{"id":52867,"date":"2024-10-31T08:00:27","date_gmt":"2024-10-30T23:00:27","guid":{"rendered":"https:\/\/norimen.net\/wordpress\/?p=52867"},"modified":"2026-05-16T15:19:22","modified_gmt":"2026-05-16T06:19:22","slug":"cost-allocation-in-construction","status":"publish","type":"post","link":"https:\/\/norimen.net\/en\/cost-allocation-construction\/","title":{"rendered":"I think anyone involved in construction knows that reallocating construction costs is a common occurrence!"},"content":{"rendered":"<p>Hello, everyone.<\/p>\n<p>This is Enta.<\/p>\n<p>In a recent news report,<\/p>\n<p class=\"p-article_header_title\"><a title=\"Okumura-gumi Reclassified Construction Costs; Multiple Incidents Uncovered Following Internal Reports\" href=\"https:\/\/xtech.nikkei.com\/atcl\/nxt\/column\/18\/00142\/02064\/?n_cid=nbpnxt_twbn\" target=\"_blank\" rel=\"noopener\">Okumura-gumi Reclassified Construction Costs; Multiple Incidents Uncovered Following Internal Reports<\/a><\/p>\n<p>I saw an article that said...<\/p>\n<p>&nbsp;<\/p>\n<p>I think a lot of people know what this is, but to explain what it means...<\/p>\n<p>&nbsp;<\/p>\n<p>There are two sites, A and B.<\/p>\n<p>We will manage costs at both the AB and on-site locations and move the project forward.<\/p>\n<p>The project at Site A wrapped up as scheduled, and we made a profit of 1 million.<\/p>\n<p>Project B is running a deficit of 1 million less than planned.<\/p>\n<p>&nbsp;<\/p>\n<p>Large companies generally prepare monthly financial statements.<\/p>\n<p>We carefully track our costs every month and manage our cash flow effectively.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-39459\" src=\"https:\/\/norimen.net\/wordpress\/wp-content\/uploads\/2019\/07\/istockphoto-843756750-612x612.jpg\" alt=\"Budget\" width=\"501\" height=\"500\" \/><\/p>\n<p>That makes it easy to see that next month is going to be rough.<\/p>\n<p>And when Company B is on track to end the month in the red, the costs (expenses) incurred by Company B are recorded in Company A\u2019s books.<\/p>\n<p>&nbsp;<\/p>\n<p>That way, B's deficit will disappear, and it'll look good, right? It's a wash!<\/p>\n<p>Naturally, the cost for Site A will be as originally planned (cost price).<\/p>\n<p>&nbsp;<\/p>\n<p>If you do this, you won't be able to determine the actual construction costs, and the cause will remain unclear.<\/p>\n<p>In the case of large companies, in particular, since they have shareholders, such practices are considered fraudulent accounting.<\/p>\n<p>&nbsp;<\/p>\n<p>Simply put, it means there\u2019s one shared budget, and expenses are managed in detail within that budget. (It all comes down to the same thing, though...)<\/p>\n<p>So, while the bottom line is what really matters, that\u2019s not exactly an option for major companies, and<\/p>\n<p>It's a serious problem because it could lead to violations of the Financial Instruments and Exchange Act or the Commercial Code, as well as false statements and tax evasion.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-8477\" src=\"https:\/\/norimen.net\/wordpress\/wp-content\/uploads\/2018\/11\/2018-11-06-15.57.36.jpg\" alt=\"Major Companies\" width=\"375\" height=\"500\" \/><\/p>\n<p>It's not limited to major companies, but they almost always do this kind of thing! lol<\/p>\n<p>As far as I know, I think 99% of them do it. (This is just my personal opinion.)<\/p>\n<p>It varies from large to small. (Isn't \"small and medium-sized\" a given?)<\/p>\n<p>While some operations at major companies generate exceptional profits, there are others where they have no choice but to take on enormous losses. (I think that\u2019s the case.)<\/p>\n<p>For us subcontractors, there are construction sites that are simply beyond our comprehension\u2014as if ordained by a higher power!!!<\/p>\n<p>&nbsp;<\/p>\n<p>What should we do to wrap up that project?<\/p>\n<p>From the very beginning, we have no choice but to assign the work to another site and make adjustments there.<\/p>\n<p>Because senior management, who know nothing about what\u2019s actually happening on the ground,<\/p>\n<p><span style=\"font-size: 130%;\"><strong><span style=\"color: #ff0000;\">\"Hey!! Why did you take that shot?!?!?