Challenges in

Performance
Auditing:
How a State Auditor
with Intriguing New
Performance Auditing
Authority is Meeting Them

AGA CPAG Research Series:

Report No. 5
June 2006
ACKNOWLEDGEMENTS
About the Authors: The views expressed in this report are those of the
authors and not necessarily those of AGA.
Ronell B. Raaum, CGAP, CGFM, is a curriculum
development consultant to the Government Audit Training AGA would like to thank Washington State Auditor
Institute, Graduate School, USDA. For 11 years as the cur- Brian Sonntag, CGFM, for providing the access to staff and
riculum manager, he was responsible for developing new information that made this case study possible, and
courses and for maintaining the currency of the Institute’s Cornelia Chebinou, NASACT, for providing information
curriculum of 50 plus courses, predominantly on perform- on state auditors’ functions and authority.
ance auditing, that it presents to federal, state and local gov-
ernment auditors. Mr. Raaum was an auditor at the U.S. Sponsor: AGA is Proud to Recognize the Firm
General Accounting Office, now the Government Account- Supporting this Effort:
ability Office, for 31 years. Among his roles at GAO, he par-
ticipated in writing the 1988 Revision to Government Auditing
Standards and was a manager in the GAO’s National Pro-
ductivity Group where the audit focus was on measuring
the performance of agency programs and applying bench-
marking to identify performance problems and possible
solutions. Mr. Raaum has co-authored two books: Opera- Corporate Partner AGA Professional Staff
tional Auditing (with D.L. Scantlebury) published by AGA, Advisory Group Relmond Van Daniker,
and Performance Auditing: A Measurement Approach (with DBA, CPA
Stephen Morgan, City Auditor of Austin, Texas) published
Leadership
Executive Director
by The Institute of Internal Auditors. He has written
numerous articles on auditing. Chairman
Ralph Campbell Jr., CFE, was elected North Carolina Hank Steininger, CGFM, Anna D. Gowans Miller,
state auditor in 1992, becoming the first African-American CPA MBA, CPA
ever elected to a statewide constitutional office in that state. Managing Partner, Global Director of Research
As state auditor from 1993 to 2005, he oversaw an agency, Public Sector,
that conducted financial, information system, investigative Grant Thornton LLP
Susan Fritzlen
and performance audits of North Carolina agencies and
Director of Corporate
other entities receiving state funds. Performance audits, Vice Chairman Partner Program
which were conducted both at the request of the General
John Cherbini, CGFM, CPA
Assembly and at the discretion of the state auditor, includ-
ing topics ranging from transportation to mental health to Partner, KPMG LLP Marie Force
an analysis of sweeping issues that cut across agency lines. Director of Communications
Many of those audits led to regulatory and management CPAG Research Liaison
reforms in North Carolina. Dennis J. Fischer, CGFM Christina Camara
Grant Thornton LLP Publications Manager

AGA’s Corporate Partner Advisory Group Research Program:

Building the Bridge Between Government and Industry

A
GA’s Corporate Partner Advisory Group (CPAG), The CPAG was organized in 2001 as a business element
executive director and director of research are creat- within AGA. The mission of the CPAG is to bring industry
ing research projects of value to governments, indus- and government executives together to exchange informa-
try and the entire AGA membership. These studies are tion, support professional development, improve communi-
expected to result in reports assessing current and/or best cations and understanding, solve issues and build
practices and make recommendations for future improve- partnership and trust, thereby enhancing AGA’s focus on
ments in federal, state and local governmental accounting, advancing government accountability. Corporate member
auditing and financial management. CPAG members sup- involvement in the CPAG is limited to organizations that
port AGA research through either cooperative or sponsored sign up for the AGA Corporate Partner membership pro-
research projects. “By undertaking research, AGA is fulfilling gram.
its mission as a thought leader in advancing government For more information on the Research Program, please
accountability,” said AGA Executive Director Relmond Van visit the AGA website, Research Section at www.agacgfm.org/
Daniker, DBA, CPA. “This is one of numerous research initia- research/default.aspx or contact Anna Miller at
tives that will benefit government and bridge the gap [email protected].
between the public and private sectors.”

2 AGA Corporate Partner Advisory Group Research

TABLE OF CONTENTS
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Research Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Washington State Voters Call for Independent Performance Audits . . . . . . . . . . . 5
The Initiative Capped a Continued Quest for the State Auditor
to Conduct Performance Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Unique Features of the State Auditor’s New Authority . . . . . . . . . . . . . . . . . . . . . . 6
A Unique Expectation of I-900 Proponents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
He Has the Authority: Now What To Do? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Common Challenges in Performance Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Staff Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Protocol for Audit Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Contracting for Audit Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Performance Management and Measurement . . . . . . . . . . . . . . . . . . . . . . . . . 12

Conclusions and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Appendix A: I-900 Audit Authority and Requirements . . . . . . . . . . . . . . . . . . . . . . . 14
Appendix B: Expectations and Objections of Proponents and Opponents . . . . . 15

June 2006 3
CHALLENGES IN PERFORMANCE AUDITING
Background stated by State Auditor Brian Sonntag, “To meet public
In November of 2005 the citizens of Washington state expectations, we must get audits under way almost immedi-
voted to give their state auditor the most extensive authority ately, and produce results. We also must balance that with
in the country to conduct comprehensive, independent per- exercising care in deciding what we audit, how we hire and
formance audits of state and local governments. To carry out train, and how we involve citizens, public employees and
this authority, the citizen-sponsored initiative dedicated a others in our decisions. And our audit work must be fair and
portion of the state sales and use tax revenue solely for the objective, it must be sound and of high quality, and it must
conduct of performance audits. Among its provisions, the be credible and constructive.” In this context, it is important
initiative requires the state auditor to follow Government to recognize that when the initiative was passed, the state
Auditing Standards, and states that no legislative body, auditor had no performance audit staff, no policies and
office holder or employee may impede or restrict the author- procedures, no space and an inadequate salary structure.
ity of the state auditor to conduct performance audits. On
the conduct of audits, it urges the state auditor to focus on
the largest, costliest government entities first, and to offer a Research Objective
step-by-step remedy to whatever ineffectiveness and ineffi- The objective of this research study is to document the ini-
ciency is discovered in audited entities. tial actions taken by Sonntag to implement the provisions of
The initiative, with its monthly revenue stream of $800,000 the initiative and prepare to conduct performance audits.
to $900,000, brings with it extraordinary expectations. As The graphic below depicts what he wants to achieve.

