Overcoming the Challenges to Auditing Efficiency
There have been relatively few audits of efficiency undertaken in Canada as compared with audits of economy (procurement) or effectiveness. In this section, we describe some of the common challenges to auditing efficiency along with suggestions on how to overcome them.
Challenge 1: Lack of specific audit methodology and related training
The available guidance is very general or outdated and may be inadequate to support audits of efficiency. |
Solution
This Practice Guide has been created to provide relevant methodology, including audit criteria. In addition, there are older publications that are still relevant, such as the Auditor General of Canada’s 1995 guide Auditing of Efficiency. The References section of this Practice Guide includes additional sources of guidance.
Challenge 2: Limited availability of appropriate benchmarks and other comparatives
The audit procedures of audits of efficiency often include comparisons with benchmarks to assess efficiency in relation to similar programs or entities. Benchmarks must be generally accepted and reliable. Auditors have noted that it is difficult to find good benchmarking sources. Even when comparative information is collected from other jurisdictions directly by the auditor, there are often differences in the programs or entities, which make comparisons problematic. |
Solution
Finding good sources of benchmarks is a challenge, but there are some good sources available. Subject matter experts may be able to point auditors in the right direction. Note that some organizations charge a fee to access the benchmarking information in proprietary databases but the resulting comparatives may be worth the cost. Auditees often benchmark their programs and may also be able to provide relevant sources.
In addition, it may be possible to compare an organization’s current performance with its past performance or to compare one location or branch against other locations and branches. In some cases, the auditor will need to think creatively about internal sources of benchmarks. For example, the efficiency of a human resource recruiting function could be benchmarked against another government department’s recruiting process.
Challenge 3: Specialized expertise may not be available
Audits of efficiency require a detailed understanding of existing processes and alternatives. In some areas, the knowledge required to assess efficiency and make practical recommendations is very specialized. This depth of knowledge may not be available in all audit offices. |
Solution
Use of specialists is required if the audit office does not have the required proficiency and knowledge of the subject matter (CICA standards, sections 5025.27 and 5025.30). Efficiency specialists are available in many areas of the public sector. Auditors from other jurisdictions who have performed similar audits may be able to recommend specialists. Also, Canadian consulting firms with global practice affiliations may have links to international experts in certain areas.
Challenge 4: Lack of performance information
Outputs and outcomes for public sector programs are often not well-defined. Several programs may target the same client groups and it may be difficult to attribute specific outcomes to particular interventions. In other cases, a program may focus on areas where outputs and outcomes cannot be defined easily. When performance information is not available, it is difficult to audit efficiency. |
Solution
When auditors begin to audit efficiency, they should select as their first topics programs that have well-defined output and outcomes. Many Canadian governments have established requirements for program performance reporting in recent years and progress is expected in this area. By recommending improvements to performance reporting, auditors can play a role in ensuring that continuing progress is made.
Challenge 5: Staying clear of the policy arena
Public sector auditors generally do not have the mandate to comment on the merit of public policies. However, some policies may create inefficiencies. For example, policy decisions on the location of service delivery offices in areas with small populations, or the maintenance of jobs in the face of declining service requirements, may be designed to meet a government’s socio-economic goals at the expense of efficiency. In such cases, auditors are faced with the challenge of reporting inefficiency while avoiding to comment on the merit of government policy. |
Solution
Auditors can report factually on program inefficiency without directly criticizing government policy. For example, they can report the results of comparisons with other entities or other jurisdictions. It is important for legislators, governing bodies, and program management to understand the impacts of particular policies on program efficiency. If the impacts are well-articulated and quantified, then those responsible for the policies will be in a better position to decide whether they should be changed.
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