Technical Audit by the Japan Board of Audit

Hiroshi Takano*

*    Auditor, First Defense Audit Division, Board of Audit, Japan. After having had several years of experience in the audit of public works, Mr. Takano is presently engaged in audit of Japan Defense Facilities Agency's facility construction.


On January 17,1995, a massive earthquake hit Kobe, a big city in western Japan. The quake and the ensuing fires killed more than 5,000 people, and total damage was estimated at nearly 100 trillion Japanese Yen (US$ 1 trillion). Urban area infrastructure such as railways and highways including the Shinkansen bullet train railways and the Hanshin Expressway were heavily damaged.

In December 1996, the Japan Board of Audit submitted its annual Audit Report to the Cabinet. The report included findings based on the examination of the original design and execution of the public infrastructure destroyed by the quake. In the report, the Board also indicated that it would place further emphasis on public works construction quality examination. The finding, which received wide mass media coverage and drew tax payers' attention, also provided confirmation that "technical audit" is one of the major areas of audit by the Japan Board of Audit.

Definition of "Technical Audit"

While the Board does not have a standard definition of "technical audit", this article defines it as "technical/engineering viewpoint audit in each stage of planning, designing, costing, and execution of public works construction."

The concept of "technical audit" in this sense is thus different from traditional financial audit in many ways. However, "technical audit" is not synonymous with "technical examination", since the Board of Audit, without exception, connects the results of technical audit with loss of public money, viz. how much money was wasted /misspent because of engineering mistakes.

Public Works Audit in the ASOSAI Region

Expenditure on public works accounts for a large percentage of the national budget not only in Japan, but also in most other ASOSAI member countries. Public works are aimed at improving living standard through disaster prevention, improvement of public transportation, protection of environment, etc. While many SAIs audit their nations' public works expenditure from the viewpoint of financial accuracy, in recent years some SAIs have come to emphasise economy, efficiency and effectiveness of public works. This trend was noticed by the author, while participating in an international seminar hosted by SAI -India in 1994 on audit of public works and projects. It is in this context that "Audit of Public Works" was selected as the theme for the third ASOSAI research project (The output of this project was a publication entitled "Audit of Public Works and Projects", which was circulated in December 1995 to ASOSAI member SAIs.). This area has also been the theme of several international audit seminars. All these factors are indicative that public works audit is a significant area for audit by SAIs throughout the region.

Need for Technical Audit

In the area of public works, wastage of public money can occur in different ways :-

Under-designing also leads to non-achievement of construction goals and wasteful public expenditure.

It is undoubtedly necessary for the Government to examine whether such situations exist or not; this could be done by the Ministry of Finance as well as or by the implementing agencies themselves. Under the Japanese system, in addition to the internal controls of the auditees, the Board of Audit conducts such examinations at the final stage of the budget cycle. Auditors are deputed by the Board for field audit at the auditee agencies' headquarters and branch offices; the selection of projects / sites for field audit is based on various factors such as budget, location and nature of project. At these sites, the field audit teams also conduct physical examination of structures using photographs or by drilling cores, where necessary. The objective of such technical audit is not only to point out existing construction defects, but also prevent recurrence of similar defects in other construction projects.

Training for Technical Audit

To improve the technical audit skills of auditors, the Board plans to build laboratories and other technical facilities from 1997 by expanding the Board's existing training centre, which is located about 100 kms. away from the Board's office. These new technical facilities will include mock-up reinforced concrete structures such as walls and box-culverts, which will help trainees understand checkpoints for examination.

Case Studies

Some interesting findings incorporated in recent Audit Reports of the Board are described below in brief, to illustrate the range of technical audit findings by SAI-Japan.

Over-costing (Tunnel Excavation Machine Operation Costing)

As part of its super-highway construction, "X" Public Corporation implemented 14 long tunnel construction projects during the financial year (FY) 1990 at a total cost of US$ 369 million. The Corporation's contractor excavated tunnels using rock drills and other operation machines, excavating the tunnels' upper and lower sections simultaneously. The Corporation prepared cost estimates for excavation, concrete blasting and rock bolt fixing, based on its machine operation costing standards.