4 AGA Corporate Partner Advisory Group Research

CHALLENGES IN PERFORMANCE AUDITING
Washington State Voters Call for Independent The Initiative Capped a Continued Quest for the State
Performance Audits Auditor to Conduct Performance Audits
On November 8, 2005, Washington state voters restored Washington State Auditor Brian Sonntag has advocated
the state auditor’s authority to conduct performance audits for performance audits since he was first elected in 1992, 13
of state and local government. State voters restored the years prior to passage of the initiative. The need for per-
authority by approving a citizen-sponsored initiative, Initia- formance auditing was a plank in his initial election cam-
tive 900, which dedicates 0.16 percent of the state’s sales and paign. On the limited success of his advocacy efforts, in his
use tax revenue for the state auditor to independently select own words, “There had
and conduct comprehensive performance audits. been several legislative
Fifty-seven percent of voters approved Initiative 900 (I- Thirty state auditors have efforts over the years,
900). Initiative proponents described performance auditing authority to select and conduct most notably since
as a valuable management tool carefully structured around performance audits on their own 2002, but they never
tough, nationally recognized auditing principles that evalu- initiative—without approval of resulted in anything,
ate whether tax dollars are being spent in an effective, effi- the legislature or some other until the initiative.”
cient and economic manner. The audits measure a program’s designated entity. Fifteen of the With Sonntag as a
actual performance against its goals and objectives and seek thirty are citizen elected state vocal advocate, the
to uncover any waste, inefficiency or unnecessary duplica- auditors. political and public
tion of services and identify steps to resolve such problems. —NASACT debate over the state
In the late 1960s the Washington state auditor conducted a auditor conducting
number of performance performance audits
audits critical of execu- continued. In 1993 (Sonntag’s first year in office), a group of
Performance audit is a valu- tive branch manage- legislators inserted wording in the state auditor’s budget
able management tool carefully ment and, most eliminating the outright ban, but said the state auditor could
structured around tough, nation- important, one audit conduct performance audits only when directed and funded
ally recognized auditing princi- critical of a trip to by the legislature. However, in the intervening 12 years only
ples that evaluate whether tax Puerto Rico taken by one performance audit was funded, approved, and conduct-
dollars are being spent in an several influential leg- ed: a review of the Washington State Investment Board in
effective, efficient and economic islators. Embarrassed 2001. Since 1990 the JLARC produced 140 audit reports (just
manner. by the audit results, over nine a year). The quality of JLARC research is recog-
—Heartland Institute (reporting the Washington State nized as excellent, however it only audits specific programs
on I-900) Legislature (the legisla- as directed by the legislature. Hence, it is not viewed as fully
ture) proceeded in 1969 independent.
to preclude the state auditor from conducting further per- In most legislative sessions over the last 13 years, legisla-
formance audits of state government. It achieved this by tion has been introduced to provide the state auditor with
adding a provision to the state auditor’s budget precluding authority to conduct some performance auditing. However,
the use of any funds for performance audits. Subsequently, the legislation either was not passed by the legislature or
in 1971, the legislature passed a law transferring the authori- was vetoed by the governor. In 2005 the legislature passed,
ty to conduct performance auditing from the state auditor to and the governor signed, a bill giving the state auditor
the legislature; to what is now known as the Joint Legislative authority to conduct performance auditing but under the
Audit and Review Committee (JLARC). oversight of a politically appointed citizen advisory board.
The ban on performance audits did not limit the state The board would approve the audits and the state auditor
auditor’s authority to conduct financial audits. The state would have the audits done on contract. In a separate bill,
auditor retained this authority and currently has an annual the Senate authorized $4 million for independent perform-
budget of $22.5 million and a staff of 320 (including support ance audits of the Department of Transportation and other
staff) conducting such audits, which include financial state- transportation-related agencies (which was explicitly pre-
ment audits, and accountability and compliance audits. The cluded by the enacted House bill). These audits, which
audits encompass both state and local government agencies remain authorized and funded, are to be conducted on
and other special-purpose state and local entities. The audit- contract.
ed units of government are required to pay for these audits Against that backdrop, Washington citizen Tim Eyman
at a rate set by the state auditor. introduced Initiative 900 to offer voters, what he called, a
“900-pound gorilla” alternative to the legislature’s weak and
limited versions of performance audits. (Eyman had been
involved in a number of tax cut initiatives through the
years.) As reported by the press, “Mr. Eyman knows the
value of imagery. He wore a gorilla suit when holding I-900
press conferences.” In a press conference on passage of his

June 2006 5
CHALLENGES IN PERFORMANCE AUDITING
initiative, Mr. Eyman is the state auditor may have up to five years to demonstrate
Nothing is more powerful quoted as saying, “All the value of performance auditing before the legislature will
than an idea whose time has the intellectual ground- venture to critically review the initiative and the dedicated
come. work for performance source of funding.
—Victor Hugo audits had been laid 2. While Initiative 900 states that performance audits may be
out for years by the done on contract, there appears to be an expectation by
Evergreen Freedom the legislature and the governor that performance audits
Foundation (a proponent of performance auditing) and talk will be done on contract. This expectation reflects a desire
radio, making Initiative 900 a real cakewalk. Voters instinc- of a large number of legislators to limit the growth of state
tively want accountability and transparency, but elected employees. As evidence of this expectation, all legislative
officials don’t.” bills since 2002 on performance auditing have contained a
While past Eyman tax cut initiatives drew media opposi- requirement for the audits to be done on contract. Sonntag
tion, I-900 enjoyed broad media support, particularly from and Long plan to conduct much of the initial performance
talk radio and most of the state’s newspapers. According to audit work under contract with private firms to meet pub-
a respected state politician who held positions in the state lic expectations for near-term results. Their short-term
legislature and the federal executive, “The appeal of the ini- goal is to conduct about 50 percent of performance audits
tiative was not hurt by the fact that the state auditor is the on contract. Their current long-term goal is to conduct
most popular elected official in the state.” about 25 percent of performance audits on contract and
On passage of the initiative, Sonntag is quoted as saying, about 75 percent with in-house auditors. To the research
“We now have a unique opportunity where we have sup- team’s knowledge, no U.S. audit office conducts perform-
port by the governor’s office and the citizens for independ- ance audits on contract as a matter of routine, ongoing
ent performance audits. practice.
While I-900's adoption in A 57 percent vote is a 3. Since I-900 was a citizen-driven initiative, Sonntag has
Washington has immediate loud voice. Clearly the embarked on a process to engage citizens and elicit their
implications for that state, sup- people are saying they ideas on where performance audits should be focused. In
porters of limited and account- want accountability its First 100 Day Report, the Office of the State Auditor
able government see the and transparency.” indicated that it has contracted with a research firm and is
initiative’s 57 percent approval working to develop focus groups, public forums, opinion
vote as having an impact on Unique Features of polling, Web surveys and other means to gather citizens’
budget debates nationwide. the State Auditor’s thoughts and ideas. Those efforts are intended to meet
—Heartland Institute (in report- New Authority proper qualitative and quantitative research methods. In
ing on I-900) public forums already held, the audit priorities of citizens
There are five
were transportation, education, social services and health
unique features of the
care. Those issues will be among the initial list of audits
Washington state auditor’s authority and expectations for
conducted.
conducting performance audits. To the knowledge of the
research team, very few, if any, audit offices in states where 4. I-900 states that the scope for each performance audit
auditors conduct performance auditing have these features. shall not be limited, and that each audit is to include nine
The first feature is one that warrants attention of the entire elements. In brief, these are to identify:
performance audit community. A full list of the authority • cost savings;
conferred by I-900 is in Exhibit A. • best practices;
1. I-900 provides the auditor with a dedicated source of • services that can be reduced or eliminated;
funding. The voter-approved initiative dedicates 0.16 per-
cent of the state’s sales and use tax revenue for the con- • services that can be transferred to the private sector;
duct of performance audits. This revenue is to be • gaps or overlaps in programs and services;
deposited to an “audits account” from which only the • the feasibility of pooling information technology systems;
state auditor or the state auditor’s designee may authorize
• opportunities to change or eliminate departmental roles
expenditures. The funding source and amount is not sub-
or functions;
ject to approval by the legislature. The money is not only
dedicated, but the amount is significant; an estimated $6.6 • statutory or regulatory changes that may be necessary for
million in fiscal year 2006 (per the state Office of Financial the department to properly carry out its functions; and
Management) and a total of $18.4 million by June 30, 2007. • to analyze departmental performance data, performance
On the question of how long this situation will prevail, measures and self-assessment systems.
state law prohibits the legislature from changing initiative- The last bullet relates to the state’s efforts to establish a
induced provisions for two years after enactment. It would “performance budgeting and measurement system” (further
be a politically sensitive vote to change what the citizens put discussed below).
in place. The research team was told by a reliable source that
given the popularity of the initiative and the state auditor,

