Don’t worry – the financial statements are audited.

When asked about an operational audit a current member of city council said citizens should not worry, the city’s financial statements were audited.

Enron’s financial statements were also edited – and we all know just how much those audited financial statements protected Enron’s shareholders and creditors.

As a Chartered Accountant I audited and often prepared Financial Statements and know the limitations involved in financial audits, which is why audited financial statements contain disclaimers from the accountant(s) preparing the financial statements.

The important point to remember is that Financial Statements involve totals, that they do not provide detail. The details are always in the accounts and working papers of the client (City of Abbotsford) and the auditors working paper file.

Knowing city council spent the budget money does not really tell citizens anything useful. What citizens need to know is how and on what the money was spent, compared to how the money was budgeted to be spent and explanations for variances.

That way we can evaluate our budgeting process and inquire about monies not spent as budgeted.

Financial Statements do not provide the detail for citizens to understand how the city actually spent its money. The budget is council reporting to citizens how they are going to spend taxpayers dollars. Taxpayers in Abbotsford currently have no solid understanding of how their tax dollars are spent.

Abbotsford needs to make available to the public details of the budget, a comparison of budget to the actual amounts spent and explanations for variances. In that way citizens can gain knowledge of how the money is actually being spent, evaluate the budgeting process and get explanations for why it was not spent as budgeted.

Currently there is the distinct possibility of council budgeting money to be spent in one manner and spending it on different projects and operations.

We need financial transparency to evaluate the financial performance and stewardship of council and city management.

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The original question asked was about operational audits which are different from financial statement audits. Actually since we are speaking of a municipality the correct term is performance audit since operational audits refer to business operations.

Making the switch away from the question of an operational audit to financial statement audits is hardly a surprising action from current council and its cloak of secrecy. It allowed the councillor to avoid the question of the effectiveness or the efficiency of the way the City of Abbotsford operates and airily suggest to taxpayers – don’t worry, be happy we have audited financial statements.

Here are definitions for both operational and performance auditing:

Operational Audit is a structured review of the systems and procedures of an organization in order to evaluate whether they are being conducted efficiently and effectively. An operational audit involves establishing performance objectives, agreeing the standards and criteria for assessment, and evaluating actual performance against targeted performance.

Performance audits are the public sector version of “Operational Audits” that are conducted to determine if an entity’s operations, programs, or projects are run effectively and efficiently.

An objective and systematic examination of evidence for the purpose of providing an independent assessment of the performance of a government organization, program, activity, or function in order to provide information to improve public accountability and facilitate decision-making by parties with responsibility to oversee or initiate corrective action.

A performance audit has two parts: (1) an economy and efficiency review, and (2) a program review. The economy and efficiency review determines if resources have been used efficiently. The program review, on the other hand, determines whether the resources were used effectively, that is, for the purpose intended by the grantor of resources. Thus, the two reviews complement each other in providing a complete picture of an agency’s performance.

It is no wonder city council wants to avoid the topic of performance audits with their value for money facet.

Take the Centennial Pool tank fiasco. A performance review of whether the money was spent efficiently and whether the money used effectively would require looking at what the total actual costs were (a piece of information currently denied the citizens) and the fact and effect of the pool opening three months behind schedule.

What do you think a performance audit would have to say about Plan A?

No, it is hardly surprising that city council wants to avoid performance audits in light of their performance.