| Written by Mark Funkhouser,
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I believe that we ought to articulate effectiveness, efficiency and equity as the values underpinning the practice of performance auditing. The central questions about government programs are:
- Do they achieve the intended results?
- Could the results be achieved at less cost?
- Are people treated fairly?
Since almost the beginning, performance auditing has been built around three "E's: economy, efficiency and effectiveness. References to these words are frequent in articles and books about performance auditing but the literature is not clear on what these concepts are. They could be principles, objectives or values.
The 1994 revision of Government Auditing Standards, for example, defines performance audit and then goes on to say that performance audits "include" economy and efficiency and program audits. These two types of audits, which are presumably subsets of performance audits, are, however, not defined. The standards describe what each type of audit "includes" and give examples of potential generic audit objectives for each. Effectiveness is referred to several times in the examples of generic audit objectives under program results audits.
To understand why these issues matter it is important to consider what the words "economy, efficiency, and effectiveness" represent in auditing. As I said earlier, the literature is not clear on this, but I believe that the best case can be made that these words reflect the underlying values that drive performance auditing. Over the last several years, particularly because of advances in the area of performance measurement, we have made considerable progress in both refining the meanings of the words "efficiency" and "effectiveness" and in understanding the importance of these concepts to democratic governance.
Efficiency is not a "bean counter" concept; it is an important value. For example, Manhattan Borough President Ruth Messenger has been quoted as saying, "Waste is the enemy of people in need." And a recent newspaper column here contained the following, "Taking bribes is illegal, but doing nothing to reduce wasteful spending? Let's recognize that this, too, is a form of corruption. Milwaukee Mayor John Norquist puts it more bluntly: `Efficiency in government is a matter of social justice.' Every tax dollar controlled by government is taken from the taxpayer who earned it. Wasting money shows contempt for the labor that produced the money."
Effectiveness is central to our ability to come together as citizens and solve problems. Government programs are a collective response to common problems. These problems range from cleaning up hazardous waste sites to maintaining infrastructure to educating our children. We argue and debate among ourselves about problems, formulate programs designed to impact those problems and create and empower organizations to implement the programs. This process of self-governance can only work if the programs we put in place are relatively effective in solving the problems or creating the conditions that they were designed to create.
Economy, however, is a concept that adds nothing to our understanding of audit that is not already supplied by the values of efficiency and effectiveness. I offer in its place "equity." Has the government treated recipients, citizens, taxpayers, businesses that are licensed or regulated, and others with equity? Has the government been fair? I think that equity is an important value that fits clearly within the accountability framework of audit.
There are three types of equity: service costs; service delivery; and police power. Service costs are taxes and fees charged by the government, but need not only include such charges. For example, in siting landfills, there are issues of equity because clearly there are costs in living close to a landfill. Service delivery includes direct services such as trash pick-up and indirect services such as response time for police and the proximity and quality of neighborhood parks. Police power concerns the government's use of its powers of coercion. Those powers include arrest, property seizure, eminent domain, and various regulatory authorities such as granting liquor licenses or building permit.
The practice of performance auditing would be enhanced substantially if we embraced equity as a central value sought in our work, along with efficiency and effectiveness. Citizens support the concept of audit wholeheartedly when they see us pursing the value of equity. They are surprised sometimes, but pleasantly so. And maybe their confidence in government is actually boosted.
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Funkhouser on Auditing