What Is a Performance Audit?

Learn about the three E’s of performance audits.

  • Posted on - 12/13/2022

The Office of the State Comptroller (OSC) conducts performance audits of the executive branch of state government, including all entities exercising executive branch authority, public institutions of higher education, independent state authorities, units of local government, and boards of education. 

Our goal is to help prevent the fraud, waste, and abuse of taxpayer money by evaluating whether entities receiving public tax dollars are operating efficiently and in the best interest of all taxpayers. With that in mind, we help entities improve their operations, ensure compliance with laws, and save taxpayers' money whenever possible. 

The Difference Between a Performance Audit and a Financial Audit 

Performance audits and financial audits have many similarities, but they are not alike. In general, financial audits examine and evaluate an organization’s financial statements to determine that public funds are spent lawfully and managed in accordance with generally accepted accounting principles. Performance audits look at a broader range of issues, providing an independent assessment of whether specific programs, processes, or functions are achieving the stated goals. 

Both types of audits must comply with Generally Accepted Government Auditing Standards (GAGAS) issued by the U.S. Government Accountability Office and are commonly known as the Yellow Book standards.  

The Goals of a Performance Audit 

Performance audits examine the efficiency and effectiveness of government programs with the goal of implementing improvements, usually to reduce costs. The principles guiding a performance audit, often called the three E’s, are: 

  • Economy – keeping the cost low 
  • Effectiveness – meeting the program’s objectives or goals 
  • Efficiency – getting the most out of available resources 

Performance audit objectives can vary widely and may include assessments of program economy, effectiveness, and efficiency; internal controls; compliance; and risk assessments.  

Objectives may also compare the current condition – what is – against stated criteria – what should be. In these cases, the auditor determines the criteria against which a program will be evaluated. Performance audits can check any subject matter against criteria such as: laws, regulations, contract terms, expected performance measures, grant agreements, standards, or benchmarks. 

Previous OSC performance audits have examined areas that include health benefits, payroll practices, contract management, human resources, legal services, procurement practices, accounting controls, and segregation of duties. 

The Benefits to Taxpayers

Performance audits deliver objective analysis, findings, and conclusions to assist in improving operational performance, reducing costs, and enabling informed decision-making.  

The results of an audit might identify cost savings, duplicative services, gaps or overlaps in service, or underutilized services that could be reduced or eliminated. Performance audits also contribute to public accountability. 

Recent OSC audits have found: 

  • Inadequate policies and procedures and controls resulting in approximately $790,000 of improperly authorized or unsupported transactions 

Wondering how OSC selects auditees? Read more about the
audit process and past audits.  

Waste or Abuse

Report Fraud
Waste or Abuse
Government Waste and Mismanagement Hotline: 1-855-OSC-TIPS (672-8477)