How a Performance Audit Helps an Organization be More Efficient and Effective

Not all audits involve financial statements, regulations or organization policy. There are also audits focused on helping the organization become more efficient and effective.

Performance audits and operational reviews can improve the efficiency and effectiveness of operations. This allows you to identify and seize opportunities for increasing customer quality, improve service and even increase positive cash flow.

What is a performance audit?
Performance auditing” is a term used whenever there is a need to distinguish between financial auditing and auditing that goes beyond financial transactions. Performance audits expand into operations, management and administrative performance of an organization. They add value and insight, and they provide information to improve performance, financial management, operational efficiency and cost reductions, as well as facilitate decision making and contribute to accountability.

In other words, performance auditing is a means of assisting management in improving its operations, not just identifying problems or weaknesses. For this type of audit to be effective, the auditor must be objective and not assess a one-size-fits-all approach when evaluating, for example, a new program or process against one that has been in existence for a long time.

Why would your organization need a performance audit?
An organization recently reached out with what was deemed a broken purchasing problem. Specifically they were experiencing:

• Inefficient, time consuming and expensive approval flow.
• Unclear, confusing and outdated policies.
• Broken processes at every level of operations, as well as external business partners.
• Recent audit findings noting significant control deficiencies that were too restrictive and not effective.

Clearly there was a sense of frustration and confusion about how to resolve the situation. At this point, it did not matter what the resolution would be called; there was an urgent need to fix the problem. It is best to identify such problem areas as they happen using effective operating procedures that are identified through a performance or operational audit.

How can a performance audit benefit your organization?
A performance or operational audit may benefit your organization through:

• Analysis of the organization’s performance data, performance measures and self-assessment systems to identify the right measures to guide continuous improvement.
• Identification of best practices for establishing baselines, defining best practices and identifying improvement opportunities or competitive advances as well as the gaps that may exist between current operations and those practices.
• Providing information to improve program operations and facilitate decision making by parties with responsibility to oversee or initiate corrective action and improve operations.
• Identification of cost savings.
• Identification of services to be reduced or eliminated.
• Analysis of gaps or overlaps in programs or services and recommendations for how to correct them.
• Analysis of the roles and functions of the entity and recommendations to change or eliminate unnecessary roles or functions.

Through periodic performance or operational auditing, you can identify the processes and procedures that are no longer working. Performance audits can help improve those areas that are working but could be more efficient.

The Impact of Performance Audits on Your Organization
Performance audits can help organizations and governments become more efficient, drive better performance and provide more value. Organizations who utilize a performance audit have a forward-looking approach to their operation.