Many project owners and in particular those from the public sector or publicly listed companies have the requirement to conduct internal audit on their capital construction projects. Although the trend for most of those project owners to conduct this internal audit after project completion, nevertheless, conducting internal audit during the project delivery could be of greater values in terms of rectifying non-compliant actions, taking advantage of identified opportunities and maybe more important detect and prevent actions that could lead to project fraud.
The internal audit should cover all management aspects of delivering capital construction projects. Those would include governance, schedule, financial, quality, communications, stakeholders, human resources, risk, procurement, health, safety and environment, sustainable development, performance reporting and eventually project closeout. Under each project management aspect or category, the internal audit objectives should be clearly stated and defined.
For example, under the financial category, the items that need to be audited might include Financial transparency as it relates to project budget, contingency usage, awarded contracts, change orders and invoices for completed works; No non-authorized transfer of budget funds from one cost center to another; Contingency spending is authorized by the project owner; Fair and proper commercial bid analysis for technically qualified bidders; No erroneous or unsupported change orders; Reported progress invoice is aligned with schedule reported performance; Reported progress invoice is aligned with the earned budget; Payments made against approved progress invoices to consultants and contractors are used to cover expenses incurred on the same project and were not used for other projects; and Proper value engineering workshops were conducted as planned and associated cost savings are reflected in the approved project budget. Each one of those audit objectives will have a weight value so the total of all audit objectives will be 100%.
For each audit item, the internal auditor needs to report the audit findings which could be compliant, opportunities for improvement (OFI), minor non compliances and major non-compliances. Those findings will be scored on a scale of 4 where being compliant will have a score of 4 points (Green) while major non-compliances will score 1 point (Red). The score for opportunities for improvement (OFI) will score 3 points (Purple) and minor non-compliances will score 2 points (Yellow).
Using a Project Management Information System (PMIS) solution like PMWeb, all project management business processes will be digitalized so they can be monitored, evaluated and reported on. In addition, PMWeb custom form builder will be used to create a template to capture the findings by the internal audit team so they can be reported on. The Capital Project Audit template will include tables to capture the audit findings for each project audit category. Each table will list the audit objectives, assigned weight for each objective, scoring and evidence of finding. The template can be modified to include details of the Internal Auditor name although this will be captured in the workflow that will be assigned to Capital Project Audit template.
PMWeb allows attaching all supportive documents to each transaction of each business process template. It is highly recommended to add details to each attached document to better explain to the reader what is being attached and viewed. In addition, links to other relevant transactions or records of other business processes managed in PMWeb can be also added.
It is highly recommended that all those supportive documents, regardless of their type or source, get uploaded and stored on PMWeb document management repository. PMWeb allows creating folders and subfolders to match the physical filing structure used to store hardcopies of those documents. Permission rights can be set to those folders to restrict access to only those users who have access to do so. In addition, PMWeb users can subscribe to each folder so they can be notified when new documents are uploaded or downloaded.
To enforce transparency and accountability in reporting the findings of the internal audit, a workflow needs to be added to the Capital Project Audit template to map the submit, review and approve tasks, role or roles assigned to each task, task duration, task type and actions available for task.
When the Internal Audit for a project is completed and is submitted for review and approval, the workflow tab available on the relevant template will capture the planned review and approve workflow tasks for each transaction as well as the actual history of those review and approval tasks. The captured workflow data will include the actual action data and time, done by who, action taken, comments made and whether team input was requested.
About the Author
Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with 40-year service record providing project management, project controls services and project management information system to over than 200 projects with a total value in excess of US $100 Billion. Those projects included Commercial, Residential, Education and Healthcare Buildings and Infrastructure, Entertainment, Hospitality and shopping malls, Oil and Gas Plants and Refineries, Telecommunication and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training and business development.
Bassam is a frequent speaker in topics relating to Project Management, Strategic Project Management and Project Management Personal Skills. Over the past 40 years he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe and South America. He has written more than 550 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP) and Earned Value Professional (EVP) from the Association for the Advancement of Cost Engineering (AACE) and Green Project Management (GPM).
Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA and London Business School, London, UK.