Audit Is Not a Four-Letter Word

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Tanya Settles
April 18, 2025

Audits are often met with apprehension except perhaps by auditors or legislative bodies. They may be mandated due to legal or operational requirements, legislative interest or as part of performance budgeting. Professional audits are frequently seen as tedious and intrusive even when the employer rather than the employee is the subject. Despite this perception, the importance of performance audits in government cannot be overstated. They are essential tools for identifying inefficiencies, finding cost-saving opportunities and supporting performance improvements. In doing so, they help align government operations with the principles of responsible stewardship of public funds. For the public, audits reinforce transparency, efficiency and accountability.

Local governments may turn to performance audits to improve operations, reduce spending and maintain service levels. Unlike financial audits, which verify the accuracy of financial statements, performance audits evaluate whether funds are being used effectively, efficiently and equitably to achieve their intended outcomes. With federal funding increasingly uncertain, state and local governments must find ways to meet service demands using limited resources. Performance audits can pinpoint unmet objectives and recommend actionable improvements.

Performance audits offer objective analysis for decision-makers and the public, identifying strengths, weaknesses and areas for improvement in public sector operations. They assess policy implementation and outcomes, scrutinize resource use and develop recommendations for change. By examining the relationship between inputs, outputs and outcomes, performance audits ensure resources align with strategic priorities. While structurally similar to financial audits, performance audits serve a distinct purpose.

Both types of audits adhere to the Government Auditing Standards, commonly known as the Yellow Book. Recognized as the international gold standard for auditing, the Yellow Book emphasizes legal compliance, ethics, independence and use of sound professional judgment. By the end of 2025, audit organizations will be subject to revised standards related to quality management for audits including engagement quality and external peer review. For performance audits, there are specific standards related to fieldwork and reporting practices.

Performance audits offer benefits well beyond financial considerations, though they can result in a reduction in expenditures. They promote a culture of accountability by identifying underperformance and highlighting successful outcomes. They support continuous improvement through evidence-based recommendations that can reduce costs, streamline processes and enhance services. They also improve transparency by making government decisions more understandable to the public and stakeholders. Furthermore, performance audits inform policymaking, guiding legislative and executive leaders in budget decisions, program reforms and spending priorities.

The integrity of a performance audit lies in its independence. Audit teams—whether from public agencies or private firms—take great care to remain neutral, nonpartisan and objective. While public officials may request audits, those conducting them have no ties to the policies or programs under review. Findings are grounded in evidence and guided by the “reasonable person” standard: a knowledgeable, impartial person would reach the same conclusions when presented with the same facts.

Two Examples of the Value of Performance Audits
In a recent report to Congress, the U.S. Government Accountability Office found that a lack of coordination between the Navy and the Office of the Secretary of Defense led to overlapping investments in shipbuilding and repair. Both entities made similar workforce and infrastructure investments, creating potential duplication and wasted expenditures. Moreover, the Navy lacked performance metrics to evaluate these investments, increasing the risk of poor return on investment.

In another example, a large city auditor’s office uncovered wage theft at adult entertainment businesses. The audit resulted in nearly $14 million in restitution and penalties for more than 230 workers—including entertainers, servers and others—who had been denied lawful wages. The city and state governments also missed opportunities to collect tax revenue while some employees were even required to pay to work, compounding their income loss.

These examples illustrate how performance audits can uncover overspending, programmatic inefficiencies and in some cases uncover criminal activity. Audits are seldom fast but they are well-planned, evidence-based and politically neutral tools that can offer insight on cost saving and performance. Performance audits also dovetail with strategic planning, budgeting, decisions about policymaking and other planning about operations and organizational performance.

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Author: Tanya Settles is the CEO of Paradigm Public Affairs LLC. Tanya’s areas of work include relationship building between local governments and communities, restorative justice and the impacts of natural and human-caused disasters on at-risk populations. Tanya can be reached at [email protected]. The opinions in this column and any mistakes are hers alone.

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