What Are Performance Audits? What is Initiative 900?

Performance Audits - Initiative 900
Contents

* Overview of Initiative I-900
* What is a Performance Audit?
* Washington State Provisions for Performance Audits
* What Local Governments Are Currently Doing
* Cities with Performance Audits
* Counties with Performance Audits
* Special Purpose Districts Performance Audit Provisions
* Performance Reports
* Further Reading
* Archives - Initiative 900 Pros and Cons
* Related MRSC Pages
o Performance Measurement

Overview of Initiative 900

Initiative 900 (Ch. 337 Laws of 2006 (ESSB 6839)), passed in the November 2005 General Election, proposed that all state and local government entities undergo performance audits to ensure accountability and guarantee that tax dollars are spent as cost-effectively as possible. The performance audits are to be conducted by the state auditor in accordance with the United States General Accounting Office auditing standards.

The initiative includes nine specific elements to be included in each performance audit: (1) identification of cost savings; (2) identification of services that can be reduced or eliminated; (3) identification of programs or services that can be transferred to the private sector; (4) analysis of gaps or overlaps in programs or services and recommendations to correct gaps or overlaps; (5) feasibility of pooling information technology systems within the department; (6) analysis of the roles and functions of the department, and recommendations to change or eliminate departmental roles or functions; (7) recommendations for statutory or regulatory changes that may be necessary for the department to properly carry out its functions; (8) analysis of departmental performance data, performance measures, and self-assessment systems; and (9) identification of best practices. This audit is in addition to the fiscal audits performed by the state on local governments.

This audit is in addition to the fiscal audits performed by the state on local governments. The initiative did not exempt smaller units of government audit nor did it acknowledge existing performance programs of local governments.

* State Auditors Performance Audit Web Site
* Local Government Performance Audits ( 115 KB) article prepared by Brian Sonntag, State Auditor for Municipal Research News, 11-06
* Auditor's Office Local Government Work Plan
o See Local Government Work Plan Summaries on Purposed Performance Audit Summaries Page

What is a Performance Audit?

* Government Auditing Standards, by the Comptroller of the United States, 2003 Revision, U.S. General Accounting Office, GAO-03-673G June 2003

Section 2.09 Performance audits entail an objective and systematic examination of evidence to provide an independent assessment of the performance and management of a program against objective criteria as well as assessments that provide a prospective focus or that synthesize information on best practices or crosscutting issues. Performance audits provide information to improve program operations and facilitate decision making by parties with responsibility to oversee or initiate corrective action, and improve public accountability. Performance audits encompass a wide variety of objectives, including objectives related to assessing program effectiveness and results; economy and efficiency; internal control;11 compliance with legal or other requirements; and objectives related to providing prospective analyses, guidance, or summary information. Performance audits may entail a broad or narrow scope of work and apply a variety of methodologies; involve various levels of analysis, research, or evaluation; generally provide findings, conclusions, and recommendations; and result in the issuance of a report. (See chapters 3, 7, and 8 for standards and guidance for auditors performing a performance audit in accordance with GAGAS.)

* Definition in Ch. 385 Laws of 2005 (ESHB 1064) (Adobe Acrobat Document 36 KB) - Relating to improving government performance and accountability

"Performance audit" means an objective and systematic assessment of a state agency or any of its programs, functions, or activities by an independent evaluator in order to help public officials improve efficiency, effectiveness, and accountability. Performance audits include economy and efficiency audits and program audits.

* RCW 44.28.005 - Definitions. (Joint Legislative Audit and Review Committee)

(7) "Performance audit" means an objective and systematic assessment of a state agency or any of its programs, functions, or activities, or a unit of local government receiving state funds, by an independent evaluator in order to help public officials improve efficiency, effectiveness, and accountability. Performance audits include economy and efficiency audits and program audits. A performance audit of a local government may only be made to determine whether the local government is using state funds for their intended purpose in an efficient and effective manner.

(8) "Performance measures" are a composite of key indicators of a program's or activity's inputs, outputs, outcomes, productivity, timeliness, and/or quality. They are means of evaluating policies and programs by measuring results against agreed upon program goals or standards.