6 AGA Corporate Partner Advisory Group Research

CHALLENGES IN PERFORMANCE AUDITING
These elements pose a challenge to the state auditor in it right. It has to be good—both in audit quality and results.
two ways. First, they have implications for audit selection in One misstep could compromise our credibility.”
that the elements can be viewed as expectations for perform- To illustrate the sense of expectation, with regard to
ance audits to achieve. To this end, five of the elements have results, I-900 proclaims that performance audit will save tax-
a cost savings focus. Second, not all of the elements can, as a payers billions of dollars. Similarly, the League of Women
practical matter, be included in each audit. Voters, in arguments for I-900, stated that the “$17 million
5. As noted above, the JLARC conducts performance audits. (from the dedicated sales and use tax in 2005-2007 for per-
Only one other state, Pennsylvania, has both a legislative formance audits) will ensure that $40 billion in taxpayer
auditor and a state auditor that conducts performance dollars are spent wisely. The league also reported that the
audits (according to NASACT data). Six states (based on state auditor would complete a draft work plan in Novem-
NASACT data) have both a state auditor and a legislative ber of 2005. The initiative vote was set for November 8, 2005
auditor, but only in Washington and Pennsylvania do and became effective on December 8, 2005.
both the state auditor and the legislative auditor conduct Sonntag explained that the expectation for quick results
performance audits. created a dilemma: If the office didn’t produce results quick-
ly, opponents would say they knew we couldn’t do it, and
It is important to recognize A Unique Expecta- proponents would be disappointed as well.
the positive impact of regular tion of I-900 Propo-
oversight (provide by perform- Sonntag’s first action after the initiative passed was to
nents thank the voters. “I got on radio shows and met with the
ance audit). Not only would
With one exception, media. Since then I have taken every opportunity, as has my
poor performance be identified
the expectations director of performance audit, to explain the challenges my
and ended, but previously
expressed publicly by office faces in gearing up to conduct performance auditing.
unpublished success stories
proponents of per- In citing the challenges, I have given assurances that we will
would become a part of the pub-
formance auditing do the job right.” He explained that he and Long are trying
lic record, allowing state man-
were not unusual. to manage expectations by laying out a chronology of the
agers and workers to establish
They reflect the senti- actions they have taken, those they have planned, and their
credibility with voters, some-
ment one finds in timeline.
thing that today is severely
reviewing literature on Since then (to March 31, 2006), the state auditor has spo-
lacking.
performance auditing. ken about the performance audit program to 25 to 30 groups
—Washington Policy Center
The exception is an across the state (per his chief policy advisor who tracks such
expectation for perform- activities). The groups include the Washington Roundtable,
ance audits to recognize and report good performance along Washington Research Council, community organizations,
with poor performance. This departs from the tradition in civic clubs, civic activist groups and local government asso-
performance auditing, which is to focus on and report on ciations. Long and members of the performance manage-
poor performance. Thus, should Sonntag embrace this ment team also have given presentations on the program.
expectation, he will take an approach to performance audit-
ing not commonly practiced by colleagues in the profession. Important Considerations I-900 Does Not Address
The research team compiled a list of expectations and There are several important considerations that are not
objections expressed by proponents and opponents of per- addressed by the initiative or in Washington state law. While
formance auditing compiled from a limited review of litera- these omissions are not fatal, they do raise issues for imple-
ture, primarily press reports citing the views of individuals mentation.
and organizations—in support or opposition to legislative
bills on performance auditing (in 2005) and Initiative 900. • The initiative does not include any limitation on access to
This list is included as Appendix B. audit working papers. It is common for audit offices to
have a provision that audit working papers are not avail-
He Has the Authority: Now What to Do able for public inspection during the course of an ongoing
audit; some audit offices never allow work papers to
“Wow! Now what do we do?” was Sonntag’s response become public. Some audit offices have a provision that
when asked about his first thoughts after Initiative 900 working papers are never available for public inspection.
passed. He said that he knew the office had a difficult task
ahead since it had no performance audit staff, no operations • Performance audits, by their very nature, require exten-
policies and procedures, no organization structure, no facili- sive research, thorough analysis and special skill sets.
ties and no plan. “Oh, we had ideas, but no detailed plan of They do not lend themselves to fast turn-around times,
action laying out what we needed to do and how soon to do especially when a staff is being developed from scratch.
it. We clearly had our work cut out for us. Compounding Yet voters are likely to expect sweeping and rapid reports.
our challenges, the initiative raises high expectations for • Performance audits, in considering effectiveness, regularly
quick results. We get a few months, not a year, to get organ- point to a shortage of resources for the tasks assigned to
ized, put a plan together, and start conducting an audit. And agencies. Findings that recommend additional staff or
while we must focus on doing something fast, we need to do other resources to effectively carry out a mandated task,

