Summary and Conclusions

This chapter examined how VFM audit methodologies are developed over time and reflected in audit practice; how the role of VFM audit changes over time in the VFM audit practice and how VFM audit methodologies relate to the alternative focus roles of VFM audit, described by Pollitt (2003). The VAGO commenced its VFM audit as part of the comprehensive audit methodology, based on its accumulated professional knowledge and expertise from 1851, and submitted its first VFM audit report to the Victorian Parliament in June 1982. The policy on comprehensive audit methodology published in 1984 became an ‘enabler’ in changing the VFM audit practice and public sector audit frame at the VAGO. It changed the role of the Auditor-General’s Office from financial auditor to comprehensive auditor. The VAGO published its first formal audit methodology and policy on VFM audit in 1984, highlighting that the VFM audit was an extension of financial audit work in selected auditee organisations to review the economy, efficiency and effectiveness of their operations. Thereafter, in 1991, the VAGO developed a VFM audit methodology handbook, known as the VPAM, for field auditors. This provided the structured framework for the VFM audit function.

The introduction of the VFM audit in 1984 can be understood as an incremental change to the traditional role of the Auditor-General in the compliance and auditing frames reflected in the existing financial audit practice, and the adoption of a more consulting frame for their work intended to go beyond the ‘fault-finding perspective’. In order to secure creditability and support, this was represented as a logical extension of existing financial audit practices. However, the change was also supported by broader NPM reform initiatives and the strong advocacy of activist Auditors-General. The major challenge was the establishment of a

coherent legal mandate for the VFM work. Initially, this was only for economy and efficiency work; however, by 1994, it was extended to also include effectiveness. The formal mandate was followed by an attempt to consolidate the internal competences of the VAGO in the VFM audit space with the recruitment of specialist expertise and the development of a VFM audit manual (VPAM).

While the VPAM and Audit Act 1994 would seem to have consolidated the institutionalisation of the VFM audit and establishment of the Auditor-General in the advisory/consultancy role, it actually triggered a form of hot overflow, when the VFM reports strongly criticised the privatisation agenda and practices of the government of the day in 1997. There is potential that this hot overflow was also linked to a reorientation away from the Parliament and towards the public as the client of the VFM reporting process. This conflict was so significant that the fundamental mandate of the audit office was revoked and the power of the Auditor-General to conduct VFM audits (and financial audits) ended.

With a change in government, the retirement of one Auditor-General (Baragwanath) and appointment of another (Cameron), the structures, mandate and credibility of the VAGO were substantially restored. As such, the capacity of the Auditor-General to function in the compliance, financial audit, management consulting and research frame was re-established. Following this restoration were two further dramatic changes to the VFM methodologies. The first was the separation of the VFM audit methodologies and VFM audit policy framework in 2004. While the framework was still publically visible in the MAP document, most of the methodologies were retained as in-house/back-of-house resources. One interpretation of this change is that it retains the VFM knowledge as specific to the Auditor- General and makes it much more difficult for private sector accounting firms to compete in the VFM space. This process of encoding the back-of-house knowledge was further continued in 2007 when the VFM methodologies were incorporated into the AmP computer system. In effect, these methodologies are now closed knowledge that is only shared with other Auditors-General.

This process was successful in restoring the reputation of the VAGO for exclusive control over the VFM audit methodologies and practical knowledge. It firmly underpinned the reframing of the VAGO work away from compliance and financial audit and towards a more advisory/consulting orientation focused on issues of economy, efficiency and effectiveness. However, in that reframing and the subsequent legal mandate, it was reinforced that the client is and remains the Parliament, and the Auditor-General forgets that at his or her peril.

I found that the VAGO developed the VFM audit methodologies as guidebooks or manuals for field auditors from 1991. The audit work and procedures completed by the field auditors remain separated and the audit methodology works as a script to guide the team of auditors on three stages of audit: planning, fieldwork and reporting. However, this situation changed dramatically after the introduction of the computerised AmP methodology in 2007. Under this new audit methodology, there is a processing power to combine the audit procedures, programs, audit evidence, auditors’ decisions and final audit reports into one single computerised audit methodology. Therefore, the AmP methodology has become an inscription that has the power to influence the auditors, Auditor-General and auditee organisations simultaneously, via one computer signal. Therefore, I argue that the first VFM audit methodology introduced in 1984 was a script and change enabler for the VAGO, but was transformed into an active agent and inscription in 2007.

Chapter 7:

Enacting Regimes of Auditability: Strategic Plans