* Snohomish County What is a Performance Audit?
* Pierce County What is a Performance Audit? (Adobe Acrobat Document 267 KB) Newsletter of Performance Audit Committee, December 1999

Washington State Provisions for Performance Audits

In 1996 the state establishing a performance-based budgeting system for state agencies. State agencies were expected to : (a) establish mission statements and set goals; (b) develop strategies to achieve goals; (c) set outcome-based objectives; (d) provide continuous self-assessment of each program; (e) link budget proposals with their mission statements and goals; and (f) objectively determine the success in achieving goals.

* State Auditor Performance Audit Web Site
* Joint Legislative Audit and Review Committee
o Performance Auditing in Washington State
o Performance Audits & Performance Outcome Measurement Reviews
* General Performance Audit Information - Washington State Auditor's Office
* Ch. 384 Laws of 2005 (Adobe Acrobat Document 14 KB)- An act relating to improving government management, accountability,
and performance. Requires that State agencies, within available funds, develop and implement a quality management, accountability, and performance system. Agencies must ensure that the agency's system:
o uses strategic business planning for the purpose of establishing goals, objectives, and activities consistent with the priorities of government;
o engages stakeholders and customers in establishing service requirements and improve service delivery systems;
o includes clear, relevant and understandable measures for each activity;
o gathers, monitors and analyzes activity data;
o uses data to evaluate program effectiveness;
o establishes performance goals and expectations for employees that reflect the agency's objectives;
o uses activity measures to report progress in reaching agency objectives;
o holds regular problem-solving sessions to develop and implement plans for addressing gaps; and
o allocates resources based on strategies to improve performance
* Ch. 385 Laws of 2005 (Adobe Acrobat Document 36 KB) - This Act creates Citizen Oversight Board to improve efficiency, effectiveness, and accountability in state government . Areas to be assessed include quality management, productivity and fiscal efficiency, program effectiveness, contract management and oversight, internal audit, internal and external customer satisfaction, statutory and regulatory compliance, and technology systems and on-line services. The Board is to establish performance audit criteria consistent with criteria and standards followed by the JLARC. Criteria shall include, at a minimum, the auditing standards of the United States government accountability office, as well as legislative mandates and performance objectives established by state agencies and the legislature. At a minimum the state auditor is to contract out for performance audits which may include:
o identification of programs and services that can be eliminated, reduced, consolidated, or enhanced;
o analysis of gaps and overlaps in programs and services and recommendations to correct gaps or overlaps;
o analysis of, and recommendations about, the roles and functions of the state agency, its programs, and its services and their compliance with statutory authority;
o identification of potential cost savings in the state agency, its programs, and its services; and
o identification and recognition of best practices
* Transportation Performance Audit Board
o Chapter 44.75 RCW - Transportation Performance Audit Board
o Amended by Ch. 319 Laws of 2005 (Adobe Acrobat Document 278 KB)

What Local Governments Are Currently Doing

The principal focus of this page is what Washington local governments currently do to improve the quality, efficiency, effectiveness and accountability in their service delivery.

A number of Washington local governments have implemented various elements of Managing for Results (Government Accounting Standards Board Web) as a way to improve how they operate and how they are perceived. The approach to managing for results involves seven basic steps: planning for results (strategic planning); program (activity) planning; developing meaningful performance measures; budgeting for results; managing work processes; collecting data and using the data to manage; evaluating and responding to results; and reporting results to elected and appointed officials and constituents.

Measuring Performance - For information on the use of performance measures see MRSC's Web Page on Performance Measurement.

Budgeting for Results - In 2002 Governor Locke introduced a Priorities of Government (OFM Web) approach to state government budgeting that identified desired results as the basis for budget decision-making. Some of Washington's larger cities and counties, including the city of Spokane and Snohomish County are also using a similar approach to their budgeting systems. See, On the Money: Creating Budgets Based on Targeted Results, by Nikki Swartz American City and County,
Jun 2005.

Performance Auditing - A number of Washington local governments have been doing performance audits on a regular basis for several years to evaluate the effectiveness and efficiency of their services. Provisions were added to both the Pierce County and Snohomish County charters regarding performance auditing in 1997. Five of the largest cities in Washington have provisions for performance audits. Others have done them on as needed basis, principally to review a new program to see if it is meeting its intended goals, to review grant funding, and in instances when a problem is being perceived.

