Trusting the numbers: The power of data verification; This article reviews the importance of verifying the reliability of performance measurement data and outlines the steps in performance measurement verification.

• Author: Williams, W. Anderson

Editor's note: This article is adapted from a chapter in a forthcoming GFOA publication on integrating performance measurement into the budget process.

In theory, the purpose of performance measurement is to facilitate and improve government decision making. In practice, however, many governments are not using their performance measurement systems for this purpose because elected officials and administrators do not have confidence in the reliability of the performance data. (1) This is perfectly understandable in that decisions based on unreliable data could be detrimental to a government's mission. One emerging solution to the reliability problem is performance measurement verification. Like a financial audit, the purpose of performance measurement verification is to assure users of performance reports that the information contained therein is reliable. This article examines the practice of performance measurement verification, using the State of Texas as a model.

The State of the Practice

Thus far, governments have been slow to implement performance measurement verification. Recent studies confirm that the number of governments verifying performance data is quite low and is typically restricted to larger state and local government units. The National Association of State Auditors, Comptrollers, and Treasurers surveyed all 50 state audit offices to determine whether or not they had verified any service efforts and accomplishment information or reports. The result: only eight states have conducted performance measurement verification in some form. (2) GFOA conducted an informal poll of 243 internal auditors on the e-mail listserv of the National Association of Local Government Auditors. Only six local governments said they were currently verifying performance measures or were planning to do so in the short term. (3) Not surprisingly, the literature on performance measurement verification is also quite sparse.

Internal Controls: Precursor to Performance Measurement Verification

An internal control system is a set of procedures designed to ensure the accuracy of reported data. In many cases, the primary reason for unreliable performance data is the lack or degradation of internal controls. Despite the best intentions of staff, internal controls often are undermined as employees leave their positions, technology changes, or priorities shift. As a mechanism for monitoring service delivery, an effective internal control system helps to ensure that management is meeting its objectives and responsibilities. Although performance measurement is not a traditional public service like public safety or parks and recreation, its importance to policy and planning makes it a worthy candidate for internal controls.

The data sources used to calculate performance measures are the focal point of control systems. Common sources of performance data include surveys, databases, and automated financial systems. The Texas State Auditor's Office has identified three specific areas of control.

* In put controls verify the accuracy of the data submitted to the performance measurement system. One example of this type of control is the use of "smart" software to reject outrageous numbers.

* Process controls help ensure that correct procedures are followed in calculating performance measures. Written procedures for calculating departmental performance measures is an example of a process control.

* Review controls verify that the measures were calculated correctly and that they accurately represent the government's performance. A review control might involve periodic random testing of departmental calculations by budget or internal audit staff.

An effective internal control system helps to ensure that performance data are properly collected and reported, thus fostering confidence in the reliability of the data. Ideally, internal controls should be in place before a government launches a performance measurement system. This is not to say that governments with established performance measurement systems could not introduce internal controls later in the game. Indeed, implementing internal controls is a good way to legitimize performance measurement.

The Logistics of Performance Measurement Verification

Planning performance measurement verifications ahead of time will save time and money. A couple of issues deserve particular consideration. First is the question of who should conduct the verifications. In general, governments can select between their own audit staffs--if they have one--and the numerous public accounting firms. Currently, internal verification of performance measures is more common. An informal telephone poll of three large accounting firms revealed that they were...