Decision No. 02/2017/QD-KTNN dated March 13, 2017 of the State Audit Office of Vietnam promulgating the process for auditing state-funded investment and construction projects

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Official number:	02/2017/QD-KTNN	Signer:	Ho Duc Phoc
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THE STATE AUDIT OFFICE OF VIETNAM

Decision No. 02/2017/QD-KTNN dated March 13, 2017 of the State Audit Office of Vietnam promulgating the process for auditing state-funded investment and construction projects

Pursuant to the Law on State Audit Office of Vietnam dated June 24, 2015;

Pursuant to the Law on promulgation of legislative documents dated June 22, 2015;

At the request of Director of Department of Audit Policy and Quality Control and Director of Department of Legal Affair, Chief Auditor of State Audit Office of Vietnam of Sector IV;

State Auditor General promulgates a Decision on promulgation of the process for auditing state-funded investment and construction projects.

Article 1.Process for auditing state-funded investment and construction projects shall be issued together with this Decision.

Article 2.This Decision takes after 45 days from the day on which it is signed and replaces Decision No.04/2013/QD-KTNN dated April 05, 2013 of State Auditor General on the promulgation of the process for auditing state-funded investment and construction projects.

Article 3.Heads of entities affiliated to State Audit Office of Vietnam and relevant organizations and individuals shall implement this Decision./.

The General State Auditor

Ho Duc Phoc

PROCESS

FOR AUDITING STATE-FUNDED INVESTMENT AND CONSTRUCTION PROJECTS OF STATE AUDIT OFFICE OF VIETNAM (Issued together with Decision No. 02/2017/QD-KTNN dated March 13, 2017 of State Auditor General)

Chapter I

GENERAL PROVISIONS

Article 1. Scope of adjustment

The process for auditing state-funded investment and construction projects (hereinafter referred to as investment projects) of State Audit Office of Vietnam specifies the order and procedures of an audit performed by State Audit Office of Vietnam. The process for auditing investment projects are formulated in accordance with the Law on State Audit Office of Vietnam, laws on State investment and construction, Vietnamese Standard on Auditing (VSA), audit process of State Audit Office of Vietnam issued together with Decision No. 08/2016/QD-KTNN dated December 23, 2016 of State Auditor General (audit process of State Audit Office of Vietnam). Actual auditing practices and Vietnam construction project management.

The process for auditing investment projects specifies contents of specific characteristics regarding auditing investment projects as follows:

- Planning phase.

- Execution phase.

- Reporting phase.

- Follow-up and audit recommendations.

Article 2.Subject of application

1. The process for auditing investment projects applies to entities affiliated to State Audit Office of Vietnam that audit investment projects.

2. Entities affiliated to State Audit Office of Vietnam (SAV) other than specialized audit departments and local audit offices assigned to carry out investment project audits.

3. Participants in any state audit mission.

4.Depending on the nature of each audit, one of these types of audit may be applied: financial audit, compliance audit, operational audit or a mixture of audit types.

Article 3. Requirements applied to audit missions and members thereof

During the audit process, the audit mission and its members shall comply with regulations as prescribed hereof and regulations prescribed in Article 4 Chapter I of audit process of SAV.

Article 4. Audit quality

Audit quality is prescribed in Article 5 of audit process of SAV.

Article 5. Audit documentation

Audit documentation is prescribed in Article 6 of audit process of SAV.

Chapter II

PLANNING PHASE

Article 6. Surveying and collecting information

According to an annual audit plan promulgated by State Auditor General, the auditing unit shall form a survey team and follow the steps below:

1.Prepare, approve and send a survey scheme

a) Prepare the survey scheme

The survey scheme includes:

- Bases and requirements.

- Basic information on the project and financial management.

- Basic information on the internal control system (ICS), inspection and audit.

- Other material on the project.

- Survey method.

- Surveyed entities.

- Request for assessment and analysis of information collected.

- Estimated time and surveying staff.

b) Approve the survey scheme

The head of the agency in charge of audit shall approve the survey scheme, then send it to surveyed entities and initiate the survey.

a) Send the survey scheme

The survey scheme shall be sent to entities responding to the survey together with a notice before procedures for surveying and collecting information are conducted.

2. Basic information about the project and financial management

a) General information

-Name of the project; its scale; group and grade; form of investment; standard and framework applicable to the project; location; intended and actual commencement date, completion date.

-Governing body approving the guidelines on investment (if any)

-The investor, representative of the investor (if any); organizations that make, appraise and approve the projects.

-Total investment (total number and details, the number of adjustments and their reasons – if any).

-the approved capital sources (central budget, local budget, loans, other capital sources, other sources, etc.)

-Design, cost estimate (Steps of design; approved cost estimate; organizations that make, appraise and approve the design and cost estimate); contract package value; contract prices.

-Cost estimate of disapproved items/contract packages (main reasons of disapproval)

-Method of project management.

-Method of contractor selection.

-Form of contract.

-List of performed contract packages; consultancy units, building and supplying contractors.

-Compensation, assistance and relocation: Units in charge, management modality, implementation, issues arising during the implementation (if any).

-The international agreement on loan, information about the language used in the project if it is participated by foreign parties.

-The changes during the execution of the project that significantly affect the project (scale, design, approved estimates, changing order, etc.); changes in policies of the state relating the project management, changes in project management form, investor, capital sources; advantages and disadvantages during the execution of the project.

-The making and retention of project documents during the execution, the making and retention of as-built dossiers, compensation, assistance and relocation documents.

-The system of legal documents related to the management and execution of the project; specific State mechanism and policies applicable to the project.

-Other information (if any).

b) General information on financial management of the project

-If the project cost statement is yet to be made:

+ Investment capital allocated to the project to the time of the survey; implementation of investment plans or implementation of capital construction investment expenditures;

+ Total cost of investment made to the time of the survey: Total number and details (compensation, assistance and relocation cost; construction cost; equipment cost; project management cost; construction consultancy cost; other costs);

+ Advance payment and recovery of advance payment; the value disbursed from the implementation until the day when the annual cost statement is made or when the survey is carried out (Total number, construction cost; equipment cost; project management cost; construction consultancy cost; other costs).

-If the cost statement of the project has been made

+ Cost statement of the finished project (Investment capital, investment expenses proposed for cost statement, investment costs not including in the value of assets created through the investment, the value of assets created through the investment);

+ Comparison chart of data on loans, credits and payment of investment capital (of each source of funding)

+ Stated investment: Total number and details (compensation, assistance and relocation cost; construction cost; equipment cost; project management cost; construction consultancy cost; other costs);

+ Whether the final report on capital is approved;

+ Newly increased fixed assets, transferred short-term assets (if any);

+ Payment situation and liabilities of the project.

-Compensation, assistance and relocation

+ Units in charge; funding sources for payment, value of cost estimate according to approved Decision, paid amount (specified the following contents: infrastructure building for relocation areas; compensation, assistance and relocation);

Compensation, assistance, work relocation, relocation, implementation organization,etc. (Detailed according to each unit in charge and contents of work in each unit in charge)

3.Survey and collect information about the ICS, inspection and audit

-Internal management environment: the organizational structure of the operational apparatus, controlling apparatus, the functions, tasks, and managerial capability of the management board (MB) and specialized departments such as technical department, planning department, finance and accounting department...

-Characteristics of the management board; the management modality; the objective and subjective difficulties and advantages relating to the project; internal policies and regulation on technical supervision, commissioning, payments and cost statements; finance, accounting; consultancy units and the units in charge of compensation, assistance and relocation; changes in personnel and organizational structure of units in charge of project management (if any).

-The controlling activities and controlling formalities

+ The implementation of managerial regulations on technical supervision, commissioning, payments and cost statements; finance, accounting, etc.;

+ Accounting: the applicable accounting regime; accounting mechanism, accounting organization (systems of documents, accounts, accounting books and accounting reports);

-Internal inspection and audit: the information collected from the results of audit report inspection, inspection conclusion and internal inspection; problems need to be concerned from the inspection and audit.

4.Information sources and information collection methods

a) Information sources

-Information from the project management unit

+ Information collected by studying documents: investment formalities relating to the project from elaboration, preparation, execution, completion, transfer, and operation; the documents relating to the organizational structure; loan agreements and guidance of sponsors; inspection and audit reports (if any), etc.

+ Information collected from participant in the projects;

+ Information from reports on the project execution.

-Information external sources (where it is necessary and the management board fails to provide adequate information for audit planning), including:

+ The approving authority: information about the capital sources, actual capital, and management mechanism of the approval agency;

+ The funding authority: disbursement at the capital provider;

+ The authorities that conduct previous inspections and audits: written conclusions and reports;

+ Mass media: articles about the project and other documents;

+ Other units (if any).

b) Information collection methods

-Send a written request for information and documents according to the survey outline to the management board.

-Examine documents on management and use of resources.

-Discuss with relevant managers and staff in charge of the entities.

-Examine archives of SAV related to the entity being audited.

-Communicate with professional regulatory authorities, superior regulatory agencies.

-Gather information about particular issues as required by audit regulations.

-Observe and survey some stages in the internal control process.

-Information about particular issues as required by audit regulations.

The information shall be surveyed and collected in accordance with the contents in paragraphs 13 through 44 of SAV standard 1315 – Identifying and assessing the risks of material misstatement through understanding the entity and its environment, paragraphs 18 through 20 of SAV standard 3000 – Performance audit guidelines, paragraphs 10 through 13 of SAV standard 4000 – Compliance audit guidelines and other regulations issued by SAV.

Information to be surveyed and collected shall also relate to the general audit program and the detailed audit program.

Article 7. Evaluating ICS and collected information

1.Contents to be evaluated

Based on collected information, the sufficiency, validity, effectiveness, reliability, and limitations of the internal control system and collected information shall be evaluated for the purpose of accessing the risks and identifying materiality, audit focus including:

a) Completeness and validity of the ICS: evaluate the completeness and validity of the ICS at the unit on the basis of the following contents:

-Description of the MB

+ Organizational structure of the apparatus, assignment, decentralization of functions and tasks of departments within the organization, decentralization mechanism of management: the transparency, rationality, and mutual control mechanism;

+ Time of establishment, experience of project management; field-based or area-based project MB; the project MB of single construction project or part-time;

+ Project management modality: field-based and area-based project MB shall directly manage the project; the investor shall decide the establishment of MB of single construction project for management; hire advisory organization; use their attached fully capable professional apparatuses to manage the implementation of small renovation or repair projects and projects with the involvement of communities.

