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Carlos Alberto Sampaio de Freitas
Maria Lúcia Oliveira F. de Lima
Federal Court of Accounts - Brazil

According to ISSAI 3000, Performance Auditing (PA) is “an independent examination of the efficiency and effectiveness of government undertakings, programs or organizations, with due regard to economy, and the aim of leading to improvements”. 
Therefore, when a SAI conducts a performance audit, the main objective is to verify whether the public money has been spending in an economic, efficient and effective way. If not, the audit team verifies what could be done to improve the delivery of public services to the citizen.


Due to the fact that some people don´t know performance auditing or don´t understand very well its concepts, some myths about performance auditing were created. The importance about these wrong ideas about performance audit is that sometimes they pose some obstacles to the institutionalization of this type of audit in SAIs.

The objective of this article is to present some myths about PA and demystify them, through explanation and examples of what really happens in a performance audit. Myth is something fabulous and imaginary that tries to give an irrational explanation to reality, usually not true.

We can list five main myths about performance audit scattered all over the world: only developed countries should conduct PA, PA diminishes SAI´s independence, it´s possible to conduct performance audit only if the auditee has performance indicators, PA recommendations don´t have efficacy and PA is a very difficult activity. Those myths will be explained below.

Myth number 1: Only developed countries should conduct PA.

The idea behind this myth is that in countries with high levels of fraud and corruption (like most developing countries), it´s a waste of efforts and resources to deal with performance. It would be more relevant to SAI to focus in “corruption fight”.

Why it´s a myth? Of course every SAI should, actually, must fight corruption. But a huge amount of public money is also lost due to waste and bad management. And when an audit team conducts a PA, it can help to avoid waste.

Performance auditing leads to know better how the public administration works and helps developing a systemic vision and allows prioritizing control actions on risk activities. PA also helps to identify inefficiency and waste. Sometimes, more public money is lost due to waste than due to corruption.

Additionally, one way to detect corruption is looking at the results the government activities produce or the failures behind the poor results. For example, in a performance audit one can find expired medicines. The cause could be bad management or corruption that allowed a purchase bigger than real need. Another finding could be brand new unused equipments in years. The reason could be lack of appropriate personnel to operate them, lack of training or unnecessary purchase due to strong lobby or bribery. Other example of a performance audit finding could be bad management that leads to excess of staff in some places and lack in others. A PA can suggest recommendations to improve those kinds of situations.

These findings, besides helping to suggest recommendations on efficiency, could give information on possible areas where there is fraud or corruption and, therefore, could indicate possible subjects for future compliance audits. The adequate control of public resources presupposes interaction between performance evaluation and actions against fraud and corruption. In fact, performance and compliance are complementary parts of the bureaucratic control.

Performance Auditing can also strengthen the cultural diversity, creativity and learning in SAIs, leading the auditors to focus on important social, political and economic matters. PA has the potential to increase SAI´s presence in media because PA themes usually attract public interest. Besides increasing visibility of SAI, it also increases auditor´s motivation due to public exposure of their work.

Because one of the PA objectives is to identify potential improvements in public administration (and so help to reduce government expenditures), the credibility and the results obtained due to this type of audit can encourage the government/parliament to increase SAI´s budgets.

Myth number 2: Performance Audit diminishes SAI´s independence

The second myth is about independence and closeness with the audited entity. Some people say that the PA team depends on the audited interest and approval about all the audit issues. Some say PA is a consulting and it is not a SAI role. Others say audit team, when present recommendations, interfere in the auditee job because says how he has to work.

In order to achieve good results in a performance audit, it´s very important to have help and cooperation from the audited entity. Why? Because the auditee is the one who will implement the recommendations. If he doesn´t believe in it or doesn´t think the recommendation is important, he will ignore it. But it doesn´t mean that the audit team will agree and will accept everything that the auditee says. The auditee is just one source of information, among many. The audit team may obtain information from a wide range of stakeholders, for example: experts, professors, researchers, citizens, congressmen, only to mention some. The audit team gathers all the information and, with independence, comes to a conclusion.

