How to inspect a project tmder implementation?

Subhash Nathuramka, FCS, Principal Consultant, Columbus Capital Management Ltd.,

Mumbai.

Projects under implementation are subjected to procedural inspections by the officials

of lending banks and fmancial institutions to ensure that the funds advanced by
e-mail: them are put to right use. Aspects which are to be considered while undertaking
snathuramka@yahoo.com
such inspections and to be included in the inspection reports are briefly outlined in
this article.

Introductory CA Certificate needs to be distinguished from

Inspection is an integral and critical part of the exercise to
ensure smooth and proper implementation of a project. Post
appraisal and post sanction of finance by Banks, financial
institutions it becomes imperative that the project is
implemented as per the plan within the envisaged timeframe.
Regular inspections are made to check whether the project is
being implemented in accordance with the approved plan/
project report and deviations are pointed out with remedial
measures in the report.
Banks and Financial Institutions rely heavily on the
inspection reports (as also Certificates from Practising
Chartered Accountants) before making disbursement of
sanctioned credit limits for part financing the projects. The
inspections are made by the officials of lending banks,
financial institutions or by their authorized empanelled
Chartered Engineers. The inspection reports emphasize more
on the physical progress of the work done and the
Expenditure incurred and do not at times provide inclusive
view of the entire project. There are several other factors
and aspects which need to be seen and reported along with
suggestions to take corrective steps. It would be a good
idea if an inspection report like a project report also covers
all relevant factors having a bearing on the project be it
technical, commercial, financial or managerial to ascertain
whether the implementation of the project is going on the
right lines.
Chartered Engineer's Certificate
A Chartered Accountant is a competent accounting
professional to certify the expenditure incurred based on the
basis of verification of vouchers, supporting and books of
account. On the other hand a Chartered Engineer is a
competent professional to certify the physical progress of
the work done.
There may be following situations where the expenditure
has actually been incurred and certified by C.A. but it does
not provide the lending bank the right input or guidance
required to take a fair view in the matter of release of credit
facility -
1. Although the expenditure has been incurred by the
company it does not relate to the specific project under
consideration.
2. The expenditure incurred on purchase of items ,
equipment is not as per the approved plan.
3. The expenditure has been incurred on a head other than
the head envisaged in the approved plan e.g. more civil
works, higher preoperative expenses, higher soft costs,
less expenditure on equipment and machinery.
Similarly without the verification of books of account the
Chartered Engineer is not in a position to know the actual
expenditure incurred. He can only physically inspect the project
and report the progress made in terms of percentage of work

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I (A· 10) JANUARY 2011