Value for money audit is an independent examination of an audit to assess whether the use of funds or resources is at the economy, efficiency, and effectiveness.
Auditors will assess the use of resources and funds against the intended objective, purpose, vision, and mission of projects, entities, or organizations.
This kind of audit service normally engages by a non-profit organization and public sectors. It is normally not engaged by the corporation.
However, some corporations require this kind of assessment because shareholders or owners want to assess agents (Managers or Directors of the Company) regarding the usages of their money.
In general, with this kind of audit engagement, auditors will assess the entity’s achievement on the economy, efficiency, and effectiveness. The following are the detail of this value for money audit:
The auditor will perform an audit assessment to assess whether the entity or organization use the available resources or fund to acquire material, labor, or other resources for the projects in the economic principle or not.
It is expected that the projects should have written procurement policies and procedures that ensure that the procurement processes could perform in the best interest of the projects and the minimum fund will spend on the acceptable quality and quantity of products.
If the procurement policy and procedure are in place, then auditors still have to assess if there any loophole that in the acquisition policy and procedure that could prevent projects from acquiring the material from the available fund. For example, no proper supplier selection process.
This could help them design the specific procedures that could target the suspected transactions.
Once the auditor completed their assessment process, auditors will review the actual acquisition transactions and assess if they are following the procurement policies.
For example, they will obtain and then select numbers of transactions base on their sampling technique and then review if the purchasing prices and quality are in the best interest.
The documents to be review including contracts, invoices, goods received noted, services delivery documents and etc.
Weakness and recommendation will be made to the audit report if the auditor finds out that the process acquires the material and equipment or others related not to the economic principle.
Effectiveness review, on the other hand, is focusing on the effectiveness of getting the desired output at the minimum resources.
For example, the effectiveness rate of one truck could collect ten square matter trash in the city per hour. If the projects have one hundred trucks, then do the projects could collect the trash at the same rate?
Also, auditors might also review if the currently available trucks could collect the trash in the city effectively compare to the same size of the city.
In case the auditor finds out that the usages of the truck are not at the effectiveness rate, then the auditor will raise the finding and then make the recommendation.
Therefore, effectiveness review, auditors’ review the effectiveness of resources usages and comparing output and input is one of the procedures that normally use.
Efficiency is the review of the whole project and it is normally taking place at the end of the project’s period. The auditor will identify what is the objective of projects that they are reviewing, fund or resources, and output.
Normally, the combination of economic and efficiency will combine into efficiency. For example, the objective of the project is to have a clean city or smart city.
Then, the assessment will focus on whether this objective is achieved or not. Maybe auditors break down the objective into ten lists of items to be achieved for the projects and then assess the achievement of each item.