June 2006 7
CHALLENGES IN PERFORMANCE AUDITING
while perfectly valid, could be seen as undermining the in Washington experienced the delicacy of this arrangement
cost-cutting results implied by the initiative. firsthand when, in 1969, the legislature barred any money
• The initiative does not address using existing financial from being spent for performance audits. Performance
audit teams to conduct performance audits, although auditing is a tough, precarious job, and auditors need pro-
those financial auditors could be a resource in gathering tection against retribution for doing it well.
data from locations across the state for evaluation by per- Washington State Auditor’s Unique Funding
formance audit teams. This is left to the discretion of the Arrangement
state auditor. Secure Source—The Washington state auditor has a
• Pressure to move quickly on performance auditing led to secure source of funding. Initiative 900,which restored the
salary waivers for performance audit managers, creating state auditor’s authority to conduct performance audits,
pay inequities with financial audit staff within the same dedicates 0.16 percent of the state’s sales and use tax rev-
office. The state’s pay scale for financial professionals enue for the conduct of performance audits. This revenue is
already was inadequate. The combination of a dedicated deposited to an account from which only the state auditor or
funding stream directed expressly to performance audits the state auditor’s designee may authorize expenditures.
and the need to hire performance audit professionals The funding source and amount is not subject to approval
quickly has the potential to magnify the salary inequities by the legislature. The research team knows of only one
and impact the overall operation of the state auditor’s other audit office in the United States that enjoys the added
Office. independence afforded by having a dedicated funding
source.
Common Challenges in Performance Auditing Adequacy—The amount of dedicated money that accrues
Audit offices face a common set of challenges in conduct- is estimated at $8.5 to $12 million a year by the Washington
ing performance audits. These challenges include: funding, State Office of Financial Management. This amount is suffi-
staff salaries, staff quantity and quality, organizational struc- cient to finance a staff of about 60 auditors (to include
ture, training, audit selection, reporting model, when to con- salaries, facilities, equipment, supplies, etc.) and about $7
duct audits in-house and on contract, policies and million in contracts. This is a relatively large performance
procedures (for conducting and managing audits with in- audit staff in the state audit community (per NASACT data).
house staff and with contractors), audit protocol and quality In comparison, the state auditor has an annual budget of
assurance. These concerns pertain to the profession as a $22.5 million and 300-plus staff to conduct financial audits.
whole, as well as to audit offices just getting started. Howev- Given that the number of government organizations and
er, because Sonntag plans to conduct audits on contract, at entities is the same (about 2,700 units), does this suggest that
least initially, he has unique challenges to deal with. financial and compliance audits are roughly two times more
In a rush to get started and produce results, Sonntag and valuable than performance audits? Is this ratio of spending
Long attempted to address all of these concerns more or less on financial versus performance auditing common in the
simultaneously. The actions discussed below were those state auditor community? More research may be needed to
they had completed or had in process at March 31, 2006. The answer questions such as these.
list is limited to the actions related to the common chal- Staff Salaries
lenges of the performance audit community and those Common Practice—
unique to the Washington state audit office.
Maintaining an adequate salary structure—from entry
In presenting the actions of the Washington state auditor through senior auditors—is the No. 2 challenge for the gov-
and his performance audit staff we have contrasted them ernment performance audit community. Without adequate
with the common practices in per-
formance auditing. In this it is impor-
tant to recognize that practices in the Figure 1
performance auditing profession are Entry Level Auditor Starting pay range $19,100 to $45,700 Mean: $30,000 - $35,000
far from standard.
Top of pay range $31,600 to $77,400 Mean: $35,000 - $50,000
Funding
Middle Level Auditor Starting pay range $25,300 to $57,800 Mean: $30,000 - $45,000
Common Practice—
Top of pay range $35,100 to $83,300 Mean: $40,000 - $55,000
Maintaining a secure source of ade-
quate funding is the No. 1 challenge Upper Level Auditor Starting pay range $29,200 to $66,600 Mean: $35,000 - $50,000
for the government performance audit
Top of pay range $41,100 to $123,200 Mean: $45,000 - $75,000
community. Government audit offices
throughout the United States are Audit Supervisor Starting pay range $33,600 to $76,100 Mean: $40,000 - $70,000
dependent on the legislature to pro- Top of pay range $51,600 to $135,300 Mean: $60,000 = $85,000
vide money to fund performance audit
operations. This is true even for elect- Audit Manager Starting pay range $37,900 to $87,600 Mean: $45,000 - $75,000
ed state auditors. The state audit office Top of pay range $57,500 to $155,800 Mean: $65,000 - $110,000

8 AGA Corporate Partner Advisory Group Research

CHALLENGES IN PERFORMANCE AUDITING
salaries, it is difficult to recruit and retain highly competent, Number—No formula has been devised to establish how
energetic, experienced staff. High turnover is one result as many performance auditors an organization of a given size
private sector firms and other government organizations should have. In practice, the number varies significantly,
with a higher salary scale seek to recruit experienced gov- from the GAO with more than 3,000 staff to a few cities with
ernment auditors. only one performance auditor. Staffing at state audit offices
In government, salary rates and scales are generally deter- conducting performance auditing is relatively low, from five
mined centrally. Salaries are often based on degreed profes- to around 45, with an exceptional high of 380 in one state.
sions (accounting, computer science, etc.) or some Organization—Large performance audit offices tend to
recognized technical skill. Performance auditing is not a organize around subject areas or functions with a manager
“degreed” profession. Hence, a given government entity responsible for each area or function. Some specialization by
may not have a position description and salary structure subject matter or special expertise is common in small as
established for performance auditing. As an expedient, some well as large audit offices. Large offices, including the GAO,
apply the salary structure for accounting and/or auditing, federal inspectors general and many state auditors, have
meaning financial statement auditing, a widely recognized field locations.
profession. Washington State Actions—
The range in salary rates for performance auditors across Sonntag’s initial plan was to have a team of eight per-
governments is significant. The range for all types of audi- formance audit managers with responsibility for specific
tors within the state audit community—for fiscal year 2005 subject areas, and for each manager to have a staff of two.
per NASACT—is illustrated at the bottom of the previous This staffing structure was decided in consultation with
page (the numbers are rounded). selected audit offices (including GAO), selected Washington
As a general rule, the salaries for government auditors— state officials, an analysis of state agency spending (90 per-
financial and performance—are below that in the private cent of the state budget is expended by 16 agencies), and
sector. This is particularly true for accountants and persons total state spending. The structure and area of responsibility
with advanced degrees. To compensate, government per- remain open to review and adjustment. The performance
formance audit offices commonly have special authority to audit staff will be centralized in Olympia.
grant pay increases at six-month intervals or to promise Five performance audit managers were hired in early Jan-
rapid advancement for the first two years or so. Federal uary; a sixth came on board in late February. Hiring of the
audit offices commonly promise “new college graduates” seventh and eighth managers was in process as of March 31.
with limited experience a promotion from GS-7 to GS-9 to Of the initial six on-board managers, two have experience
GS-11 within two years. They also emphasize the good conducting performance audits plus a wide range of other
health benefits and a true pension program. When hiring experience; two have a variety of work experience, including
professionals with experience, individual audit offices may expertise in working with contractors; and two came from
not have flexibility to offer a salary competitive to the pri- within the auditor’s financial, accountability and compliance
vate sector, or with those for other positions in government. audit staff. This number was kept low because in asking
Washington State Auditor’s Actions— other state auditors about their experience in having finan-
The state did not, at passage of I-900, have a position cial auditors conduct performance audits, Sonntag was told
description and pay scale for performance auditing profes- that the conversion is generally difficult. At the cut-off for
sionals. The performance audit team has since developed a this research project, Sonntag and Long were still consider-
job description with the State Personnel Office. The salary ing what role the financial and compliance audit staff will
structure for auditors was also inadequate. The salary scale play in the conduct of performance audits. Three possibili-
for financial staff was at the low end of the median for state ties are the potential for the financial audit staff to: gathering
audit offices. Perhaps as a consequence, Sonntag has been data from locations across the state for evaluation by per-
experiencing a 25 percent turnover rate in his financial audit formance audit teams, verify the reliability and relevance of
staff. Sonntag granted a salary “exception” for higher pay to performance measures, and prepare a trend analysis of
enable him to recruit the performance audit managers. changes in performance over time. The staff has the basic
prerequisite technical verification and analytical skills.
Staffing
The credentials of the performance managers are impres-
Common Practices sive—in education, knowledge and breadth of diversified
Disciplines—The general practice in performance audit- experience. In interviews with the research team, the man-
ing is to recruit professionals with a college degree, but not agers exuded an excited and positive “we can get it done”
from a single discipline. The U.S. Government Accountabili- attitude. These attributes, and the synergy of the managers
ty Office hires from a mix of disciplines with an emphasis on in working together, are considered strengths. As stated by
advanced degrees for its performance audit staff. The gener- one manager, “The team has horsepower (to get things
al practice of federal inspectors general is to hire account- done). We can’t fail.”
ants, but some recruit from other disciplines. State auditors Hiring staff to support the managers proceeded slowly
conducting performance audits generally hire from a mix of due in part to two key problems. First, the state pay struc-
disciplines, as do local government audit offices. ture was not adequate to attract experienced staff. Pay

