http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No.

3; 2015

Value for Money Audit: A Veritable Tool for Expenditure Management

Nwosu M. Eze1 & Mshelia M. Ibrahim2
1
Manager, Internal Audit, National Institute for Legislative Studies, National Assembly, Abuja, Nigeria
2
Deputy Director, Finance & Accounts, National Institute for Legislative Studies, National Assembly, Abuja,
Nigeria
Correspondence: Nwosu M. Eze, Manager, Internal Audit, National Institute for Legislative Studies, National
Assembly, Abuja, Nigeria. E-mail: [email protected]

Received: May 27, 2015 Accepted: June 18, 2015 Online Published: July 16, 2015
doi:10.5430/ijfr.v6n3p150 URL: http://dx.doi.org/10.5430/ijfr.v6n3p150

Abstract
As a constitutional creation, it is the statutory responsibility of public sector organizations at federal, state and local
government levels to embrace the concepts of value for money audit and integrate it in their organizations. However,
determining how economical, efficient and the extent to which the related programmes are effective in meeting their
objectives is still a subject of debate in most jurisdictions. Triangulating existing knowledge regarding the basic
processes, while stating the ideas in practical and useable form, this paper examines the importance of value for
money audit as a veritable tool for expenditure management and evaluates its crucial objectives and essential features.
Using the desktop analytical approach, result shows that lack of value for money audit processes affects the smooth
running and growth of an organization. The paper recommends for proper value for money audit in organisations and
the independence of Internal Audit for the purposes of value for money audit functions.
Keywords: value for money audit, expenditure management, public sector organisation
1. Introduction
Value for money audit, according to Okwoli (2004:80) is “a systematic evaluation of the methodologies employed in
the execution of programmes, projects, and activities with the objectives of confirming whether the stated objectives
of the programmes, projects, and activities were actually achieved and at what cost”. According to him, this method
of audit has evolved over time and been found to be the best approach to confirming whether managers of resources
are applying best practices in the use and application of resources.
He maintains that the best practices in this respect will be the extent to which the managers apply economically and
efficiently the resources made available and how the expected results are being achieved. In effect, therefore, while
the need to achieve stated results is of primary importance, the curtailment of waste and extravagance makes the
results more realistic.
Oshisami (1992) Value for Money Audit determines whether the entity is acquiring, managing or utilizing its
resources (staff, buildings, spaces, materials, etc) in an economic and efficient manner and the causes of any
inefficiencies or uneconomical practices.
Oshisami (1992) went further to state that it involves an inquiry into whether in carrying out its responsibilities, the
organization gives adequate consideration to optimal acquisition, procedures and practices, safe keeping of its assets,
money and minimum expenditure of effort.
Value for money audit has been found to be particularly useful in public sector where measurement of results
achieved by public sector organizations is more subjective than in the private sector. In the private sector,
measurement of the success of an enterprise is a function of the profit of such an enterprise. Its continuous existence
depends entirely on the ability of the enterprises to make profit without which it will fold up. Whereas the private
sector enterprises endeavour to make profit in order to continue to remain in business. This particular urge is not very
prevalent in public sector. Public sector enterprises are set up specifically to address various problems, some social,
while some are economic. However, profit motive is not usually the main objective of setting up such bodies. Even
though many of such enterprises are not strictly set up as profit-making organizations, it is expected that they should
not contribute an undue burden to the Government.

Published by Sciedu Press 150 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

