Note: Presented by Gary Blackmer, Multnomah County (OR) Auditor to the 1998 National Intergovernmental Biennial Audit Forum
It is a grand time to be a performance auditor! Managers are emphasizing measurement and improvement. Elected officials are talking about increased accountability and obtaining assurances of results. They are investing in data systems and analysts, and incorporating measures into their reporting and budgeting systems. These efforts to measure performance are occurring across all levels of government in every corner of our country, and the world. But I fear their enthusiasm is short-lived.
You see, we have been through these periods before. Most of it began in 1911 when F.W. Taylor showed how "scientific management" could increase productivity. He applied scientific methods to industrial operations to find improvements. On the government side, the New York Bureau of Municipal Research applied his principles to advocate for civil service, better budgeting, and streamlined administrative systems. In subsequent years, other management theories became more popular than Taylor's fundamentals.
Then in the 1930s, with the contraction of the economy, managers focused on waste and inefficiency, again turning to measurement to increase productivity and reduce costs. In the 1950s the tools created during World War II - such as statistics, queuing analysis, and information theory - were used to manage better. The early 1970s brought Management-By-Objectives which started from objectives and worked back to measured activities. And here we are in the 1990s with Total Quality Management and Deming's methods for measurement and improvement.
I think that there are lessons to be learned in this history. The value of measurement is regularly rediscovered by managers, it almost seems on a 20-year cycle. But there is also a down cycle when measurement inevitably loses its eminence to other management styles and theories. Each time we discover measurement we apply it everywhere with enthusiasm until we see its limitations and renew our search for other means of achieving our desired outcomes.
There is a basic formula at work when we discover the value of measurement: the cost of the measurement must be less than the value of improvement that can be gained. The ratio of cost and benefit has shifted with new analytical tools and technologies. It started in the 1910s with the use of motion pictures to analyze and streamline assembly-line activities. The recent revolution in computers and software has reduced the cost of gathering, analyzing and presenting measurement information.
At some point in the near future we will run into some areas where the costs of gathering, verifying, analyzing, reporting, and using measurement information exceed the value for management and decision-making. We will find that the quality of a service or the extent of human behavioral change cannot be measured without great expense. Perturbations, time lags, and outside forces will confound our measures. Finally, measures often require new measures to explain why a change has occurred. These are the methodological challenges of measurement.
Social and political pressures can also reduce the popularity of measurement. Obviously, authors and consultants can't make money selling what everyone knows. In three or four years a senator or commissioner will ask: "We've invested huge amounts of resources in computers, custom software, data collection, analysts, reporting mechanisms and management training. Why aren't we realizing the great benefits that were promised?"
As auditors, we should be concerned about how that question is answered. One wrong answer is: "Bad data." We shouldn't poison the well of data - we still want to use it. I would suggest that we answer the question with, "No value? That's odd, our auditors can generally find all sorts of valuable recommendations from that kind of data when we conduct performance audits." This preserves the value of the data and accomplishes another important task: creating an aura of superhuman auditing powers.
Rest assured that measurement doesn't go away during the twenty-year cycle, when other management styles and theories gain prominence. Each cycle of discovery creates investments in data gathering and measurement tools that continue to provide auditors with valuable audit findings even when management's enthusiasm for measurement dies down.
I don't want to leave you with the impression that I have anything against measurement, or wish it an early demise. I think it is important for performance auditors to be involved with measurement because we have become experts at it. My office has been involved in performance measurement in Multnomah County for at least five years, and I continue to push for more and better measures to be used in decision-making. My office participated in the development and training of our program-performance budget and we helped review the 250 performance measures developed by the programs. My office is also involved in tracking over 85 community indicators that we call the Portland-Multnomah Benchmarks.
The survival of these measures in the future depends upon how well we can produce something of value with them. As performance auditors, we are always finding value in measurement, but we go at it a little differently. Performance measurement is the construction of a dashboard full of gauges to detect problems and inform us of conditions. Performance auditing is the observance of a problem that we then build a gauge to measure. There is more selectivity in performance auditing, which reduces the ratio of measurement costs to the value produced.
Since 1911, each measurement effort has added to the layers of management information and analytical tools available to performance auditors. Regardless of the popularity of measurement in the future, as auditors we will have more data to sift through for valuable recommendations. As a result, performance auditing will continue to be the most valuable effort we can perform, which will continue to show the importance of measurement.
In the interest of measurement and accountability I would advocate for more performance auditing at the local level. I would like to see incentives and dispensations given to local governments with an independent performance audit function that complies with Yellow Book standards. With the devolution of responsibilities and the increasing sophistication of local government operations, I would hope that state and federal auditors look to local governments for assurance that pass-through money is prudently spent. My office does not distinguish the source of funds when we decide on our audit schedule. We examine Medicaid dollars, HUD dollars, and local tax dollars in the same light. Every dollar is a taxpayer dollar intended to be appropriately spent for the betterment of our community.
The Association of Local Government Auditors now has over 525 members who aspire to a high level of professionalism. When federal or state auditors ponder their audit schedules and sites, I would hope that they consider the accountability provided by these local auditors and, at the very least, speak to them before undertaking an audit. Ideally, they would feel a greater assurance that a local government with an independent audit function is a lower risk than one without.
For our part, auditors will continue to show the value of performance measurement and performance auditing, regardless of their popularity.
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Opportunities for Improvement