PROJECT CLOSING AUDIT

PROGRAM
By: YUL BRYAN MIRANDA
Question…

Many construction projects are

financially successful until the
end, when costs suddenly spiral
out of control.
Answer…
The main reason for the additional costs is
because the project wasn’t completed on time.

“When I say completed, I don’t just mean

handed over, I mean one hundred percent
finished. “
Answer…

Many Construction Project Managers focus

only on handing over the project. However,
there’s normally more to a project than this. It
includes finalising punch lists, finishing and
submitting all paperwork (including as-built
drawings, quality data packs, guarantees and
warranties) and concluding all the contractual
obligations (such as commissioning and
testing).
PROJECT CLOSING
AUDIT PROGRAM
PROJECT CLOSING AUDIT PROGRAM
 Project Closing Audit Program reviews the
various aspects of the project to ensure
they are complete based on the contract,
will be approved by the client in turning
over the project and will operate properly
as what it’s suppose to do.
PROJECT CLOSING AUDIT PROGRAM
 The program activity ensures the recording
project documents, archiving in organizational
process assets, making final payments, releasing
resources and completing the project.
 THE IMPACT OF NOT
CLOSING OUT THE PROJECT
PROPERLY
Failure to complete construction projects
correctly, including completing all
paperwork and documentations, results
in increased costs to construction
companies due to:
1.the project extending beyond the contractual
end date, often resulting in the application of
penalties or liquidated damages

2.construction resources remaining on the

project longer than budgeted for
4.resources not being released to other
construction projects where they’re required,
which negatively impacts those projects

5.retention money and sureties being retained

longer by the client

6.insurances remaining in place for a longer time

7.And the contractor incurring additional

overheads, such as the costs of facilities,
accommodation, vehicles and security remaining
on site longer
CONSIDERATIONS IN PROJECT CLOSING
OUT AUDIT PROGRAM
1. Obtaining the certificate of completion
2. Handing over quality documentation,
commissioning data, spare parts lists and
warranties to the client
3. Handing over all spare parts and unused
client-purchased materials to the client
4. Getting the release of sureties or bonds and
returning them to the institution which issued
them
5. Requesting the release of retentions
6. Putting items of equipment off-hire and
transferring them from site
CONSIDERATIONS IN PROJECT CLOSING
OUT AUDIT PROGRAM
7. Clearing unused materials
8. Moving personnel records to the head office
9. Sorting, filing and archiving project
documentation
10. Agreeing the final accounts with the client
11. Settling accounts with subcontractors and
suppliers
12. Moving personnel records to the head office
13. Submitting the final project invoice to the
client
CONSIDERATIONS IN PROJECT CLOSING
OUT AUDIT PROGRAM
14. Demobilising all offices and facilities
15. Reinstating lay down areas and access
roads, including obtaining signed
acceptance from the client
16. Handing back all accommodation
17. Disconnecting services
18. Transferring or terminating personnel
19. Disposing of project-purchased assets
20. Completing the final cost report
PROPER AUDITING FOR
PROJECT CLOSURE
1. Confirm work is done as per the
requirements
 Once the project is closing, all
deliverables of the project must
have been completed and
delivered to the customer. You
should also take formal
acceptance of the customer for
the completed work.
2. Complete procurement closure
 Sincethe project is closing, you
should complete any remaining
payments that need to be made to
the suppliers or partners. The
procurement steps are also
completed.
3. Gain formal acceptance
 Formal acceptance of the project and
project deliverables are taken from
the customer. Usually, the customer
presents a written document, it can be
an email or a signed off document,
which states that the project has been
completed and they accept the
outputs of the project.
4. Complete final performance reporting
 The final performance of the project is
calculated and recorded. These
include cost performance, schedule
performance, quality performance etc.
For instance, whether the project has
been completed under budget or if it
could not be completed, how much
did the project exceeded the planned
budget?
5. Index and archive records
 Collected documents are finalized.
Final versions of the project
management plans and all
necessary documents about the
project are archived in the
company records.
6. Update lessons learned
 Lessons learned is collected and
gathered from all stakeholders.
Lessons learned documentation is
stored in the organizational
process assets of the company.
7. Hand-off completed product and documents
 Once the project is completed, the
product of the project is handed over
for the use of the end customer. The
handover may need a predetermined
period of assistance or some
documents describing how to use or
how to operate with the product.
8. Release the resources
 After
the project is completed
successfully, all assignments of
the project resources are closed,
lessons learned inputs from the
project resources are collected
and then these resources are
released respectively.
 Case Study
Case Study #1
Background and business objective

The project, a new retail facility completed for ₱450M, was 100% complete when
the client requested audit assistance.

The construction agreement was for a Guaranteed Maximum Price. The audit scope
included analysis of the construction contract and an evaluation of the contractor's
billing to determine compliance.

The owner also requested recommendations for best practices and/or procedural
improvements that could be incorporated into the owner's project management
process.
 Case Study
Case Study #1
Approach and solution

The first objective of the audit was to review documentation of costs incurred and
paid for by the owner in completion of the project to determine if the requests for
reimbursement were in alignment with the applicable contracts.

The scope of the audit included all costs invoiced by the general contractor
including subcontractor costs, in addition to direct costs paid for by the owner.

The second objective of the audit was to obtain an understanding of the control
environment surrounding this particular project to determine if any control
deficiencies were noted.
 Case Study
Case Study #1
Outcomes and results achieved

Potential overcharges totaling ₱1,260,000 (2.8% of the contract value) was

identified due to inaccurate labor burden billing rates. The general contractor billed
labor billed ups (employment tax, workers compensation, insurance, etc.) at full
regulatory rates rather than the actual rates incurred and to be billed per contract
requirements. This was identified by viewing actual detailed labor records provided
by the General Contractor.

Provided the owner with processes and procedural improvements to easily identify
and prevent these costs from being passed through during the course of projects
going forward. AUDIT.
THANK YOU FOR LISTENING.