Value for money audit

A value for money (VFM) audit is a systematic, purposeful, organized and objective examination of government activities. It provides Parliament with an assessment on the performance of these activities; with information, observations and recommendations designed to promote answerable, honest and productive government; and encourages accountability and best practices.

In Simple words, A VFM Audit or value audit is designed to check proper arrangements which have been made to secure economy, efficiency and effectiveness in the use of resources for desired quality.

An independent evidence-based investigation which examines and reports on whether economy, effectiveness and efficiency has been achieved in the use of public funds.

VFM auditing, also called management auditing, examines the ability of government organizations to discharge their responsibilities and control their costs by ensuring that resources are managed at the lowest cost and that activities are organized efficiently. It also deals with accountability in these areas.^[1][2][3]

Scope

Its scope includes the examination of economy, efficiency, cost- effectiveness and environmental effects of government activities; procedures to measure effectiveness; accountability relationships; protection of public assets; and compliance with authorities. The subject of the audit can be a government entity or activity (business line), a sectoral activity, or a government-wide functional area.

Economy: refers to the terms and conditions under which the public sector organizations acquire both human and material resources.

Efficiency: this is the extent to which a program achieves goals or other intended effects.

Effectiveness: this relates to how well a program or activity is achieving its established goals or intended effects.^[4][5]

Objectives

The primary objectives of value for money (VFM) audit are to provide the Assembly with independent information and advice about how economically, efficiently and effectively departments, agencies and other central government public bodies have used their resources, encourage audited bodies to improve their performance in achieving value for money and implementing policy, and identify good practice and suggest ways in which public services could be improved .^[2]

Phases

Phases of value-for-money audit are:

Proposal phase: aims at justifying the study of a particular area, authorize initial resources and determine further considered initial analysis of financial statistics, audit costs and other performance indicators.

The Scooping phase: aims at gathering sufficient details. It embraces gathering working information, studying related legislations and testing controls act. At this stage there will be comprehensive management systems and objective review.

Planning phase: Aims at planning to fully develop identified potentials. The planning and control processes are properly analyzed and methods of reviewing operating results are examined through analysis of control and reporting systems.

Implementation phase: Aims at reporting the audit results to those responsible for receiving or acting on them.

Evaluation phase: is to evaluate the audit result, methodology and performance of the audit staff. The focus here will be assessment of efficiency and effectiveness review. Value-for-money audit aims to identify ineffectiveness in the system and under-utilization of resources.^[6]

Why it matters

The responsibilities of managers are to attain economy, efficiency and effectiveness in their designated areas and a VFM audit provides a check to confirm that management is fulfilling this responsibility properly.

References