-Evaluate the conditions on the capacity and professional qualifications of the advisory organization (if any), the MB.

-Assessment of capability of consultancy units, independent individuals participating in the project.

-Assessment of capability of units in charge of compensation, assistance and relocation.

b) The completeness and validity of the ICS

Evaluate the completeness and validity of the implemented internal control procedures, including:

-Particular legal documents that have great impact on the activities of the unit.

-Managerial policies of the unit.

-Legal documents specified regulations for the implementation of the project issued by competent authorities and the detailed regulations of the investor.

-The conformity of ICS and relevant legislative documents affecting the implementation of the project.

c) Evaluate adherence to the law and relevant regulations

Evaluate the observance of regulations of law of the unit based on the collected legal documentation system related to the project.

d) Limitations of the ICS

e) Difficulties and advantages; objective and subjective reasons relating to the project; the changes in personnel of the management board.

2.Methods

-Consider and evaluate information about the internal control system: organizational structure diagram, assignment, qualification of managers, internal managerial documents, organization of internal audit work.

-Communicate relevant managers and staff in charge in order to understand characteristics of the organization, personnel policies, qualifications, and attitude of the managers and staff.

-Direct observation.

The evaluation procedures for the internal control system shall be consistent with the contents in paragraphs 18 through 44 of SAV standard 1315 - Identifying and assessing the risks of material misstatement through understanding the entity and its environment.

Article 8. Identifying and assessing audit risks

1.Potential risks

a) The volume of construction and installation of departments; work items prone to fraud and shortcomings (volume, underground and obscured items…)

b) The price lists are made during the period where policies of the State on construction management relating to the projects are changed; special prices; the application of limits not announced by the Ministry of Construction and relevant Ministries.

c) The issues about compensation, assistance and relocation; impact of the environment, the degeneration of the construction, project, etc.

d) The scale of the project is large and its items are complicated, etc.

e) The project uses specialized technologies and equipment; the proportion of equipment to total investment is large.

f) Prices and quality of supplies, materials, and equipment imported.

g) The compliance with planning of the project.

h) Particular mechanisms applied to the project.

i) Arising contents: arising workload due to changes in the design or adjustment during the execution, non-contractual prices and workloads.

j) Changes in prices and contracts; inflation relating to multiple currencies; inflation due to slow progress.

k) Other problems (if any).

2.2. Control risks

a) The operational mechanism of the management board is still inappropriate; the capability of the management board is limited; capacity of advisory units involved in the implementation of the project is still low.

b) The changes in policies.

c) Irrationalities of previous audits and inspections, systematic errors that have not been resolved (if any).

d) Manifest issues during the project management, including accounting and financial management.

e) Mistakes in strategies and planning; the compliance and rationality of professional and geographical planning; the deficiencies in management that were identified such as improper investment, slow progress, extravagant investment, and failure to achieve set targets; environmental effects caused by the project.

f) Repetition in operation.

g) Other problems (if any).

3.Risk assessment

According to collected information and results of information analysis and evaluation, the state auditor shall identify and evaluate material risks (potential risks, control risks) for the purpose of formulating a general audit plan.

The procedures for evaluating material risks shall be consistent with the regulations in paragraphs 45 through 56 of SAV standard 1315 – Identifying and assessing the risks of material misstatement through understanding the entity and its environment, paragraphs 23 through 24 of SAV standard 3000 – Performance audit guidelines, paragraphs 16 through 18 of SAV standard 4000 – Compliance audit guidelines and other regulations issued by SAV.

Article 9. Identifying audit materiality and audit focus

-Identifying audit materiality: is a matter of professional judgment and depends on the auditor’s interpretation of the users’ needs. Materiality should be considered throughout the audit process. The procedures for identifying audit materiality shall be consistent with SAV standard 1320 – Identifying and applying the audit materiality; paragraphs 21 through 22 of SAV standard 3000 – Performance audit guidelines, paragraphs 19 through 24 of SAV standard 4000 – Compliance audit guidelines.

-Identifying audit focus: based on the results of information analysis and evaluation and findings of risk assessment; the annual instructions on contents, goals and audit focus of the state audit to identify audit focus for the purpose of formulating the general audit plan. The project audit focus shall be determined according to each audited object and selected among the audited objects such as:

+ The compliance with regulations of the Law on Public Investment on the allocation, management and use of development investment capital belonging to the state budget; strict control of the establishment, appraisal and endorsement of investment schemes, decisions on the investment in the public investment projects;

+ The compliance with planning approved by competent authorities, the necessity of the project;

+ The compliance with the investment formalities (Formulation, appraisal and approval of projects, determination of the total investment; formulation, appraisal and approval for design and cost estimate; selection of consultants, installation organizations and equipment suppliers, etc.);

+ The installation and equipment costs; compensation, assistance and relocation costs;

+ Other problems (if any).

Due to the nature of the construction investment project being single and not repetitive, the characteristics of each project are different, the strict control of all state budgets for capital construction investment activities is necessary. In a case-by-case basis, depending on the analysis of professional judgment, it is possible to apply audit materiality, audit focus in accordance with each audited project.

Article 10. Making general audit plan

According to the information about the internal control system that is surveyed, collected, and evaluated, financial information, and other information about the audited units, risk assessment and identification of audit materiality, audit focus, a general audit plan shall be made as prescribed in paragraphs 11 through 35 of SAV standard 1300 - Planning an audit of financial statements, paragraphs 21 through 48 of SAV standard 3000 - Performance audit guidelines, paragraphs 8 through 38 of SAV standard 4000 - Compliance audit guidelines. The general audit plan shall at least contain:

1. Objectives

Objectives of an audit shall be identified according to the annual auditing orientation of SAV; audit schemes (if any), requirements and nature of the audit; results of the survey, focus determination and audit risks.

Objectives of the audit:

-Confirm the correctness and truthfulness of accounting documents and information (source of funding, investment cost), the final report on capital of completed project, annual financial statement of the project.

-Assess the compliance with law, policies on construction management and the accounting and financial management regime of the State.

-Detect shortcomings of the State s relevant mechanisms and policies in order to propose competent state agencies to adjust and supply (if any).

-Evaluate the profitability, efficiency and effectiveness of the project.

-Provide reliable information and data to the National Assembly and state management agencies to monitor the investment of projects.

-Promptly detect acts of corruption, wastefulness and violations in the implementation (if any); determine responsibilities of related collectives, individuals and request for solving violations in accordance with law; propose to competent authorities for amendments of policies, regimes of economic – technical management and financial – accounting management.

2.Content

Pursuant to the annual auditing guidelines of SAV, audit schemes (if any), relevant audit process, audit materiality and audit focus, audit risks, audit objectives to identify main audit contents for the determination of specific audit contents in the general audit plan.

Contents of the audit:

-Capital sources.

-Implementation investment cost.

- Compliance with state regimes, policies and laws (financial and accounting regimes; investment projects on the construction regimes).

-Evaluation of the profitability, efficiency and effectiveness of the implementation and management of the project.

3.Criteria

Criteria for an audit shall be identified in conformity with its purposes and contents and in conformity with the work of confirmation inspection and evaluation inspection.

a) Criteria for a financial audit shall be identified in accordance with paragraphs 26 through 28 of SAV standard 1300 – Planning an audit of financial statements.

b) Criteria for a compliance audit (capital resources, compliance with state regimes, policies and laws, etc.) shall be identified in accordance with paragraphs 28 through 32 of SAV standard 4000 – Compliance audit guidelines.

c) Criteria for a performance audit shall be identified in accordance with paragraphs 37 through 43 of SAV standard 3000 – Performance audit guidelines.

Depending on each project, audit missions may assess the profitability or efficiency or accomplishment of the project or all of them, and determine the assessment criteria. The profitability, efficiency and accomplishment of a project are usually assessed based on the following criteria:

-Profitability: Assessing the implementation of the project to ensure the frugality; the degree of frugality in the content and the entire project.

+ Amount of wasted money because the construction is not conformable with planning; the scale, class, and purposes of the construction are not correctly identified;

+ Unreasonable increases in costs due to improper level of total investment and inappropriate selection of building materials and technologies;

+ Unreasonable increases in costs due to mistakes during surveys (topographical, geological, hydrography surveys), project planning and project execution;

+ Increase in costs due to prolonged period of planning and examining the project;

+ Unreasonable increases in costs due to inappropriate plan for land clearance and relocation;

+ Unreasonable increases in costs because the scale, standards, solutions, material using plan, design (architecture, structure, infrastructure, etc.) are not suitable for the fundamental design of the approved project;

+ Unreasonable increases in cost due to mistakes during making, appraising, and passing cost estimates;

+ Unreasonable increases in costs due to incorrect prices of contract packages and incorrect evaluation of selection of contractors;

+ Unreasonable increases in cost due to mistakes in negotiation and contract conclusion;

+ Unreasonable increases in costs due to mistakes in the management of contractual construction progress and quality;

+ Increases in costs due to mistakes in commissioning, cost statement and payment of finished works;

-The effect: Evaluate the achievement of objectives and expected results of the project.

The degree of achievement of each specific target of the project by comparing the actual achievements (Including the main internal goals of the project: cost, quality, duration of the project; performance, capacity of the project).

-The effectiveness: Assessing the output result compared with the cost invested; the way the implementation of project affecting the social and economic in each content and the entire project.

+ Assess the influence of the project on poverty reduction, employment generation, environmental improvement, easier access to medical, educational, and credit services, access to political, economic centers, shift in economic and employment structure based on the statistics on socio-economic growth after the project is finished;

+ The wasted amount of money because the finished construction fails to serve intended purposes;

+ Comparison of living conditions of people in new residences and those in the old ones;

+ Behind schedule projects that lead to slow commission for exploitation;

+ The feasibility of environmental impact assessment and requirements of National defense and security; impacts on the environment and life of the community in the area within which the project is located;

+ Other problems (if any).

