match the statement level to the program you want and present your financials the way underwriters read them.
If you're on internal or compiled statements and want better rates or more capacity, call our surety department. We'll look at where you stand and what a review could do for your program.