Auditing Management Contracts

Armenia’s Public Services Regulatory Commission (PSRC) has suggested that new operator contracts with Yerevan Water require provisions requiring audit controls. Given some commentator’s thoughts on the management failures of the present agreements this request is not surprising.

Providing contract requirements for audits is not uncommon. However, determining what audit level is appropriate for a domestic water utility management contract is not easy. Regardless, it is a necessity. Comprehensive management audits can cost upwards of hundreds of thousands of dollars so selecting appropriate management criteria to limit output is critical to obtaining a true picture of management. As Armenia moves forward with new contracts between the Joint State-Controlled Stock Companies, it will be interesting to note, not if, but what auditing mechanisms will be selected.