Auditing Development Projects
Hari Bahadur Thapa
Historically, the country is now ruled by a strong government with a two-thirds majority in parliament. Major political parties have finally settled political transition through their continuous and collaborated efforts. With the strong political commitment, the government has given high priority to fulfilling the people’s aspirations and country’s prosperity. This requires leapfrog economic growth that is only possible through large investment in development projects implemented by efficient, capable and committed bureaucracy.
The country has launched various development projects under different rubrics such as national pride projects, regional projects and city projects and rural community projects. They have absorbed a large fraction of public budget and also vibrated the national economy. A few years back, national economy was affected by delayed public budget approval in parliament. But, now we have not faced such problem as the new constitution has clearly mentioned calendar regarding the announcement of annual fiscal budget.
Development projects are not just indicator of infrastructure development activities, but they also play crucial role in the growth of multiple sectors of economy and society. Technology transfer, people’s livelihood enhancement, employment generation, fund and asset transfer, capacity development and social development are the key sectors benefited by the development projects.
However, critics argue that the development sector is not performing well as desired. If we look at the situation of our projects, most of them suffered from various problems-- cost or time overrun, quality non-compliance or their cumulative effects. Projects are rarely accomplished in stipulated time with predefined cost and quality compliances.
In order to realise the government’s vision of Prosperous Nepal, Happy Nepali, there is no better option but to make large investment in development projects. But, the idea will not easily come to fruition as our past past experiences show. In the changing context, our development projects must not miss deadline and fulfil all quality-related requirement so that they have good returns. For this, we have to design and manage a systematic tool to assess the cost effectiveness, scheduled work progress and quality compliances following prevalent legal provisions. The technical audit is a systematic tool that has already been practiced in some public projects in Nepal. It has been widely accepted tool that can be used as an integral part of project management.
Technical audit is a systematic and independent process for obtaining evidence and determining the extent to which needs or expectations are fulfilled. Due to the nature and established system adopted in the technical audit, it is appreciated and easily accepted by project stakeholders. Independent process, evidence, predefined goals, and objective assessment are the key characteristics of technical audits.
Principally, the technical audit of project consists of three steps. The first party audit is conducted by project management itself for quality assurance; second party audit is carried out by customers/clients or higher authorities of projects for quality verification and providing feedbacks in time, and the third party audit is the type of pure ‘audit’ conducted by authorised public entity other than project stakeholders for the preventive measures and corrective actions. For third party technical audit, independent and certified third party consultants having no personnel or institutional concern and interest in the projects are employed.
In Nepal, the National Vigilance Centre, as oversight agency established under direct control and supervision of the Prime Minister, has been conducting technical audit of public-financed projects on sampling basis since F/Y 2060/061. The centre was established according to Article (37) of Corruption Control Act (2002) for conducting the promotional and preventive measures against corruption and corruption-oriented activities. Development projects consume a large amount of public treasury so there is the possibility of abuse of public funds. Bearing this fact in mind, technical audit of development projects was initiated by the centre as preventive measures of corruption in public-funded development projects.
During the audit process, the auditor suggests the project officials for correction of mistakes and faults in time, due to which projects will not incur losses in future. The auditor reports the findings to authority for appropriate and timely actions so that similar mistakes will not surface in similar projects in the future. Technical auditor seeks to ensure that the projects follow the provisions related to quality, cost, timeframe and mandatory rules.
In addition to experience in particular profession, qualification and knowledge, the attitude and behaviour of technical auditor is important in the audit process. Technical auditor is assumed as professional expert too, having best managerial and technical ideas for project implementation as well. The suggestions and report, given by technical auditor, will be highly valued for project and its higher authorities.
A technical auditor should prove him/herself as independent, expert and experienced in scoping the audit job, analysing the documents, collecting and evaluating the evidences and analysing the root cause behind the problem with possible corrective actions. The suggestions and recommendations, received by audited project from technical auditor, can be likened to medicine that a physician prescribes to a patient.
We are in the beginning phase of state restructuring with three-layer government. It is not possible to conduct third party technical audit for all projects implemented by public entities due to several reasons. But, if the beneficiary people, implementing agencies and monitoring authorities assess, monitor and evaluate at least these four aspects -- cost, schedule, quality and rules – in any scale and level of project, that will play an effective role in technical audit.
No doubt, beneficiary people are principal and vital auditors of all type of development projects. Concerned authorities should give emphasis on conducting the first and second party technical audit, and the National Vigilance Centre should be strengthened to conduct the third party technical audit of large and medium scale public financed project on regular basis. Unless our development projects are ‘technically sound’, it is unlikely that the government makes good returns from its investment.