Performance Auditing

Performance Auditing, or widely known as Value for Money Auditing, has been practiced and claimed some success by Governmental Auditor in the developed countries. Developing countries, like Indonesia, this is a new approach for accountability measures, especially for the public sector governance.

What is the big idea? Well, for starter, public sector governance is close, but not quite the same as private one. The public sector institutions and  programs serves wider range of objectives. Much of them are not directly connected with the main activities of the programs. This so called positive externalities, however, are not to be ignored. They are the main driver of the sector, in terms economics and politics.

One major pillars of governance are accountability. That is having an independent person or party to do the audit and express an opinion about the fairness of an accountability report. Much of the methodology and techniques of auditing are developed for the private sector, corporation and capital market. The main objectives are to measure the stewardship of economic resources and to avoid the asymmetry of information.          

Though public sector accountability share the same spirit with the private, when it come down to measurement it cannot use the same framework. This is where the performance auditing would fill the gap. The performance auditing makes assessment whether the program is achieving the economy, efficiency and effectiveness in the employment of available resources.

World bank report states that performance auditing is an important building block with which to improve accountable and responsive governance of public resources. Recent development in public management is not focusing solely on accountability on the "input" side (i.e. the budget or public expenditures) but also on "output" side (i.e. achievement or coverage of the program).

The moral hazard of governmental budget is the temptation to create more program and increase more spending without carefully looking at the value to the people. The main motive is actually more to the short term political goal or to comply with the performance indicator of the administration. This new type of abuse in budget can only be detected by performance audit.

Performance audit has the flexibility in the process. Most of the audit using only monetary value as the main attributes. The fairness of the report are in term of the currency unit. Performance audit does not limit itself with only monetary value, but using other value to determine the performance of the program in term of economy, efficiency and effectiveness.

Nevertheless, the impact of performance audit can make for the betterment of public sector management rest also on the administration set up, legal and regulatory framework, as well as constantly educating and informing people about the importance of accountability in our public sector.