Performance Audit
Performance audit is an assessment of efficiency and effectiveness of the programmes, with due regard to economy and addresses the issues of inputs, processes, outputs (Products) and outcomes (impact). Internal Audit functions on the principle of 3 "E"s:
Minimising the cost of resources used by acquiring them in due time, appropriate quantity and quality and at the best price.
Economy: Judging economy in itself implies forming an opinion on the resources human, financial and material) deployed. This requires assessing whether given the context, resources have been acquired, held and used economically and acquired in due time, in appropriate quantity and quality at the best price. The performance auditor needs to examine Whether the means chosen represent the most or at least reasonable economical use of public funds.
The relationship between resources employed and Efficiency outputs delivered; in terms of quantity, quality and timing.
Efficiency: The principle of efficiency means getting the most from the available resources. Efficiency exists where the use of
financial, human, physical and information resources is such that output is maximised for any given set of resource inputs, or input is minimised for any given quantity and quality of output. The main issue to be examined here is whether the resources have been put to optimal or satisfactory use or whether the same or similar results in terms of quality and turn-around time could have been achieved with fewer resources. It refers to the relationship between the quality and quantity of goods and services yielded and the cost of resources used to produce them, in order to achieve the results.
A finding on efficiency can be formulated by means of comparison with similar activities, with other periods or with standard, which the entity has explicitly adopted. Assessments on efficiency might also be based on conditions that are not related to specific standards, i.e., when matters are so complex that there are no standards. In such cases, assessments must be based on the best practices and available information.
Auditing efficiency embraces aspects such as whether human, financial and other resources are efficiently used;
public sector programmes, entities and activities are efficiently managed, regulated, organised and executed;
Internal Audit Manual, Government of Tripura services are delivered in a timely manner; and the objectives of public sector programmes are met cost effectively.
Meeting the objectives set and achieving the intended results.
Effectiveness: Effectiveness is essentially a goal-attainment concept. It addresses the issue of whether the programme/activity has achieved its objectives. When focusing
on effectiveness, it is important to distinguish between the immediate outputs or products and the ultimate impacts or outcomes. Outcomes are important to the effectiveness of programmes/activities but may be more difficult to measure and assess than the inputs and outputs. Outcomes will often be influenced by external factors and may require long term rather than short-term assessment.
In auditing effectiveness, performance audit may, for instance:
- assess whether the objectives of and the means provided (legal, financial, etc.,) for a new or ongoing public sector programme are proper, consistent, suitable or relevant to the policy:
- assess and establish with evidence whether the observed direct or indirect social and economic impacts of a policy are due to the policy or to other causes;
- identify factors inhibiting satisfactory performance or goal-fulfilment;
- assess whether the programme complements, duplicates, overlaps or counteracts other related programmes
- assess the adequacy of the management control system for measuring, monitoring and reporting a programme's effectiveness; and
- identify ways of making programmes work more effectively.