Performance Audit Services
Performance audit services for California public agencies and programs: independent GAGAS audits of effectiveness, economy, efficiency, and internal control.
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Performance Audit Services for California Public Programs
A financial statement audit tells readers whether the numbers are fairly presented. It does not tell a governing board whether a program is reaching the people it was created to serve, whether services are delivered at a reasonable cost, or whether reported results can be trusted. Those are performance questions. RTN CPA's performance audit services help California public agencies, special districts, and organizations that administer public programs obtain independent, evidence-based answers to them.
A performance audit is a defined engagement, not a general review. It starts with specific objectives, measures conditions against stated criteria, and reports findings, conclusions, and recommendations under Government Auditing Standards (GAGAS), the U.S. Government Accountability Office's "Yellow Book."
What Is a Performance Audit?
GAGAS describes performance audits as audits that provide objective analysis, findings, and conclusions to help management and those charged with governance and oversight improve program performance and operations, reduce costs, support decisions on oversight and corrective action, and contribute to public accountability.
In GAGAS, "program" is a broad term covering processes, projects, policies, operations, activities, functions, and entire entities. The audit objectives are the questions the auditor seeks to answer using evidence assessed against criteria, and they set the limits of the conclusions.
The Yellow Book contains separate standards for financial audits, attestation engagements, and performance audits. Its 2024 revision (GAO-24-106786) is effective for performance audits beginning on or after December 15, 2025. For government financial audits under GAGAS, see our Yellow Book and government audit services.
Performance Audits Versus Financial Audits
The two engagements answer different questions. A financial statement audit results in an opinion on whether the financial statements are presented fairly, in all material respects, under the applicable financial reporting framework. A performance audit does not express that opinion. It reports on agreed or mandated objectives, often using nonfinancial information such as service volumes, processing times, or outcomes.
- Subject matter: financial statements, compared with a defined program, function, or activity.
- Criteria: an accounting framework such as GAAP, compared with laws, contract terms, performance targets, policies, or benchmarks.
- Result: an opinion on fair presentation, compared with findings, conclusions, and, when appropriate, recommendations.
Many organizations need both. If a funder requires audited financial statements, see Financial Statement Audits. If the main question is whether grant or contract requirements were met, a compliance audit may fit better.
Not a Consulting Review or an Informal Operational Assessment
Requests for an "operational audit" or an efficiency study are common. That work is a GAGAS performance audit only when an independent auditor performs it under the standards for planning, evidence, supervision, documentation, quality management, and reporting. A consultant's operational review is a different service, with different responsibilities and no GAGAS compliance statement. We help you decide at the outset whether you need an audit or an advisory engagement such as our consulting services.
Economy, Efficiency, and Effectiveness
These terms are related but not interchangeable, and an efficiency and effectiveness audit usually needs all three:
A sound audit separates outputs from outcomes. Processing more applications is an output; shorter waits for eligible residents is an outcome. The lowest cost is not automatically the best result, so conclusions should account for service quality, legal obligations, and the program's mandate.
California law uses these concepts directly. Under the Transportation Development Act, transportation planning agencies and the transit operators they allocate Local Transportation Funds to receive performance audits every three years that evaluate the efficiency, effectiveness, and economy of their operations (Public Utilities Code section 99246).
- Economy: are resources such as staff, contracted services, supplies, and equipment obtained at a reasonable cost while meeting timeliness and quality needs?
- Efficiency: what is the relationship between resources used and outputs produced, such as cost per unit of service?
- Effectiveness: is the program achieving its intended goals and results, not just completing activities?
Program Objectives, Criteria, and Performance Measures
Useful performance audits start with questions that evidence can answer. "Is the agency well run?" is too broad. "Did the permitting program meet its approved processing-time targets this fiscal year, and if not, why?" can be audited. When a statute or oversight body sets the objectives, the auditor may have little latitude to adjust them.
Criteria are the benchmark for measuring the condition. Under GAGAS, they may include laws, regulations, contracts, grant agreements, standards, measures, expected performance, defined business practices, and benchmarks. Unclear criteria should be resolved during planning, not in the draft report.
Performance measures need their own scrutiny. A reported improvement means little if the underlying data are incomplete or the measurement method changed midyear. Assessing the reliability, validity, or relevance of performance measures can itself be an audit objective, and evidence limitations that matter to the conclusions should be disclosed in the report.
Internal Control and Operations
Internal control is often central to a performance audit, but it is not automatically in scope. GAGAS requires the auditor to determine and document whether internal control is significant to the audit objectives. If it is, the auditor obtains an understanding of those controls and assesses them to the extent the objectives require, which may cover design; design and implementation; or design, implementation, and operating effectiveness.
When a finding involves a control deficiency, the auditor considers it in developing the finding's cause, which makes recommendations more practical. GAO's Standards for Internal Control in the Federal Government (the Green Book) and the COSO Internal Control-Integrated Framework can provide criteria, and GAGAS notes that state, local, and nonprofit entities may adopt the Green Book. A performance audit reports only on the controls it examined, not on an organization's entire control system.
- Completeness and accuracy of performance data and public reports
- Contract and subrecipient oversight
- Eligibility determinations and service-delivery processes
- Information systems that produce data the audit relies on
Audit Findings and Recommendations
A finding has up to four elements: the criteria (what should be), the condition (what is), the cause (why the difference exists), and the effect or potential effect (why it matters). Findings should be put in perspective, for example by relating exceptions to the number of cases examined, so readers can judge how widespread an issue is.
When feasible, recommendations should flow logically from the findings and conclusions, address the cause, and state clearly what action is recommended.
Management and the governing body decide how to respond, implement corrective actions, and monitor progress. Under GAGAS, an auditor who assumes management responsibilities for an audited entity impairs independence, so we do not design or carry out corrective actions as part of the audit. Any separate assistance must first be evaluated under the independence rules.