The managers in the civil service are usually provided with resources in the form of men, materials, money for the
purpose of achieving stated objectives. How far these objectives are achieved depends on how these resources are
utilized. Public service is a trust. It is therefore highly obligatory for any one, entrusted with such responsibility to
exercise utmost prudence in the utilization of given resources and to ensure that the expected results are achieved.
2. Objective of the Study
This paper explores the ingredients and essential features of value for money audit as a veritable tool for expenditure
management. While having an overview of the essential characteristics of value for money audit as being necessary
and worth discussing. Value for money audit relates to the extent to which funds are expended economically and
efficiently and the extent to which the related programmes are effective in meeting their objectives.
The term value for money as a desirable characteristic of the conduct of public business has only recently come into
vogue. Value for money audit practice promotes a public service that is more responsible to public needs and is more
accountable. In the opinion of Ene, (2000) value for money, in contemporary usage, summarizes the separate but
inter-related values of efficiency and effectiveness. He clarifies that taken together, these values include the
traditional values of prudence, due diligence, regularity, probity, integrity and equity. He expands those values as
follows:
- Economy refers to the terms and conditions under which the Government acquires financial, human and
physical resources in appropriate quality and quantity at the lowest cost.
- Efficiency refers to the relationship between goods or services and resources used to produce them. An
efficient operation produces the maximum output for any given set of resources inputs or it has minimum
inputs for any given quantity and quality of services provided.
- Effectiveness concerns the extent to which a programme achieves its goals and related effects. For example,
to increase the income level in a particular area, a programme might be devised to create jobs. The jobs
created would be programme output. This contributes to the desired programme effect of a higher income
level, which can be measured to assess programme effectiveness. Of course, the effectiveness of programme
is not always easily evaluated. Also, management procedures for measuring and reporting effectiveness will
differ between programmes.
It has been opined by Ene, (2000) that the value for money aspects of public sector auditing are important steps
towards assuring taxpayers concerning the accountability of Government to elected representatives and public
officials for the receipt and spending of public money. He posits that in the light of this assertion external auditors
concerned with assessing value for money issues ask the following questions respecting the 3 Es.
- Economy: Are we getting the right inputs at the least cost (getting a good deal)? Economy is essentially a
resource acquisition concept with a least cost notion and is concerned with the acquisition of resources of
appropriate quality and quantity at the lowest reasonable cost (buying resources at the right time at the
favourable price, in the right quality and quantity). Economy means getting the right amount at the right
time in the right place, at the right cost. Lack of economy in acquiring resources could result in a higher than
necessary cost of products or services, of appropriate quality, quantity or timeliness.
- Efficiency: Are we getting the most output from our inputs (getting a lot of efforts)? Efficiency is
essentially a resource-usage concept, also with a least-cost notion, is concerned with the maximization of
minimal cost or the usage of minimum-input resources (as evidenced by high productivity, in- time
performance). This refers to the relationship between the quantity and quality of goods and services
produced (output) and the cost of resources used to produce them at a required service level to achieve
programme results. An efficient operation either produces the maximum quantity of output of a given
resource input, or uses minimum input to produce a given quantity and quality of output.
- Effectiveness: Are the inputs getting the results we want (doing the right things) Effectiveness has been
defined as an ends-orientated concept that measures the degree to which predetermined goals and objectives
for particular activity or programme are achieved (the attainment of the right results from usage of resources
and organizational operations). Programme effectiveness is the extent to which programme objectives or
intended consequences are achieved, where unintended negative effects occur, effectiveness must be judged
on the balance of positive and negative consequences.
3. Literature Review
In the public sector, functions revolve around planning, budgeting, approval implementation and monitoring,
controlling, recording transactions, accounting, auditing and reporting. After approving the budget, funds are

Published by Sciedu Press 151 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

released to Government ministries, departments, other agencies and parastatals to carry out specific functions
approved in the budget. Funds are expended on the acquisition of goods and services. Infrastructures are repaired,
renovated or new ones constructed and salaries are paid. Contractors are engaged in the execution of a significant
number of the services. Government establishes rules, regulations and guidelines for the smooth operation of these
functions.
The term value for money audit is a new entrant in public sector auditing literature, though the various aspects of the
concept have been relatively observed in the process of accountability in the public sector. Johnson (1996: 72) noted
that the concept is currently the subject of much discussion in the public sector, some taking the view that it presents
a new concept aimed at checkmating the public office holders.
As public sector officers became more conscious of the need to ascertain the actual utilization of resources, the
concept of value for money started to emerge. Ene (2000:10) indicated that value for money involves the appraisal of
pursuit of the economy’s efficiency and effectiveness in utilization of organizational resources.
In Nigeria, the concept became very pronounced because of the economic depression experienced since the 1980s.
Government’s emphasis shifted from expenditure control towards value for money as the need for effective
utilization of economic resources became imminent (Ene, 2000:10). However, Okwoli (2004:80) stated that the
concept of value for money audit has not gained the required level of recognition in Nigeria, though it lies within the
jurisdiction of internal control, which is a management device for effective operation of the organization.
He further stated that the auditor should confirm that there is adequate accounting and financial system in operation.
That the form and content of the accounts rendered confirm with statutory and treasury requirements. That the
figures have been properly stated, that funds have been applied to the services and for the services intended,
payments and receipts are in accordance with status and financial regulations.
Adeniyi (2004:210) gave the following as the objectives of value for money audit: Investigate a system or activity in
the organization, Judge whether the objectives of the system are being achieved, and if not, why not, Judge whether
the resources of the organization are being efficiently utilized in achieving the objectives and Judge whether the
system is being operated economically, or whether there is over spending.
i. 'Value for money' (VFM) is a term used to assess whether or not an organisation has obtained the maximum
benefit from the goods and services it both acquires and provides, within the resources available to it.
Some elements may be subjective, difficult to measure, intangible and misunderstood. Judgement is therefore required
when considering whether Value for Money has been satisfactorily achieved or not. It not only measures the cost of
goods and services, but also takes account of the mix of quality, cost and resource use, fitness for purpose, timeliness,
and convenience to judge whether or not, together, they constitute good value.
ii. He emphasized further that achieving Value for Money is also often described in terms of the 'three Es' -
economy, efficiency and effectiveness. The definition of the three Es approved by the Value for Money
Committee is as follows:
▪ Economy - Careful use of resources to save expense, time or effort.
▪ Efficiency - Delivering the same level of service for less cost, time or effort.
▪ Effectiveness - Delivering a better service or getting a better return for the same amount of expense, time or
effort.
The need to expand public sector auditing beyond the financial (regularity and legal) audit, otherwise described as
certificate audit, is in line with modern development in public sector auditing and an increasing demand for public
accountability and transparency by members of the public (the tax payers) and other stakeholders.
Besides, and very importantly the Government’s white paper of Ayida’s Report on the Civil Service Reforms added
value for money audit to duties of the Auditor General. Okwoli (2004)
While financial audit is still very essential and important, it has been realized that value for money audits are the
more comprehensive approach to conducting audit of public programmes, projects and activities and the reports
therefrom are more beneficial to the managers of public resources and attract more interest from the members of the
public accounts and other stakeholders. Besides, it is the best approach to report accountability and transparency in
the management of public resources.
Nigerians expect good governance and accountability from Governments (Federal, State or Local) in return for the
tax they pay. Value for money audit provides ample opportunity for satisfying this expectation. Once properly