Reporting on Performance - The Governmental Accounting Standards Board's Reporting Performance Information: Suggested Criteria for Effective Communication (Adobe Acrobat Document 29 MB) suggests criteria and good practices to guide the preparation of performance reports to effectively communicate the results of their operations. Recently Bellevue and King County Department of Natural Resources and Parks received a “Certificate of Excellence in Service Efforts and Accomplishments” (SEA) from the Association of Government Accountants (AGA) for performance reports that fulfilled GASB's suggested criteria for communicating results and thereby increasing public accountability. See samples of Performance Reports Below

The Government Performance Project's Final Report (2003), notes that while there is no definitive list of managing for results elements, there appears to be a consensus about its core procedural aspects: the creation and distribution of performance information through strategic planning and performance measurement routines. Increasingly, the verification of performance information, through performance-auditing routines, also is regarded as a core element (Ch. 7, Managing for Results Adobe Acrobat Document 270 KB).

In defining the relationship between performance measures and performance audits, Harry Hatry notes that performance audits are ad hoc studies, often closely resembling in-depth program evaluations. Performance auditors should have considerable interest in performance measurement systems as ways to provide data on outcomes that they can use in their audits. These offices are likely to be given the responsibility for periodically assessing agencies' performance measurement systems, the indicators used, and the data provided. (From Ch. 1, Harry P. Hatry, Performance Measurement: Getting Results, The Urban Institute Press, 1999; Publisher Blurb).
Cities with Performance Audits

* Bremerton
o Bremerton City Charter Article III, Section 18 - Audit Committee
o Bremerton Municipal Code Ch. 2.18 - Audit Committee and City Auditor - Brings a systematic disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes as defined by the institute of Internal Auditors.
* Seattle
o Seattle Municipal Code Section 3.40.020 City Auditor -- Ancillary powers - Includes performance audits and other initiatives to improve City operations for all City departments
o Seattle Office of the Auditor - The Office of City Auditor conducts financial audits, performance audits, management audits, and compliance audits of City of Seattle programs, agencies, grantees, and contracts.
o Seattle Auditor Reports Index
* Spokane
o Spokane Municipal Code Ch. 7.11 - Spokane Auditor
o Spokane City Auditor - is authorized to conduct financial, performance or other audits of all departments, offices, boards, activities and agencies of the City.
+ Reports and Presentations
* Tacoma
o Tacoma Municipal Code Ch. 1.35 - Performance Audits
o Tacoma Council Committees - Government Performance and Finance Committee

Counties with Performance Audits

* Clark County
o Clark County Code Section 2.14.025 - Performance Audits
o Clark County Audit Reports - Includes Performance Audits
* King County
o King County Charter Section 250 - County Auditor - Provides for financial and compliance audits, economy and efficiency audits, and program result audits for the purpose of reporting to the council regarding the integrity of the function of the financial management
system, the quality and efficiency of agency management, and the effectiveness of programs.
o King County Code Ch. 2.20 - County Auditor See Section 2.20.035 - Types of Audits, and 2.20.040 - Scope of Authority
o King County Audit Reports - Includes Performance Audit Reports
o Council Approves Plans to Ensure County Keeps “Measuring Up”: Auditor will Emphasize Performance Audits to Increase Efficiency, King County Council News Release July 18, 2005
* Pierce County
o Pierce County Charter, Article 2, Section 2.20 (f) (Adobe Acrobat Document 96 KB) - Relating to performance audits
o Pierce County Code Ch. 1.26 - Performance Audits (Adobe Acrobat Document 213 KB)
o Pierce County Performance Audits - Performance audits are required under the Pierce County Charter, as amended by the voters in 1996.
* Snohomish County
o Snohomish County Charter Section 3.130 Powers and Duties of County Auditor - Sets up department of performance auditing
o Snohomish County Code Ch. 2.700 - Snohomish County Auditor's Office Division of Performance Auditing
o Snohomish County Office of Performance Auditor
o Snohomish County Performance Audit Committee
* Whatcom County
o Whatcom County Charter Section 1.51 - Performance and Strategic Planning - provides for long-term strategic planning to establish organizational structure, priorities, and performance measurements
o Internal Audit Division