The Corporation estimated the machine operation cost based on the following machine deployment :-

  1. two crawler (caterpillar) type jumbo rock drills attached with hydraulic drills (100 kg tare weight each) to be deployed in the upper section; and
  2. one crawler type jumbo rock drills attached with two air rock drills (100 kg tare weight each) to be deployed in the lower section.

When the Board examined contractors' actual implementation of the construction, it noticed that:

  1. the contractors used bigger size jumbo rock drills with two hydraulic drills (tare weight 120 or 150 kg each) in the upper section in most of the construction works;
  2. the contractors also used higher performance hydraulic drills in the lower section in most of the works.

The Board also found that due to the higher machine performance shown above, the contractors implemented drilling, rock bolt driving and other excavation works using considerably shorter machine operation hours than that estimated by the Corporation in its costing exercise. It thus determined that the Corporation had over-costed $1.93 million in the 14 tunnels by overlooking actual machine deployment. Based on the Board's findings, the Corporation revised its costing standards appropriately.

Note: Under the costing and contracting system prevalent in the Japanese Government, an orderer (the public body) calculates the construction cost in advance and thereby pre-determines the upper limit in monetary terms of the construction to be contracted.

The orderer then awards the contract to the bidder, whose bid amount is the lowest within the set upper limit. Over-costing by the orderer therefore means setting the upper cost limit too high, and often leads to over-contract in monetary terms.

Improper designing (Misplacement of Bridge Piles)

As part of its State-subsidised regional road improvement projects, "Y" Prefecture (local government body) built a pre-stressed concrete bridge. As per the original design, it planned to drive 14 steel piles (600 mm diameter and 9 mm in steel thickness), below the two abutments. In its stress calculation sheet, it determined that the bridge, as designed, would withstand the stipulated upper structure weight and vehicle pressure, both at normal times as well as during earthquakes.

However, on the design sheets, the prefecture's designing consultant contractor erroneously indicated pre-stressed concrete piles (PC piles) instead of steel piles. Based on the incorrect drawings, the construction contractor used PC piles whose strength is much inferior to steel piles. The Board's re-calculation showed that these PC piles were not strong enough to sustain the abutments and bridge girder and the Board determined that the construction had totally failed to achieve its goal. Based on the Board's finding, the prefecture reinforced this bridge, by expanding the abutments and driving additional PC piles. The cost of additional reinforcements was borne by the prefecture.

Having found auditee's questionable pile driving record, the author
(left) is checking whether the piles of bridge abutment reach
the rockbed strata at a public works construction site.

Improper re-designing (Mis-redesign of Box Culvert)

As part of its State-subsidised road width expansion projects, "Z" City installed a box culvert in FY 1991. The culvert was to be installed as a drainage facility under the road to be expanded. While examining the design of the culvert, the Board found that the original design envisaged installation of a pre-cast concrete culvert (factory produced concrete) . However, after conducting a comparative cost analysis, the City subsequently decided to go in for a cast-in-place concrete culvert (concrete case in the construction site). Despite this change, the City did not increase the number of steel bar placement, and made the culvert as per the original design, which envisaged a pre-cast concrete culvert. The Board found that the bending, compaction and tensile moments expected to be produced in the steel bars of the cast-in-place concrete culvert far exceeded the maximum bearable moments. Since the culvert was still under construction at the time of the Board's audit, the City re-designed the placement of steel bards.

Note: Steel bars in cast-in-place concrete receives more pressure inside than pre-cast concrete, because the strength of cast-in-place concrete is inferior to that of pre-cast concrete.


Shortly after World War-ll, a large number of technical audit findings were reported in the Board's annual Audit Reports during the period 1951 to 1957. Many of these related to over-claiming of subsidy, over-spending and/or wasteful spending in State-subsidised public works projects caused by over-costing (deliberate or otherwise), deficient constructions etc. The number of cases of impropriety highlighted by the Board reached its peak between FY 1952 to FY 1954. This led to the passing of the State Subsidy Law in 1955, which tightened Government control on State subsidy payments. This Law has functioned as a strong deterrent against improper receipt of state subsidies up until now. However, the Japan Board of Audit's unique mechanism of technical audit has contributed and will continue to contribute towards the accuracy, efficiency, economy and effectiveness of the public works of the Japanese Government, and lead to a better living environment for the people of Japan.