4.Subjects, range, limits, and location of audit

-Subjects of audit: Construction and management, use of the investment.

-Range

+ Audited period: Specify the exact period of time of the capital construction program/project or work, or period of time in which an audit is expected to be conducted.

+ Audited units: the agency competent to decide on investment, investor’s governing body, investor’s representative (the management board), and relevant managerial units.

+ Determining the limit of work to be performed by auditing contents.

+ Criteria for selecting audited content, etc.

-Audit limits: the contents exempt from audit and reasons.

-Location of audit: at the audited unit or the head office of State Audit Agency (if possible) according to the approval of State Auditor General. In special cases, if relocation in the course of audit is necessary, the head of the audit mission shall request the head of the unit to decide and take responsibility before the State Auditor General and at the same time report to the State Auditor General.

5.Methods and procedures

Apart from the methods specified in the audit process of the State Audit Office of Vietnam. In the audit of investment projects, it is necessary to pay attention to the following auditing methods:

-Hire/solicit expert opinions, inspect the quality of works, assess assets, inspect the site, etc. Must specify the scope and contents of the aforesaid methods.

-Inspect and compare to a third party (the MB, contractors, enterprises, economic organizations, etc.), the audit plan must clearly state whether it is the inspection or comparison and the scope, content of the inspection or comparison.

-And some auditing methods for material and complex contents that need to be specifically outlined the auditing methods and procedures that should be used to obtain sufficient audit evidence.

6.Other contents of an audit plan

The regulations on the audit period; audit personnel; funding, and material conditions necessary for the audit is prescribed in Clause 6, 7, 8 Article 11 of the Audit Procedure of State Audit Agency.

A general audit plan shall be made as prescribed in paragraphs 11 through 35 of SAV standard 1300 - Planning an audit of financial statements, paragraphs 21 through 48 of SAV standard 3000 – Performance audit guidelines, paragraphs 8 through 38 of SAV standard 4000 – Compliance audit guidelines and other regulations issued by SAV.

Article 11. Consideration of general audit program

Consideration of general audit program is prescribed in Article 12 of audit process of SAV.

Article 12. Making and approving detailed audit program

The making and approving of detailed audit program is prescribed in Article 13 of audit process of SAV.

Identification of audit materiality and audit focus: Depending on the characteristics and results of the survey on the collection of information on investment projects, in each specific case depending on the analysis of professional judgment, the making of detailed audit program shall be applied the method of determining audit material and audit according to Article 9 of this Procedure.

Identification of audit sample: Audit elements and audit samples shall be selected according to professional judgment of the auditors from the specific characteristics of the investment projects or the specific guidance of State Audit.

Article 13. Audit decisions

The audit decisions are prescribed in Article 14 of audit process of SAV.

Article 14. Disclosing audit decision and general audit program and update knowledge for members of audit mission

1.The SAV mission leader shall disclose the audit decision, general audit program, Regulations on organization and operation of SAV mission and other relevant regulations in order for the audit mission to be familiar with and reach a consensus on objectives, requirements, contents, scope and time limit for the audit.

2.Update members of audit mission on essential knowledge about the contents and forms of the following:

-Actual reports on operation, management experience, internal control, accounting professional operation, economic activity analysis, etc.. made by internal or external experts in the field of auditing.

-Raise awareness of policies, regulations on management of investment and capital construction, regulations on management of economy, finance, accounting promulgated by the state to which the auditee must adhere or allowed to apply. Especially, new regulations on investment, capital construction, finance and accounting relating to the operation of the auditee must be updated.

-Characteristics of the project should be noted in the implementation in terms of investment scale, capital source, implementation and characteristics for each type of project (communications, irrigation, construction, etc.)

Article 15. Preparation of necessary materials and facilities for audit mission

The preparation of necessary materials and facilities for audit mission is prescribed in Article 16 of audit process of SAV.

Chapter III

CONDUCTING OF AUDIT

Article 16. Publishing audit decisions

The audit decision shall be published in accordance with Article 17 of audit process of SAV.

Article 17. Conducting an audit

1.Collect information so as to complete or amend the detailed audit program (if necessary)

Following the steps prescribed in Clause 2 Article 13 of audit process of SAV.

2.Collect and verify audit evidence

a) The state auditor shall audit issues assigned

-According to the approved detailed audit program and the assigned task, the auditor shall use audit methods and procedures for auditing each of contents and items so as to obtain and verify audit evidence. Common audit methods and procedures are prescribed in Clause 5 Article 10 of this Procedure.

-The state auditor shall audit issues in accordance with the general-to-specific order; select one or combination of multiple methods audit methods and procedures that are appropriate. During the conducting of the audit, the state auditor shall properly use audit methods and procedures, knowledge and professional judgment; legislative documents to perform tasks on the effective and time-saving basis.

-The obtained audit evidence shall be verified in accordance with SAV standards 1500 - Audit evidence; paragraphs 55 through 84 of SAV standards 3000 - Performance audit guidelines and paragraphs 43 through 61 of SAV standards 4000 - Compliance audit guidelines.

-The state auditor shall perform his/her work with due professional care, professional judgment, conservatism, and professional skepticism throughout the audit process.

-During the audit process: If there are grounds that state auditor to believe that a document is possibly inauthentic, or has been modified without any notification, or shows signs of fraud, the state auditor shall undertake additional verification as follows: Direct certification with a third party; employ specialists and other legitimate methods for the purpose of verifying the authentication of such document; and verify it from other sources of information. In a case where representations made by the auditee are inconsistent, the state auditor shall undertake verification of the inconsistency so as to obtain sufficient evidence for the purpose of asserting or excluding doubts of the state auditor. The verification, investigation, etc. must be recorded and enclosed with evidence. When discovering material violations or criminal-related violations, the state auditor or team leader shall promptly send a report to the mission leader, Chief Auditor, and then the mission leader or Chief Auditor shall forward it to the State Auditor General for handling.

b) The state auditor shall inspect and review the audit results in accordance with regulations in Point c Clause 2 Article 18 of the Audit Procedure of State Audit Agency.

c) The state auditor consolidates audit results and send the team leader a report on the audit progress in accordance with regulations in Point d Clause 2 Article 18 of the Audit Procedure of State Audit Agency.

3.Other contents: Preparing audit documentation; the team leader shall examine and review tasks performed by the state auditor; the state auditor signs the confirmation of figures and audit progress.

The implementation of the abovementioned contents is prescribed in Clause 4, 5, 6 Article 18 of audit process of SAV.

Article 18. Contents of investment project audit

1. Audit the compliance with law, the project management and construction regimes

1.1. Auditing the making, appraisal, and approval of projects

a) Audit basis

-Law on Public Investment, Law on Construction, Law on Investment and relevant legislative documents.

-The regulations on managing and using ODA (for constructions funded by foreign parties); the regulations of sponsors (for projects funded by sponsors).

-Relevant branch planning, regional planning and specific planning; the agreement on funded projects.

-Annual and medium-term plans for investment preparation delegated by competent authorities; approved funding estimate.

-Reports on the proposed investment policy (if any), reports on construction project (pre-feasibility study report), construction investment project (feasibility study report) or economic-technical reports and decisions made by competent authorities to on the permission for making investment in the construction.

-The Decision to assign tasks to the investor and to establish the project management board, the contract for project management consultancy (if any).

-Contracts to investigate survey and advice on making reports on construction project, investment project or economic-technical reports.

-Business licenses, construction capability of units and individuals in charge of performing the contracts to investigate, survey and advice on making reports on construction project, investment project or economic-technical reports.

-Written assessment, opinions of authorities related to the assessment of the construction projects and basic design; approval of the project or economic – technical reports; commissioning report and document handover.

-Other documents.

b) Content

-Examine and evaluate the necessity of the construction investment and the investment policy, the investment construction objectives, the construction site and area of land use, the capacity and the form of construction investment.

-The basic designs conformity with the approved detailed construction planning; the basic designs conformity with area of land use, suitability of the connection to the areas technical infrastructure; for adjusted projects, it is necessary to inspect the basis and conformity of such adjustments with the Law on Construction, the Law on Investment and relevant regulations.

-The conformity of technological options and technological lines selected with technological designing requirements; the conformity of design solutions of construction safety, environmental protection, fire and explosion safety; the compliance with standards and technical regulations in the design; the conformity of the solution to organize the implementation of the project according to construction stages and aspects with the requirements of the basic design.

-The basis of the total investment calculation; the legitimacy of the method of total investment calculation.

-The compliance to investment procedures: reports on construction project, investment project or economic-technical reports shall be made, appraised, and approved in accordance with the regulations on procedure, time, and contents.

-Authority of the organization that decides the investment: find out whether the decision to invest is within authority.

-Authority of the organization that appraises reports on construction project, investment project or economic-technical reports.

-Capability of consultancy units: inspect the conformity of the Business licenses, capability of the consultancy units with the project being worked with; inspect the Licenses of participants in the project.

For misstatements identified from audits, it is necessary to determine the causes and the value of misstatements (if any) which shall serve as a basis for making conclusions and proposing financial settlement and responsibilities of relevant collectives and individuals in accordance with the regulations of the State.

1.2. Auditing the project execution

a) Audit basis

-Survey, design, estimate documents; design dossier and design examination reports; decision to approve the design and estimate (Initial documents and amendments during the implementation of the project).

-Contractor selection plan, written assessment of contractor selection plan (if any); decision on approving the contractor selection plan; decision on adjusting the contractor selection plan (if any).

-Contractor selection documents: invitation for bid/request documents; approval for the invitation to bid/request for proposal; notice on invitation to bid; written approval for the list of bidders in case of selective bidding; bidding documents/request for proposal/capability records of contractors; bid evaluation; reports on assessment of selection of contractors; written approval for the result of contractor selection.

-The contract negotiation record, economic contracts and appendices thereto, records on finalization of contracts for building, installation, equipment procurement, costs on construction consulting and other costs.

