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Practice Guide to Auditing Efficiency

Operational Planning


Operational planning is the process of linking strategic goals and objectives to tactical goals and objectives. Operational planning lays out milestones, budgets, and conditions for success, and explains how the different parts of a strategic plan will be put into operation during a given period. Two aspects of operational planning are particularly relevant to the achievement of efficiency: financial information and personnel allocation.

Financial information. In the context of efficiency, having complete and reliable financial information on the costs of inputs and the unit cost of delivering specific services is especially important. Organizations that track input costs and unit costs are better able to compare their services against those of sector leaders. This allows these organizations to identify areas where efficiency improvements are needed.

Personnel allocation. In the context of efficiency, the focus of human resource management is to optimize the allocation of personnel among various projects or business units, maximize the utilization of available personnel to achieve an organization’s operational and strategic goals, and clearly define and assign the roles and responsibilities for achieving efficiency.

Knowledge of Business Questions

Potential Audit Criteria

  • Does the organization have service level standards?
  • Has an efficiency-focused spending review ben conducted? Has a recognized improvement framework been implemented?
  • Has the organization identified and analyzed the input costs for all its major services and programs?
  • Does the organization have information on the unit costs of delivering its main services and how the unit costs are changing over time?
  • Does the organization have information on how costs change in response to changing levels of activity?
  • What are operating budgets and resource levels? Are operating budgets established based on unit costs or performance standards (such as output/input ratios), or on historic funding levels? If the budget is based on unit costs or performance standards, what are the costs or standards reflected in the current budget?
  • What are full-time equivalent (FTE) resource levels in relevant business units? How does the organization optimize the allocation of its personnel to its different services or business units? For example, does it use staffing formulas or other allocation methods? Does the allocation method consider workload or production levels?
  • How does the organization maximize the utilization of allocated personnel to achieve its operational and strategic goals? For example, is staff utilization monitored? If so, how is it monitored? If third party service providers are utilized as part of the operational strategy, how are those contracts monitored? Is the efficiency performance of those third parties assessed?
  • Are there required competencies for all staff? Do staff meet the required competencies? Have any competency gaps been identified? If so, is there an identifiable cause for the gaps (such as the fact that the labour market cannot meet demand)?
  • Has the organization identified clear roles and responsibilities for managers and personnel delivering on efficiency objectives? If so, provide examples.
  • Are incentives used to encourage managers and personnel to improve efficiency and meet established targets? If so, provide examples.
  • What type of training is provided to managers and personnel in relation to efficiency?
  • Operational planning—The organization’s systems and practices to allocate financial, human, and material resources to its projects and operations are designed to increase operational efficiency (or designed to meet recognized best practices).
  • Service levels—The organization has adopted service level standards that are used by operational planners to identify, budget for, and allocate required inputs.
  • Input costs—The organization identifies and analyzes the input costs for all its major services and programs.
  • Unit costs—The organization calculates the unit cost of delivering its main services and tracks how the unit costs change over time.
  • Cost variation—The organization has a clear understanding of how costs change in response to changing levels of activity.
  • Comparable financial information—The organization continually compiles relevant financial information and produces information that is comparable over time.
  • Personnel allocation—The organization’s systems and practices to allocate its personnel to its various services or business units are designed to increase efficiency.
  • Qualified personnel—Operations are designed and carried out by qualified personnel with clear roles and responsibilities.
  • Accountability—Roles, responsibilities, authority, and accountability for efficiency matters are clearly defined, attributed, and communicated.