INEN261: Chapter # 12

Project AuditingProject Auditing

Presented by:

Jasim Alnahas

Chapter Learning OutcomesIf you complete the given assignments for this chapter you will:

Understand the purpose of project evaluation Learn what the project review report should

contain Understand the critical elements of the audit

and the essential conditions for a credible audit

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Project Audit

A formal review of any aspect of a project Audits focus on whatever matters senior

management desires Another type of audit is an ethics audit

Evaluate means to set the value of or appraise

Project evaluation appraises progress and performance against standard

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Purpose of Evaluation—Goals of the System

Efficiency in meeting both the budget and the schedule

Customer impact/satisfaction Business/direct success Future potential

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The Project Audit

The main purpose of an audit is to help achieve the goals of the project

All facets of the project are studied A project audit is equivalent to the application

of TQM to project management

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Chapter 12 discusses “Project Audits” Project Audits are “more or less formal inquiry into

any aspect of the project” I would prefer to use the term “Project Review”

Less confusion with the term audit as applied to financial evaluations

The review is intended to compare the project progress and performance to the planned progress and performance or to similar project progress and performance

Answers the question: “How are we doing?”

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How are we doing compared to what? How are we doing against the goals that we set out

for the project The direct goals of any project are pretty straight

forward Performance (What is to be accomplished?) Schedule (How long will it take to accomplish the

performance?) Budget (How much will it cost to achieve the desired

performance?) The S curve or earned value chart depicts these

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How we are doing against schedule or budget is derived from this kind of review or audit

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However projects also may have additional or “Ancillary Goals” Improved customer satisfaction Project team satisfaction or growth Organizational or enterprise achievement to

further a strategic objective

There are additional results apart from the direct goals of Performance, Schedule and Budget which can also be reviewed

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Designing a Project Review Process: What are the key questions in structuring the process? What constitutes project success? (What are the

direct and ancillary goals of the project? How deeply should we review the Project? When should we review the Project? Who should perform the Project Review? How should the results of the review be

documented? Where should the results of the review be published?

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Should the review be limited to the Direct Goals of Performance, Schedule and Budget?

Certainly the Direct Goals must be included in every review

The criticality of the project to achieving broader organizational goals would determine whether ancillary goals should be added

Examples Client satisfaction may outweigh budget adherence

where new markets are being entered Technical quality may be vitally important when

adding a service or product line

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How deeply should the Project be reviewed? Project reviews take time and resources ($) to

perform The depth of project review is constrained by

these two factors Obviously the cost and time required for

review should be a small fraction of the time and cost required for the project (Perhaps in the 5-30% range)

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Project reviews have direct and indirect costs associated with them The direct costs are associated with the review

team itself In addition, reviews are a “distraction” for the

project team Time, energy and anxiety devoted to the review

takes away from the level of effort devoted to project execution

The results of the review can have morale damaging potential which can further erode project efficiency

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Three levels of review depth: General, Detailed and Technical General review touches lightly on several

general areas The current status of the project The future status of the project The status of crucial tasks An assessment of risk of project failure or

financial loss Lessons learned from the project Limitations of the review

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General Review

May consist of reading monthly reports May be covered at routine meetings Review may not get below the stoplight level

of evaluation

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Problems uncovered via General Review may trigger a Detailed Review

A review team is assembled and deployed They are sent in to explore the areas of

concern uncovered in the general review The depth of the Detailed Review is a

function of the seriousness of the findings from the General

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When does it make sense to review a project? If we are reviewing for problems, the sooner they

are detected the easier it is to fix. (Therefore the earlier the better particularly for technical reviews.)

General reviews should be performed according to some calendar schedule. (Monthly makes sense for significant projects)

Detailed reviews should be performed as needed or perhaps on a quarterly basis if done routinely

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Who should perform the review? General reviews should be the responsibility of the

PM. The PM or the Project office should provide

documented regular status reports of the project Those reports should be monitored by the

general management staff Detailed reviews would involve non-project staff

Look at the project with fresh eyes Verify that things are going well Provide assistance for trouble spots

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Possible representation on a detailed project review team Project management staff

Accounting/finance Technical specialists The client or customer Senior management Legal staff Human resource staff

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Typical steps in a detailed project review:

Assemble a small team of experienced

experts

Familiarize the team with the

requirements of the project

Audit the project on site

After the completion, debrief the project’s

management

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Steps to carry out a review (cont.): Produce a written report according to a pre-

specified format

Distribute the report to the project manager

and project team for their response

Follow up to see if the recommendations

have been implemented

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How should the review be documented? General review formats may be contractual

requirements We are trying to compare actual performance

to predicted performance We are trying to identify and illuminate

surprises We are trying to be constructive The reviews should be accurate and truthful

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Typical format for a review or audit report Introduction and overview

Current Status Cost Schedule Progress Quality

Future Project Status Recommendations for future work

Critical issues to monitor Major areas of risk or concern Limitations and assumptions of the review

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Where do you publish the results? I generally subscribe to a full disclosure strategy

The best surprise is no surprise If there is one, get it out early so that it can be

addressed To the team To the management To the client

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The document should be introduced via discussion Presentations should accompany the report When possible I would inform in the following

order: The project team The management of the performing organization The client or customer

Inform all without delay

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Summary of Chapter 12 The purposes of the evaluation are both

goal-directed and also aimed at achieving unspecified ancillary goals

The project review report should contain at least the current status of the project, the expected future status, the status of crucial tasks, a risk assessment, information pertinent to other projects, and any caveats and limitations

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Summary (Continued) Audit depth and timing are critical elements of

the audit A difficult responsibility of the reviewer is to be

honest, objective and constructive in presenting the audit results

Several essential conditions must be met for a credible audit: a credible audit/evaluation team, sufficient access to records, and sufficient access to personnel

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