• Cart
Log in

Log in

home page banner blank

Practice Guide to Auditing Efficiency

What is Efficiency?

Efficiency is about making the most of available resources, ensuring that an organization is getting the most—in terms of quality and quantity—from its inputs.

Put another way, efficiency is the optimal use of resources to achieve a given output or outcome.

Traditional definitions of efficiency have tended to focus on the ratio of inputs to outputs. The definition from the Canadian Institute of Chartered Accountants’ CICA Handbook (PS5400.08(b)), for example, illustrates this concept: “Efficiency refers to the use of financial, human and physical resources such that output is maximized for any given set of resource inputs, or input is minimized for any given quantity and quality of output provided.”

This Practice Guide does not adopt a single definition of efficiency. Rather, the Practice Guide encourages auditors to take a broad view of the concept and to consider different perspectives of efficiency, such as:

  • doing the same with fewer resources,
  • doing more with the same resources, and
  • doing more with fewer resources.

For a long time, reducing waste, streamlining processes, reallocating resources, and using new technologies have been common means of “doing the same with fewer resources” or “doing more with the same.” This has often improved service delivery at the same time, such as reducing wait times.

More recently, a challenging fiscal environment has generated additional efficiency concepts, which public sector managers have been required to consider as they develop budgets and strategies for their areas of responsibility. For example, budget reductions, coupled with increasing public expectations, have led to demands for the public sector to “do more with fewer resources”; that is, provide improved services while also using fewer resources than before.

Another trend driven by the need to reduce program budgets and deficits has been to eliminate unnecessary or unproductive outputs and to focus on the right outcomes, which is sometimes called “doing less with less, but focusing on the right things”. This approach is based on the careful definition of desired program outcomes and on the reduction or elimination of resources that go into producing non-essential outputs and outcomes. However, since this approach is primarily focused on defining the right outcomes – as opposed to finding the most efficient ways of meeting them – it is closely related to the merits of government policy and, for this reason, may not constitute an appropriate audit approach.