2 a. project auditing
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A project audit evaluates the progress and performance of a project compared to its planned objectives. It examines all aspects of a project including its management, methodology, budgets, and completion status. The audit report assesses the current status, future projections, critical tasks, risks, and lessons learned. It follows a life cycle of initiation, baseline definition, data collection, analysis, reporting, and termination. The auditor maintains independence and objectivity to truthfully evaluate the project's strengths and weaknesses.
2 a. project auditing
- 2. Project Audit/Evaluation/Review • A more or less formal inquiry into any aspect of the project • A major vehicle for evaluation • “Evaluation” – to set the value of; to appraise • “Project evaluation” – appraises the progress and performance of a project compared to that project’s planned progress and performance, or compared to the progress and performance of other similar projects
- 3. 12-3 The Project Audit What and why Benefits of a project audit Judging success and failure Determining project objectives Contents and format of a project audit Project Audit Life Cycle Responsibilities of an auditor
- 4. 12-4 What is a Project Audit, & Why Is It Done? A formal inquiry into any or all aspects of a project Possible reasons: Revalidate the business feasibility of the project Reassure top management Confirm readiness to move to next phase of project Investigate specific problems
- 5. 12-5 Some Specific Benefits of a Well-Done Project Audit Identify problems earlier Clarify performance/cost/schedule relationships Improve project performance Identify future opportunities Evaluate performance of project team Reduce costs Inform client of project status/prospects Reconfirm feasibility of/commitment to project
- 6. 12-6 Judging a Project’s Success To what extent is a project meeting its objectives? Efficiency: Does the project use resources in a cost- effective manner? Cost efficiency? Schedule efficiency? Customer impact/satisfaction: Quality, timeliness, customer satisfaction, meeting/exceeding specifications. Business success: Meeting expectations in ROI, market share, cash flow Future potential: Will project lead to future business prospects?
- 7. 12-7 The Difference Between Project Success & Failure Audits of 110 projects over 11 years reveal four basic differences between success and failure Objectivity in design, scope, cost and schedule Experienced people throughout project Authority commensurate with responsibility Clear responsibility and accountability
- 8. 12-8 Determining What the Project Objectives Really Are Explicit objectives are easy to find Cost, schedule, performance specs Profit targets Ancillary objectives are not Examples include retaining employees, maintaining a customer, getting a “foot in the door,” developing a new capability, blocking a rival
- 9. 12-9 Ancillary Objectives are Important, but Often Obscure If an audit ignores ancillary objectives, it will draw an incomplete picture But people tend to disguise ancillary objectives. Why? If not explicit, how can it be judged a failure? People and teams may have their own goals and priorities The stronger the project culture, the greater the suspicion toward outsiders, e.g., auditors
- 10. 12-10 Costs of Project Audits While audits offer benefits, they aren’t free Some costs are obvious, others less so Salaries of auditors and staff Distraction from project work Before and during the audit Anxiety and morale within the project Cost of outside experts
- 11. 12-11 Timing of the Audit Early audits tend to focus on technical issues, and tend to benefit the project Later audits lean toward cost and schedule, and tend to benefit the parent organization Transfer of lessons learned to other projects
- 12. 12-12 Contents of a Project Audit Format can vary, but six areas should be covered 1. Project status, in all dimensions 2. Future projections 3. Status of crucial tasks 4. Risk assessment 5. Information relevant to other projects 6. Limitations of the audit
- 13. 12-13 A Format for a Project Audit Introduction Including project objectives Also audit assumptions, limitations Current project status Cost Schedule Progress/Earned Value Quality
- 14. 12-14 Format for Project Audit (cont’d) Future Project Status Conclusions and recommendations Critical Management Issues A Pareto approach Risk Management Major threats to project success Appendices
- 15. 12-15 The Project Audit Life-Cycle Like the project itself, the audit has a life cycle Six basic phases: 1. Project audit initiation Focus and scope of audit; assess methodologies, team members required 2. Baseline Definition Determine the standards against which performance will be measured
- 16. 12-16 The Audit Life Cycle (cont’d) 3. Establishment of Audit Database Gathering/organizing pertinent data Focus on what’s necessary 4. Data Analysis The judgment phase Comparison of actuals to standard
- 17. 12-17 The Audit Life Cycle (cont’d) 5. Audit Report Preparation Present findings to PM first Then, prepare final report 6. Audit Termination Review of audit process Disbanding of team
- 18. 12-18 Responsibilities of a Project Auditor As in medicine, “first do no harm” Be truthful, upfront with all parties Maintain objectivity and independence Acknowledge entering biases Project confidentiality Limit contacts to those approved by management
- 19. 12-19 Baseline Marketing Data, Figure 12-2
- 20. Purposes of Evaluation • Four dimensions of project success – Efficiency in meeting both the budget and schedule (meeting cost, time and scope objectives) – Customer impact/satisfaction (loyalty, repurchase, fulfilling customer’s needs, actual use by the customer) – Business/direct success (level of commercial success, market share; yields, cycle times, quality, processing steps) – Future potential (factors relating to opening a new market, developing a new line of products and services, developing a new technology, skills, competencies)
- 21. Purposes of Evaluation, 2 To help translate the achievements of the project’s goals into a contribution to the parent organization’s goals. To do this, all facets of the project are studied in order to identify and understand the project’s strengths and weaknesses. It is the equivalent of an application of Six-Sigma or TQM to project management. Result in a set of recommendations for the project’s direct goals
- 22. Purposes of Evaluation, 3 To review contributions of ancillary/ unplanned goals: Improve understanding of the ways in which projects may be of value to the organization Improve the process for organizing and managing projects (project management maturity) Provide information and experience for entering new markets Provide a congenial environment in which project team members can work creatively together Identify organizational strengths and weaknesses in project-related personnel, general management and decision-making techniques and systems Identify and improve the response to risk factors in the firm’s use of projects Allow access to project policy decision-making by external stakeholders Improve the way projects contribute to the professional growth of project team members Identify project personnel who have high potential for managerial leadership
- 23. The Project Audit A thorough examination of the management of a project, its methodology and procedures, its records, its properties, its budgets and expenditures and its degree of completion. Different from and broader than a financial audit (use and conservation of resources) and technical audit It may deal with the project as a whole, or only with a part of the project
- 24. The Formal Audit Report Current status of the project Does the work actually completed match the planned level of completion? Future status Are significant schedule/scope changes likely? If so, indicate the nature of the changes Status of crucial tasks What progress has been made on tasks that could decide the success or failure of the project?
- 25. The Formal Audit Report, 2 Risk assessment What is the potential for project failure or monetary loss? Information pertinent to other projects What lessons learned from the project being audited can be applied to other projects being undertaken by the organization? Limitations of the audit What assumptions or limitations affect the data in the audit?
- 26. The Project Audit Life Cycle Project Audit Initiation Project Baseline Definition Establishing an Audit Database Preliminary Analysis of the Project Audit Report Preparation Project Audit Termination
- 27. Responsibilities of the Project Auditor/Examiner “Tell the truth”: objective, ethical manner Walker et al (1980): independence: Assemble a small team of experienced experts Familiarize the team with the requirements of the project Audit the project on-site After completion, debrief the project’s management Produce a written report to the PM and project team for their response Follow up to see if the recommendations have been implemented