-The License for construction (if the License for construction is compulsory), License for resource extraction (if the project requires resource extraction).

-Construction quality control documents: as-built drawing, construction diary, commissioning documents, etc.

-Payment documents and cost statements.

-Contract performance documents of the contract packages: installation, equipment, construction consulting and other costs.

-Regulations on price management, progress, quality, payment and cost statement.

-Documents on incident settlement (if any).

-Document on compensation, assistance and relocation:

+ Plan and estimate land use;

+ Inventory minutes of land and assets on land;

+ Compensation plan, appraisal and approval documents of compensation, assistance and relocation plans;

+ Document on payment of compensation, assistance and relocation.

-Other information (if any).

b) Content

-Check the conditions and capabilities of organizations and individuals participating in the implementation of the project (Survey, design, consultancy, construction, etc. have legal person status and business license, certificate of eligibility for construction, construction practice certificate).

-The compliance of the design with the construction standards and criteria approved by competent authorities and other relevant regulations; the authority of appraising agencies (design, estimate and cost statement); authority of agencies that approve the survey, design, estimate outline or that issue licenses, etc.

-The compliance with procedure such as the order of construction design according to defined steps; design and estimate documents that must be assessed before approval; conditions of commencing the construction; other regulations (if any).

-Inspect the contents of documents on investment procedures. Comparison of the scale, level, and targets with other predominant documents and procedure of the project that have been issued, such as: the scale, technologies, output, class, building standards of subsequent design steps must be conformable with previous steps that have been approved.

-Inspect the value of construction estimate: inspect the conformity of the construction volume, types and quantities of equipment in the estimates as compared to the volumes, types and quantities of equipment calculated from construction designs and technologies; the limits, prices, and surcharges must comply with regulations. Inspect the procedure and authority and adjusting estimates; the construction estimate must not exceed the total investment.

-Inspect the adequacy and legitimacy of the invitation for bid/request documents, contractor selection documents, bid results, decisions to appoint contractors, etc. in accordance with law (the Law on Construction, the Law on Bidding, and relevant legislative documents).

-Inspect the contract negotiation and signing in construction activities to be in accordance with the Law on Construction, the Law on Bidding and relevant legislative documents; inspect the compliance with regulations of the contract in the implementation; inspect the procedure of contract finalization.

-The procedure for construction price management, the compilation and approval of prices must comply with regulations.

-Inspect the conformity of changes in the design, arising works (changed orders) with the regulations, bidding documents and regulations of the contract.

-Inspect the compliance with regulations on compensation, assistance and relocation:

+ The composition of the compensation, assistance and relocation Council;

+ The rates of compensation and support promulgated by provincial People’s Committees;

+ The making, verification, and approval for compensation, assistance and relocation plans;

+ Inspect the competent authority’s certification of status map, technical documents of land, etc. made by consultancy units;

+ Inspect the adequacy of compensation, assistance and relocation documents.

1.3. Auditing the quality control

a) Audit basis

-Law on Public Investment, Law on Construction, Law on Bidding and relevant legislative documents; relevant national technical regulations, procedures and standards.

-Invitations to bid/request documents, bidding documents/requests for proposal.

-Construction quality control documents: documents on survey, design, construction quality, etc.

-Contract documents.

-As-built documents.

-Other documents for grant of approval for adjustments and supplements (if any).

b) Content

Based on the result of auditing the compliance with legislative documents on project management, based on the legislative documents on construction quality control, based on the result of field inspection and quality assessment (if any) to assess the quality of each stage of the project execution and of the whole project. In particular:

-Assessment of the survey quality

Inspect the conformity, procedures and quality of the survey through the following contents: construction survey tasks, construction survey technical plans, applicable survey standard, survey inspection of contractors and investors, test results of the survey together with the contents of the survey report, etc.

-Assessment of the design quality: the conformity, procedures and quality of the design shall be in accordance with the investment guidelines and objectives; the content of the design shall follow the approved design task and be in accordance with the survey results and selected design criteria; the implementation of design shall ensure logic and inheritance; evaluation of the survey verification, appraisal and approval quality and design acceptance.

-Assessment of the building quality: inspect the quality management of materials, products, structures and equipment used in the construction; inspect the supervision of building quality of contractors; inspect the supervision of building quality and commissioning of the construction of the investor; inspect the designer supervision of construction designers; inspect the implementation of control experiments, quality assessment and testing of bearing capacity of the work structure; inspect the conformity of warranty and maintenance as prescribed.

-Field inspection and assessments of specialized organizations

The field inspection must be planed and approved by the chief commissioner, including the contents, methods, instruments, personnel, etc., and the field inspection result must be accompanied by a field inspection record. The works that require deep knowledge or quality assessment may be carried out by hired specialized quality assessment units or experts in accordance with regulations of SAV after obtaining the approval from the State Auditor General.

1.4. Auditing the progress management

a) Audit basis

-Law on Construction, Law on Bidding and relevant legislative documents.

-Decisions of competent authorities to permit the construction of the project.

-Relevant planning and approved investment project plan.

-Invitations to bid/request documents, bidding documents/requests for proposal.

-Construction quality control documents.

-Documents on contracts, arising documents and documents on contract extensions.

-As-built documents.

b) Content

-Assess the overall progress management according to regulations.

-Determine the lateness or ahead of schedule of each works from project planning to construction, and transfer of each item and the whole construction; inspect the contract extension (if any) of contract packages and the project according to concluded contracts.

-The lateness or ahead of schedule of the project compared to the initial plan.

-Determine objective and subjective reasons for the lateness and contract extension; the entitlement to decide the contract extension.

-Determine the cause of contract and project progress shortening (if any).

-Assess the solutions of the investor for such lateness.

1.5. Auditing the commissioning, cost statement and commencement of operation

a) Audit basis

-Law on Construction and relevant legislative documents.

-The commissioning reports, parts, stages, items or the whole project; the quality control documents (testing input materials; inspecting quality of the whole project, etc.).

-The as-built drawing, the report on result of the project (if any), construction warranty documents and warranty provided by building units, etc.

-The cost statement of the finished project, the final report on capital according to work items or finished works; A-B statement; reports from independent auditors (if any).

b) Content

-Commissioning documents: inspect commissioning records of works, parts, stages, items and the whole project.

-Inspect the as-built documents as prescribed; inspect construction warranty documents and the warranty provided by building units.

-Inspect the cost statement on finished project, the final report on capital according to work items or finished works; reports on value of finished works.

-The actual use of assets and construction after the transfer.

2.Auditing the compliance with financial and accounting regime of the State

2.1. Auditing the financial management

-Audit the management and use of investment sources of the project: capital from the State budget, loans and other capitals.

-Audit the compliance with regulations on regular expenditures of the project management board.

-Audit the conformity with procedures for advances and payment; inspect the compliance with payment procedures based on the contracts and regulations.

-Audit the compliance with the regime for reporting annual final report on capital according to state fiscal year.

2.2. Auditing accounting works

-The compliance with accounting regimes including: applied accounting regimes, form of accounting, the work of opening accounting books and making reports according to regulations, etc.

-The comparison of debts and payments of the investor and their representatives with those of contractors, suppliers, and creditors.

3.Audit the cost statement of the finished project (or final report on capital statement in case the cost statement of the finished project has not been made).

3.1. Auditing capital sources

a) Audit basis

-Law on State Budget, Law on Public Investment, Law on Construction and relevant legislative documents.

-The management and use of ODA and other sources of funds, agreements signed with creditors.

-Decision to approve the project investment.

-Financial and accounting regimes of the State

b) Content

-Inspect the release and payment of capital; inspect the adequacy of invested capital: invoices, accounting books; compare the amount of capital that was provided, loaned or paid to the investor with the numbers provided by corresponding capital providers, creditors and payers; inspect the exchange rates of capital in foreign currencies according to the exchange rates at that time.

-Inspect the legitimacy of capital sources; inspect the capital statement in accordance with State budget fiscal year.

-Inspect the conformity of the use of capital sources with the decisions to invest of competent authorities.

-Inspect the capital investment plan preparation, capital allocation and implementation of capital investment plan.

3.2. Auditing costs

3.2.1. Audit basis

-Law on Public Investment, Law on Construction, Law on Bidding and relevant legislative documents.

-Financial and accounting regimes of the State

-Documents provided by the unit about the survey, design drawing, estimate, shop drawing of a civil work (shop drawing), contracts, commissioning record, as-built drawing, documents on quality management, A – B statement, etc.; cadastral documents, compensation, assistance and relocation documents, relevant documents.

3.2.2. Content

a) General provisions

-According to the approved total investment and the investment expenses, the state auditor shall audit each component of the total investment according to approved detailed audit program including: compensation, assistance and relocation cost; construction cost; equipment cost; project management cost; construction consultancy cost; other costs.

-The auditor shall audit according to regulations for each form of contract price and specific terms of the contract, in conformity with the documents on quality management and the investment expense item executed by the investor or hired contractors.

-Where costs of temporary construction works, auxiliary works, construction camps for accommodation and execution in the construction site are separately designed and estimated by work item, the verification shall be carried out as for an independent construction contract package.

-Where costs of construction of temporary construction works, auxiliary works, construction camps for accommodation and execution in the construction site are included in the estimates of main construction contract package and are expressed by percentage (the design and estimate are not made); the percentage of such costs shall be verified according to the main construction contract package verification results.

-When carrying out the audit, the auditor must thoroughly study the contract documents, design drawings, as-built dossiers and relevant documents; sample the construction and installation volumes with high value, the portion of work with much likely errors in order to go into detailed examination.

b) Auditing building costs

b.1. Auditing contract packages in the form of all-inclusive contracts

-Check contents and quantities of works in the A-B statement/price spreadsheet against records of work acceptance, construction drawing design, as-built drawing, commissioning and technical instruction of the project, documents on quality management, field inspection result and contract requirements to determine the quantity of work duly accepted.

-Check the unit price in the A-B statement/price spreadsheet and those in the contract price.

-For bidding packages for which cost statement of completed works have been made, if the contractor fulfills contract requirements and tasks at a certain workload and unit price stipulated in the contract and contract price calculation sheet; the final price shall exactly equal the fixed price stipulated in the signed contract. Work breakdown and the detailed unit price approved by the competent authority shall not be repeatedly calculated.

