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Establishing a PPP Framework

21.9.2 Audit Entities and Ex-Post Evaluation

Audit entities are an important link in the chain of accountability for public expenditure decisions, providing independent reviews of government finances and performance to parliaments and to the public. The International Organization of Supreme Audit Institutions (INTOSAI) provides an online list of its member audit entities.[160]

The mandate of supreme audit entities varies by jurisdiction, but should generally include two levels of audit. The first is regularity audits which can include auditing the financial statements of government entities and of the government as a whole, and auditing decision-making processes for compliance and probity. The second is performance or Value for Money audits, reviewing the government’s effectiveness and efficiency.[161] Value for Money audits can be conducted at the PPP program or project level.

While the remits of supreme audit entities vary, they typically extend only to government agencies and entities wholly or majority owned by the government. Supreme audit entities, therefore, typically do not have the right or responsibility to audit PPP companies. Nonetheless, the private company often holds a lot of relevant information. Attempts by an audit entity to access information held by the private party can cause conflict.

To overcome this, the PPP contract can include requirements that the PPP Company provide audited accounts and any other relevant data the government may require. The audit entity also needs to be clear about its rights to access information belonging to the PPP Company. INTOSAI has published guidelines for auditing PPP projects (2007).[162]

Regularity auditing for PPPs

When carrying out regularity audits of contracting authorities, audit entities will typically check that PPP commitments are appropriately reflected in the accounts, and that PPP processes have been followed. Audits can occur at any stage of the PPP process, including during project preparation or after procurement.

Performance auditing of PPP projects and PPP programs

Auditing agencies may carry out performance or Value for Money audits of particular PPP projects or broader PPP programs when there is concern over whether processes have been appropriately followed, or whether the project is providing Value for Money.

INTOSAI recommends that performance audits of PPP projects should be conducted soon after procurement, and further reviews should be carried out over the project lifetime covering the following information;

  • All major aspects of the deal that have a bearing on Value for Money, such as required actions, outputs, and timing of delivery;
  • How the PPP was identified;
  • How the transaction process was managed;
  • The tender process that was adopted;
  • How the contract was finalized; and
  • Ongoing management of the PPP contract.[163]

Examples of a PPP project performance audit in two states in Australia are outlined in box 2.25.

BOX 2.25: Project Performance Audits

  • In the state of New South Wales, Australia, the auditor-general audited the Cross City Tunnel, a PPP project that provides a highway underneath Sydney’s central business district. The 2006 report included an analysis of the process in which the PPP contract was awarded, how the contract was eventually amended, and whether the costs of the project to citizens were justified. The project audit noted its high tolls, lower than expected levels of traffic, implications of the upfront fees paid by the concessionaire, and a lack of transparency in the amendment of the initial contract. The Auditor-General provided opinions on each of these issues based on the analysis.
  • The state of Victoria, Australia, awarded concession contracts (called “franchises”) for the tram and train system in the city of Melbourne. When these operators ran into financial difficulties, the government decided to renegotiate with the existing private contractors, rather than retender. This raised some concerns for the resulting Value for Money. The government carried out an ex post Value for Money audit of the concessions and renegotiations. The report, published in 2005, focused on the effectiveness of the responsible agency, transparency of the process, proper risk allocation of the project, the development of public sector benchmarks, and adequate monitoring systems.[164]

It may be useful for the PPP program as a whole to be audited after it has been working for some time. Program-based audits should focus on providing recommendations for improving the program. Box 2.26 provides an example.

BOX 2.26: Legislative Audits and Reviews of PPP Programs

In 2011, the UK National Audit Office (NAO) published a review of the PFI program and other large procurement projects, and provided key lessons from the UK’s experience. The NAO assessed various aspects of the program, including Value for Money, project preparation and implementation, and accountability. Based on this analysis, the NAO offered recommendations for future improvements to the PFI program.

Source: Controller and Auditor General (2011) Lessons from PFI and Other Projects National Audit Office.


[160] See

[161] INTOSAI’s International Standards of Supreme Audit Institutions (ISSAI) 100 sets out basic principles in government auditing. Paragraphs 34-44 describe the mandates of audit institutions, and define regularity and performance audits.

[162] INTOSAI (2007) Guidelines on Best Practice for the Audit of Public/Private Finance and Concessions (revised).

[163] ibid.

[164] Auditor General Victoria (2005) Franchising Melbourne’s Train and Tram System Victorian Government Printer. Available at:

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