June 2006 9
CHALLENGES IN PERFORMANCE AUDITING
exceptions were required (and obtained) to recruit the per- islative or executive branch requests; some act on issues
formance audit managers. Second, the state initially had no uncovered by investigative and financial audit teams. In
civil service position description addressing the knowledge, preparing annual audit plans, many audit offices seek input
skills and abilities required of performance auditors. Hiring from the legislature or from officials of the entity they report
of additional staff for performance audit began in March. to. The research team does not know how many audit offices
seek input from citizens. This is not a widely publicized
Training practice.
Common Practice— Washington State Auditor’s Actions—
Training is critical to an audit office’s success. No college I-900 encourages the state auditor to look at large-sized,
or university program in the United States specifically trains big-dollar organizations first. In that spirit, Sonntag’s “First
students to be performance auditors. As a consequence, 100 Days Progress Report” states that the initial audit selec-
audit organizations either hire auditors from other audit tions were based on size, public concerns, and audit staff
offices or develop their own. The “development” of profes- knowledge and opinion that the subjects will yield signifi-
sionals into performance auditors is achieved through a cant opportunities for cost savings and improved services.
combination of formal and on-the-job training, coupled with Input from citizens—a telephone interview survey and an
experience doing performance audits. The success of this ongoing website survey—weighed heavily in the subjects
development process is heavily dependent on good training. initially selected for audit. In addition, the state auditor has
The importance of training is recognized by the profes- a legislative mandate, funded at $4 million, to conduct per-
sion. Government performance auditors are required by formance audits of the State Department of Transportation
auditing standards to obtain continuing professional educa- and some transportation-related agencies. These audits must
tion. Government Auditing Standards require each auditor be completed by June 30, 2007.
to obtain 80 hours of continuing professional education Selection Criteria—The following criteria were chosen to
every two years with at least 20 hours obtained in one of the guide selection of specific topics for audit:
years. Auditors obtain the necessary training in a wide vari- • expectations from citizens;
ety of ways, to include training from professional audit
• ideas and suggestions from frontline public employees;
training organizations.
• opinions and recommendations of policymakers, interest-
Washington State Auditor’s Actions—
ed organizations and the government entities themselves;
Sonntag plans to pursue a cross training program to
• ideas generated by the governor’s performance-based
expand the capacity of his professional staff that performs
initiatives;
financial and legal compliance audits. The intent is to pro-
vide them with new skills that will give the audit office • auditor’s own research including analysis of best
greater flexibility in staffing for all types of audits, and practices;
expand career opportunities with the audit office. The state • auditor’s own judgment from knowledge and long expe-
auditor’s office is also working with two state universities to rience in conducting financial and legal compliance audits
provide internship opportunities for students doing gradu- of state and local governments;
ate work. • expectation of identifying significant efficiencies and cost
Contractors—Materials were in place for state audit office savings; and
staff to provide contractors with pre-audit training on Team- • the nine elements contained in I-900. The performance
Mate, working papers, public records, referencing and active audit team reordered the I-900 cited nine elements to
listening. reflect the team’s order of priority. As a signal of the
team’s priorities, it put identifying “best practices” ahead
Protocol for Audit Selection of the five elements that focus on “cost savings.”
Common Practice— Outreach to Citizens—Sonntag insists that his office
To have a full degree of independence, performance audit engage the public, including public employees. In particular,
offices need authority to select subjects for audit without they must gather information from various public groups on
approval of the legislature, governor or some other oversight topics of interest for audit. The performance audit team
body. Most, if not all, federal and local government auditors established a website survey which 600 people had complet-
have such authority. Of the 42 state auditors who conduct ed by March 30, 2006. The performance audit team also con-
performance audits, 30 have authority to independently tracted with a professional firm with experience in obtaining
select audits, according to NASACT. ideas from diverse public groups—through opinion polls,
The methods used to select subjects for audit vary among focus groups and other means—to assist them in obtaining
performance audit offices. Many conduct risk assessments, input from the public, to include citizens, business, interest
some using the COSO approach that involves constructing groups and government employees. The state auditor
an audit universe, prioritizing areas in accordance with risk intends for the results of these surveys to play a large role in
level, getting validation from a group of advisors, and audit- his audit selection. The first survey was conducted in mid-
ing the highest risk areas first, each year. Others receive leg- March. A telephone survey covered 405 voters from a mix of

