Revenue and Contract Receivables, net
 9 Months Ended
Apr. 30, 2013
Revenue and Contract Receivables, net [Abstract]  
Revenue and Contract Receivables, net
5.       Revenue and Contract Receivables, net

Revenue Recognition
 
Substantially all of the Company's revenue is derived from environmental consulting work. The consulting revenue is principally derived from the sale of labor hours. The consulting work is performed under a mix of fixed price, cost-type, and time and material contracts. Contracts are required from all customers. Revenue is recognized as follows:
 
Contract Type
 
Work Type
 
Revenue Recognition Policy
 
 
 
 
 
Time and Materials
 
Consulting
 
As incurred at contract rates.
 
 
 
 
 
Fixed Price
 
Consulting
 
Percentage of completion, approximating the ratio of either total costs or Level of Effort (LOE) hours incurred to date to total estimated costs or LOE hours.
 
 
 
 
 
Cost-Type
 
Consulting
 
Costs as incurred. Fixed fee portion is recognized using percentage of completion determined by the percentage of LOE hours incurred to total LOE hours in the respective contracts.
 
Substantially all of the Company's cost-type work is with federal governmental agencies and, as such, is subject to audits after contract completion. Under these cost-type contracts, provisions for adjustments to accrued revenue are recognized on a quarterly basis and based on past audit settlement history. Government audits have been completed and final rates have been negotiated through fiscal year 2005. The Company records an allowance for project disallowances in other accrued liabilities for potential disallowances resulting from contract disputes and government audits (refer to Note 10).
 
Change orders can occur when changes in scope are made after project work has begun, and can be initiated by either the Company or its clients. Claims are amounts in excess of the agreed contract price which the Company seeks to recover from a client for customer delays and /or errors or unapproved change orders that are in dispute. Costs related to change orders and claims are recognized as incurred. Revenues and profit are recognized on change orders when it is probable that the change order will be approved and the amount can be reasonably estimated. Revenues are recognized only up to the amount of costs incurred on contract claims when realization is probable, estimable and reasonable support from the customer exists.
 
All bid and proposal and other pre-contract costs are expensed as incurred. Out of pocket expenses such as travel, meals, field supplies, and other costs billed direct to contracts are included in both revenues and cost of professional services. Sales and cost of sales at the Company's South American subsidiaries exclude tax assessments by governmental authorities, which are collected by the Company from its customers and then remitted to governmental authorities.

Contract Receivables, Net

Contract receivables, net are summarized in the following table.

 
 
April 30,
2013
  
July 31,
2012
 
 
 
  
 
Contract Receivables:
 
  
 
Billed
 
$
35,569,554
  
$
42,977,016
 
Unbilled
  
25,442,561
   
28,829,818
 
 
  
61,012,115
   
71,806,834
 
Allowance for doubtful accounts and contract adjustments
  
(10,665,837
)
  
(10,238,391
)
 
        
Total contract receivables, net
 
$
50,346,278
  
$
61,568,443
 

Allowance for Doubtful Accounts and Contract Adjustments

The Company reduces contract receivables by recording an allowance for doubtful accounts to account for the estimated impact of collection issues resulting from a client's inability or unwillingness to pay valid obligations to the Company. The resulting provision for bad debts is recorded within administrative and indirect operating expenses on the condensed consolidated statements of income.
The Company also reduces contract receivables by establishing an allowance for billed and earned contract revenues that have become unrealizable, or may become unrealizable in the future. Management reviews contract receivables and determines allowance amounts based on historical experience, geopolitical considerations, client acknowledgment of the amount owed, client ability to pay, relationship history with the client and the probability of payment. Such contract adjustments are recorded as direct adjustments to revenue in the condensed consolidated statements of income.
 
Activity within the allowance for doubtful accounts and contract adjustments is summarized in the following table.

 
 
Three Months Ended
April 30,
  
Nine Months Ended
April 30,
 
 
 
2013
  
2012
  
2013
  
2012
 
Balance at beginning of period
 
$
10,216,404
  
$
7,732,072
  
$
10,238,391
  
$
6,755,087
 
Net change recorded during the period
  
449,433
   
114,352
   
427,446
   
1,091,337
 
Balance at end of period
 
$
10,665,837
  
$
7,846,424
  
$
10,665,837
  
$
7,846,424
 

Contract Receivable Concentrations

Significant concentrations of contract receivables and the allowance for doubtful accounts and contract adjustments are summarized in the following table.

 
 
 
Balance at April 30, 2013
  
Balance at July 31, 2012
 
Region
 
Contract
Receivables
  
Allowance
for Doubtful
Accounts
and Contract Adjustments
  
Contract
Receivables
  
Allowance
for Doubtful
Accounts
and Contract Adjustments
 
 
 
  
  
  
 
United States, Canada and South America
 
$
39,719,664
  
$
1,207,686
  
$
46,860,299
  
$
1,729,515
 
Middle East/Africa
  
13,855,925
   
6,826,450
   
21,224,062
   
7,377,650
 
Asia
  
7,436,526
   
2,631,701
   
3,722,473
   
1,131,226
 
Totals
 
$
61,012,115
  
$
10,665,837
  
$
71,806,834
  
$
10,238,391
 
 
Combined contract receivables related to projects in the Middle East, Africa and Asia represented 35% of total contract receivables at April 30, 2013 and July 31, 2012, while the combined allowance for doubtful accounts and contract adjustments related to these projects represented 89% and 83%, respectively, of the total allowance for doubtful accounts and contract adjustments at those same period end dates.  These allowance percentages highlight our experience of slow and inconsistent collections that result from heightened political, regulatory and cultural risks and scrutiny within these regions in comparison with similar risks in the United States, Canada and South America.  Slow payment of these receivables results in higher credit and liquidity risk as we expend resources that may not be recovered for several months, or at all.
 
In January 2013, the Company announced that it had entered into a contract to provide environmental consulting services to a client in Asia.  This contract replaced a previous agreement dated in fiscal year 2011.  Through April 30, 2013, the Company recorded $6.7 million of contract receivables related to these agreements.
 
Through April 30, 2013, the Company encountered significant transitional issues and delays in collecting payments due to it under both of these agreements.  After considering the age of contract receivables, non-payment of advanced payments owed to the Company under the agreement and the lack of any other cash collections to date, the Company recorded $0.4 million and $1.5 million of additional allowance for doubtful accounts and contract adjustments related to these projects during the three months and nine months ended April 30, 2013, respectively.  The total allowance for doubtful accounts and contract adjustments related to these contracts was $2.0 million at April 30, 2013.