Course Information

The course will enable auditors to conduct an audit focused on efficiency and effectiveness (E&E) recommendations. The course is focused on the “what’s and how’s” of the 5 phases of an E&E operational audit: planning, work programs, field work, development of findings and recommendations, and reporting. Students will learn that E&E audits are a type of performance audits as outlined in the Yellow Book, and that nearly all their education, experiences, and training have already prepared them to accomplish quality E&E audits. The course provides the foundations, guidance, methods, and instruments for auditors to successfully plan and execute an E&E audit of a government organization or program.

Objectives

Upon completion of this course, participants will be able to 1) plan an E&E audit, 2) develop associated work programs, 3) accomplish field work using established techniques and tests, and 4) develop, substantiate and validate findings and recommendations, and 5) confidently report.

Additionally, graduates of this course will have the skills and confidence to:

• Prepare interview protocols and conduct interviews.

• Facilitate an interference diagram session to solicit sources of inefficiency and ideas for increased effectiveness.

• Utilize flowchart mapping to collect work observations and operational challenges which can later be addressed with recommendations.

• Gather and utilize financial data to determine the operational cost to produce one quality goal unit (e.g. the cost for 1 quality investigation is $1147, on average)

• Analyze performance data to conduct 1) ratio, change and trend analysis 2) accurately report performance 3) recommend key performance indicators and 3) determine potential efficiency and savings gains using the formula: potential productivity minus (-) current productivity equals (=) the estimated E&E ROI from improvement.

• Validate findings with the organization’s leadership prior to issuing the report.

• Issue an E&E audit report with full confidence, well-supported with documented evidence.

Outline

Part I: What is the goal of an E&E audit?

A. To enable the organization to realize its efficiency and effectiveness potential, resulting in better outcomes for the agency’s primary customer.

B. What is an efficiency and effectiveness (E&E) audit?

a. Whether an organization or program is using its resources optimally to achieve results, w/ minimal waste. I.e. find inefficiencies and opportunities for greater efficiency.

b. Whether agency programs duplicate, overlap, or conflict with another state program.

C. The Three E’s

a. Economy

b. Efficiency

c. Effectiveness

D. What are the 4 main objectives of an E&E audit?

a. Measure Performance

b. Define Success

c. Identify Limitations, Inadequacies and Risks

d. Find Improvement Opportunities

Part II: What, in E&E audits, is the same as a standard performance audit?

A. What does the Yellow Book say?

a. GAGAS and references

i. GAGAS view E&E audits as a type of performance audit.

ii. GAGAS requires that the auditor identify the subject matter and performance aspects to be included.

iii .GAGAS defines a program as processes, projects, studies, policies, operations, activities, entities, and functions.

Part III: What many may see in E&E audits as different from the standard performance audit?

A. What E&E auditors are looking for (i.e. scope of E&E audits):

a.ID causes of inefficiency

b.ID causes of ineffectiveness

c. Assess management and information systems

d. Ensure compliance w/ laws

e. Specifically, what we are looking for is:

i. Fragmentation

ii. Overlap

iii. Duplication

iv. Cost Savings

v. Revenue Enhancement

B. Where should E&E auditors be looking? (from Texas):

a. Report on “Organization and Efficiency of State Agencies”

b. Sunset Commission Reviews.

c. Agency’s strategic plan

d. Agency’s biennial operating plan

e. Statewide Cost Allocation Plan.

f. Agency’s Legislative Appropriations Request from the LBB.

g. List of agency contracts and awards

h. Agency’s Annual Financial Report.

i. Fleet report:

j. Real estate, assets, and facilities report and management.

Part IV: How can a performance audit be accomplished? One full example.

A. Risk-based, mission-based, and opportunity-based planning.

B. A Planning Checklist example for an E&E Audit

1. Understand the Entity’s Mission, Objectives, and Environment

2. Assess Governance, Risk Management, and Controls

3. Review Prior Audit Findings and Recommendations

4. Identify Laws, Regulations, and Compliance Requirements

5. Understand Key Processes and Systems

6. Engage with Stakeholders

7. Document Planning and Understanding

8. Assess Internal Control

9. Plan for Sufficient, Appropriate Evidence

Part V: 1.5 phases of an E&E operational audit:

a. Planning an E&E audit

b. Work Program Work Steps

c. Accomplishing field work using established techniques and tests

i. Field work techniques:

1. Workflow depiction and evaluation

2. Benchmarking strategies

3. Restructuring, reengineering, and reinventing

4. Learning organization models

5. Workplace climate assessment

6. Employee engagement (survey or other assessment)

7. Activity-based constant

8. Budgeting process and its afforded flexibility.

d. Developing substantiating and validating findings and recommendations

e. Reporting with confidence.

2. The 5 “passes” of a E&E audit as data is gathered and analysis commences:

a. 1st Pass: All you can get from afar.

i. Sources: reports, audits, public documents, federal assessments, etc.

b. 2nd Pass: Gather E&E comments from those in the know.

c. 3rd Pass: Provide agency a data request package; analyze data.

d.4th Pass: Hands on collaboration w/ the program to understand the operations:

e.5th Pass: Run the numbers: Potential savings from discovered redundancy, waste, inefficiency, etc.

3.Key Deliverables of An E&E Audit

a. Executive Evaluation:

b. Current State Diagnostic Report:

c. Recommendations:

d. Value & Performance Measurement

Part VI: What are the edges and futures of E&E?

Previous experience conducting a performance audit (internal or external), compliance audit, operational audit, IT audit, or financial audit in a government environment (any level).