Who May Use Performance Audit Services?
Performance audits are usually commissioned because a law, funding agreement, governing body, or oversight function calls for independent answers about a program.
Not every organization needs a performance audit. Most nonprofits that need an audit are asked for a financial statement audit, and organizations that expend federal awards at or above the Uniform Guidance threshold generally need a Single Audit. A short conversation about the source of the requirement usually clarifies which engagement applies.
Why RTN CPA
Our assurance practice specializes in nonprofit and governmental organizations, including grant-funded and mission-driven entities. We start with the program, its funding, and the requirement behind the request, and we tell you plainly whether a performance audit, a different type of audit, or a non-audit service is the right fit.
Every engagement is subject to independence and engagement-acceptance requirements, including GAGAS competence and continuing professional education requirements. We communicate with management and governing bodies throughout the engagement and write recommendations that are practical for the people who must act on them. For our broader audit work with mission-driven organizations, see Nonprofit Auditing.
- City councils, county boards of supervisors, and their audit or finance committees
- Special districts and joint powers authorities
- Transportation planning agencies, county transportation commissions, and transit operators subject to Transportation Development Act performance audits
- School districts, community college districts, and county offices of education with Proposition 39 bond programs, and their citizens' oversight committees
- Nonprofits that administer government-funded programs when a contract or grant agreement calls for a program audit
Four Categories of Performance Audit Objectives
GAGAS objectives vary widely and are not mutually exclusive. One government performance audit can combine several.
- Program Effectiveness and Results: Measures the extent to which a program is achieving its goals and objectives. These objectives are often paired with economy and efficiency, which address the costs and resources used to achieve results.
- Internal Control: Assesses one or more aspects of the system of internal control designed to provide reasonable assurance of effective and efficient operations, reliable reporting, or compliance with applicable laws and regulations.
- Compliance: Assesses compliance with laws, regulations, contracts, grant agreements, or other requirements that affect how resources are used and how services are delivered. These requirements can be financial or nonfinancial.
- Prospective Analysis: Provides analysis or conclusions about information based on assumptions about future events and the actions an entity may take in response, such as forecasting program outcomes under different assumptions.
Audit Planning and Evidence: How the Engagement Works
A GAGAS performance audit generally follows this path, tailored to its objectives.
- 1. Confirm the mandate and engagement acceptance: We review the statute, contract, or board direction behind the request, identify the intended users of the report, and evaluate independence and engagement-acceptance requirements before agreeing to terms.
- 2. Define objectives, scope, and methodology: These are documented in an audit plan. Planning considers significance and audit risk, identifies suitable criteria, and continues throughout the audit as evidence comes in.
- 3. Obtain sufficient, appropriate evidence: Methods may include document review, interviews, observation, testing of program records, and data analysis. Evidence must be relevant, valid, and reliable, and sufficient to support each finding and conclusion.
- 4. Develop findings: The auditor develops the criteria, condition, cause, and effect of each finding to the extent they are relevant and necessary to the objectives.
- 5. Obtain the views of responsible officials: GAGAS requires the auditor to obtain and report officials' views on the findings, conclusions, and recommendations, including planned corrective actions.
- 6. Issue the report: The report describes the objectives, scope, and methodology; findings, conclusions, and recommendations; and a summary of officials' views. It states whether the audit was conducted in accordance with GAGAS.
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Discuss Your Performance Audit Requirements
Share the statute, funding agreement, board direction, or request for proposal behind your audit need. We will discuss the proposed objectives, whether a GAGAS performance audit or another engagement fits, and the independence and acceptance steps that apply.
Frequently Asked Questions
How is a performance audit different from a financial statement audit?
A financial statement audit ends with an opinion on whether the financial statements are fairly presented under the applicable framework, such as GAAP. A performance audit examines a defined program or activity against criteria tied to specific objectives, such as effectiveness, efficiency, internal control, or compliance, and reports findings, conclusions, and recommendations instead of a financial statement opinion.
What standards apply to a government performance audit?
When a law, contract, or policy calls for a performance audit of a government program, it commonly requires Government Auditing Standards (GAGAS), issued by GAO. Chapters 8 and 9 of the 2024 revision set the fieldwork and reporting standards, and the requirements on independence, competence, and quality management also apply. The 2024 revision is effective for performance audits beginning on or after December 15, 2025.
Is an operational audit the same as a performance audit?
Not necessarily. "Operational audit" is an informal term that can describe anything from an internal efficiency study to a consultant's process review. A GAGAS performance audit is performed by an independent auditor under specific standards for planning, evidence, and reporting, and the report states whether it complied with GAGAS. If a requirement calls for a GAGAS performance audit, a consulting review will not satisfy it.
Does a Proposition 39 school bond require a performance audit?
Yes. Under the California Constitution, a school facilities bond approved by 55 percent of voters under Proposition 39 must include a requirement for an annual, independent performance audit to ensure the funds were spent only on the listed projects. Education Code section 15286 requires that audit to follow Government Auditing Standards and to be submitted to the citizens' oversight committee no later than March 31 each year.
Can a performance audit cover compliance with a grant or contract?
Yes, when compliance is part of the audit objectives, such as whether services went to eligible recipients or whether costs follow contract or grant terms. If the need is an opinion on compliance with specific requirements, such as for major federal programs, a compliance audit or Single Audit is usually the appropriate engagement.
Will a performance audit guarantee better program results?
No. A performance audit provides independent, evidence-based findings, conclusions, and recommendations. Management and the governing body decide whether and how to act, implement changes, and monitor progress. The value of the audit depends on clear objectives, reliable data, and follow-through by the organization.
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