Performance audits play a crucial role in improving the management and use of public funds, resulting in more effective and efficient government operations. Enhancing the capacity of supreme audit institutions to perform these audits is critical for improving public accountability and achieving development goals.
Developing countries in Asia and the Pacific undertake ambitious public spending programs for housing, healthcare, and other vital services to deliver results for people most in need. Given the increasing demand for funding, each dollar spent must yield optimal value and the best development impact.
Performance auditing is a tool that can help governments become economical, effective and efficient in public spending. These audits are comprehensive, covering organizational, financial, service delivery and administrative functions of the government. Auditors conduct them to assess the efficiency, effectiveness and strategic relevance of a government program.
Performance audits are a key mandate of supreme audit institutions, which are independent constitutional offices that oversee public fund accountability and resource management. These audits provide value to citizens and other stakeholders, by identifying waste and inefficiencies in the use of public resources, with analysis and insights for strategic improvements.
Performance audit reports provide meaningful recommendations. Translating them into fundamental changes in government policy or the creation of development programs requires the active support of the public accounts committee of parliament or equivalent, and the legislators.
For example, Bhutan’s Royal Audit Authority FY2022-2023 Performance report indicated that its audit of the housing sector conducted in 2018-2019 led to a thorough revision of the National Housing Policy of 2002. The Ministry of Infrastructure and Transport established the Housing and Urban Affairs Division in July 2021, which addressed the longstanding gap in the management of the housing sector, providing tenants across the country with a central agency to seek assistance and oversee urban affairs.
In the Philippines, the Philippine Health Insurance Corporation issued PhilHealth Circular 2024-001 in April 2024, following the Commission of Audit’s performance audit recommendation issued in February 2021. This may help the government reduce unnecessary expenditures in the health sector, leading to better use of public funds and the delivery of health services to its beneficiaries.
Most audit resources are dedicated to financial audits, resulting in insufficient resources for performance audits. Development partners meet their fiduciary responsibilities for ensuring that funds are used for the intended purpose through financial audits, which leads to providing more capacity building support for financial and compliance audits.
Being part of the mandate of supreme audit institutions, performance audits are not receiving equal importance and support from supreme audit institutions and development partners.
Countries where supreme audit institutions conduct performance and financial audits have better public financial management systems that are more effective, efficient, and economical, leading to better achievement of development objectives.
The Global Supreme Audit Institution Stocktaking Report 2023 showed an increased coverage of performance audits globally to 56% from 49% in 2020, but challenges remain. The report underscored the need for supreme audit institutions and development partners to work together in building supreme audit institution capacity including performance audit, particularly in lower income countries.
Countries where supreme audit institutions conduct performance and financial audits have better public financial management systems, leading to better achievement of development objectives.
Demand among stakeholders for robust performance audits by supreme audit institutions is continuously growing. The conduct of performance audit is particularly important for 2030 Agenda for Sustainable Development. In addition to SDGs, information technology audit, environmental audits and climate change are topics of great interest globally. Supreme audit institution and their performance auditing capacities can be leveraged to address these demands.
Supreme audit institutions are constrained by a lack of expert skills and resources, which combined with the legislative mandate to prioritize resources for financial audits over performance audits, limits their ability to respond to this growing demand. They face several challenges, including a lack of stakeholder understanding and appreciation.
The visibility and impact of performance audits is limited as supreme audit institutions make inadequate efforts to demonstrate the value of performance audits to their stakeholders by failing to focus on high-impact topics, manage audit quality, provide actionable insights, engage stakeholders, and establish effective follow-up systems.
To increase public accountability and positive impact on citizens, the following actions are needed:
Engage stakeholders. Supreme audit institutions should work closely with the public accounts committee of the parliament or its equivalent to ensure performance audit findings and recommendations are considered at the highest level. Supreme audit institutions can demonstrate how the government can be more effective and efficient in supporting development programs. Their recommendations can influence parliamentarians’ directives, ultimately bringing positive changes for citizens. It is crucial that the public accounts committee provides actionable guidance, supported by the government, to develop or improve public policy.
Enhance visibility. Supreme audit institutions can raise stakeholders’ awareness on performance auditing by clearly showing their value and becoming more effective in the fulfillment of their mandates. This would ensure they create a constituency which supports adequate human resources including funding for performance audits.
Intensify performance auditing in sectors and themes. Supreme audit institutions must strategically formulate their audit plan, which focuses on impact-driven audits.
Provide technical and financial assistance. Development partners need to assist supreme audit institutions to address their challenges in raising the profile and conducting performance audits.
These efforts not only improve the efficiency and effectiveness of public spending but also ensure that development programs truly benefit the people they are meant to serve.
Source : Asian Development Blog
