Performance Auditing and Adjudicating Political Disputes

• Author: Warwick Funnell
• Published date: 01 February 2015
• DOI: http://doi.org/10.1111/faam.12046
• Date: 01 February 2015

Financial Accountability & Management, 31(1), February 2015, 0267-4424

Performance Auditing

and Adjudicating Political Disputes

WARWICK FUNNELL*

Abstract: Performance audits have provided governments with new opportunities

to take advantage of the public sector auditor’s moral legitimacy as an agent of

accountability who is independent of government. With particular reference to

a recent performance audit by the Australian Auditor-General which the Prime

Minister called for after he was accused of lying to the Parliament, and adopting

insights from Suchman’s theory of legitimacy, this paper confirms that after an

extended, intense period of resistance governments now recognise performance

audits and the Auditor-General’s considerable reputation for integrity as potentially

potent ways to enhance their political legitimacy.

Keywords: performance auditing, political legitimacy, independence

INTRODUCTION

Subsequent to the transformation of the public sector in the image of the market

over the past three decades there has been the adoption of managerialist

models of public sector governance, collectively referred to as the new public

management (NPM) (Kettl, 2000), which are meant to be able to deliver services

more efficiently and manage programmes more effectively (see, for example,

Hood, 1991 and 1995; Lapsley, 2009; Aucoin, 1995; Ferlie et al., 1996; Leeuw,

1996; Lapsley, 1999; Johnston, 2000; Gendron et al., 2007; and Power, 2000, pp.

112–6, see also 1994, 1996 and 1997). Coincident with the radical transformation

of government, the methods and priorities of which have changed over time

and varied across different contexts, the long standing quasi-judicial role of

public sector auditors has been extended into very clear political arenas with

the introduction of performance auditing, also known as value-for-money or

efficiency auditing.

The contributions and potential of performance auditing were significantly

enhanced with the greater prominence given by public sector reforms to

*The author is from the Kent Business School, University of Kent.

Address for correspondence: Warwick Funnell, Kent Business School, University of Kent,

CT2 7PE, UK.

e-mail: W.N.Funnell@kent.ac.uk

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PERFORMANCE AUDITING AND POLITICAL DISPUTES 93

measurable dimensions of public sector performance amidst enduring institu-

tions of democratic governance which were designed to preserve and protect,

as their first responsibility, qualitative values such as service, honesty, fairness,

access and probity. English and Skærbæk (2007, p.239) refer to the way in

which performance auditing has been perceived as ‘influencing the framing

and implementation of NPM reforms, and as providing a mechanism through

which those reforms are controlled, regulated and made accountable’ (see also

English 2007, p.313). Audit provided a powerful means to ensure that reformist

values become embedded in public sector practices which eventually are meant

to find expression in the efficient use of resources in the implementation of

Executive policies (English and Skærbæk, 2007; Hellman, 2006; and Morin, 2001

and 2003). However, contrary to the widespread acceptance of the considerable

virtues claimed on behalf of NPM, increasingly the achievements and legacy

of these reforms is being questioned. With reference primarily to the British

experience Lapsley (2009) asks whether the reality is that NPM represents ‘the

cruellest invention of the human spirit’ for ‘in terms of outcomes, the failure,

generally, of NPM, makes it a cruel disappointment . . . ’ (Lapsley, 2009, p.2).

In a significant contribution, Dunleavy et al. (2005, p.467) refer to ‘the crisis’ of

NPM which has ‘now largely stalled or . . . reversed in some key ‘leading-edge’

countries’. A particularly unsettling reflection on the failings of NPM is provided

by Funnell et al. (2009) in the context of the delivery of core public services in

the UK.

Performance auditing, which is widely recognised as being a far more mall-

eable construct than financial audits (Guthrie and Parker, 1999; Radcliffe, 2008;

and Funnell and Wade, 2012), has created a complex array of responsibilities

for public sector auditors with a greater need for judgement, thereby exposing

auditors to frequent, and potentially aggressive, criticism from public agencies.

Recently Lindberg (2007, p.338) referred to performance auditing as ‘the

oddball in the auditing family’, an ‘ambiguous concept’ in contrast to financial

auditing, which sometimes makes it difficult to classify the work carried out

as performance auditing, thereby increasing the complexity of the task and

potentially providing more opportunities for the Executive to criticise auditors

(see also Tillema and ter Bogt, 2010).

Public sector auditors provide the means to signal the Executive’s financial

competence and commitment to transparent, accountable government and

thereby provide the possibility of confirming the political legitimacy of those

who govern (Sharma, 2007; Power, 1994, 1996, 1997 and 2000; Leeuw, 1996;

Kitchener et al., 1999, Lapsley and Pong, 2000; Bowerman et al., 2000; Shore

and Wright, 2000; Gendron et al., 2001; and Groundwater-Smith and Sachs,

2002). Macintosh (in Cooper and Hopper, 1990, p.153) would describe this as

a ‘non-rational’ role for auditing whereby audit performs a symbolic function

in addition to satisfying the need for an objective, reliable assessment of the

actions of the executive. In part this recognises what Sharma (2009, p.289)

refers to as the ‘complex interplay of actors’ in the writing and presentation

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