PPP Audit of Infra Project - Importance and Implication

    Purnima Bajpai, Reliance Infrastructure, Pune.

    Public Private Partnership Audit

    Scope of Public Private Partnership Audit

    A contentious issue in the context of PPP arrangements and their audit relates to the scope of audit by Supreme Audit Institutions (SAI), in view of the following:
    • The government or the public sector partner is usually only a minority partner /shareholder or will have only minority participation in the PPP arrangement, with the private sector partner controlling the majority stake.
    • Most of the funds are brought in by the private sector partner.
    • The construction, management and operational risks are transferred to the private sector partner.
    Broadly speaking, the audit of PPPs by the SAI may cover the aspects of the Project indicated hereunder:
    1. The data, records, analysis and the decision process of the government department / public sector agency to prefer the PPP route to execute the project instead of undertaking it directly.
    2. Documents and files leading to the formulation, appraisal and approval of the project.
    3. The process of identifying the private sector partner, requests for proposals, bidding and tendering process of the contract with due diligence to fairness, transparency and objectivity.
    4. In-depth analysis of the project documents including the shareholders’ agreement, concession agreement, operation and maintenance agreement etc., total project cost, financing arrangements (including cash flow, ROI / ERR / DCF), justification for the viability gap funding, contract period etc.

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