| Written by Mark Funkhouser,
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In 1988, Richard C. Tracy, Audit Director for the Portland City Auditor's Office, published an article in Government Finance Review entitled "Performance Auditing: Catalyst for Change". This article is, in my view, the first indication of a profound shift in the nature of government auditing, which is evident even in the title of the piece. You would not expect, for example, to read "Financial Auditing: Catalyst for Change". While financial audits may indeed prove to result in significant organizational change, as when substantial wrongdoing or a material misrepresentation of financial statements is uncovered, that is not ordinarily the purpose of such audits.
Jewel Lansing, the former Portland City Auditor, had taken the theoretical ideas of Lennis Knighton, the inventor of modern performance auditing, and put them into actual practice in Portland. Knighton intended performance auditing to alter the balance of power in government. He felt that the growth of government in the half-century prior to his 1967 book The Performance Post-Audit in State Government was "almost synonymous with an increase in the size of the executive branch of government" and that controls instituted to provide for more efficiently managing this much larger government had also worked to increase the power of the executive. In practice, performance auditing has worked not only to hold the executive accountable, but also to provide a mechanism for proactive improvement in government. As Tracy writes "Like most bureaucracies, local governments resist organizational change....The City of Portland, Oregon, has developed a method of bringing about operational and administrative change-performance auditing."
If government bureaucracies resist change and performance auditing is designed to bring about change, then some sort of political process is occurring. In 1991, political scientist Edward M. Wheat, published an article "The Activist Auditor: A New Player in State and Local Politics". Wheat's article examined the new dimension that performance auditing brought to the political process and the role of the auditor in that process. On the whole, Wheat concluded that performance auditing was a positive development, writing "..perhaps we should welcome the emergence of new players in the great game of state and local politics who possess a bias toward disclosure and carry about a little book of publicly acknowledged and professionally agreed upon principles and standards to which they feel obligated to adhere."
Wheat's article provoked considerable discomfort among auditors. In 1993, a prestigious group put together by the Association of Government Accountants published a report on the state of performance auditing in The Government Accountants Journal. They sought to define "success" in performance auditing, and concluded that a successful audit is one that has impact. They wrote, "...after all of these and other limitations are recognized, we come back to the view that performance auditors should aim for impact." The group also concluded, however, that "while audit reports can have a significant "political" impact, we think it is extremely important that auditors not seek to become "players" in the political process."
Clearly the impact that performance auditors seek to achieve is not supposed to be random. We must intend to control and direct the "organizational and administrative change" that Tracy describes toward some end and manage the process in some way. The end we seek is greater accountability, guided by principles of efficiency, effectiveness and equity. As a profession, however, we know very little about how to manage the process. Knighton saw performance auditing as essential to the vitality and effectiveness of democratic government. But in the vast majority of local governments, there is either no performance audit function or else the one that does exists is very fragile. If we wish performance auditing in local government to thrive, we must begin to consider how to define and manage the political role of the performance auditor.
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Funkhouser on Auditing