\"<\/span><\/strong><\/span><\/p>\n<p>That's why it turns out that way.<\/p>\n<p>&nbsp;<\/p>\n<p>Even if it\u2019s a project that salespeople and construction supervisors at each branch think is \u201cunavoidable,\u201d it doesn\u2019t matter to upper management...<\/p>\n<p>And as for the site side, will they pay from another site, and what will the project name be on the invoice...<\/p>\n<p>&nbsp;<\/p>\n<p>Even if I told upper management the truth and sought their advice, I don't think they'd be able to say anything.<\/p>\n<p>&nbsp;<\/p>\n<p>If we don't do that, the branch's construction manager will keep getting disciplined and having their pay cut, and eventually there won't be anyone left lol.<\/p>\n<p>In a world like this, someone has to take responsibility (Poison)<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-6155\" src=\"https:\/\/norimen.net\/wordpress\/wp-content\/uploads\/2018\/03\/9eb2d0696ead4defd451d881794a7e2f.jpg\" alt=\"Roles and Responsibilities\" width=\"600\" height=\"460\" \/><\/p>\n<p>What if you were in a position like that?<\/p>\n<p>To be honest, if there are no repercussions for reclassifying costs, I don't think it's a big deal.<\/p>\n<p>&nbsp;<\/p>\n<p>I used to do that, too.<\/p>\n<p>Or rather, I was the one who got swapped out, lol.<\/p>\n<p>The reason is that when I'm reassigned to another site, I check with the person in charge of that site.<\/p>\n<p>Then they usually don't like it.<\/p>\n<p>It's because profits at my worksite will drop and my performance evaluation will suffer.<\/p>\n<p>&nbsp;<\/p>\n<p>That\u2019s actually just common sense, isn\u2019t it?<\/p>\n<p>However, in my case, I had agreed to the transfer as part of the welcome offer.<\/p>\n<p>That's because even if we reassign staff, the branch's overall profit won't change, and,<\/p>\n<p>I figured that, after all, even if a green, young employee like me were to get recognized, it wouldn't really matter anyway, lol (how cocky of me).<\/p>\n<p>&nbsp;<\/p>\n<p>At my workplace, things always seemed to be either break-even or slightly in the red.<\/p>\n<p>I didn't really care, but maybe because of that, I was the guy who was way out of the running for company awards lol<\/p>\n<p>&nbsp;<\/p>\n<p>There was a news article recently about a major general contractor switching contractors, but to be honest, this is something that happens all the time.<\/p>\n<p>Since most small and medium-sized contractor firms\u2014especially the smaller ones\u2014operate on a year-by-year basis anyway, the idea of switching contractors is completely out of the question.<\/p>\n<p>Anyone who categorically insists, \u201cThat\u2019s not true!\u201d regarding this matter is highly suspect.<\/p>\n<p>&nbsp;<\/p>\n<p>I think it\u2019s easier to file accurately and pay my taxes on time, so I don\u2019t think switching tax returns will have much of an impact. (Though I may not be fully informed on this.)<\/p>\n<p>These days, I don't bother with tax-saving strategies because they're pointless. (There's no need to defer taxes.)<\/p>\n<p>Since the company only has one budget, we just have to make do with it as we go here and there.<\/p>\n<p>What do you all think?<\/p>\n<p>So, how about your company?<\/p>\n<p>&nbsp;<\/p>\n<p>See you later.<\/p>","protected":false},"excerpt":{"rendered":"<p>Hello, everyone. This is Enta. I saw a news article the other day reporting that Okumura-gumi had falsified construction costs, and that multiple instances were uncovered following an internal whistleblower report.   I\u2019m sure many of you are familiar with this, but to explain what it means:   Let\u2019s say there are two construction sites, A and B\u2026<\/p>","protected":false},"author":2,"featured_media":42434,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_total_topic_count_hidden":0,"_bbp_total_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[1],"tags":[240,525,1855,4524,6453],"class_list":["post-52867","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-others","tag-240","tag-525","tag-1855","tag-4524","tag-6453"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium 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