Technical Audit – An Auditee’s Perspective

In most organisations, technical audits can be sanctioned at any stage of the project cycle to ascertain whether the project’s objectives are being or were achieved, within the right contractual framework or not. For those that may have experienced a technical audit on a large infrastructure project, this reason may sound like an academic reason for undertaking an audit.

In public organisations, it is common for individuals working on large infrastructure projects to interface with auditors because the stakes on such projects are extremely high, right from commencement of the project to implementation.

In this article, I had the pleasure to interact with Anthony and Salim who agreed to share their experiences. Anthony was a project manager on a road project in Latin America while Salim, a project engineer on a Water Treatment Plant in Kenya.

I met Anthony at one of the Rotary International Conventions. During one of the break-out sessions, we had an interesting discussion that gave me an insight into technical audits.

Anthony’s road project in Latin America

Anthony: I was once hired as a resident engineer by a local government in Latin America to supervise construction works for a government funded road project in Peru. When I completed the critical stages of the project, my application for annual leave was approved and I headed to the Bahamas. My intention was to spend three weeks on the beach side and then head home to England for another three weeks before returning to Peru.

No sooner had the first week ended than I received an email from an unknown address on a Friday afternoon. This was shortly followed by a phone call from an unknown number. The caller informed me that I was being investigated for fraud on the road project. Suddenly, the lager I was sipping lost its taste.

This is usually an e-mail from a colleague (which includes either true or false information) leveling accusations of blame, which is also copied to senior colleagues, and any other would be interested parties. Such emails are intended to shame or coerce another into doing or admitting to something

Later on Saturday morning, I was tipped off by one of my confidants in the government, that I may be a victim of a witch-hunt which had been brewing four weeks prior to my departure for annual leave. I sat on my couch in disbelief, wondering what was really going on.

Early Monday morning, I received an Email to the Gods. The email sought clarification on some inconsistencies which had apparently been identified in one of the Contractor’s interim payment certificates (IPCs). The project director (my boss), three audit managers and the chief accounting officer (MD) of the government entity I was working with were all in copy. There was a sixth email in copy but I did not know the recipient. Only God knows how many people received a blind copy of the same email.

Cyrus: What’s an Email to the Gods and what were the contents in the e-mail?

Anthony: This is usually an e-mail from a colleague (which includes either true or false information) leveling accusations of blame, which is also copied to senior colleagues, and any other would be interested parties. Such emails are intended to shame or coerce another into doing or admitting to something.

I was politely and unceremoniously advised to resign on grounds that I did not advise the government appropriately, and had therefore caused them a financial loss

One of the audit managers sought clarification on why I had recommended payments to the road contractor for construction start-up costs, which were noticeably high and evidently front loaded in view of the overall construction cost. Secondly, audit further inquired why I had allowed certain workers from the contractor’s team to remain on site yet they did not have the competence to execute the construction works.

Cyrus: How did you respond to the auditor?

Anthony: I took a day off to try and think through the contents of the email and the tone in which audit was seeking the clarifications. I made an attempt to reach my confidant but I could sense he had decided to keep away from the investigations, having already briefed me on what was going on, lest he is misunderstood to be an “accomplice”. I also noticed that my mobile phone was being tapped.

I responded two days later. However, by this time, my precious time at the beach side had morphed into long frustrating hours on end, seated at my desk, on my laptop in the hotel suite, drafting an appropriate response. The frustration with the auditor’s questions was that the answers seem to have been already known to some of the email recipients but I had to find a way to submit a tactful and non-offensive response.

As the resident engineer, I was required to manage the contract as signed by the contract parties, whether or not the start-up costs had evidently been front loaded or not. The contract parties needed to have sorted out such issues before contract signature. Early on in the project, I made an attempt to relieve some of the contractor’s workers from site because they could not speak Spanish (the language of the contract), but my efforts were thwarted when one of the politicians in Peru visited the construction site upon commencement of works.

I prefer to keep the details of my reply email private, but I believe I submitted what I thought was an appropriate response. Upon submission, I received a series of additional requests for further clarification, which in the end led me to cancel my vacation and fly back to Peru.

While in Peru, I requested for a fair hearing to explain myself. During this hearing, most of the members in attendance spent the greater part of the proceedings looking at their shoes and fiddling with their mobile phones, while I made my submission.

Cyrus: Were you exonerated?

Anthony: No. Even though I felt I had given the auditors a thorough and contractual account of my actions while administering the contract, I was politely and unceremoniously advised to resign on grounds that I had not advised the government appropriately, and had therefore caused them a financial loss. Without making any further attempt to explain to my boss and his senior colleagues how the contract had been administered, and sighting foul play, I resigned, packed my belongings and returned to England.