Published by Sciedu Press 152 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

implemented, value for money audit will contribute tremendously to the advancement of discipline and
accountability in the implementation of public programmes and projects. Managers will be obliged to demonstrate
what results they achieved and disclose the cost of the results.
Under value for money audit, focus is on achievement of results. Auditors will have to answer some basic questions
before commencing detailed audit. Such questions are: What is the mission of the organization under audit? What is
the objective of the programme, project or activity under audit? What are the goals and how are they being measured?
The answers to these questions cannot come easily. It requires constant and vigorous training to be able to answer
them.
A public sector auditor conducting value for money audit painstakingly examines and assesses the performance of
government officials executing programmes, project, or activity to determine whether they are achieved at a minimal
cost. The primary objective is therefore to confirm that relevant results expected from the programmes, projects and
activities are achieved economically and efficiently. The auditors accumulates evidences to confirm that those
entrusted with public resources are utilizing them economically, effectively, and achieving stated objectives. Causes
of uneconomical practices are established and reported to the management for corrective action.
To confirm that the functions are performed economically and efficiently, the auditor will consider whether the
organization is complying with the significant laws, regulations, rules, circulars, and guidelines relevant to the
particular functions. It will be appropriate to confirm whether the organization is following sound procurement
practices in the acquisition of goods and services. Whether organization is acquiring the appropriate cost and
properly protecting and maintaining them. The audit will confirm that the organization is complying with laws and
regulations that will significantly affect the acquisition protection and use of the organization and there is in place
adequate management control system for measuring, monitoring and reporting on the application of economy and
efficiency.
In the light of the above, this paper therefore, provides a conceptual analysis on value for money audit as a Veritable
Tool for Expenditure Management.
4. The Dynamic Nature of Public Sector Audit
Auditing in public sector has moved a further step beyond simply legal supervisory and control. It has oriented its
activities towards the evolution of administrative management of the incoherent. It has therefore undergone
fundamental changes by being increasingly concerned with matters of economy, efficiency and effectiveness and the
evaluation of Government programme results. This is often termed “Value for money Audit”. Others call it
“Management Audit” while in some countries it is known as “Operational Auditing” or “Performance Auditing”. No
matter which name it takes, the main aim is to determine whether value has been received for money that
Government has spent or to evaluate the extent to which statutory or other goals are being achieved and whether
alternative methods of operation should be considered. Value for money Audit, therefore, encompasses the review of
the three Es-economy, efficiency and effectiveness. Of these three, economy and efficiency can be regarded as two
sides of the same coin, using a classic input-output function theory. Audit of economy looks at the problem from
input side. It examines whether it would be possible to achieve the same output with a smaller input of resources.
Efficiency audit perceives the problem from output side that is, whether it would be possible to achieve higher output
with given limited input of resources Chandler (1985).
It has been emphasized by Chandler (1985) that in matters of economy and efficiency the auditor may, where
appropriate, consider whether the entity.
- Is following sound procurement procedures;
- Adopts proper procedure to ensure that the needed types, quality and amount of items are available and
are properly used and maintained;
- Avoids duplication of efforts by employees;
- Uses efficiency operating procedures.
- Avoids work that serves little or no purpose; future cost and its position on the Government’s priority
rating.
- Avoids Over Staffing. In order for the auditor to reach a clear conclusion on the input-output relation
observed, comparison with some standard relation or previous situation is necessary. Simple measurement
of this relationship at a particular level of activity is not enough to tell us whether what we have observed
or measured is good or bad. On the other hand, effectiveness audit is designed to check whether the

Published by Sciedu Press 153 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