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CHALLENGES IN PERFORMANCE AUDITING
ages, genders, regions, political party, employment status, Washington State Auditor’s Actions—
education and income. The citizens were asked about sub- The state auditor will sign the reports for all performance
jects they favored for a first performance audit. The key find- audits done on contract. The reports will be prepared by the
ings were: 28 percent favored public schools 19 percent contractors following a prescribed format developed by the
favored health care, 17 percent favored transportation, and performance audit team and the state audit office report spe-
16 percent favored social and human services. Of all respon- cialist. Sonntag has two professional writers on staff; both
dents, 49 percent wanted public schools to be audited either former newspaper reporters and editors. As a matter of pro-
first or second. tocol, the policy is to provide regular progress reports dur-
Initial Audit Topics—The subjects cited in the state audi- ing audits and to give completed reports wide distribution.
tor’s initial audit plan were based in part on research done Reports will be posted on the state auditor’s website.
by the performance audit managers. Each manager
researched and compiled a list of suggested audit areas. The Contracting for Audit Services
first audit will be on transportation issues to meet the legis- Common Practice—
lated 2007 deadline. An audit of the state’s nine educational
service districts is on the list of initial projects. That audit is Federal and state auditors commonly hire contractors
to look at their governance, organizational structure and to conduct financial statement audits. They and their col-
services they provide to school districts. Beyond the near leagues in local government seldom do so for performance
term, a comprehensive review of the K-12 education system audits. Contracting out is generally, but not exclusively,
is scheduled. Public education encompasses nearly half of limited to obtaining special technical knowledge and skills
the state budget. The subject areas selected for audit in the needed in a particular audit.
near term are listed below. Per the initial audit plan, the list- Washington State Auditor’s Actions—
ed audits of health care are dependent on hiring a perform- The legislation passed by the Senate requires transporta-
ance audit manager with expertise in the area. tion or transportation related audits to be conducted by pri-
vate firms. The legislature and the governor expect that
Figure 2 performance audits will be done on contract. This expecta-
tion reflects a desire of a large number of legislators to limit
Transportation • Highway Project Management
• Materials Inventory Management
the growth of state employees. The short-term goal is to con-
• Transportation Administration duct about 50 percent of performance audits on contract. The
• Performance Measures and Traffic Congestion current long-term goal is to conduct about 25 percent of per-
• Road Maintenance formance audits on contract and about 75 percent with in-
• Asphalt Buying house auditors.
• Washington State Ferries
Template to Contract for Audit Services—The existing
State Government • Health Care Services statewide templates for procuring professional services were
• Administration of Children’s Programs not sophisticated enough to accommodate the size and scope
• Workers’ Compensation of performance audits. Hence, the performance audit team
• Health and Recovery Services
prepared a model RFP and contract template. It did so for
• Agency Customer Service Call Centers
• Unemployment Compensation two types of contracts—to conduct a complete performance
audit, and to obtain special expertise. Development of pro-
Local Government • Sound Public Transit Agency curement templates was possible because two performance
• Port of Seattle-Construction and Management audit managers had extensive experience in contracting for
• Public Development Authorities
professional services. The performance audit team intends to
(there are about 50 such entities)
follow the established state process for advertising Request
For Proposal (RFP), to include notifying interested private
firms with competence to conduct performance audits.
Reporting Policies for Managing Audits Done on Contract—The
Common Practice— performance audit management team intends to take a
hands-on approach in managing audits conducted on con-
The tradition in performance auditing is to issue written tract. This includes participation in planning, observing and
audit reports. Performance audit report formats are as varied monitoring fieldwork and reviewing contractor reports. The
as the topics themselves. Some audit offices prefer a short, extent of their participation in report writing is under con-
terse style that resembles the narrative sections of financial sideration. The team is developing policies setting forth the
audit reports. Others take a broader approach, incorporating practices they will follow in all four audit phases—survey,
graphics, photographs and special fonts intended to make planning, fieldwork and reporting. It is also developing
the reports more readable. Each report is unique. It is com- procedures for contractor use of TeamMate.
mon practice for public sector audit offices to make their
reports available to the public and to post the reports on Strategic Plan
their websites. Common Practice—
The value of following a strategic plan is widely acknowl-

June 2006 11
CHALLENGES IN PERFORMANCE AUDITING
edged in both the private and public sectors, and is required the tools of strategic business planning and performance
by many, if not most, government entities. Beyond a few measures to establish their priorities and measure their
generally recognized items, such as a vision statement, mis- progress toward their stated goals.” This order established a
sion statement, an explanation of how the mission is to be series of “quality management” activities for state agencies,
achieved, and measures of performance, organizations are including the establishment of a quality-improvement repre-
free to decide the form and content for their strategic plans. sentative for individual agencies, and quality steering com-
For performance audit offices, one unique, and important mittees, which were to report to the governor each quarter.
strategic planning item is audit selection—the method and For every major program administered by an agency, pro-
rationale for selecting subjects for audit. gram objectives are to be reported with measurable outputs
Washington State Auditor’s Actions— and outcomes, to the extent possible. This performance
Sonntag and Long’s stated intention is to totally transform information is publicly reported, at the agency level, in the
the plan in light of their performance audit authority. At the biennial executive budget document. The JLARC is responsi-
cut-off date for this research project (March 31, 2006), the ble for assessing the relevance and reliability of agency per-
plan was still in development. formance measures.
One item common to strategic plans is a vision statement. The quality of the performance measures developed by
Sonntag’s vision for performance audit is that the audits: agencies can directly affect the results of performance audits.
If those measures are broad, vague and difficult to quantify,
• be fair, then the performance auditors will have a difficult time
• be valued and implemented as a management tool, clearly delineating, which measures have been met and
• promote continuous improvement of quality, efficiency which have not. In conducting performance audits, the audi-
and effectiveness, tors will be faced with preparing their own measures, which
• focus on results, they may recommend that the agency prepare on a regular,
recurring basis.
• enhance accountability and trust, and
Priorities of Government (POG) Budget Process
• complement the state’s performance management and
budgeting priorities. The Washington state POG initiative was designed to rank
and prioritize state government services and develop a
His expectation for the performance audit program is that budget strategy from the results of these exercises. POG cate-
it will achieve profound results, first and every year, meas- gorizes all state programs in services into one of 11 results
ured by success in having recommendations implemented areas. The results areas are statewide desired conditions (for
and the impact achieved. example, improve student achievement in elementary, mid-
Performance Management and Measurement dle and high schools; improve quality of Washington's natu-
Current Practice— ral resources); they are not program-specific.
In recent years the federal government, and many state A guidance team and 11 results teams that corresponded
and local governments, have enacted laws requiring estab- with each of the results areas were developed to implement
lishment of measures of performance and for use of those the POG process. Ultimately, the POG approach informed
measures in managing. These laws generally require that the governor’s proposed budget for the 2003-05 biennium.
executive branch agencies engage in strategic planning to Budget activities were ranked by contribution to the results,
include the development of an agency mission statement, and a line was drawn at the dollar amount allocated to the
measurable goals for applicable aspects of output and out- results. Activities below the line were listed in order to iden-
come performance, and performance measures indicating tify how changes in funding might affect service provisions.
the relative success in achieving program goals. Some have a Washington State Auditor’s Actions—
requirement for use of performance measures in budgeting, Initiative 900 cites as one of the 11 items to be included in
generically referred to as performance-based budgeting. each performance audit, “an analysis of departmental per-
To date, the efforts of audit offices in verifying the reliabil- formance data, performance measures and self-assessment
ity of agency-prepared performance measures has been lim- systems.” In keeping with this requirement, one of the state
ited, based on the knowledge of the research team. auditor’s visions for performance audit is that his audits
Washington’s Government Management Accountability “will complement the state’s Priorities of Government Bud-
and Performance Program (GMAP) get Process and the Government Management Accountabili-
ty and Performance program.”
In 1993 the legislature amended Washington’s Budgeting
and Accounting Act to require state agencies to engage in Consistent with these performance-based management
strategic planning, including the development of an agency initiatives, Sonntag envisions his audits to “be valued and
mission statement and measurable goals, program objec- implemented as a management tool.” This could prove to be
tives, and budget proposals that incorporate performance a considerable challenge. The state auditor is independently
measures indicating the relative success in achieving pro- elected and not considered a member of either the legislative
gram objectives and goals. This legislation was followed in or the executive management team. Moreover, both the legis-
1997 by an executive order requiring state agencies to “use lature and the executive have historically perceived the state