-Errors in the completed volume (the completed volume calculated according to audit results is different from the volume requested for cost statement) shall be calculated as the basis for proposing amendments and determining responsibilities of collectives and individuals according to the State s regulations and the provisions of economic contracts signed between involved parties.

b.2. Auditing contract packages in the form of fixed-price-based contract

-Check the unit price in the A-B statement/price spreadsheet against the fixed-price unit stipulated in the contract price calculation sheet and attached documents.

-The payment equals the quantity of accepted work multiplied by (x) the fixed price stipulated in the contract.

b.3. Auditing contract packages in the form of adjustable price-based contracts:

-Clearly determine the scope and methods of price adjustment according to contract provisions.

-In case of adjustments to the quantity of works, based on the commissioning records, construction drawing design, as-built drawing, commissioning and technical instruction of the project, documents on quality management, field inspection result and contract requirements to calculate and determine the quantity of work duly accepted.

-In case of adjustments to the unit price, determine the final unit price according to the principle of unit payment adjustment.

-Where the unit price is adjusted under the State s policies, the principle of unit price adjustment stipulated in the contract and current regulations of laws shall apply. Regarding contract packages that are behind schedule, the unit price shall not be adjusted if the contract execution lasts longer than the duration stipulated in the contract due to contractor’s fault.

-The payment equals the quantity of accepted work multiplied by (x) the unit price.

b.4. Auditing contract packages in the form of combined price-based contract

The auditor shall specify the scope of work, work items or specific tasks to which pricing methods such as all-inclusive, fixed-price or adjustable price methods are applied. Verification of the contract by part shall be carried out in accordance with point b.1, b.2, b.3 Point b of this clause.

b.5. Auditing unplanned costs

Unplanned costs audit shall be carried out in accordance with regulations on construction contract adjustments corresponding to each type of contract agreed upon by parties and the appendix of the contract (if any) , the handling dossiers shall be approved by competent authorities for conducting detailed audit.

b.6. Auditing contract packages carried out by the investor as stipulated in the Law on Bidding

In case the investor signs a contract for implementation of a package with an affiliated unit, the audit shall be carried out in accordance with point b.1, b.2, b.3, b.4, b.5 of Point b of this Article.

In case the investor signs an agreement on implementation of the package with its division, the verification shall be conducted as follows:

-Check contents and quantities in the cost statement price spreadsheet of the investor against commissioning records, construction drawing design, as-built drawing, commissioning and technical instruction of the project, documents on quality management and field inspection result to calculate and determine the quantity of work duly accepted.

-Check the consistency between unit prices in the cost statement price spreadsheet of the investor and those in the approved estimate.

-The final price/settlement equals the quantity of accepted work multiplied by (x) the verified unit price.

b.7. Field inspection

-Carry out overall inspection of the construction volume, quality, technique, aesthetic, etc.

-Sample some works and items, inspect size by measuring and counting; inspect the specifications, standards of materials; use instrument to examine the consistency of the actual construction with the as-built drawing, commissioning record. For the inspection of works under construction, it is necessary to inspect hidden works (if possible) before implementing other works.

c) Auditing equipment costs

c.1. Auditing contract packages in the form of all-inclusive contracts

-Check the list of equipment, equipment category, origin, quality, configuration and price in the A-B final price spreadsheet and those in the contract; field inspection result, price stipulated in the contract, contract price calculation sheet and work acceptance records.

-For contract packages for which the cost statement of completed works have been made, if the contractor fulfills contract requirements and tasks at a certain workload and regulations stipulated in the contract; the final price shall exactly equal the fixed price stipulated in the signed contract. Work breakdown and the detailed unit price approved by the competent authority shall not be repeatedly calculated.

-Errors in the list of equipment, equipment category, origin, quality, configuration and price (the results calculated according to audit results is different from the list of equipment, equipment category, origin, quality, configuration and price requested for payment) shall be calculated as the basis for proposing amendments and determining responsibilities of collectives and individuals according to the State s regulations and the provisions of economic contracts signed between involved parties.

c.2. Auditing contract packages in the form of fixed-price-based contract

-According to the commissioning record, check the list of equipment, equipment category, origin, quality, configuration and price in the A-B final price spreadsheet and those in the contract; field inspection result, price stipulated in the contract, contract price calculation sheet and commissioning records.

-Check the unit price in the A-B final settlement price spreadsheet against the fixed unit price in the contract price.

-The payment equals the quantity of accepted work multiplied by (x) the fixed price stipulated in the contract.

c.3. Auditing contract packages in the form of adjustable price-based contracts:

-Clearly determine the scope and methods of price adjustment according to contract provisions.

-In case of adjustments to the quantity of work, the auditor shall, according to the commissioning record, check the list of equipment, equipment category, origin, quality, configuration and price in the A-B final price spreadsheet and those in the contract; field inspection result, price stipulated in the contract, contract price calculation sheet and commissioning records.

-In case of adjustments to the unit price, determine the final unit price according to the principle of unit price adjustment.

-The payment equals the quantity of accepted work multiplied by (x) the unit price.

c.4. Auditing contract packages in the form of combined price-based contract

The auditor shall specify the scope of work or specific tasks to which pricing methods such as all-inclusive, fixed-price or adjustable price methods are applied. Verification of the contract by part shall be carried out in accordance with point c.1, c.2, c.3 Point c of this clause.

c.5. Auditing unplanned costs

c.6. Auditing contract packages carried out by the investor as stipulated in the Law on Bidding

-In case the investor signs a contract for implementation of a package with an affiliated unit, the inspection shall be carried out in accordance with point c.1, c.2, c.3, c.4, c.5 of Point c of this Article.

-In case the investor signs an agreement on implementation of the package with its division , the verification shall be conducted as follows:

Check the list of equipment, equipment category, origin, quality, configuration and price in the final price spreadsheet and those in the commissioning record; documents on equipment design and equipment cost estimate to determine the final expense of such equipment.

+ Verification of costs of processing and installation of processed equipment shall be carried out according to the approved cost estimate and commissioning record. The final value equals (=) the quantity of work duly accepted multiplied by (x) the verified unit price.

+ Relevant costs such as costs of transport of equipment to the construction site, warehousing, maintenance and others.

c.7. Field inspection

Inspect some equipment on the spot to determine the presence of assets, categories, technical standards, origins of technological equipment and parts attached thereto and other equipment.

d) Auditing project management cost

-Base on relevant invoices and documents to inspect the legitimacy of project management expenses; compare the expenditures with estimates approved by competent authorities; compare actual costs with prescribed limits; the purchase, management, and use of assets.

-If a project management board simultaneously manages multiple projects without following details of each project: compare the distribution of project management cost of each project with the ratios and limits prescribed by the State.

e) Audit construction consulting fees and other expenses

-Audit groups of costs according to limits: based on the prescribed limits, ratios, and terms of contracts.

-Audit groups of direct costs according to approved estimates: inspect the calculation, examination and appraisal of estimates; the cost statement.

-Audit groups of fees under time-based contracts: determine the amount of salary paid for the contractor by multiplying the unit price as agreed by the investor and contractor by the actual working time (by month/hour/day/week).Travel expenses, survey costs, office rents and other expenses shall be verified on the basis of regulations on payment methods (valid invoices or unit price-based contracts).

f) Audit compensation, assistance and relocation

-Audit the legitimacy and adequacy of compensation, assistance and relocation documents, the formulation and approval of compensation, assistance and relocation plan.

-Determine the area, origin and grade of compensated land based on compensation, assistance and relocation documents, cadastral documents together with field inspection; cost estimates of works on compensated land; the rates of compensation for land, crops and works on land according to the State’s policies in each period; the final value of works and constructions serving the compensation (if any).

-Check the compensation list signed by compensated organizational and individual entities to determine the final value.

-Audit the preparation of cost estimates, allocation and finalization of costs of implementation of compensation, assistance and relocation.

-In case of technical infrastructure facilities, the audit shall be similar to the audit of construction costs specified in Point b of this Clause.

-Audit the preparation of cost statements and verify the final accounts of units performing the compensation, assistance and relocation in cases where the compensation, assistance and relocation are divided into sub-projects and independently implemented.

4.Audit investment costs not included in asset values

4.1. Audit basis

-Law on Construction and relevant legislative documents.

- Finalization documents and approval decisions of competent authorities.

-Results of audits of investment in each project or each work item.

-Written determination of damage and decision of cancellation of competent authorities to not include in asset values.

4.2. Content

a) Damages due to force majeure events permissible to excluded from the value of assets shall be audited as follows:

-Inspect the causes and value of damages according to the record of calculation and certification; the insurance company s records and proof of compensation to determine non-insurance losses.

-Determine damages according to State’s regulatory principles and procedures for assessment of damages.

-The determination of costs not being included in project value is based on damage assessments (asset inventory and damage assessment carried out by the Internal Inventory Council; damage value according to the record of certification examined, certified and proposed for handling by the investor, the contractor, the supervision consultant and the insurance contractor); compare them with the volume of finished works, inspect the legitimacy of the decision on cancellation and bases for calculating the value of cancelled works (quantities, prices, etc.)

-The investment cost included in asset values equals investment costs after auditing minus investment expenses not included in asset values.

b) Audit costs not generating assets to obtain the competent authority’s permission not to include such investments in asset values such as the verification of investments in provision of training for management authorities and community and central project management board s overheads not directly generating assets which are formed and transferred to local authorities.

5.Audit assets generated from investment

a) Audit basis

-Law on Construction and relevant legislative documents.

-Finalization documents and approval decisions of competent authorities.

-Results of audits of investment in each project every year.

-Records on the transfer of assets for being use.

-The price floor and polices of the State at the transferring time.

-Documents providing guidance on converting building costs into the price floor at the transferring time.

b) Content

-Inspect the list of assets transferred to managers, including fixed assets and current assets.

-Inspect the accuracy of the classification of long-term fixed assets and current assets generated from investment. Detect incorrect classification of long-term fixed assets and short-term assets.