purpose of a programme or individual project has actually been activated. Effectiveness means achieving
the programmed objectives or goals Chandler (1985).
The subjects of efficiency and effectiveness audit are as numerous as the number and kinds of public sector activities
of the Federal/State/Local governments. In the field of regularity audit, the law and regulations are based on it, as
well as established norms; in particular the financial record keeping comes to the aid of the auditor. Prior to 1997,
there were no readily applicable standard for value for money audit in Nigeria. The standards have been developed
taking into account, the aims of Government activities, the specific circumstances of the society and norms prevalent
in the relevant sector of the economy at home and abroad.
Chapter two (2) of the Auditing Standard can be found on the effort of the public sector auditing institution to set
durable standard on issues of economy, efficiency and effectiveness. The standards are approved by the Federal
Government. However, it has to be remembered that assessment of efficiency of public enterprise produces a
compound of picture of management and operations-fault in decision, lack of coordination in higher echelons of
management, lack of adequate economic analysis. This may be occasioned by objective judgment and can hardly and
unequivocally be defined.
In the case, among the countries, which are leading the movement towards operation auditing is United State of
America (USA). This recent concept of the control oriented towards evaluating the management of public sector
programme, projects and services beyond the traditional financial area and at the same time emphasizing,
broadcasting the supervisory control of administrative systems. Israel’s Legislation gives clear mandate to the office
of the Auditor-General to carry out operational audit. For over twenty years Sweden has been called “Effectiveness
Auditing” which is primarily concerned with economy, efficiency and effectiveness audit. Australia is also very well
advanced in it. Other countries that have made enviable progress along same direction include Peru, Chile,
Venezuela and Ecuado in Latin America.
It is my fervent hope that this paper will strengthen the best of its consumer in the accountability process by
practicing public sector value for money auditing in Nigeria. Economy, efficiency and effectiveness audits hinge on
the Government activities in which vast resources are expended. Theory suggest and practice proved that judicious
reading of audit reports can significantly improve decision making in the areas of government programmes, projects
and services.
Public Morality
The normative activity of public sector audit is based consciously on the principles of propriety or even morality.
The audit institution either in Federal, State or Local government tends to be highly and constantly aware of the
president’s or governor’s duty to maintain, at all times, a high degree of justice, equity and fairness in dealing with
citizenry. They also tend to populate high standards for judging such dealings. In particular, they take a jaundiced
view of the expediency or shortage of resources used, to excuse improper acts or lack of consideration towards
citizens.
The normal day-to-day behaviour of public servants are regulated by the laws and other written codes of behaviour /
conditions of service. Serious offences such as theft, misuse of public funds and gross abuse of authority are
regulated by the criminal codes and adequate base exists for dealing with them. Civil Service Rules and similar
regulations deal with lesser offences through disciplinary procedures. But there are broad grounds of administrative
behavior and discretion where decision are taken and implemented which can be questionable in terms of propriety
and morality not covered by any law or rule. It is therefore the duty of the Audit Institutions to suggest ways to
reduce the opportunities for making improper decisions. It is their duty to scrutinize improper decisions and in the
process establish new norms of behaviour for the prevention of improper decisions in the future.
Accountability and transparency process should not be stalled.
Public Sector Audit, has thus, been defined by Chandler (1985) as the comparison of the reality of public
administration (planning, implementation, and control) to norms, in order to induce corrections of shortcomings,
effect improvements in managing and accounting for Government activities (programmes, projects and services).
Generally, auditing of the public sector activities is aimed at prevention of mistakes, shortcomings and misdeeds in
the public administration (current phase audit). There are more specific effects of prevention. The institution and the
probability that it can one day scrutinize some administrative action, prevents some gross abuses by those in
authority and is instrumental in deterring the misapplication of funds. This implied fear will contribute to the
willingness of public servants to act in compliance with discretion in an objective and reasonable way resulting in
spending public funds carefully, judiciously and prudently.

Published by Sciedu Press 154 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

The above underscores the need for audit organization to have access to the auditing standards. The comprehensive
nature of auditing carried out in accordance with objectives, the scope of work to be undertaken and the reporting
requirements. Chandler (1985) maintains that the audit organization has responsibility for ensuring that:
- The audit is conducted by personnel who collectively have necessary skills.
- Independence is maintained.
- Applicable standards are followed in planning and conducing audits and reporting results.
- The organization has appreciable internal quality control system in place, and
- The organization undergoes external quality control review.
5. Educational Role of Public Sector Audit
In some establishments, little or nothing is known about accountability especially where there are political
appointees from outside the system and who are uniformed. Such office holders unwittingly think that Government
fund allocated for projects is to be spent according to their personal whims and caprices. The preventive role,
therefore becomes necessary at the outset, before the misdeed is done, by drawing proper attention to the existing
rules of the game. Current phase auditing is often necessary to monitor compliance. Organization of seminars and
workshops helps in stemming the tide of mismanagement and misappropriation of public funds.
In some cases, the preventive role is not played by the audit organization alone. This is amplified below through
examination of four stages of administrative process at which pre-audit can be carried out:
- The Planning Phase/Budgetary Stage: The office of Budget and planning with the data available examines the
feasibility of a project, its ramifications in terms of future costs and its position on the Government’s priority rating.
- The Release of Funds Phase: Once the budget has been approved by the Chief Executive, the release warrants can
only be issued on the approval of the Chief Executive and after a thorough scrutiny of the request by the office of
budget and planning as to priority allocation and validity of the request.
- Contractual Phase: The terms of agreement and mode and timing of payment and work done should be properly
checked.
- Disbursement Phase: All relevant attestation documents must be scrutinized very carefully and the project
supervision must have taken place with proper certificate of attestation as to work done and the value of such work.
Since internal audit unit is an instrument of management control his scrutinization falls under the unit’s
responsibility. The Office of Accountant General will examine the relevant attestation document (payment voucher)
to ensure that the voucher is flawless` before payment is authorized.
The primary objective of the contractual and disbursement phase is to ensure that the expenditure:
- Conforms to the purpose expressed in ambit of vote;
- Is within the amount granted in the approved estimates;
- Is covered by specific authority example, warrant;
- Is supported by valid vouchers showing proof of performance and evidence of payment to correct payee.
- Has come in the course of payment during the year.
6. Reformation Role
It is expected that the Audit institutions should achieve a measure of reforms in public administration. Suggestion on
Budgeting, Governmental, Accounting, Internal Audit, Monitoring of project are potent areas for the Audit
Institutions to tackle. If as a result of changed circumstances, for example, shortages of funds, lack of skilled
manpower, changes in needs, it is impracticable or necessary to provide services stipulated by law, the Audit
Institution is in the best position to suggest the necessary reforms to adjust outmoded plans to present reality. The
Audit Institution should suggest the elimination of what is superfluous and discarding of dead woods no matter
whose ox is gored. Auditors who have the clout can question bad policies. A follow up action is essential to ensure
that the ascribed roles to the institution are performed with success.
The reputations of Public Sector Audit Institution are based on the personal and professional qualities of the
Auditor-General and his staff. Such qualities include dedication, honesty, integrity, hard work, modesty, objectivity,
and capacity to understand perspective. Insight and vision critics are of the view that, the practice whereby staff of
the office of the Auditor-General are recruited by the Civil Service Commission which is subject to scrutiny of the

