Harvesting Public Audit Knowledge: Implications for Theory and Practice

• DOI: http://doi.org/10.1111/ijau.12088
• Date: 01 July 2017
• Published date: 01 July 2017
• Author: David McKevitt

Harvesting Public Audit Knowledge: Implications for Theory and Practice

David McKevitt

University College Cork, Cork, Ireland

For over three decades international public policy has dictated that not-for-profit organisations achieve economy,

efficiencyand effectiveness or ‘value for money’(VfM). Across the globe VfM performanceaudits are deployed in

order to promote compliance with this objective.Despite consistent politicaldiscourse, the current literaturelacks

conceptualintegration of the factors that affectperformance informationand use, which frustrates effortsto better

understand the factors that inhibit the emergence of VfM. Using the lens of information processing theory (IPT)

this paper systematically analyses VfM audit reports produced by the Comptroller and Auditor General,Ireland.

The contributioncategorises strategic, operational and tacticalbarriers that affect the motivation, opportunityand

ability to process information related to value for money. A key implication is that effectiveness needs to be

reframed in terms of service-dominant (S-D) logic and is thus defined as value co-created by politicians, policy

makers and public servants.

Key words: Value for money auditing, information processing, content analysis, Ireland

INTRODUCTION

Value for money (VfM) audits originated in the 1970s in

response to the economic crisis and public expenditure

deficits in the UK, Canada, the USA, Sweden, Australia

and New Zealand (Pollitt et al., 1999). The reform of the

public sector gave rise to new public management (NPM)

and resulted in more frequent audits (Johnsen et al., 2001).

NPM was designed to promote the three Es of economy,

efficiency and effectiveness (Osborne & Gaebler, 1992;

Power, 1999; van Thiel & Leeuw, 2002; Radcliffe, 2008).

The auditing process seeks to promote accountability for

the resources used and results delivered.

Despite the pervasiveness of VfM audits, academic

interest in the subject has been modest. For example, Keen

(1999) investigated the decision and evaluation process of

audits, while Johnsen et al. (2001) examined the perceived

efficiency and effectiveness of the process itself. Alwardat,

Benamraoui and Rieple (2015) highlighted the perceived

role conflict between auditors and clients. It is common

for researchers to conceive the audit as a ‘top-down’

process.However, this has ledto little scrutiny of the ‘value

for money’concept itself. Research has only recently

sought to clarify the conceptual boundaries andproperties

of VfM (see Lapsey& Pong, 2000; McKevitt, 2015;McKevitt

& Davis, 2016).

It is thus importantto first define how the term‘value for

money’or ‘performance audit’is similar to performance

measurement. A value for money audit is in fact a

synonym for performance audit (Jacobs, 1998; Pollitt et al.,

1999; Al Athmay, 2008). Specifically, a performance audit

measures the three constituents of performance consisting

of economy, efficiency and effectiveness. Performance

auditing processes are substantive or systematic.

Substantive auditing involves the evaluation of pre-

defined standards and benchmarks. An important

distinction between performance auditing and

measurement is that the former is an independent

undertaking whereas performance measurement (and

performance management) may be conducted ‘in house’

(see Barzelay, 1997). The focus of this article is systematic

auditing which appraises the adequacy of performance

information and use (OECD, 1995; Al Athmay, 2008).

Critics have argued that systematic audits constitute a

relatively narrow domain of performance measurement

and priority is given to measurement over context (Kloot

& Martin, 2000). Notwithstanding such criticism, there is

a need to develop conceptual linkages between individual

behaviouralprocesses –the factors that affectthe adequacy

of performanceinformation and use –and value for money

outcomes. The central research question of this paper is to

explore what factors affect the motivation, opportunity

and ability to process information related to value for

money outcomes.

The remainder of the paper is structured as follows.

Section 2 provides a critical review of the concept of value

for money using definitions from the literature. Then the

theoretical framework of the study is outlined. The

methods section describes the research design used to

support the research question in Section 3. The findings

and contribution to the literature is discussed in Section 4

and the article concludes with Section 5.

LITERATURE REVIEW

Defining value for money

Critics argue that VfM is an elastic concept (McKevitt,

2015). Someof the confusion is caused by the fact that value

for money is not equivalent to the price paid for a product

or service (see McKevitt & Davis, 2016). It is instead a

‘value-in-use’that takes account of performance over the

lifetimeof the product or service.Therefore VfM audits will

account for variation in actual versus expected

performance and include cost overruns. However, VfM

auditors may well use the nomenclature of ‘value in

exchange’(i.e. price and output) in assessing whether or

not value for money is achieved.

The intrinsic meaning of VfM (Table 1) is synonymous

with the ‘3Es’, an acronym for efficiency, economy and

effectiveness (Shaoul, 2005; Demirag & Khadaroo 2008,

2011). The 3E ‘definition’is inherent in the Local

Government and Finance Act (1982) in England and Wales

(Glynn, 1985; Martin, 2000). The ‘3Es’remain central to

extensions of public performance concepts including ‘Best

Val ue’and ‘Commissioning’(see Murray, 2009).

Correspondence to: Dr. David McKevitt, School of Management and

Marketing,UniversityCollege Cork,Cork, Ireland.Email: dmckevitt@ucc.ie

International Journal of Auditing doi: 10.1111/ijau.12088

Int. J. Audit. 21:190–197 (2017)

©2017 John Wiley& Sons Ltd ISSN 1090-6738