FINANCIAL MANAGEMENT/Audit function restores credibility
The audit function in local government is an essential element of public control and accountability. By independently reviewing and reporting on programs, functions, activities and organizations, auditors provide the public, elected officials and management with a fair, objective and reliable assessment of local government performance. In addition, the opportunity for independent review strengthens managers’ credibility when they provide information about performance and the results of services they provide.
Virtually the only way to judge the viability of government programs is to ask the managers of the programs about them. Those managers, of course, are not neutral. Even when they are honest and careful in their dealings with elected officials, the news media and the public, doubts may remain as to whether the information they provide is complete, balanced and accurate.
A local government audit function can help restore credibility to government. A strong audit function is one that is: * established in the charter or other basic legal document; * organizationally independent of management. The auditor may be directly elected by the voters, appointed by the legislative body or appointed by the chief executive. His appointment must be confirmed by the legislative body, and he is subject to removal only with the concurrence of the legislative body; * conducted with complete and unrestricted access to employees, property and records, usually accompanied by subpoena power for the auditors; * sufficiently funded; * performed by auditors that can conduct all types of audits, especially those related to performance; and * understood and supported by elected and appointed officials.
A critical component of local government assessment is performance auditing. First developed in the late 1960s and shepherded by the United States General Accounting Office (GAO) — the chief audit arm of the federal government — performance auditing has spread to most state governments and nearly all of the best managed local governments.
Government auditing standards, promulgated by the GAO, define performance auditing as “an objective and systematic examination of evidence for the purpose of providing an independent assessment of the performance of a government organization, program, activity, or function.” A performance audit can help a local government determine not only the cost of an activity, but also its effectiveness.
Unfortunately, many local governments have no audit function of any kind. The only audit work they have done is the annual review of their financial statements by a public accounting firm. That process only confirms whether the financial statements have been prepared in accordance with generally accepted government accounting standards; it does not address the central questions of effectiveness, efficiency and equity.
Competent government managers recognize that the best organizations do not deny the existence of problems. They also know that it is critical to try to form partnerships with citizens to create solutions to problems. The local government audit function can be a critical component in the ongoing process of identifying problems and opportunities and enabling officials to engage the community in a discussion about how to deal with them.
For more information on how to establish a local government audit function or strengthen an existing one, contact the National Association of Local Government Auditors at (606) 276-0686 or www.nalga.org.