Special Purpose Districts with Performance Audits

* Sound Transit Performance Audit Committee

Performance Reports

* The Fine Art of Reporting Results, by Jonathan Walters, Governing, August 2006
* Bellevue 2004 Performance Report ( 5.44 MB) - As a tool, the 2004 Annual Performance Report provides department managers, councilmembers, and the public with a glance at Bellevue’s key program outcomes for 2004. It helps build understanding of program operations, serves as a tool for setting priorities, charts progress, and helps build community trust.
* Kent Performance Reports
* King County Department of Natural Resources and Parks 2004 Performance Measures Report
* Lynnwood 2004 Performance Report ( 546 KB) - This Annual Performance report is provided in compliance with Lynnwood Municipal Code Section 2.70.020 B. The purpose is to illustrate our city governments strengths and areas for improvement using performance measurement.

Reference and Further Reading

* Agencies and Associations
o Institute of Internal Auditors
o National Association of Local Government Auditors
o National Intergovernmental Audit Forum
o The Performance Institute
+ Center Government Performance Management
* Financial Management /Audit Function Restores Credibility, Mark Funkhouser, American City and County, May 1, 2000
* Home Improvements: A Manual For Conducting Performance Reviews, Texas Performance Review, Texas Comptroller of Public Accounts, 1998
* International City Management Association Performance Measurement
* Governmental Accounting Standards Board
o GASB Performance Measurement for Government
o Reporting Performance Information: Suggested Criteria for Effective Communication (Adobe Acrobat Document 29 MB)
o Government Service Efforts and Accomplishments Performance Reports: A Guide to Understanding, July 2005 Summary (Adobe Acrobat Document 226 KB) Complete Text (Adobe Acrobat Document3.29 MB)
* Government Performance Project
o Introduction - A Management Report Card 2005
* Government Performance Project: Grading the States
o Texas: Grading the States 2005 .... The current administration considers performance-based budgeting a costly operation that doesn't justify its expense as long as a state is handling its regular financial operations in an acceptable way...
o Washington: Grading the States 2005 ....for most of his time in office, [Gary Locke] was pushing efforts to measure performance, reform human resources and reinvent the state’s budgeting system. [Washington State's]... new process, dubbed “priorities of government,” is a kind of managerial triage. It begins with a topdown approach, establishing the key results that leaders and citizens would like to see their state achieve. Then, agencies with similar goals are grouped to determine which of their activities are most closely aligned with the results desired.
* Guidelines and Model Legislation For Local Government Auditors (Adobe Acrobat Document 64 KB), National Association of Local Government Auditors, 1999
* Joint Legislative Audit and Review Committee Related Links
* Performance Audit Essentials, by Bob Williams, Policy Highlighter Volume 13, Number 5, January 30, 2003 Washington Freedom Foundation
* Performance Auditing for Added Value: Governance, Politics and Accountability (Adobe Acrobat Document 168 KB), 2nd Biennial Forum of Central Region Government Auditors, Presented by Mark Funkhouser, City Auditor, Kansas City, Missouri August 9, 2005, National Audit Forum
* Performance Auditing for Local Government, by Jolene Ann Lauria, ICMA MIS Report, Jan 1989; 21 p. MRSC Library Loan
* Performance Auditing: A Measurement Approach (Summary), by Ronell Raaum and Stephen L. Morgan, The Institute of Internal Auditors, 2001

Archives - Initiative 900 Pros & Cons

* Text of Initiative 900 (Adobe Acrobat Document 24 KB)
* OFM Fiscal Impact Statement I-900
* For and Against Statement ( 529 KB) - 2005 Voter Pamphlet, Secretary of State
* Association of Washington Cities I-900 Web page
* Performance Audits Are Great; Great Performance Takes Money, by Chris Dugovich, Seattle Times Editorials/Opinions, May 5, 2005
* Performance Audits Are Great, but It’s Hard to Perform without Revenue, by Chris Dugovich, Letter from the President, Winter 2005, Washington State Council of County and City Employees
* Performance Audits - Evergreen Freedom Foundation
* Vote No on Initiative 900 - Permanent Defense
* Reasons to Oppose Initiative 900- Permanent Defense
o Auditor's Office Letter to Permanent Defense
* State Auditor Answers Questions about Initiative 900, the Performance Audits of Government Initiative, LewisNews, July 13, 2005

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