Cyrus: That verdict was malicious and unfair. How did you recover from such a nightmare?

Anthony: Well, I was eventually vindicated when an external audit was carried out on the government entity after the projected closed. The external audit unearthed high profile dealings of a cartel within the government entity.

I was eventually vindicated when an external audit was carried out on the government entity after the projected closed. The external audit unearthed high profile dealings of a cartel within the government entity

Someone had to be sacrificed but once your conscience is clear, and you are certain that you acted in good faith, you are disturbed in the short-run but move on in the long run, especially when you know the under currents that are at play.

Cyrus: Thanks. That was enlightening.

Anthony: You are welcome. I know you are working on similar projects so be alert and always look out for yourself.

A “costly” change order on a water project in Kenya

Salim and I met at a training workshop organised by the World Bank in February 2020. I could tell from the questions he was asking the facilitators that he had experienced a number of challenges on his projects.

I recall when he told one of the workshop facilitators that some auditors are not knowledgeable about what they set out to audit, but they have a cunning and tactful habit of extracting information from naïve auditees, who volunteer information by saying more than they have been asked – thereby feeding the audit strategy of the auditors.

We sat next to each other during one of the lunch breaks and Salim told me about a “costly” change order on a water project in Kenya.

Salim: My boss once went on a year’s sabbatical and I was temporarily assigned as project manager for a water project under construction in Kenya. A challenge arose on the construction site requiring a change order to the works and the works supervision consultant formally sought the employer’s opinion on how to proceed.

After a careful thought on the matter and a phone consultation with my boss, I issued an instruction to the consultant to authorise the change order. The consultant immediately proceeded to issue the change order to the contractor. The change order saved the employer money but delayed the project by two months.

Eventually, common sense prevailed and the project was commissioned by the Member of Parliament two months behind schedule

Unknown to me at the time was the fact that a Member of Parliament had positioned himself to handover the project to the community, and the change order had distorted his political schedule. My actions were interpreted as sabotage even though money was being saved on the project.

Unknown to me at the time was the fact that a Member of Parliament had positioned himself to handover the project to the community and the change order had distorted his political schedule. My actions were interpreted as sabotage even though money was being saved on the project

When the Member of Parliament (MP) was informed of the delay, our chief executive’s office was literally under siege by the MP. A team of auditors descended on me, seeking further clarification on why the project had been delayed. While all this was happening, my boss, who was still on leave denied responsibility for the delay or having been consulted before the change order was issued.

Cyrus: What saving was the project destined to register because of the change order?

Salim: Approximately USD 500,000.

Cyrus: A two months’ delay versus a project saving of USD 500,000! That should be common sense.

 Salim: Try explaining that to the auditors that were sent to me. To this day, I don’t think any of them appreciated the decision I had taken to extend the time of completion by an additional two months. Eventually, common sense prevailed and the project was commissioned by the Member of Parliament two months behind schedule. Guess who was applauded most for a very successful project?

Cyrus: The Chief Executive?

Salim: No, my boss.

Cyrus: The one who denied being consulted before you instructed the change order!

Salim: Yes.

Cyrus: Interesting. Look, that’s our facilitator. I think we are being called back to resume the training.

Salim: You are right. Let’s keep in touch.

Cyrus: I will.

From Anthony and Salim’s experience, four key lessons stand out;

1. You need to be aware of office politics; know when it is in play and who the key players are. Always try not to get caught offside. On projects such as these, your good intentions can sometimes be misunderstood – especially when you make some mistakes in the course of executing your project.

2. When technical audits are under way, let the auditors do their work. Be cooperative but do not volunteer more information than asked for. You may risk opening up a can of worms.

3. If you are temporarily or permanently delegated similar tasks, try to avoid taking certain unilateral decisions which may eventually turn out to be of high significance, especially where public funds are involved. It is a smart move to involve key decision makers at all times. Once such decisions are eminent, getting the key people to formally commit will relieve you of the need to respond to audits of this nature.

4. Seek the opinion of knowledgeable Bystanders. In this context, bystanders are individuals around you who know that you are in a problematic situation, but they stand on the sidelines, doing nothing for one reason or another. When faced with similar dilemmas in the course of your work you need to be “politically” astute enough to know who the bystanders are and seek their opinion if you deem them able to help you out. Bystanders often leave revealing signs if we can get close enough to them to ask their opinion. However, when some of them are engaged, they tend to give you some ideas on how to navigate your situation but often choose a hasty exit or change of subject.

The End

© The Builders’ Garage 2020. Permission to use this article or quotations from it is granted subject to appropriate credit being given to thebuildersgarage.com as the source.