-Inspect the allocation of project management costs, consulting fees and other expenses for the whole project which are made breakdown by specific fixed assets on the principle: a direct cost of a fixed asset shall be allocated for such fixed asset; the general cost generating multiple fixed assets shall be allocated by the ratio of each fixed asset’s direct cost to the total direct cost of the whole fixed assets.

-Inspect the legitimacy of assets transferred to users and their purposes: the costs used for calculating price conversion and handing over to users are the investment costs after audited to have unreasonable costs eliminated and supplement missing portions or receive cost handover from other projects; a finished project may be transferred to multiple users.

If the project MB are not dissolved and keep managing assets (belonging to the project and are not completely depreciated or liquidated) that are used for their activities, such assets are not included in the transferred value.

-Inspect the conversion of costs into the price floor at the transferring time under the guidance of the Ministry of Construction: inspect the summarization of costs in each year; the determination of conversion factors; the calculation and summarization of converted costs (applied for projects granted investment decisions that are requested for conversion of costs into the price floor at the transferring time)

6.Audit debts, remaining materials and equipment

a) Audit basis

-Decisions on asset transfer.

-Accounting books of supplies, assets, debts and relevant documents.

-Asset inventory records and debt comparisons.

-Policies of the State on handling assets after the project is finished.

-Documents on liquidation and sale of assets.

b) Content

-Audit debts payable

Inspect the amount payable to each client: based on the value of the compensation, resettlement, construction, equipment, consulting and other costs for which payments are accepted; aggregate and classify according to each contractor in order to determine and inspect the accounting books and documents to determine the actual amount of payment to each contractor; determine the debt payable by deducting the paid amount from the amount to be paid; compare debts with contractors or send letters of certification (where necessary).

-Inspect the quantity of the remaining assets and capital by balancing the imported, exported and remaining quantities then compare them with the data in accounting books, financial statements and inventory documents to see whether they are consistent or not, in which sample a large quantity of some remaining assets for actual comparison.

-Inspect remaining cash by comparing with the balance in accounting books.

-Inspect bank deposits by comparing them with sub-books and request certifications from the bank, compare and certify the account balance at capital providers.

-Consider the settlement of excess assets (supplies and equipment), untreated wastes, amount of recovered investment not being remitted to the budget, residual deposits and cash, etc.

Auditors shall execute the audit as prescribed in SAV standard 200 – Fundamental principles of financial audit, SAV standard 400 – Fundamental principles of compliance audit and SAV standard 4000 – Compliance audit guidelines.

7.Audit the evaluation of the profitability, efficiency and effectiveness of the construction investment project

According to the audit criteria specified in Point b Clause 3 Article 10 of this Procedure; based on the audit results on the contents of project formulation, design, cost estimate, contractor selection, quality control, investment cost management, etc. to assess the profitability, efficiency and effectiveness of the investment project in accordance with the approved general audit program.

Auditors shall execute the audit as prescribed in SAV standard 300 – Fundamental principles of performance audit and SAV standard 3000 – Performance audit guidelines.

Article 19. Making and sending audit record of the audit team and draft of audit results provided at the detailed audit authority

The making and sending audit record of the audit team and draft of audit results provided at the detailed audit authority is prescribed in Article 19 of audit process of SAV.

Chapter IV

MAKING AND SENDING AUDIT REPORTS

Article 20. Making draft audit report

1. Acquiring the audit evidence and audit results

The acquisition of audit evidence and audit results is prescribed in Clause 1 Article 20 of audit process of SAV.

2.Examining, classifying and consolidating audit results

The examination, classification and consolidation of audit results are prescribed in Clause 2 Article 20 of audit process of SAV.

3.Making draft audit report

According to the audit progress and figures, the mission leader shall make a draft audit report.

The audit report must satisfy general requirements prescribed in system of SAV standards and the form prescribed by State Auditor General. An audit report at least contains:

a) The opening consists of the following basic contents:

-Audit contents: record according to the decision on audit.

-Scope and limits of audit: specify the contents audited and not audited and explanation.

-Bases for audit.

b) The content includes:

-Summary of the project: name of the project, the investor, purposes, scope of investment, total investment, commencement date and completion date.

-Audit results according to audit contents: capital sources; investment costs; other contents of the final report on capital of the finish project (if any). Specify the results and reasons for differences.

-The correctness and truthfulness of the cost statement of the Project

-The compliance with law, policies, regulations in the investment project management and other relevant documents: In each content, the outstanding issues need to be analyzed and assessed: advantages, well-done aspects; shortcomings, remaining issues, limitation, responsibilities of collective and individuals concerned.

-The profitability, efficiency and effectiveness of the project.

c) Conclusions, requests and others (if any).

d) Description and supporting statements (if any).

e) Contents in the format of: signature, seal, date of signing auditor s report as prescribed.

The draft audit report shall be made in consideration of objectives and type applicable to the audit so as to choose the guidelines for making audit reports prescribed in system of SAV standards.

4.Discussing and consulting with the members of audit mission

The discussion and consultation with the members of audit mission is prescribed in Clause 4 Article 20 of audit process of SAV.

Article 21. Chief auditor considering approving draft audit report

The Chief auditor shall consider approving draft audit report as prescribed in Article 21 of audit process of SAV.

Article 22. State Auditor General considering approving draft audit report

The State Auditor General shall consider approving draft audit report as prescribed in Article 22 of audit process of SAV.

Article 23. Completing and sending draft audit report to auditee for consultation

The completion and sending of draft audit report to auditee for consultation is prescribed in Article 23 of audit process of SAV.

Article 24. Notifying audit results

The notification of audit results is prescribed in Article 24 of audit process of SAV.

Article 25. Issuing audit report and notifying audit results

The issuance of audit report and notification of audit results is prescribed in Article 25 of audit process of SAV.

Chapter V

OBSERVING AND INSPECTING THE IMPLEMENTATION OF AUDIT CONCLUSIONS AND REQUESTS

Article 26. Observing and inspecting the implementation of audit conclusions and requests

The observation and inspection of the implementation of audit conclusions and requests is prescribed in Chapter V of audit process of SAV.

The State General Auditor

Ho Duc Phoc

APPENDIXES

Appendix 01: Common mistakes and frauds

Appendix 02: List of questions 01 – Designing phase

Appendix 03: List of questions 02 – Bidding phase

Appendix 04: List of questions 03 – Construction, supervision and commissioning phase

APPENDIX 01

COMMON MISTAKES AND FRAUDS
(Issued together with Decision No. 02/2017/QD-KTNN dated March 13, 2017 of State Auditor General)

1.Audit the compliance with law, the project management and construction regimes

1.1. The making, appraisal and approval of projects

-The making, appraisal and approval of projects are not conformable with the regulations on the order, authority, and punctuality.

-The contents of the project is cursory and insufficient.

-The documents about market survey, material sources, motives, environment, plans for compensation, assistance and relocation, capital sources, etc. are not adequate.

-The consultancy works for which charges are not regulated but such charges are not estimated or estimated at a high rate.

-The project is not conformable with the sectional and regional planning.

-The total investment calculated is not accurate and well founded.

1.2. Project execution

-The survey document is inadequate and the design is not well founded.

-The technical design and construction design documents are inadequate and incorrect in terms of scale, technologies, capacity, construction class, capital, land area in comparison with the decision to invest.

-The estimates apply incorrect limits and prices; the determination of charges for works is not well-founded; calculate incorrect volume, calculate excess or lack construction work volume.

-Provision of compensation and assistance: the compensation plan is improperly made, approved and examined; compensation documents are in adequate, etc. ;

-The contractor selection: invitations to bid are not sufficient, clear and detailed; bidding documents and plans are approved ultra vires; the number of contractors participating is not sufficient; the regulations on time are not complied with; biddings are launched without sufficient composition; bids are unfairly and groundlessly examined, etc.

-The construction contract is not strict, sufficient and proper.

-The workload arising without the amended design or estimate.

-The construction is not consistent with the approved design.

-The commissioning and payment are not consistent with the contract; making payment for unfinished works.

-Regulations on the supervision of the performance and copyright of design consultants are not complied with.

-The commissioning documents are insufficient: the commissioning records of each part, documents about material, concrete and structure testing are missing, etc.

-The building diary does not record every development and incidents during the construction, etc.

1.3. Commissioning, payment and commencement of operation

-The overall commissioning documents are insufficient.

-As-built documents are insufficient or incorrect.

-The final report on capital is not made or not correctly made.

2.The evaluation of the profitability, efficiency and effectiveness of the construction investment project

2.1. The making, appraisal and approval of projects

-The information and data that serve as bases for project planning are not reasonable: the economic and market indexes, environmental indexes (sewage, noise, pollution, etc.); technical indexes (resistance to storm, wind, rain, earthquake, etc.); improper technical standards (durability, lifecycle, material quality, etc.).

-All investment plans are not examined to make an optimal selection.

-The location is unreasonably or subjectively chosen without due regard to relevant factors (geology, traffic, material sources, market, human resources, etc.).

-The technologies are not selected according to price/performance criteria; the consistency is not ensured, standards, features, economic and technical specifications of equipment are not clear.

-The calculation made without considering the actual condition of existing infrastructure such as electricity, water supply and drainage, etc.

-The selection of construction methods does not consider the technological advances and obsolescence.

2.2 Design and cost estimate

-The design is created without sufficient information about demands or not based on demands.

-The survey is incorrect and that leads to an improper design.

-The design and arrangement of technological line is unreasonable.

-The design is not sufficient and fails to consider necessary workload that leads to a large amount of additional workload which slows down the progress and exceed the cost estimate.

-The technical equipment and construction design are not compatible.

-The design exceeds demands and solutions are costly: corridors and passages are unnecessarily wide; the furniture is lavish, the technical operation equipment is too expensive not only for initial cost but the frequent cost of repair and maintenance arising from the process of operation later, etc.;

-The duration of the design is too short so that the design is only completed during the building which affect the progress and make costs uncontrollable.

-The cost estimates are incorrect due to insufficient information, careless calculation or deliberately making low cost estimate so that the project are easily approved and then request for additional funding approval upon the implementation; conversely, making high cost estimate to use the fund for purchase of expensive equipment.

