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Weekly UpdatesGovernments conduct performance audits for many reasons. One of the most important is to improve the performance of specific operations. Performance audits can provide valuable information that managers and policy makers can use to achieve better results from existing programs, re-design programs to improve results, or reallocate resources to other programs they believe will be more successful.
THE PALM BEACH COUNTY EXPERIENCE
The County of Palm Beach, Florida, has an ongoing program to review the performance of county operations, staffed by the Financial Management Division. Over the past several years the division has completed performance reviews of functions as diverse as code enforcement, human services, and occupational license enforcement. A particularly noteworthy aspect of the county's program is its emphasis on measuring and improving performance. At the conclusion of each performance review, auditors provide the audited agency with performance indicators to be used to assess whether and to what extent audit recommendations, once implemented, actually improve program results. Using performance indicators for this purpose provides critical feedback to "close the loop" in the performance management cycle. It is also a way to evaluate the extent to which performance audits contribute to improving results.
Palm Beach County has also initiated a strategy called "harnessing organizational performance" (HOP) to encourage departments to use performance measures for improvement. HOP includes a systematic review of how departments measure performance and how they use measures to improve service delivery to the public. The County has found that regularly evaluating program performance has not only contributed to improved results but has also fostered an organizational culture focused on performance.
THE PERFORMANCE MANAGEMENT CYCLE
Performance management encompasses a continuous cycle of planning, budgeting, implementation--or operations--and evaluation. Including performance audits or other evaluation processes as part of an organization's performance management system can help to instill an improvement focus into the organization's culture. Performance measures are at the center of the performance management cycle and provide data that tie each phase of the cycle to the others. Each performance audit completed by an organization offers an opportunity to take an in-depth look at individual organizational units or programs. Performance audits can play a key role in the performance management cycle by completing the feedback loop and provide critical information, not only about whether programs are achieving the desired results, but also why programs are or are not effective.
Because auditing resources are limited, programs or activities to be audited should be carefully selected. Programs reviewed should be important to citizens, policy makers and managers. It is easy to make the mistake of "searching under the light" and only reviewing those programs where data is readily available or issues are easily analyzed, or where highly publicized mistakes have been made. Programs that are most difficult to analyze, or have escaped the media's radar, are some times the most in need of review. Presenting an annual performance audit plan to the organization's chief executive officer or legislative body for feedback and approval can help to ensure that the programs being audited are relevant and important to the future of the organization and the community.
ACCOUNTABILITY, LEARNING, AND IMPROVEMENT
Performance auditing at its best serves a dual purpose: accountability and learning. Conducting regular program audits enhances organization accountability by substantiating that funding is being used as intended and that management is making timely and effective programmatic decisions. Accountability can be confirmed by reviewing written records and by analyzing performance measures that are deafly and regularly reported, as well as through the existence of transparent and open business processes.
While accountability is a necessary and important goal for performance audits, it is not sufficient from a performance management perspective. As Harry Hatry has commented, "Unfortunately, throughout the United States, outcome measurement has been used primarily to assess agency accountability--indeed, a legitimate and important use of outcome information. However, to make measurement efforts really worthwhile, public and private agencies also need to analyze and use the information to help them improve services. This transforms "outcome measurement" into "outcome management." (1)
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Performance audits can support this learning function. Performance audits can help managers and policy makers understand which strategies work and can provide information that is useful for making improvements to programs and processes that lead to better results. In order to obtain and analyze the data necessary to achieve a meaningful understanding of the relationships between program inputs, outputs, and results, performance audits may require more sophisticated qualitative and quantitative analysis and diverse research tools and methodologies. Some local governments may require outside assistance to complete rigorous performance audits. Public policy or public administration programs at local universities can sometimes provide local governments with free or low cost coaching and advice for designing and conducting performance audits.
CONCLUSIONS
Performance audits are sometimes viewed by program managers as a necessary bureaucratic evil at best or as an onerous accountability to citizens and policy makers by providing key performance information while at the same time generating data and analysis that managers can use to select more effective strategies and to improve existing processes. Performance audits conducted in this manner closes the performance management loop and aids local government efforts to improve the delivery of services to citizens.
Note
(1). Harry Hatry, "Public and Private Agencies Need to Manage for Results, Not Just Measure Theme," http://www.urban.org/ud.cfm?ID=900731, 2004.
STEVEN R. KREKLOW is a senior manager in the GFOA's Research and Consulting Center.
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