Does Your Company Have Effective Project Process Controls?
No one usually questions the importance the
capital project process plays in a company. Project spending
on such things as new product development or infrastructure
enhancements helps to lay the foundation for a company's
future. Because of the strategic nature of projects and the
rather large amounts of money they consume, one would think
that the capital project process would be more aggressively
managed. And one would especially think this area is ripe for
review given the catastrophic events that occurred at
Worldcom. For many companies though, the capital
project process has historically been a most difficult process
to control.
The auditing department can play an important
role in the process by examining the effectiveness of the
company's controls for analyzing, approving, recording, and
monitoring of its capital projects. Improved controls in this
critical function will ultimately result in the approval of
higher-quality projects that should subsequently enjoy more
trouble-free implementation phases.
A small booklet from the Stonehaven Group,
A Capital Project Guide for Auditors,
offers concise guidance on how to evaluate the effectiveness
of the capital project process. The booklet was adapted from
the award-winning book, Maximum
Return. The first part of the booklet focuses on the
management of the company's overall process, and the second
part is directed at reviews of individual projects.
Also, if your company is lacking in adequate
policies and procedures for the capital project process then
you might want to consider contacting
us for an evaluation. The capital project process involves
big money, and whether your company is publicly or privately
held, most management teams should take the necessary actions
to ensure that shareholder value is not squandered.
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