The role of audit on Construction Works in Brazil
By André Henrique Gaspar de Oliveira and Luísa Zanini da Fontoura, Maciel Auditores
Over the years, auditing has retained its significance in public finance and, as such, Supreme Audit Institutions (SAI) 1 receive constitutional recognition in many countries around the world, including Brazil. Although it has been argued that Brazil suffers from serious accountability deficits, here, as watchdogs of public finances, the auditors act to enforce accountability of executive agencies to national and state legislatures and through them to the general public.
We argue that accountability initiatives in construction projects can be of benefit internationally to the public and private sectors and that these initiatives – since common sense cannot be relied upon based on Brazil’s latest track record especially in politics and the construction industry – are worthy of attention and recognition.
Little doubt remains that the punishment of official misconduct (which may include bribery, embezzlement, kickbacks and fraud) is instrumental as well as fundamental to reduce both the incidence and the perception of public sector corruption. As we know in this context, due to recent events of corruption, industry is investing heavily in operational capacity. Brazil's growing infrastructure needs significant investment and investors must understand Brazil's public procurement framework.
The main legal framework for public procurement in Brazil is set forth by Federal Law 8.666/1993, which establishes general procurement rules applicable to the acquisition of goods and services (including construction) by federal, state and municipal government entities. Although there are general procurement rules that establish internal and external control systems, there is no specific regulation of how they should be implemented, especially in the area of public construction.
Usually the focus of any audit is on the accounting items, without taking into account the particularities and specific diversities of the civil construction, and therefore, being thus, little effective. Often auditors end up focusing their efforts on verifying the principles of legality and economy, leaving aside the process of execution as a whole. They analyse a project from its conception to its results, without considering whether or not it fulfilled the proposed objectives within society.
The best way to efficiently control public works through audits is through multidisciplinary teams, capable of analysing all variables and factors of the project. Ideally, the team might include not only accountants or auditors but also engineers, lawyers andeconomists. We believe that many problems might already begin to appear during the bidding phase, since a great number of problems detected in the past can be traced back to a lack or low detail of documentation. Improper changes during the rest of a project’s execution might also be warning signs to consider.
The civil construction sector suffered the most from the global financial crisis and from the political scandals in Brazil. Therefore, in order to grow again, one must consider and support the parameters of control, for total transparency and technical efficiency. It is also important that the audit should not only be performed at the end of a project, but also at the beginning and for the duration of the activity, since many relevant items relating to quality, budget and technical specifications can only be clearly verified if analysed together with the progress of the contract.
We conclude that the role of audit in the Construction Works sector can bring about greater transparency, efficiency and reliability to all processes, and would therefore be the best way to regain the confidence of the government and investors, as well as the Brazilian population as a whole.
Gaspar de OliveiraMaciel Auditores, Porto Alegre, Brazil
T: + 55 51 40071219
Luísa Zanini da FontouraMaciel Auditores, Porto Alegre, Brazil
T: + 55 51 40071219
Published: May 2018 l Photo: lulu - Fotolia.com