Recipients of federal and/or state aid funding are accountable for carrying out the programmatic objectives and outcomes as reflected in in applicable laws, regulations, policies, grant agreements, and contracts. Audits of this funding frequently require that these audits be conducted in accordance with Government Auditing Standards as promulgated by the United States Government Accountability Office. These standards are commonly referred to as Generally Accepted Government Auditing Standards (GAGAS).

One of the most effective types of engagements conducted in accordance with GAGAS, are performance audits. These audits are a useful tool to be used by management and those charged with governance and oversight. Audit objectives can vary widely, so the performance audit is a great vehicle to use to customize the audit scope and objectives. The guidance in GAGAS makes reference to program. The term “program” as used hereafter is in the generic sense and can refer to an actual programs, processes, project studies, policies, operations, activities, entities, and functions. Key categories of performance audit objectives include: Program Effectiveness and Results, Economy, and Efficiency, Internal Controls, Compliance, and Prospective Analysis.

WHAT IS THE PURPOSE OF A PERFORMANCE AUDIT?

A performance audit may have multiple objectives depending upon the specific concerns of the management of the organization. Many times, the program services are provided through third parties and the results of the performance audits serve to provide a monitoring oversight function.  Performance audits are designed to provide objective analysis, findings, and conclusions to assist management to improve program performance and operations, reduce costs, and facilitate decision making.

A well-designed performance audit will provide management or those charged with governance and oversight. Findings in performance audits are developed to address the audit objectives. The elements of a finding include the:

• Condition: states the situation as it exists;
• Criteria: conveys the specific guidelines for how the program should be operating;
• Cause: outlines the factors contributing to the difference between the condition and the criteria;
• Effect: indicates the impact or potential impact of the consequences of the condition; and
• Recommendations: details the actions necessary to assist the program in correcting deficiencies and improving operations.

IMPROVE YOUR OPERATIONS

Programs that implement the recommendations and development sufficient corrective action plans will see significant improvement in program operations. Additionally, based on systemic type findings, management will issue revised guidance and policies and procedures which strengthens the oversight process.

Organizations and programs that take a proactive approach with performance audits  will ultimately be much better positioned should the external auditor or oversight monitor come in at a later date with the potential to identify large disallowances.

OUR TEAM IS HERE TO HELP

Mercadien’s Compliance Oversight Group has decades of experience in conducting performance audits and has worked with numerous organizations on improving their program operations and strengthening oversight and governance. Contact us today to learn more about how we help organizations like yours effectively manage compliance.

DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice, and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.