Resources are scarce and should be used in the best possible way. The main reason for carrying out performance audits is that the audits can lead to better use of resources by public entity/entities and provide support to democratic government. Political goals and public commitments are often the starting points for performance audits. Performance audits do not question these political decisions but can point out unforeseen consequences regarding the implementation of such decisions.
Performance audit deals with deficiencies in economy, efficiency and effectiveness.
- Economy is measured as the cost of resources used for an activity, with regard to the appropriate quality.
- Efficiency is measured as the relationship between outputs, in terms of goods, services and other results, and the resources used to produce them.
- Effectiveness is measured as the extent to which objectives are achieved and the relationship between the intended impact and the actual impact of an activity.
Performance audits are audits of the economy, efficiency or effectiveness with which the audited entity/entities use its resources to achieve its goals. Basic questions in performance auditing are the following:
- Are the entity/entities doing the right things?
- If so, are entity/entities doing things in the right way; and
- If not, what are the causes?
Performance audit is not based on formalised opinions; it is an independent examination on a non-recurring basis. Performance auditing deals with many different types of problems, within its legal mandate, it is free to examine all government activities from different perspectives and is flexible in its choice of, for example, focus, audit objects and methods.
Performance audits can be conducted on a single public entity of any kind. It may encompass the whole or part of the operations of that entity. Performance audits can also examine particular issues or functions, for example procurement or human resource management, across a number of public entities.
Performance audits help ministries, departments and agencies to improve their operations. Performance audits can be seen as investments that should lead to better functioning public entities. Performance audits identify important problems, analyse the causes and effects and present recommendations for using resources better. Performance audits can bring new insights into problems faced by audited entities. Performance audit assists government in the decision-making process.