By Brenda Erickson
Audit that agency ... Evaluate that program … Review that department… Sunset that board…
Legislators need information to help them make decisions about the programs they oversee—information that tells them whether, and in what important ways, a program is complying with regulations, working well or poorly, and why.
Most state legislatures have created specialized staff units to conduct special studies to evaluate state government policies and programs. Their studies may be called program evaluations, policy analyses sunset reviews, performance audits, compliance audits, financial audits, etc.
When legislators request one of these special studies, the audit and evaluation staff respond. But what does it mean to audit, evaluate or review?
While similar, these processes are not exactly the same. Let’s check out some types of audits, evaluations and reviews and see how they provide necessary information with slightly different purposes.
Compliance audit. A compliance audit is a comprehensive review of an organization's adherence to external regulatory guidelines or internal policies. They assess whether an agency, program or business (and its employees) is “following the rules and regulations.”
Financial audit. A financial audit is an independent, objective evaluation of an organization's financial reports and financial reporting processes. The primary purpose for financial audits is to determine, with reasonable assurance, that an entity’s financial statements are accurate and complete.
Performance audit. A performance audit is an independent review of the economy, efficiency or administrative effectiveness of a government program (or agency) but does not extend to assessing the policy merit of a program. It focuses on performance rather than expenditures and accounting and answers questions such as:
- Do the inputs represent the most economical use of public funds?
- Are we getting the best services from available resources?
- Are the aims of the policy being fully met, and are the impacts the result of the policy?
Performance measurement. Performance measurement is the ongoing monitoring and reporting of program accomplishments, particularly progress toward pre-established goals or performance indicators. It focuses on whether a program has achieved its objectives, expressed as measurable performance standards.
Program evaluation. Program evaluations are individual systematic assessments of the appropriateness, effectiveness or efficiency of a program (or a part of a program). These studies are conducted periodically or on an ad hoc basis. Evaluations may cover both policy and administrative aspects of a program. They may:
- Assess the extent to which a program is operating as it was intended.
- Assess the extent to which a program achieves its outcome-oriented objectives.
- Assess the net effect of a program by comparing program outcomes with an estimate of what would have happened in the absence of the program.
- Compare a program’s outputs or outcomes with the costs (resources expended) to produce them.
Sunset review. In government, the term “sunset” means that a particular agency, program, policy or law will expire on a specific date, unless the legislature passes a bill to continue it. A sunset review is an evaluation of the need for the continued existence of a program or an agency. The process creates a unique opportunity and powerful incentive for the legislature and stakeholders to look comprehensively at each agency and make improvements to its mission and operations. A sunset review yields a recommendation to either:
- Retain the program or agency as is.
- Modify the program or agency.
- Allow the program or agency to terminate, including the repeal of the relevant statutes.
At NCSL, the legislative employees who conduct the special studies to audit and evaluate state government programs are represented by the National Legislative Program Evaluation Society (NLPES). NLPES provides its members with training to improve their skills and opportunities for exchanging ideas and information. NLPES’s aim is help audit and evaluation staff better able to assist the legislators in their states.
Brenda Erickson is a program principal in NCSL’s Legislative Staff Services Program and the NCSL liaison to NLPES.