About the consulting, it´s true that, sometimes, the work in a performance audit is similar to the work done on a consulting. There´s no problem about it. The auditor is a professional with skills and knowledge in public policy, management, research methodology and performance improvement. His objective is learning about the audited object and suggests improvements. It´s the auditor´s job to exam the performance dimensions aiming to improvements of the audited object, like is said in PA´s definition.

About the interference, it´s an important issue that every auditor has to have always in mind. The auditor studies the audit object and proposes recommendations aiming to improvements. However, how these recommendations will be implemented, the better way to do it, is the manager´s decision. He knows better the actions he has to take in order to accomplish the recommendation. Consequently, the auditor can suggest things to be done, but only as a contribution to the auditee. If the auditee takes some other course, but solves the problem, the audit objective is accomplished.

Myth number 3: It is possible to conduct performance audit only if the auditee has performance indicators

Some people think it´s impossible to conduct a good performance audit without performance indicators and without an adequate information management system. Let´s accept this premise as truth. Then how to explain that many SAIs all over the world do performance audit on a regular basis even if the government departments do not have solid information systems or performance indicators?

Of course it would be easier to performance auditors if the government managers have a good performance evaluation system. Unfortunately, it doesn´t happen in most government institutions. There are improvements in this area, but, so far, the managers aren´t used to plan and to direct their actions based on performance indicators.

So, what do the auditors do if they don´t find performance indicators? The lack of performance indicators could mean opportunity for improvement in the audit object. Therefore, it can be part of the audit scope. In this case, the audit team identifies objectives related to performance and encourages the use of indicators. Many times, in a performance audit, one recommendation is about performance indicators. The audit team can build some performance indicators and suggest its use by the manager.

Myth number 4: Performance audit recommendations don´t have efficacy

The auditee isn´t obliged to implement the recommendations. As the name says, it´s something recommended. Some people think that, because the recommendations aren´t mandatory, the manager won´t implement it.

If we take a look at the Brazilian SAI recommendation´s follow-up background for example,  since 2004 the average percentage of implemented recommendations is 75%. This number means the managers do implement the recommendations. Of course, there are other explanations to implement an audit suggestion other than obligation.

First, the audit follow-up process itself is relevant. Follow-up is the last step of the performance audit cycle. If there are recommendations not implemented, the audit team verifies why, putting some “pressure” to the auditee. Besides follow-up, there are two other good ways to increase the implementation of the recommendations. One is to have a robust methodology. It will lead to a quality report and will give legitimacy before the manager. Another way is give publicity to the report. If the citizens know what is asked for the manager, they can help demanding service improvement, enforcing the power of audit recommendations.

The second reason is that the recommendations help the manager to work better, to improve his performance. So, he is the most interested in implement it.

Myth number 5: Performance audit is a very difficult activity

There is an idea among some auditors that PA is dealing with a lot of complicated techniques. Some techniques are required to conduct a performance audit, especially during the planning. Actually, those techniques are very simple and well known among professionals from business, management and public policies. Just to give an example, a SWOT analysis, which is widely used in PA (on problem oriented approach), is very easy to understand and to apply.

It´s important to study the audit object in order to understand it and, using the techniques, define the audit questions. It isn´t difficult, but requires methodological discipline and creativity. Each audit is like a project. You have to have a schedule, goals, work process, inputs and outputs. Some people confuse difficulty and complexity with need of organization and working method.

Because there is a wide range of audit objects, it´s impossible for the audit team to become an expert in each audit object. The audit team can and should seek for experts´ help. Since the beginning of the planning phase, it´s very important to identify experts about the audit theme and conduct interviews with them, to gather information about the audit object.

In conclusion, there are many myths about performance audit. Once you demystify it and understand more the performance audit world, I bet you will find it a very exciting and rewarding job.

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