-The estimate is cut unreasonably in the progress of assessment and approval then additional approval must be made later.

-The estimate of costs of arising workloads is made late, even after an item is finished, so the cost management becomes ineffective.

2.3. Contractor selection.

-No public biddings, only selective bidding or limited bidding.

-The invitation to bid is incorrect that leads to the unqualified contractor selected for the project and affects the progress and quality of the works.

-The contract package description is not sufficient and clear that leads to alternative interpretation which is likely to cause disputes during contract performance.

-The investor and contractor have colluded with each other so that the contractor is provided with information about one portion of the additional works in the future. The contractor upon knowing this information shall make a drastically high bid for such works, reduce prices for other works to win the contract and enjoy substantial benefits from additional works which lead to increases in costs of the project.

-Bidder collusion: A contractor buys all invitations for bid; contractors reach a mutual agreement to let one of them win the contract and share the benefits among them (usually in selective bidding), etc.

-Appraisals are inaccurate, approved contract package prices are too high.

-Bids are unfairly examined without following the criteria approved by competent authorities.

-Criteria for assessing bidding documents are unreasonable in a way that enables inexperienced and incapable contractors to participate and win contracts, or to offer criteria unfavorable for qualified contractors.

2.4. Contract and contract implementation

-Terms and conditions in the contract are not strict.

-Prices on the contract are not consistent with successful bids.

-The contract is not adjusted to match the design, therefore the developments of costs are not monitors and excess of cost is not promptly detected. In those cases, arising costs are usually higher than the original ones in the contract (a reason usually given by management boards is the construction is not commenced at the same time).

-The sanctioning of contractors that violate the terms and conditions of the contract is not made.

2.5. Construction management

-The progress is prolonged due to subjective and objective causes

-Indecent supervision leads to late discovery of items having technical defects or using inferior materials, equipment of which specifications are not consistent with agreements, etc. which damage the project.

-Defects are discovered while commissioning items but builders are not compelled to make immediate rectification.

-The reason for late request for rectification of defects may be due to users’ failure to notify the project management board of such defects when taking delivery of the project, which may enable the contractor to cite expired warranty as a reason and therefore the remedy would be costly.

2.6. Conditions and capability of participants in the construction

-Participants in the construction are not financially and technically capable.

-Functions and specialties of participants are not suitable; their reliability and experience are insufficient, etc.

3.Auditing the report on the final report on capital according to work items or finished works

3.1. Capital source

-All capital sources are not recorded, incorrect exchange rates are used that cause variances in capital balances in the reports compared to the data of capital providers.

-Capital sources are incorrectly classified.

-Capital sources are not used in accordance with financial principles and the decision to invest.

-Capital sources are not used for proper purposes.

3.2. Investment costs

a) For value of finished works

-Workload:

+ Incorrect or falsified statement of work volume;

+ Incorrect calculation of the workload compared to the design and as-built drawing;

+ Duplicated workload (usually happens at joints);

+ Costs of another project are included in the cost statement;

+ Failure to properly follow procedure;

+ Inclusion of works removed due to mistakes of contractors in the cost statement;

+ Failure to deduct recovered products and supplies;

+ Inclusion of additional works which are shown in the invitation to bid and the design but omitted by contractors in the cost statement.

-Unit prices:

+ Incorrect application of regional prices, successful bids or project prices;

+ Incorrect application of transport coefficients and price coefficients;

+ Incorrect classification of supplies;

+ Incorrect calculation of the volume of materials eligible for price different due to incorrect application of limits;

+ Incorrect time of price different calculation, etc.

+ Incorrect application of the slippage index: incorrect source indexes or incorrect time.

-Surcharges:

+ Incorrect calculation of limits;

+ Surcharges are calculated based on prices of installed equipment.

-Arithmetically incorrect calculation of payments.

b) Costs of finished equipment:

-The equipment does not ensure technical features, quality and origins as prescribed.

-The quantity of equipment and spare parts are not as adequate as stated in the contract.

-Incorrect application of exchange rates to imported equipment.

-Payment formalities are lacking; documents are invalid or storage cost, cargo inspection cost, transport cost, warranty cost and maintenance cost are incorrectly paid.

-Equipment transport, storage and maintenance costs are incorrectly distributed to fixed assets.

-Non-contractual payments are made.

c) Other costs

-Incorrect calculation or falsification of workload.

-Other costs according to limits: incorrect application of percentages, incorrect determination of bases for calculation, incorrect or confused application of construction, equipment and other costs.

-Costs are not regulated such as: no estimates are made or estimates are not approved by competent authorities.

-Compensation costs are inconsistent with the actual volume, incorrect compensation of land area, incorrect unit prices, compensations are not sufficiently paid to people, payment are made for public land, incorrect determination of house or land categories, etc.

-Invalid invoices, the final value exceeds the signed contract value.

-Recording duplicate costs.

-Failure to record the recovery of product value during the experimental production or recovery of scrap value after investment.

-Incorrect application of tax rates; making tax-inclusive payments but receiving tax-exclusive invoices.

-Recording construction insurance but not actually made payment.

-Receiving construction insurance without reducing construction costs.

-Incorrect calculation and distribution of loan interests.

-Failure to make payment to the State budget the amount collected from leasing premises, equipment or assets.

4.4. Construction quality and progress control

4.1. Quality control

-Incorrect survey and design that affects the quality and use.

-The construction does not comply with technical procedure and requirements of the project; the materials used are not consistent with standards of the project, etc. that affects the quality.

-The construction quality control is not good, failure to promptly discover and handle mistakes that affect the quality.

4.2. Progress management

Determine reasons for slow progress:

-The contractors are incapable: machinery and equipment are inconsistent with the contract; financial and managerial capability are not good, etc.

-The contractors deliberate delay the progress to earn benefits when payments are made.

-Managerial capability of consultancies (monitor, project management) and investor.

-Unsuitable survey and design that leads to adjustments of many contents, etc.

-Considerable price fluctuation.

-Force majeure.

5.5. Investment costs included in asset values

-Damage concerning material and equipment costs incurred by party B is confused with the cost of application for cancellation made by the investor.

-Incorrect calculation of cancelled works.

-Other mistakes shown in the audit of investment.

6.Assets generated from investment

-Projects that are executed for many years, the price conversion is too complicated that likely leads to incorrect calculation.

-Many types of assets are hard to be classified as fixed assets or current assets.

-Omitting the investment value handed over of other projects in the investment process or omitting the subjects for handling over the investment property.

7.Audit debts, remaining materials and equipment

-The calculation of debt is not well-founded.

-Units (or individuals) in debt have dissolved, changed their organizational structure… failing to grasp the state of debt or being unable to collect debts.

-Remaining supplies and equipment are not logged, assessed, and strictly managed.

APPENDIX 02

TASKS TO BE PERFORMED DURING THE DESIGNING PHASE
(Issued together with Decision No. 02/2017/QD-KTNN dated March 13, 2017 of State Auditor General)

1.Design basis

-Before design, relevant parties must inspect the land used for work construction and geological survey the land foundation.

-Inspect the reference to the result drawn from the above information and applied to the work of design.

2.Organizing work of design

-Inspect the compliance of work of design based on general regulations and requirements of the investor.

-Inspect the compliance with the promulgation of project MB and tasks stipulating the competence handed over to the MB in accordance with regulations in Law on Construction and guiding documents.

-Inspect whether the design documents contain measures and regulations to ensure that the design documentation had taken due account of operation and maintenance costs during its use.

3.Technical design

a) Inspect the appropriateness of design solutions and alternative design options:

-Type of the project (e.g. bridge, tunnel).

-Construction method (e.g. Casting concrete on the site or assembling precast concrete components).

-Foundation construction (reinforced concrete pile foundation, stunk foundation or bed-plate foundation).

b) Inspect whether the construction method take account of factors such as:

-Geological survey of the land foundation.

-Regulations of regulatory agencies.

-Regulations and requirements of the investor.

c) Inspect whether the selection of design plans tale account of:

-Correlation between cost and efficiency.

-Conditions for later expansion or changing uses.

-Operational cost, maintenance cost and other costs.

-Environment protection, fire and explosion prevention.

-Various construction durations.

d) Inspect specific issues related to the selected construction methods and building materials (technical requirements and implementation experience).

dd) Inspect whether the calculation and design of the bearing frame is appropriate to ensure the profitability of these design solutions (assessment of profitability of the bearing frame, etc.).

e) Inspect the compliance with the preparation, assessment and approval of competent authorities in the adjustments of design and its impact on the progress and quality of the project.

g) Inspect whether the preparation, assessment and approval of design drawings are sufficiently and punctually made in accordance with the progress and regulations of the Law on Construction.

4.Progress plan

a) Inspect the preparation and approval of the progress plan of each contract packages and the project.

b) Inspect the compliance of the progress with the scale and requirements of the project; inspect the measures given in the progress plan when there are discrepancies between the plan and the actual implementation of the project.

c) Inspect the compliance in the monitor of all activities important to the construction and setting a specific deadline for each work.

d) Inspect the preparation and determination of deadline for each specific work or set deadlines for completion of those works of the project.

dd) Inspect the review, evaluation and handling of issues by parties related to the project activities that may cause the entire project to delay if they are delayed.

e) Inspect the compliance with intended deadlines.

g) Inspect the determination of reasons and responsibilities of the delay (were such delay in the progress planning or actual implementation)

h) Inspect the evaluation and conclusion reached of the contractor related to the shortcomings in the preparation and implementation of the progress plan.

APPENDIX 03

TASKS TO BE PERFORMED DURING THE BIDDING PHASE
(Issued together with Decision No. 02/2017/QD-KTNN dated March 13, 2017 of State Auditor General)

1.Work description, construction description and list of works

-Inspect the sufficiency in the construction description and list of works promulgated based on the approved design basis.

-Inspect the assurance of fairness, transparency and competition in the preparation of invitation to bid/request documents:

+ The work description (contract package description) treats all contractors equally or there is no special information that was beneficial to a particular contractor;

+ Potential contractors are mobilized to take part in and there are no competitive advantages for those contractors;

+ The adequacy of the construction task description on the expected targets of the construction work and the technical characteristics of the contract package/project.

