Capital Construction Projects Accountability, Independent Technical Evaluation Complements Independent Financial Audit (2010)

The Owner invests significant amount of money on various capital projects. The public funds expenditure requires a high level of scrutiny, audit and accountability. The Agency/Authority sets up rules and regulations for the project accountability. There are thresholds and authority levels for various management staff, set up in compliance with Federal Transit Administration (FTA) guidelines. Improper use of funds results in the cancellation of funds and penalties. Auditors independently review project budgets and change orders against pre-established thresholds and check the accounting methods against the Generally Accepted Accounting Principles (GAAP), as established by Department of Cost Defense Contract Audit Agency (DCAA). Auditors make recommendations for proper entitlement on the financial side, based on their verification and findings of the payroll, invoices, material shipment tickets and other accounting records. Most Auditors (financial) are not qualified to interpret the technical side of the contract. They assume prior technical validity of the change. They do not normally review against the contract documents in detail, for a change in scope of work. During the Audit findings, if the fraud potential is suspected then further investigation is performed. The selection of these audits could be directed by the project manager due to Board requirements or annual work plan or random selection of projects or public complains. To account for proper use of public funds, full and complete audit is important. In this paper, the author will address a need for an independent “Technical Evaluation”, to compliment the “Financial Audit”. By reviewing and interpreting the intent of the contract documents for its General Conditions, Technical Requirements, schedules requirements and change in the scope of work, by a qualified technical staff, financial audit performance can be enhanced. A good number of cases, where entitlements is recommended by the Financial Auditors, are rejected or significantly reduced by the independent Technical Evaluator, as being part of original (base) contract scope. This is due to their strong knowledge and technical expertise in reviewing of the contact documents. The author has found that the technical evaluator performs the merit review (entitlement evaluation) of the scope change to avoid paying twice for a portion of the work already in the contract. The project quality can be improved, lessons learned can be incorporated and value engineering ideas can be implemented. The staff becomes conscious to maintain good documentation, thus creating significant indirect savings, without delaying the project. It also brings consciousness in the contractors industry that they are being watched by the qualified staff of the Owner. The author will address the following: 1. Current Audit Process. (Financial audit without Independent Technical Evaluation). 2. Role of an Auditor. 3. Role of an independent Technical Evaluator. 4. Need for Independent Technical Evaluator to compliment the financial audit. 5. Benefit to the project. 6. Analysis of few randomly selected projects with and without technical evaluation.