12 AGA Corporate Partner Advisory Group Research

CHALLENGES IN PERFORMANCE AUDITING
auditor not only as an outsider, but as an adversary, at least their state auditor and the funds to carry out that authority.
in the context of the legislature precluding his office from The two other legs of the stool must come from the execu-
conducting performance audits. It must be noted that the tive and legislative branches of government—establishment
audit office is well respected throughout the state and this is of meaningful performance measures for every audited
attributable to the work done by the financial and compli- agency and ongoing performance management that focuses
ance audit staff. As an indication of this respect (and recog- not only on the quantitative factors of dollars and clients,
nition of the state auditor's new performance audit but also the qualitative factors embodied in the basic per-
authority), the governor, in response to a series of media sto- formance questions.
ries about patient mistreatment and abuse at state licensed Washington state provides a unique laboratory for further
health care facilities, asked the state auditor to conduct a study of performance auditing and performance manage-
performance audit of the state’s health care licensing and ment issues, the development of meaningful performance
discipline practices. The request was made, and accepted by measures and the adjustments needed to manage enterprises
the state auditor, as our research report was in final prepara- for more than just “number” outcomes.
tion.
The Washington state auditor, with the clear support of
This raises a fundamental question for all auditors. What his citizenry, is in a unique position to encourage the devel-
is the appropriate role of audit in government performance opment of performance reporting models and performance
management initiatives—initiatives that include measure- measures that could well benefit other jurisdictions.
ment-based management, budgeting and reporting? The
respective managerial roles of the legislature and executive Because the initiative calls for performance reports that
are established in law, principle and practice. The role of the highlight positive outcomes, the state auditor also is in a
auditor as an accepted and respected third member of the unique position to identify and promote “best practices”
performance management team has not been articulated. that can be used by other government programs.
Moreover, it is unclear whether auditors would feel comfort- With that in mind, the following recommendations are
able in this role. Some might perceive such a role as compro- suggested:
mising their independence, citing the Government Auditing • Because the performance auditing authority is citizen-
Standards as their support. The Washington state auditor driven, Sonntag has already started to ensure that his
has said he intends to work cooperatively with the GMAP work is transparent to the citizens of the state. Those
and POG efforts, primarily to avoid any potential duplica- efforts should continue. Also, the State Auditor’s Office is
tion and seek ideas for audits. But he said those programs undertaking an extensive, perhaps one-of-a kind, effort to
are clearly separate from the role of auditors, who must obtain ideas from citizens on subjects for future audit.
remain independent. Other audit offices may consider seeking input on audit
The research team believes that further research is needed topics from citizens to the extent they are not already
to explore the appropriate role for public sector auditors in doing so. Because his office’s outreach to citizens may
government performance management initiatives. provide some valuable lessons, the Washington state
auditor should carefully document the proceedings and
Conclusions and Recommendations the results.
The voters of Washington state have given their state • The state auditor should partner with the state Personnel
auditor a level of independence that is virtually unprece- Office to address the salary disparity between financial
dented in the auditing community. Not only has this citizen- audit teams and performance audit teams. Revisions to
driven initiative given the state auditor a mandate to check the state personnel salary scale should be aggressively
the performance of state and local agencies, but it also has pursued.
given the Office of State Auditor a dedicated revenue stream • Financial audit teams, with their broad coverage and
that is resistant to tampering by those who might resent a access to state and local agencies, should be integrated
critical audit. into the performance audit process. Financial audit teams
The Washington initiative is a sign that at the federal, can be helpful, not only in auditing performance meas-
state and local levels, citizens are demanding more account- ures for the agencies with which they are engaged, but in
ability from the government programs they finance with analyzing whether measured performance is increasing,
their tax dollars. They do not want to know just how many decreasing or remaining relatively stable. This issue of
dollars were spent and how many people were served. integration and performance measurement could well be
Instead, they want the answer to more basic questions: Is the worth a follow-up study.
program fulfilling the purpose for which it was created? • The state auditor can partner with others to develop
And is it fulfilling that purpose in the most economical and model legislation for meaningful performance measures
efficient way? Are there opportunities to improve the per- that could apply both to local governments and to other
formance of those programs, or in some cases, should those jurisdictions.
programs or activities be reduced or eliminated? • Washington state voters, with the encouragement of the
But answering those basic questions requires a three- state auditor, have shown great innovation in tying a ded-
legged stool approach. The citizens of Washington have sup- icated revenue stream to performance audit authority.
plied one of the legs—performance auditing authority for Other jurisdictions may want to consider seeking similar

