Project Governance & Audit Functions

by Matt Petryni

Effective project management is like the ground floor of an organization's management. How individual projects and tasks are completed will determine how effectively a company can meet its larger goals. Having projects that are ineffectively managed will make it difficult to follow through on strategic planning objectives. Investors benefit by learning about the objectives of project governance systems and audits as they provide the means to assess the quality management for individual projects.

Basics of Project Governance

Project governance is a set of systems or procedures intended to ensure that an organization's projects are executed according to its organizational mission, objectives or standards. A project governance structure consists of both the rules and policies that the project's execution must follow as well as the means for enforcing those expectations. The focus of project governance is on transparency and accountability at the lowest organizational level -- that of the individual project -- to ensure that investors' capital is not misused.

Key Governance Functions

The primary objective of project governance is accountability -- ensuring that the people involved in the project are careful to adhere to their organization's expectations. By offering accountability, project governance serves a number of critical functions for the organization. Governance makes it possible to better manage its risk and financial resources by enforcing cost controls and performance expectations. It also provides the means to consistently evaluate the quality of work over time and provides information that can be used to improve the execution of future projects.


Audits are an aspect of some structures of project governance that help to identify problems and enforce standards. An audit is a formalized, external review by a third-party organization that examines a project's finances and management. Professional auditors usually have experience in assessing compliance with regulatory standards or internal policies. Third-party audits are especially common when the organization has substantial resources invested in the project or at the urging of investors and regulators.

Internal Audits

In some cases, time and cost concerns make an extensive external audit infeasible. External audits are less common for smaller projects and programs, where the risk to investors of inadequate performance is more limited. In these cases, either project managers or independent quality control agents within the company may review a project to ensure compliance with the organization's standards. These internal reviews similar functions as an external audit, but they tend to be less formal and less rigorous because they don't involve the intensive scrutiny characteristic of a third-party auditor.

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