Escrow Process
It's understood that not all construction jobs are identical in how they are performed, but below is a general overview of how the escrow process works.
NACS will work directly with the Bonding Agent or Surety to complete the Escrow Order Form. This will give NACS the necessary project information, Principal/Obligee/Surety/etc., need to draft the Escrow Agreement.
The Escrow Agreement will be sent to the principal for review and signatures. A section of the agreement, the Exhibit 1 or Irrevocable Letter of Direction, will be signed by both the Principal and Obligee. This document directs all funds on the respective project to be sent to the escrow account* established by NACS specifically for this project.
*Separate checking accounts are established for each escrowed project. THERE IS NO CO-MINGLING OF CONTRACT FUNDS. The accounts are established in the Principal's name with NACS acting as the signing agent for the account.
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- Once the Escrow Agreement is received and the Exhibit 1 is verified, NACS will work directly with the Principal in regards to the handling of contract funds.
- The first form needed from the Principal will be the Job Cost Breakdown (pdf). This more or less mirrors the Principal's schedule of values submitted to the Obligee with the exception that NACS asks that the Principal's costs be broken out into separate line items (Labor, Equipment, Materials out of Inventory, Overhead, Profit, etc.).
- The Principal will also submit the Sub/Supplier Information form, which lists the contact information for all know Sub/Suppliers being used on this particular project, as well as any subcontracts.
- The Principal will perform work on the project and invoice the Obligee as they would any other project. The only difference will be that when the progress payment is approved, the payment will be forwarded to the established escrow account.
- Once funds are received, NACS will notify the Principal. The Principal will then submit the Payment Request Form, detailing all of the costs that need to be paid and what cost code/line item they will be applied against. Any labor, overhead, profit, equipment, etc., payable to the Principal can also be requested using this form. Copies of invoices, labor reports, etc., will need to accompany the payment request form.
- After reviewing the Payment Request Form, NACS will process each request using its Timberline Accounting System powered by Sage Software. Checks will then be cut by NACS. Each check is made out separately to each Sub/Supplier with the Principal's name listed as the Payer. The checks will then all be sent to the Principal using their preferred method of shipping, in which the Principal can then deliver them to their Subs/Suppliers however they choose. Accommodating each check will be a lien waiver that will need to be signed and returned to NACS before the next payment request is processed.