How to Audit Yourself Before the Auditor Audits
ADVISORY
By Dr. Kenneth Smith, PMP
Honolulu, Hawaii
& Manila, The Philippines
This article describes a ‘quick & easy’ financial management internal control and vulnerability assessment test — VULNAS – a semi-automated Excel template which is available for program / project managers to apply within their own areas of financial responsibility and accountability.
DISCLAIMER: I am not now, and have never been, an Auditor. But I am a professional Evaluator and have helped auditors design & conduct vulnerability assessments of programs and projects.
Many project managers can concentrate on delivering the technical components of their project on time and on budget, relying on their organizations to handle the procedural financial management aspects. Other project managers, however, often also have internal financial management control responsibilities; so are accountable as well as responsible for their project. Unfortunately, unlike chartered accountants, CPAs, & Auditors — most project managers have absolutely no idea what financial management standards are, or how they are supposed to comply with them!
Moreover, even if they are vaguely aware, and ‘inherit’ an existing financial management control system, it may be inadequate, so it doesn’t function as intended, or expected. Once established, financial control systems are often neglected, ignored, inadvertently abused, deliberately tampered with, and/or mismanaged during project implementation, resulting in FWAM — Fraud, Waste, Abuse & Mismanagement. Consequently, many managers fail to recognize potential risks, and go about their business oblivious to the inherent dangers, until they fall afoul of a major infraction and/or are brought up short by an audit.
To mitigate this situation in 1984, the U.S. General Accounting Office (GAO) — not Oceania’s ‘Big Brother’ in George Orwell’s novel – called for significant improvements in government agency financial management controls & vulnerability assessment practices. What this entailed was:
- Clarifying established standards for financial processes
- Identifying potential problems in terms of those standards
- Identifying current safeguards already in place
- Assessing remaining weaknesses and prioritizing them in terms of their potential financial magnitude and impact
In essence, there were 20 aspects to probe; consisting of five General Standards, six Specific Standards, as well as nine Environmental Areas to safeguard for improved management and internal control.
More…
To read entire article, click here
How to cite this article: Smith, K. F. (2020). Internal Controls for Project Managers: How to Audit Yourself Before the Auditor Audits, PM World Journal, Vol. X, Issue VII, July. Available online at https://pmworldlibrary.net/wp-content/uploads/2021/06/pmwj107-Jul2021-Smith-internal-controls-for-project-managers.pdf
About the Author
Dr. Kenneth Smith
Honolulu, Hawaii
& Manila, The Philippines
Initially a US Civil Service Management Intern, then a management analyst & systems specialist with the US Defense Department, Ken subsequently had a career as a senior foreign service officer — management & evaluation specialist, project manager, and in-house facilitator/trainer — with the US Agency for International Development (USAID). Ken assisted host country governments in many countries to plan, monitor and evaluate projects in various technical sectors; working ‘hands-on’ with their officers as well as other USAID personnel, contractors and NGOs. Intermittently, he was also a team leader &/or team member to conduct project, program & and country-level portfolio analyses and evaluations.
Concurrently, Ken had an active dual career as Air Force ready-reservist in Asia (Japan, Korea, Vietnam, Thailand, Indonesia, Philippines) as well as the Washington D.C. area; was Chairman of a Congressional Services Academy Advisory Board (SAAB); and had additional duties as an Air Force Academy Liaison Officer. He retired as a ‘bird’ colonel.
After retirement from USAID, Ken was a project management consultant for ADB, the World Bank, UNDP and USAID
He earned his DPA (Doctor of Public Administration) from the George Mason University (GMU) in Virginia, his MS from Massachusetts Institute of Technology (MIT Systems Analysis Fellow, Center for Advanced Engineering Study), and BA & MA degrees in Government & International Relations from the University of Connecticut (UCONN). A long-time member of the Project Management Institute (PMI) and IPMA-USA, Ken is a Certified Project Management Professional (PMP®) and a member of the PMI®-Honolulu and Philippines Chapters.
Ken’s book — Project Management PRAXIS (available from Amazon) — includes many innovative project management tools & techniques; and describes a “Toolkit” of related templates available directly from him at kenfsmith@aol.com on proof of purchase of PRAXIS.
To view other works by Ken Smith, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/dr-kenneth-smith/
