Introduction
In recent years, there has been a growing demand on the part of society for the audit of state organizations and departments, including the assessment of the effectiveness of state bodies and the misuse of budgetary funds. It is necessary to find balanced accounting and auditing methods to meet this request and create a more efficient public administration system (Cordery and Hay, 2019). Two crucial criteria become the focus of public requests – financial and performance audits (Cordery and Hay, 2019). These indicators enable the public to understand how budgetary funds are used and what results specific programs and organizations show.
The scope of Value for Money Audits and Performance Audits
The Value for Money (VFM) Audit is an independent investigation that seeks to obtain information about savings and efficiency in the use of public funds. Auditors should check the organization’s financial records and conduct a value-for-money analysis of the services provided or received (Adi and Dutil, 2018). In the process of such an audit, both fraud and misuse of budgetary funds, as well as suboptimal use of resources, can be identified (Adi and Dutil, 2018). Based on the results of the VFM Audit, recommendations can be given to optimize costs and reduce costs for administrative and organizational processes. This type of audit is necessary as it protects public authorities from the risk of fraud and misconduct and helps to review and optimize costs.
Performance Audit is an independent verification of government bodies’ work and implementation of programs and functions. Reviewers examine documentation, plans, projects, and stated goals and compare them to execution (Muda et al., 2018). Thus, it is possible to understand whether the planned activities are carried out as initially intended. Auditing standards established by the US Accounting Office usually include an assessment of effectiveness, efficiency, compliance with legal requirements, and original documentation (Muda et al., 2018). The purpose of the audit is to improve the administrative and work processes within the organization (Muda et al., 2018). The public can see which programs and organizations are achieving their goals and require new approaches.
Value for Money audit and performance audit have different objectives and complement each other, but neither is sufficient on its own to audit an organization’s performance. A performance audit is an expensive audit that is not carried out suddenly and requires a lengthy investigation (Muda et al., 2018). Experts check the documentation, the optimal use of resources, each operation’s effectiveness, financial providers’ reliability, and compliance with goals (Muda et al., 2018). However, this type of inspection cannot detect well-planned fraud and illegal activities at the level of financial management (Muda et al., 2018). A VFM audit can be conducted suddenly for an organization and is completed primarily by financial experts (Jatmiko et al., 2022). This audit determines the legitimacy of spending budget funds and value for money and can detect suspicious spending of resources (Jatmiko et al., 2022). Thus, Public Managers cannot neglect both types of audits, as they provide insights into different parameters of the work of public organizations.
The Purposes that Public Managers Have for Measuring Performance
Measuring the performance of government organizations and programs is an essential component of their efficient and successful work. First, audits allow the public manager to evaluate public organizations’ performance based on various evidence-based information (Moullin, 2017). Collecting and evaluating data and making it publicly available allows society to assess whether the program is worth its investment. Secondly, managers thus exercise control over the work of organizations, adjusting it based on the results of inspections (Moullin, 2017). In the process of project execution, objective and subjective difficulties, problems, and deviations inevitably arise when confronted with reality (Moullin, 2017). Therefore, constant monitoring and reconciling goals and objectives with results is necessary. Third, financial audits make it possible to allocate budgetary funds more efficiently and find opportunities for optimization (Moullin, 2017). Fourth, reviews motivate employees and maintain an organizational excellence culture (Moullin, 2017). During audits, employees are forced to check their activities for compliance with job descriptions.
Audits generally increase confidence in government agencies and civil servants. The fifth goal for measuring performance is to raise and promote personnel and reward organizations that show high efficiency and productivity (Moullin, 2017). This builds a hierarchy of competence in the institution and improves its work. Sixth, changing productivity allows you to celebrate and reward the people and programs that perform best (Moullin, 2017). Seventh, audits provide an opportunity to collect information and study the cause-and-effect relationships of the execution of certain programs (Moullin, 2017). Working with society, it is necessary to constantly learn which methods work, which do not, and why. People and government are complex multidimensional systems that require flexibility to work with. Eighth, the main goal of measuring performance is to introduce improvements, so audits always end with creating specific recommendations for the organization (Moullin, 2017). Public managers always try to control and give positive feedback, which will help to correct the work and achieve the planned results.
Conclusion
Society and the state are interested in monitoring and improving the efficiency of government bodies and programs. Productivity change is an important mechanism that allows both these functions to be carried out, as well as to create a hierarchy of competence and motivate civil servants to work honestly and productively for the benefit of society. With these goals, public managers conduct different types of audits that check various aspects of the activities of organizations. Value for Money audits are used to detect fraud and evaluate costs, while performance audits determine the level of efficiency. These independent reviews are necessary to maintain and improve the work of public authorities.
Reference List
Adi, S. and Dutil, P. (2018). ‘Searching for strategy: value for money (VFM) audit choice in the new public management era’, Canadian Public Administration, 61(1), 91-108.
Cordery, C. J. and Hay, D. (2019). ‘Supreme audit institutions and public value: demonstrating relevance’, Financial Accountability & Management, 35(2), pp. 128-142.
Jatmiko, B., Haya, B. S. and Utami, T. P. (2022). ‘Determinants of value for money performance of local government organizations: the role of public financial accountability as intervening’, Jurnal Reviu Akuntansi dan Keuangan, 12(2).
Moullin, M. (2017). ‘Improving and evaluating performance with the Public Sector Scorecard’, International Journal of Productivity and Performance Management, 66 (4), pp. 442-458.
Muda, I., Erlina, I. Y. and Nasution, A. A. (2018). ‘Performance audit and balanced scorecard perspective’, International Journal of Civil Engineering and Technology, 9(5), 1321-1333.