Published by Sciedu Press 155 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

Auditor-General is not the best approach. The absolute independence of the Audit Institution should be ensured if
recruitment of staff is insulated from Civil Service Commission. Some critical observers also opine that most of the
staff of the public sector audit are not qualified and knowledgeable as they had only on the job training based on
regularity audit. They went on that this creates a personal impairment and so inhibits such staff from meaningfully
playing the role of the Audit Institution in furtherance of accountability process. If auditors will come to grips with
the reform engendered by value for money audit, they need sophisticated training. It is recognized that the then
Federal Military Government in appreciation of the need for capacity building promulgated Decree Number 80 of
1990 which stipulated that 10% of Minister’s personnel cost should be set aside in the budget and used for training
programmes. This if implemented will reduce manpower problem. But good plans are marred at the altar of
execution. In order to adequately and efficiently cover the audit of economy, efficiency and effectiveness not only
accountants need be engaged by Audit Institutions but also other quality staff with varied qualifications in
Engineering, System Analysis, Law, and Social Sciences should be called in. A combination of these without loss of
professional pride will result in effective scrutiny of the public sector expenditure management in a dynamic
economy. It will foster accountability and transparent process.
7. Criteria Used in Value for Money Audit
Criteria, according to Ene, (2000) (a)) are the yardsticks against which auditors assess actual performance. They are
objective benchmarks that help auditors decide whether something is acceptable or whether it should be identified as
a deficiency. They may be either quantitative or qualitative and are usually process-oriented, such as best practices or
generally accepted norms. In other words, criteria are reasonable standards against which management practices,
controls and reporting system can be assessed. They are used to judge the degree to which an audited organization
conforms to expectations that have been explicitly articulated and sanctioned. Auditing cannot be done without audit
criteria.
In value for money audit, criteria are defined as reasonable and attainable standards of performance and control
against which the adequacy of the system and practices, and the extent of economy, efficiency, and effectiveness of
operation, can be assessed in the particular circumstance of the audited organization. Value for money audits do
utilize general audit criteria where relevant, but whenever necessary, relevant adjustments are made, sub-criteria are
created and further specific tailor-made criteria are fashioned to provide audit assurance, address the auditors
concerned and capture the requirements of the particular value for money audit exercise (Ene 2000 (a)).
The following are some value for money audit criteria presented by Ene, (2000 (a)):
Planning and Acquiring of Capital Assets
To control the planning of major capital projects, and acquisition, management should:
- Clearly define and communicate responsibility and accountability:- support request for funds with accurate
and complete documentation;
- Base final approval on full information;
- Properly control project implementation, and review completed project.
- Sub – Criteria
(i) To arrive at an opinion that:
- The need was justified
- The technical requirements were appropriately specified
- Available options were considered
- The acquisition process was suitably managed
- Custody and control of assets are provided for.
(ii) To assess performance against individual sub-criteria, example, to determine whether the acquisition
process was suitably managed:
- Consider bid solicitation
- Access contractor selection
- Evaluate contract administration
- Analyse project controls and work – in – progress payment policy

Published by Sciedu Press 156 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

Materials Management
The following materials management criteria are associated with life cycle stages of material: needs definition,
requirements definition, acquisition, in-service and disposal.
- The need for service should be well-defined and related to approved programme objectives.
- The requirements for material should be defined in such a way that the material required will enable the user
to meet the need for a given service in an economical and efficient manner.
- Material should be acquired with due regard for economy at the time and in the quantity and quality
required.
- Inventory control, storage and distribution should be economical and efficient.
- Equipment should be properly utilized.
- Repair and maintenance should be economical and efficient.
- Procedure should be in place to ensure adequate security and custody of material.
- Procedures should be in place to ensure that material is not misused.
- Disposal should yield maximum net benefit to the Government
Procedures for Effectiveness:
To measure and report the effectiveness of programs procedures should be in place which:
- Specify programme objectives and effects as precisely as possible.
- Identify programme objectives and effects that can be measured
- Reflect the state of the art and are cost-justified
- Report the result of effectiveness measurement
- Employ evaluations to increase programme effectiveness
Efficiency:
To help control the efficiency of work done, performance measurement systems should:
- Use relevant and accurate measures of performance.
- Compare performance to a standard.
- Tailor reports to management needs.
- Use performance data to achieve productivity improvement.
- Keep productivity measures and report correctly.
Payroll Costs Management:
To achieve value for money in staff training, managers should:
- Clearly define and communicate responsibilities for staff training
- Identify staff training needs
- Plan staff training activities and control their implementation
- Evaluate staff training activities
8. The Procedures of Value for Money Audit
According to Ene, (2000 (b)) the process of conducting value for money audit in Government accounting System is
divided into three phases.
Planning the Audit: This means determine audit scope, timing, objectives, criteria, methodology to be used, and
resources required to ensure that the audit covers the most important organizational activities, system and controls.
Execution Phase: This involves collecting, testing and analyzing evidence that is appropriate in quality and quantity
based on audit objectives, criteria and methodology developed in the Planning Phase.
This Phase is carried out by applying audit techniques for:
- Testing and evaluating controls.

