The Impact That Government Auditing Could Have (and Doesn't)

Auditors are irrelevant in most places. Two things could change that.
August 2015
By Mark Funkhouser  |  Former Publisher
Former publisher of Governing and former mayor of Kansas City

Performance auditing can be a powerful contributor to effective and accountable government. There is, however, a gap between the positive impact it could have and that which it is actually having.

In many jurisdictions, the work of the government audit office is largely irrelevant, having little or no influence on the decisions made by the government or the outcomes of those decisions. But two changes to the standards that govern the profession could make performance auditing more relevant.

It is hard to overstate the influence of the auditing standards published by the U.S. Government Accountability Office (GAO). They shape performance auditing in most state and local government audit organizations. But the first problem with the GAO’s standards has to do with the way they deal with audit risk. The standards essentially define audit risk as the chance that the audit organization will make a mistake by, for example, drawing a conclusion that is not warranted by the evidence or by not drawing a conclusion that it should have. Audit organizations have built elaborate systems of quality control to prevent these types of mistakes. The very strong signal to auditors is to be very, very careful in their work.

A better approach is outlined in the standards issued by the International Organization of Supreme Audit Institutions. “Many topics in performance auditing are complex and politically sensitive,” the group acknowledges, adding that while “simply avoiding such topics may reduce the risk of inaccuracy or incompleteness, it could also limit the possibility of adding value.” In other words, be careful, but do work that matters.

The second problem with the audit standards is their focus solely on money. I have long argued that the standards should include the concept of equity -- the fair exercise of power -- along with efficiency and effectiveness. Governments use both money and power to achieve results. Efficiency and effectiveness address money, while equity addresses power. As the recent events involving police in Ferguson, Mo., and Baltimore remind us, citizens are as concerned with the misuse of power as they are with the waste of resources. As the citizens’ watchdogs, auditors should examine and report on both kinds of issues.

Auditing that focused on equity as much as on efficiency and effectiveness would be auditing that mattered, because the three concepts are connected just as money and power are connected. As John Norquist, the former Milwaukee mayor who later led the Congress for the New Urbanism, has written, “Efficiency in government is a matter of social justice. Every tax dollar controlled by the government is taken from the taxpayer who earned it. Wasting money shows contempt for the labor that produced that money.”

Nearly universally, performance auditors define a successful audit as one that results in better government decisions and outcomes. Changing the professional standards for auditing would make their work more relevant -- and more successful.