Control Systems projects
If we take the example of a pharmaceutical company, the major economic activities are the research, development, marketing and sales of new drugs. The construction of new facilities although important is not a core business activity; however, the decision to build a laboratory or factory is intrinsically linked to them. It will also be subject to the same internal and external constraints placed upon that business such as the required return on invested capital, the availability of finance, shareholder returns, environmental concerns etc.
Similarly, capital projects must operate to the same standards as the whole of the business. It will be subject to the same human resource procedures, health and safety regulations and accounting standards. The implementation of the Sarbanes Oxley Act of 2002 in the US demonstrated to the accounting and finance community across the world that adequate control doesn’t happen by accident. It's the end result of thorough design and rigorous testing of processes and procedures.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) defines internal control as “a process affected by an organization's structure, work and authority flows, people and management information systems. It is a means by which an organization's resources are directed, monitored, and measured. It plays an important role in detecting and preventing fraud and protecting the organization's resources, both physical (e.g. machinery and property) and intangible (e.g. reputation or intellectual property such as trademarks)”. It’s with this in mind that internal controls for capital projects must be designed and integrated into, and be compliant with, the general internal controls of the company. The responsibility for the design, implementation, testing and audit of specific controls for capital projects would usually be with the programme management office (PMO) in conjunction with finance and corporate compliance.