Published by Sciedu Press 157 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

- Identifying efforts variance from criteria and considering main causes and
- Developing conclusions and recommendations.
Reporting Phase: This is the final phase in the audit process. It involves communicating the results of audits to
management, and reporting to the legislature or Board of directors.
These three Phases-Planning, Execution and Reporting are usually carried out in the sequence indicated, that is, the
output or result of the work of one phase will form the basis for planning the work of the following phase. The three
phases, and various steps within them, are part of a total process which in practice is highly inter-related. For
example, although understanding the entity is a step in the planning phase, actual understanding of the entity
improves throughout the entire audit. Moreover in the planning phase, attention must be given to reporting
considerations. It must be pointed out that considerable attention and time should be devoted to the planning phase
because of its importance to the success of the overall audit.
9. Management Controls and Value for Money Audit
A number of major audit management controls should be established and strictly applied in order to ensure that
audits are conducted in accordance with acceptable office standards and also in the most efficient manner possible.
In consonance with this during each step in the Audit Process a specified control is exercised as follows:
Overview Stage (Planning Phase): A review of the survey plan should establish that it reflects a good
understanding of the entity and, based on that understanding of the entity, an adequate scope for the survey
has been developed, suitable staff identified, and efficient time budgets prepared.
Preparing the Survey Report (Planning Phase): The Survey report and outline audit plan (specifying the
audit scope, the proposed audit criteria and the resources needed to conduct execution phase once revealed
and approved serve as the authority to begin the execution phase of the audit.
Preparing Detailed Audit Plan and Audit Programme (Planning Phase): These documents (which
specify the audit objectives, the steps to be performed and the nature and extend of the audit work required)
serve as basis for project leaders to begin, assign and carry out work in specific audit areas.
Conducting Tests and Obtaining Audit Evidence (Execution Phase): A review of the evidence obtained
(in terms of its relevance to audit objective and degree of its persuasiveness and conclusiveness) will permit
project leaders to assess its sufficiency.
Finalizing Reports (Reporting Phase): A review of detailed and summary reports will establish the
fairness of finding and the reasonableness of improvements recommended.
10. Application of Value for Money Audit
Value for Money Audit is conducted both in the public sector and in the private sector, it is usually known as
management or performance audit.
The public sector environment undoubtedly is different from the private sector environment. It is because of this that
the value for money auditor must be thoroughly acquainted with that environment if he intends to be successful:
- Government institutions, establishment, organizations, or units do not have profit as their primary objective
at their inception. They are expected to render needed services to citizens at reasonable costs.
- Government and its institutions are owned collectively by citizens who make contributions through direct
and indirect taxes for their upkeep, subsistence and growth. Ownership is not usually evidenced by share
certificates or coupons, which may be traded.
- Stakeholders in Government and its institutions do not always get in proportion to their financial
contribution benefits that can be regarded as getting value for their money.
- Therefore, government and its institutions or other non-profit organizations exists because the community
or society supporting them want them to continue to operate without minding that they do not get reciprocal
benefit from such institutions.
- It is believed that Governments, institutions of Government and non-profit organization hardly die because
of lack of patronage. These days, this belief may not be founded as many governments or institutions are
almost bankrupt and therefore are in danger of total collapse.

Published by Sciedu Press 158 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