June 2006 13
CHALLENGES IN PERFORMANCE AUDITING
dedicated funding to ensure the independent voice that Expectations—The following provisions lay out key
citizens want and expect from their government auditing expectations of I-900 performance audits.
agencies. How those resources are used and managed in • The people encourage the state auditor to aggressively
Washington state creates another subject for future study pursue the largest, costliest governmental entities first but
and review. to pursue all governmental entities in due course.
• AGA should consider conducting further research to • The scope for each performance audit shall not be limited
explore the appropriate role for public sector auditors in and shall include nine specific elements: (1) identification
government performance management initiatives. of cost savings; (2) identification of services that can be
reduced or eliminated; (3) identification of programs or
Appendix A: I-900 Audit Authority and Requirements services that can be transferred to the private sector; (4)
State Auditor’s Authority—The following provisions of analysis of gaps or overlaps in programs and services and
Initiative 900 lay out the state auditor’s authority for con- recommendations to correct gaps or overlaps; (5) feasibili-
ducting performance audits. ty of pooling information technology systems within the
• The state auditor shall conduct independent, comprehen- department; (6) analysis of the roles and functions of the
sive performance audits of state government and each of department, and recommendations to change or eliminate
its agencies, accounts and programs; local government departmental roles or functions; (7) recommendations for
and each of its agencies, accounts and programs; state and statutory or regulatory changes that may be necessary for
local education governmental entities and each of its the department to properly carry out its functions; (8)
agencies, accounts and programs; state and local trans- analysis of departmental performance data, performance
portation governmental entities and each of its agencies, measures, and self-assessment systems; and (9) identifica-
accounts and programs; and other governmental entities, tion of best practices.
agencies, accounts and programs. Government includes • To the greatest extent possible, the state auditor shall
all elective and nonelective offices in the executive branch instruct and advise the appropriate governmental body on
and includes the judicial and legislative branches. a step-by-step remedy to whatever ineffectiveness and
• The state auditor shall review and analyze the economy, inefficiency is discovered in the audited entity.
efficiency and effectiveness of the policies, management, Requirements of Report Recipients—The following
fiscal affairs, and operations of state and local govern- I-900 provisions lay out the requirements of audit report
ments, agencies programs and accounts. recipients.
• The state auditor may, at any time, conduct a performance • On or before 30 days after the performance audit is made
audit . . . Follow-up performance audits . . . may be con- public, the corresponding legislative body or legislative
ducted when determined necessary by the state auditor. bodies shall hold at least one public hearing to consider
• No legislative body, officeholder or employee may impede the findings of the audit and shall receive comments from
or restrict the authority or the actions of the state auditor the public.
to conduct independent, comprehensive performance • For performance audits of state government and its agen-
audits. cies, programs and accounts, the legislature must consider
• The state auditor is authorized to issue subpoenas to gov- the state auditor reports in connection with the legislative
ernmental entities for required documents, memos and appropriation process.
budgets to conduct the performance audits. • An annual report will be submitted by the joint legislative
• These performance audits shall be conducted in accor- audit and review committee by July 1 of each year detail-
dance with the U.S. Government Accountability Office ing the status of the legislative implementation of the state
government auditing standards. auditor’s recommendations. Justification must be provid-
ed for recommendations not implemented. Details of
• The state auditor may contract out any performance other corrective action must be provided as well.
audits.
• For performance audits of local governments and their
• For counties and cities, the audit may be conducted as agencies, programs and accounts, the corresponding leg-
part of audits otherwise required by state law. islative body must consider the state auditor reports in
• Each audit report shall be submitted to the corresponding connection with its spending practices.
legislative body or legislative bodies and made available • An annual report will be submitted by the legislative
to the public on or before 30 days after the completion of body by July 1 of each year detailing the status of the leg-
each audit or each follow-up audit. islative implementation of the state auditor’s recommen-
• Beginning on December 8, 2005, 0.16 percent of the sales dations. Justification must be provided for
and use taxes collected shall be dedicated to funding com- recommendations not implemented. Details of other
prehensive performance audits. This revenue shall be corrective action must be provided as well.
deposited in the Performance Audits of Government
Account. Only the state auditor or the state auditor’s
designee may authorize expenditures from the account.

14 AGA Corporate Partner Advisory Group Research

CHALLENGES IN PERFORMANCE AUDITING
Appendix B: Expectations and Objections of • Front-line employees are frustrated by waste and red tape.
Proponents and Opponents The front-line employees would benefit from a solid, hon-
est performance audit. (Supporters of House Bill 1064)
This list of expectations and objections expressed by pro-
ponents and opponents of performance auditing were com- • Not only would poor performance be identified and
piled from a limited review of literature, primarily press ended, but previously unpublished success stories would
reports citing the views of individuals and organizations in become a part of the public record, allowing state man-
support or opposition to legislative bills on performance agers and workers to establish credibility with voters,
auditing (in 2005) and Initiative 900. With the exception cited something that today is severely lacking. (Washington
above, the expectations and objections are not unusual. They Policy Center)
reflect the sentiment one finds in reviewing literature on per- Objections of Opponents
formance auditing. • Performance audits are not a cure-all for the ills facing
Expectation of Proponents state government. (Washington Policy Center)
• Performance audits are a valuable management tool • Initiative 900 is ill-conceived, not drafted with public
carefully structured around tough, nationally recognized input, and is not needed. Initiative 900 doesn’t solve any-
auditing principles that evaluate whether tax dollars are thing. It’s like enlarging a wound instead of applying a
being spent in an efficient, effective and economic manner. bandage. (Permanent Defense)
(The Heartland Institute) • Initiative 900 overloads Washington state with audits.
• Voters instinctively want accountability and transparency. (Permanent Defense)
(Eyman, sponsor of I-900) • The state auditor’s office says implementing I-900 would
• A performance audit looks at government programs to see cost $90 million every two years. The office also says the
whether agencies are using public money efficiently. The initiative will require the auditor’s office to expand four
audits root out the cause of wasteful practices and meas- times its current size and will take a decade or longer to
ure a program’s actual performance against its goals and fully implement. (Permanent Defense)
objectives. (Washington Policy Center) • I-900, which, honestly, will pass by a large margin, is a bit
• Supporters of both the legislature’s plan and Initiative 900 of a boondoggle, a one-size-fits-all solution to a problem
agree citizens deserve the most “bang for their buck.” The that really doesn’t exist. (unknown source)
long-term goal would be to uncover any waste, inefficien- • It is more appropriate to fund performance audits in the
cy or unnecessary duplication of services and identify budget process where citizens have an opportunity to
steps to resolve such problems. (Washington Policy Cen- participate. (The League of Women Voters of Seattle)
ter)
• It should not be the business of the state to manage and
• Our foundation is a strong advocate of using comprehen- dictate state priorities on local government (re: state audi-
sive performance audits as a tool to ensure the wisest pos- tor’s authority to audit local governments). This intrudes
sible use of taxpayer dollars and to decrease the cynicism upon local control and home rule powers of cities and
people have about their government. (Evergreen Freedom counties. (The League of Women Voters of Seattle)
Foundation)
• There is concern that comprehensive audits of every
• Regular performance audits determine if an organization agency won’t reap savings and that they are expensive to
is carrying out its responsibilities effectively and efficient- conduct. Also, performance audits aren’t silver bullets,
ly and determines if information reported in performance clear and disciplined leadership is the most effective way
measures is accurate. (Evergreen Freedom Foundation) to increase performance, and performance audits do not
• In authorizing performance audits (HB 1064), the legisla- build capacity to improve because they are too focused on
ture recognized that citizens demand and deserve the past. (Opponents of House Bill 1064)
accountability of public programs and that public pro- • Initiative 900 is so unnecessary that even if it gets the
grams must continuously improve in quality, efficiency needed signatures and passes, there will be no discernible
and effectiveness to increase public trust. (The League of impact. (Washington State Council of County and City
Women Voters of Seattle) Employees)
• Essential tools for improving the efficiency and effective-
ness of government include fair, independent and profes-
sional performance audits of state agencies, performance
reviews, a performance-based budgeting process and
quality assessments. (House Bill 3109 giving the state
auditor limited authority to conduct performance audits)

June 2006 15
Advancing
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Association
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