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Dr. Alexia Nalewaik and Prof. Anthony Mills

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1 Dr. Alexia Nalewaik and Prof. Anthony Mills

2 The Three E’s of Performance Audit
A performance audit examines the process by which an entity is achieving its objective using; Economy – undertaking the work with least wastage of physical and financial resources (inputs) Efficiency – performing work productively, with a high ratio of inputs to outputs Effectiveness – extent to which business and stakeholder objectives are met (outputs)

3 QA and QC Quality Assurance Quality Control Processes Product
Prevention Evaluation Compliance Performance

4 Nalewaik - Mills Performance Review method

5 Module 4 - Compliance Sample findings Retention not held consistently
Total equipment charge exceeds equipment Fair Market Value Labor costs calculated incorrectly Unallowable charges & reimbursable expenditures Failure to give credit for deductive change orders Change orders calculated using different unit rates Color of money issues Reconciliation issues

6 Module 1 – Project Planning
Sample findings Gap between project scope and available funding, can’t afford the project! Not enough contingency allocated – P50? P80? Contract language that does not protect the owner from some risks Disconnect between organization’s strategic plan and capital plan Extreme low bid

7 Module 2 – Stakeholder Identification
Sample findings Measures of “Effectiveness” are unclear or ambiguous Stakeholders increased scope that was not beneficial to the project Contractor failed to declared conflict of interest with other firms employed on the contract Stakeholder turnover Power, influence, and level of interest Stakeholders held project permits hostage Quotable book quote Failure to understand stakeholders could very well mean failure of the project. (Nalewaik & Mills 2017, p51)

8 Module 3 – Risk Assessment
Sample findings Risk modeled, but not managed Fraud protection or Inspector General function not in place Intentional understatement of risk Lessons learned and risks not applied from previous projects Extreme focus on only technical and financial risks Quotable book quote “one of the objectives of the performance review is to understand both project and enterprise vulnerabilities and opportunities …..strengthening related controls, examination of risk assessment is a key element of the performance review. (Nalewaik & Mills 2017, p56)

9 Module 5 – Resource Analysis
Sample findings Equipment utilization is inconsistent Redundancy, overburdening, & gaps in staffing Failure to document the poor performance of contractors and consultants Effective use of technology Poor management resulting frequent turnover of staff Duplicate IT systems Materials and vendor management Contingency spent before project broke ground Quotable book quote The concept of resources becomes broadened … to any that may impact project outcomes. (Nalewaik & Mills 2017, p65)

10 Module 6 – Management Controls
Sample findings Project procedures that are burdensome or duplicative Failure to update written procedures “Independent PMO” had a conflict of interest Lack of controls over who can sign invoices and contracts Line item budget exceeded without explanation Organizational structure isn’t functional Lack of process QA/QC Missing deductive change order Line item transfers Lack of change management

11 Module 7 – Post-Project Concerns
Sample findings Projects that have not been closed out (for years) Assets missing from asset management system Funding remains in system after projects were closed out Failure to capture lessons learned Poor quality of historic data Less than smooth transition to operations Warranty / maintenance system incompatible with BIM Missing closeout documentation Quotable book quote Much of what is reviewed during project closeout and post-project is related to effectiveness, and capturing information for success of …future projects (eg cost, (Nalewaik & Mills 2017, p73)

12 Recap - Performance Audit Objectives
Facilitate continuous improvement Enable organizational maturity Support a learning culture Improve performance and professionalism Provide assurance to stakeholders Contribute to good governance Empower critical questioning

13 Project Performance Review: Capturing the Value of Audit, Oversight, and Compliance for Project Success Nalewaik & Mills 2017 Routledge / Taylor & Francis website Hardcover & e-book Amazon.com


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