- For survival, all the three tiers of Government and the institutions of Government must utilize their scarce
resources economically, efficiently in order to achieve their objectives. Effective control measures must be
in place if their goals are to be achieved-in both the short and long term.
In Nigeria, Governments (Federal, States and Local Government Authorities) have experienced so much dynamic
growth in the last ten years that the capital expenditure on State and Local Government Authorities have more than
doubled. Federal Government employs a very large network of railways, roads, air transport, and marine transport
systems. To do all these, it budgets yearly billions of naira, which we hardly get value for.
If the citizens of Nigeria must get value for money spent by the three tiers of Government, there must be:
- Sound financial management system that includes appropriate budgeting systems, sound accounting and
reporting systems, decision oriented auditing systems and honest managers of our resources at all levels of
Government.
- Distinction between pure Government operations and those profit-oriented operations of Government that
must subject themselves to measures of performance of the private sector.
- Distinction between quasi-private sector organization for which cost-benefit measures must be applied in
order to determine whether they are adhering to the practice of economy and effectiveness in their
operations. For this class of organizations or institutions additional non-qualitative financial measures of
performance are to be developed and used for their assessment. Governments are therefore to be audited by
the legislative auditor with respect to:
- Financial Management and Control
- Reporting on performance
- Attesting to the financial statements and authority of transaction
- Management Controls
- Economy, efficiency and effectiveness.
The auditor’s report should of course, contain findings on Government performance in these areas. All the operations
of the public sector are dictated, governed and circumscribed by laws and regulations. They are regulated by law but
not by profit motive or drive for excellence.
In order to move these organizations towards the achievement of their objectives, administrative as well as
bureaucratic controls are established. However, these controls mean very little since Governments can also get their
funds through taxation or by printing of new moneys. Consequently, government and its institutions continue to
operate ineffectively, uneconomically and inefficiently.
11. Obstacles to the Conduct of Value for Money Audit
There are certain obstacles that impede the effective conduct and timely completion of value for money audit.
Okwoli (2004) classified them into both External obstacle and Internal obstacles.
External Obstacles
According to Okwoli (2004) there are certain established and recognized management practices which facilitate the
conduct of value for money audit. Where these practices are non-existent or even where existent are not spelt out in
sufficient details, the auditor will certainly experience serious handicap in successfully executing a meaningful value
for money audit.
Ways Out
It is therefore incumbent on the auditors to establish that these generally accepted management practices are in
operation in the organization under audit. Where the contrary is the case, the auditor should not hesitate to report
accordingly. Of primary importance is the set-up of the organization understanding of the particular programme,
project or activity. The organizational set up must be such that the authority is well defined and identified.
Responsibilities should be very clear to every member of the organization to the extent that individual roles are
clearly known without ambiguity. Where authority is delegated, it must be accompanied with adequate power. The
situation in the organization must be such that it will be very clear to any interested party on who is in charge and
handle what responsibility. This is to enable accountability to be clearly placed. The advantage is that if any shoddy
work or inefficiency is noticed, the responsible individual will easily be identified. The absence of these well-defined

Published by Sciedu Press 159 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

roles of members in an organization, department or unit dealing with a particular programme, project, or activity
under audit, will certainly constitute an obstacle to a value for money auditor.
The objectives of the particular programme, project, or activity undertaken by the organization or agency must be
clearly stated and document made available to the auditor. Within the objectives, targets, must be set with their
completion time frames stated. In additions, there should be adequate allocation of funds and other resources to meet
timely settlement of completion certificate and overall completion of the project. This helps to compare the
completion time of the project with the agreed time scale and will contribute in identifying the bottlenecks militating
against time completion deadlines. Where information on the objectives and their targets including completion time
schedules are not available to the auditor, the value for money audit will be very difficult. This development will
compel the auditor to search for the objectives and their targets.
All applicable laws, regulations, circulars, rules and internal guidelines governing the execution of particular
programmes, projects and activities must be strictly complied with. Compliance includes following closely laid down
internal guidelines and procedures for the implementation of the project. This step by step approach should be
recognized, documented and followed. The auditor should be in possession of this information failing which is
frustrating.
Effective control measures must be established and maintained. This is to ensure that the appropriate objectives,
targets, specifications and standards are maintained. The controls should ensure that the finances are safeguarded,
assets protected and loss or pilfering minimized. Part of this control system must be effectively of internal audit
headed by a management staff with adequate competent staff and working tools. Where internal audit is non-existent
or ineffective, the auditor will be constrained to spend more resources on mere regularity audit, which will vitiate the
conduct of value for money audit.
There should be effective internal monitoring system in operation besides the internal audit unit. A monitoring team
comprising relevant personnel with the technical-known-how in the particular project should be in existence within
the organization. Their primary role will be to ensure that all the provisions in the agreement, specifications, and
other technical details relating to the project are adhered to, that objectives are followed, target are being met and that
the project cost is effective and within the budget. The team which among others must include an accountant who
must pay constant site inspection visit to the project to make an on the spot assessment. It should be mandatory for
the team to always issue inspection report to management on each completed tour. The report must be
comprehensive and indicate variance observed between expected achievements and actual performance. Causes of
variances must be highlighted and appropriate recommendations for improvements made to management. Where the
need arises, an external monitoring team could be contracted to complement the function of the internal team. It will
be appropriate to design standard information on the inspection tours. The responsibility of the value for money
auditor will be to authenticate the veracity of these reports but where they do not exist the job of the auditor will be
in serious stress.
Finally, there should be a system for staff development within the organization or agency undertaking projects so
that the knowledge of the staff involved in the execution of these assignments should be updated constantly to bring
in line with modern developments in their career. In addition, there should be provision for the hiring of consultants
where necessary.
Internal Obstacles
In the views of Okwoli (2004) value for money audit is an onerous responsibility for the auditor. The audit report
resulting there from must be factual, objective, and convincing. Therefore, the efficiency of the audit organization
must be relatively high. The atmosphere and environment of the audit, the staff is expected to be conversant with the
demands of value for money audit and must be adequately sensitized and properly oriented. Value for money audit is
a team effort and the team should collectively possess the skill and expertise for the effective prosecution of the audit.
If the audit team lacks the necessary professional competence and skill for the audit, it will constitute an obstacle.
Ways Out
The management of the audit office must establish strategic plans for the overall coverage of their statutory
responsibilities allocating appropriate time, men and material resources for value for money audit. Value for money
audit demands a lot of resources which are in short supply, value for money audit must not be handicapped. If the
office does not establish the overall strategic plan, they may not be adequately positioned for value for money audit
assignments. There must be effective quality control system in the office. This is to ensure that the reports are of high