-Inspect the inconsistency between parts of the bid description.

-Inspect the sufficiency and transparency of the task description, in particular:

+ Purposes of construction methods;

+ The topography and geology of the construction site;

+ The current traffic capacity leads to construction site;

+ The building methods and most important works of the project;

+ Existing building and works;

+ Cases where a construction project needs to be implemented in two or more stages;

+ Notices on regulations of regulatory agencies, especially applied technical requirements of the investor.

-Inspect the application of the results of geological survey, whether the survey is sufficient to assess the geology, water proportion and possible environmental impacts that may occur in the general description.

-Inspect the sufficiency of the list of works specified in the design drawings together with the invitation to bid/request documents.

-Inspect the provision of alternatives for items that need price comparison in the list of works.

-Inspect the grouping the same type of works in the list of works.

-Inspect the clear separation from one to another work in the list in order to prevent duplication and double calculation.

-Inspect the coherence and detail assessment (to an extent that all contractors can interpreter in the same way)

-Inspect the calculation of the volumes included in the bill of quantities (the volumes must be accurately calculated in accordance with the design document and conformable with the limitations of the contractee)

-Determine reasons and solutions for differences arising.

-Inspect the appropriateness of the units of measurement of workloads suitable for summarizing and checking workloads during the cost finalization.

2.Terms and conditions

-Determine confusing and inconsistent terms and conditions of the contract.

-Inspect the remedy of confusing and inconsistent issues or issues that cause adverse effect on the contractee.

-Inspect terms and conditions of the contract on:

+ Requirements for personnel and construction equipment use;

+ Methods of dealing with interruptions;

+ Regulations on settlement of contract disputes;

+ Penalties for not complying with agreed deadlines;

+ Determination on the level of penalty;

+ The clear description on instruments necessary for construction? (e.g. electricity, water, concerning the location: way and capacity of drainage of waste water and waste rubbish);

+ Specific provisions on the construction hygiene, discharge of refuses and building materials as well as the distribution of relevant costs, etc.

-Inspect the encouragement on contractors to provide alternative solutions to raise the profitability within terms and conditions of the contract.

-Inspect whether the appendix to the contract specify:

+ Contracting the work items by each period contract package;

+ Guarantee on the implementation of the contract;

+ Commissioning;

+ Construction diary;

+ Warranty;

+ Obstructions and interruption of construction;

+ Resolutions for disputes over payment;

+ Regulations on construction payments.

3.Invitation to bid

-Inspect the conformity in the formulation, appraisal and approval of invitation to bids on the following contents:

+ The conformity in the formulation, appraisal and approval of invitation to bids;

+ Bidding works executed by competent authorities;

+ When the bidding is held, the procuring entity has already satisfied all conditions in accordance with regulations.

+ The contents of bidding dossiers shall be made according to the form prescribed by the State.

If the invitation for bid is implemented in advance, the reasons for such action must be considered.

-Inspect whether the selection of bidders specially paid attention to the aspects:

+ Reputation – the first thing is the reliability and punctuality;

+ Position of contractors on the market;

+ Technologies, capability, and quality;

+ Geographical distances.

-Inspect the change of contractors of the investor in case of limited bidding.

-Inspect the compliance with effective regulations on the publication of the invitation to bid on mass media in case of open bidding.

-Inspect the assurance that all contractors taking part in the bidding fully receive the invitation to bids with the same content and at the same time.

-Inspect the regulations on the assurance that all contractors are enable to see the drawings and visit the site to know its terrain, type and scale of works to do.

-Inspect the order and procedures in the bidding invitation; issuance, amendment and clarifying of the invitation to bid; preparation, submission, receipt, management, modification and withdrawal of bidding documents.

4.Bid opening, bidding document verification and bid evaluation

-Check compliance in the bid opening, clarification of bidding documents, correction of deviations, evaluation of bidding documents on the following contents:

Deadline for submitting bidding documents; bid opening procedures of the procuring entity;

+ Making sufficient minutes of bid opening as prescribed;

+ Suggestion about bidding documents in the bid examination phase of the procuring entity;

+ The adjustments of the bid-marking consultants in which take notices of the abnormal unit price, the content of the conflict between the technical proposal and the financial proposal of the bidding document;

+ The compliance with regulations in the adjustment of bidding documents;

+ The procuring entity s procedures for evaluation of bidding documents shall comply with regulations;

+ Inspect the price collusion (if any);

+ Determine the reasons for the cancellation of bidding result (if any).

5.Contract negotiation

-Inspect the order and procedures of the contract negotiation and contract finalization for bid-winning contractors.

-Inspect the handling of issues related to unsuccessful negotiation with bid-winning contractors.

6.Handover and contract signing

-Inspect the compliance with regulations in the submission, evaluation, approval and publicity of contractor selection results.

-Inspect the compliance of the content of the contract on payment time limit, payment times required by the invitation to bid and the contractor selection results.

-Inspect contents of the signed contract according to the approved contractor selection results.

-Inspect the sufficiency of documents attached to the contract in accordance with the agreements agreed upon by both parties.

-Inspect the validity collectives and individuals participating in the contract.

-Inspect the compliance with regulations for ensuring works are done after a written agreement is made.

7.Contract adjustment

-Inspect the reasons leading to the necessity of contract adjustment and additional contract.

-Inspect the compliance in price renegotiation and other agreements in the contract signed between the parties.

-Inspect the compliance in determining the price for adjustments made during the performance of the contract.

-Inspect the impact of adjusted or additional contracts to changes in the progress and payment.

-The contract adjustments must comply with terms and conditions, conformable with the laws on contract adjustment and price adjustment.

APPENDIX 04

TASKS TO BE PERFORMED DURING THE CONSTRUCTION, SUPERVISION AND COMMISSIONING PHASE
(Issued together with Decision No. 02/2017/QD-KTNN dated March 13, 2017 of State Auditor General)

1.Construction

-Inspect the sufficiency of formalities when the construction is commenced:

+ License to build (For construction that needs a license to build);

+ Design drawings and the list of works;

+ Other conditions of the State.

-Inspect the compliance with agreements in the bidding documents in the adequate mobilization of machinery and equipment.

-Inspect the implementation of the workloads with the correct volume, scale and quality in accordance with regulations

-Inspect the compliance with technical standard of the project for materials that are brought into the works

-Inspect and determine reasons for slow progress.

-Inspect the compliance with regulations on the formulation of as-built drawings in accordance with the actual performance

2.Construction adjustment

-Determine reasons of adjustments.

-Inspect the adequacy of adjustment documents during the construction (a complete explanation of the reasons for the adjustments, the approval of competent authorities before implementing those adjustments).

-Inspect the identification of changes in costs for adjusted contents.

-Inspect the compliance of the adjustment documents in cases where it is necessary to adjust due to the requirements of the construction supervisor but not yet made, evaluated and approved (these adjustments must be fully explained, promptly made and submitted to the competent authorities for additional approval).

-Inspect the compliance of procedures in the payment of additional workload and changes of design.

3.Construction supervision

-Inspect the sufficiency of personnel assigned to supervise the construction.

-The constant examination of the categories and quality of materials executed by the contractee.

-Inspect the supervision during the construction on:

+ Record mistakes detected during the construction and written request on rectifying such mistakes;

+ The remedy of mistakes is on schedule as requested;

+ Personnel, materials and machinery are recorded in order to serve later payments

-Inspect the as-built drawings in accordance with the regulations in which it is adequately reflect the adjustments to serve as a basis for payment of works.

-Inspect the compliance in the commissioning of hidden works before carrying out others.

4.Deadline supervision

-Inspect the completion of work under responsibility of the investor:

+ Provide documents necessary for the construction;

+ Set primary targets and foci;

+ Arrange the building site and building roads;

+ Coordinate the companies by imposing deadlines.

-Inspect the implementation of the contractor s agreements in the bidding document and the contract to meet the construction requirements: mobilization of all personnel, materials, machinery and equipment.

-Inspect the compliance with contractual deadlines.

-Inspect the recording of incidents that interrupt the constructions and directives of the relevant construction supervisor.

-Assess reasons and responsibilities of parties when there are lateness.

-Inspect the appropriateness of the increase payment due to the lateness on account of the investor.

-Inspect and determine reasons in cases separate works failed to meet deadlines; inspect measures to ensure the overall progress of works; determine the costs and liability of the party causing the delay.

-Inspect and evaluate the deadline extension for the contractor to completely execute the contract in case the contractor fails to complete the schedule as committed under the contractor s responsibility.

-Inspect the extension of contract execution time and works related adjustments in the progress plan.

-Inspect the provisions of timely sufficient information for the divisions concerned on the time limits occurred or likely to occur and is the re-negotiation of the binding new time limits made.

5. Commissioning

-Inspect the compliance of procedures in the final settlement:

+ The commissioning is conducted in strict accordance with the provisions of the Decree on the construction quality control and the provisions of the contract signed between parties;

+ The commissioning record contains necessary information and bear signatures of responsible persons;

+ Deadline for rectifying the mistakes discovered during the commissioning is regulated;

+ The commissioning certified by state authorities and all required certificates are presented (e.g. material testing certificate, steel rebar commissioning record, etc.)

-Inspect the participation of experts during the commissioning (if any).

-Inspect the consistency between the calculation of construction work values and commissioning records.

-Inspect the rectification of shortcomings regarding shortcomings that cannot be rectified or the rectification is unacceptably costly (is there an agreement on payment reduction and is the rate of reduction adequate).

-Inspect the rectification of mistakes made by the contractor in cases the contractor refuses to rectify mistakes.

-Inspect and determine reasons for the acceptance of the contractor on works with defects (if any).

-Inspect the formulation of the list of warranties and warranty periods for all construction works and sending it to all contractors

-Inspect the completion of the construction warranty.

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Decision No. 02/2017/QD-KTNN dated March 13, 2017 of the State Audit Office of Vietnam promulgating the process for auditing state-funded investment and construction projects

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