Published by Sciedu Press 160 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

quality. There must be close supervision of subordinates for focus and compliance with audit work plans. The
absence of these facilities will be an obstacle for effective value for money audit exercise.
The office of the Auditor-General must endeavour to be aware of the major contracts by Government and to demand
for the early submission of the relevant contract agreements. The bulk of the value for money audit assignments is on
capital projects, many of which are handled by contractors. Therefore the contract agreements are very crucial to
value for money audit. It will constitute a serious obstacle to value for money audit if auditors are denied copies of
agreements or where they are not received in time.
The office of the Auditor-General could face very serious obstacles on the conduct of value for money audit where it
suffers from acute shortage of skilled manpower, lack of sufficient equipment/working tools and poor funding. Value
for money audit involves extensive touring to project sites. Therefore the audit office must be equipped with touring
vehicles. Adequate funding is very important for the Auditor-General to afford him necessary working tools
including computers, photocopiers, and writing sheets for the timely rendition and transmission of audit report.
Sufficient training programme should be scheduled for the staff of the Auditor-General in order to continue to update
their knowledge, skill and attitude.
There is the need to update the Audit Law to give prominent emphasis on value for money audit. This will reflect
Government’s acceptance of value for money audit and clear any lingering doubt on the statutory coverage for value
for money audit. This will equally accord the audit office a high leverage.
Anticipated risks could be an obstacle to the conduct of value for money audit. Value for money is usually a sensitive
exercise. The reports attract a lot of attention of the Public Accounts Committee (PAC) and other stakeholders.
Affected individuals of organizations may resort to threats, which can weaken the effort of the individual auditors or
the audit office. On the other hand, the audit office for fear of stepping on powerful toes may decide against
undertaking value for money audit or fail to report comprehensively on audit findings. Such self-inflicted obstacles
should be avoided as much as possible.
12. Summary and Conclusion
Value for money audit which is a recent phenomenon in Nigeria is a useful tool of curtailing expenditure in the
public service. Its main components are efficiency, effectiveness, and economy. It ensures that taxpayer’s money is
judiciously used for the purpose for which it is meant, thus providing the available goods and services for the
benefits of the people.
This system of auditing is necessary because it expands the scope of auditing from regularity audit, to internal audit
to other modern developments in auditing like certificate audit, management audit, thus ensuring public
accountability and transparency by members of the public and other stakeholders. Value for money audit is a more
comprehensive approach to conducting the audit of public programmes, projects, and activities than regularities
audit/internal audit. It is concerned with results, performances of Government officials executing programmes,
projects and courses of action so as to ensure accomplishment of goals and objectives.
Values for money audit are used in curtailing extravagant expenditure by determining the geniuness of transactions
at the lowest possible cost.
For value for money audit to be successful, suitable criteria have to be used. Sources of audit criteria are determined
by the auditor through a review of the nature of the programmes involved and the key operational characteristics of
the management process.
Amongst the criteria sources are:
‐ Generally accepted accounting standards
‐ Public sector auditing standards
‐ Good management principles and practice
‐ Specials audit guides
‐ Law, policy statements or statements of ethical practice by professional associations.
‐ Pragmatism
‐ Innovations.
13. Recommendation
Suitable criteria are useful in curtailing extravagant expenditure because:

Published by Sciedu Press 161 ISSN 1923-4023 E-ISSN 1923-4031

http://ijfr.sciedupress.com International Journal of Financial Research Vol. 6, No. 3; 2015

‐ They provide useful benchmark for assessing management of financial, human and material resources, and
for determining that value for money audit is being achieved.
‐ Provide a means for managers to develop or compare their own management procedures and
‐ Constitute a basis for senior managers to evaluate their systems and procedure. Value for money audit is
therefore a useful tool for curtailing extravagant expenditure in the public service. Public sector
organizations at the Federal, state and local g qw
‐ Overnment levels should therefore embrace the concepts of value for money audit and integrate it in their
organizations. This is because a lot of cost saving and other advantages await them from such realization.
References
Adeniyi, A.A. (2004). Auditing and Investigations. El-Toda Ventures Ltd. Lagos.
Chandler, R.A. (1985). Value for Money Auditing: Its Potential and Its Problems. ACCA Students Newsletter,
December.
Ene, E. (2000). Value for Money Audit in the Public Sector. ICAN Student Newsletter, December.
Johnson, I.E. (1996). Public Sector Accounting and Financial Control. Financial Training Nigeria, Lagos.
Nwosu, M.E. (2013). Principles of Accounting with Questions and Suggested Solutions. Petra Digital Press, Abuja.
Okwoli, A.A. (2004). Value for Money Auditing in the Nigeria Public Sector: Its Problems and Prospects in the Next
Millennium. Go-go Int’l Ltd. Jos.
Oshisami, K. (1991). Government Accounting and Financial Control. Pitman, Lagos.
Leff N. H. (1974). International Sourcing Strategy. Columbia Journal of World Business, 9(3), 71-79.

Published by Sciedu Press 162 ISSN 1923-4023 E-ISSN 1923-4031