Value for Money audit is a comprehensive examination that provides an objective and constructive assessment of the extent to which financial, human and physical resources are managed with due regard to economy, efficiency and effectiveness; and accountability relationships are served.
(i) Economy – this is minimizing the cost of resources used for an activity having regard to the appropriate quality. Economy refers to all types of resources such as physical, financial, human and information. The question of economy is relevant to the acquisition of resources. Auditors try to determine whether the resources have been acquired in the right amount, at the right place, and the right time, of right kind and at the right cost. It is presumed that there are standards available to judge whether considerations of economy were kept in view in acquiring resources.
(ii) Efficiency – refers to the quality of outputs from a given input. It is relevant to the use of resources. Examples of efficiency are: teacher-pupils’ ratio in a school and machine-hours to output ratio in a factory. An increase in output without a corresponding increase in input or getting the same output as before with a reduced input indicates an increase in efficiency. But measuring efficiency presumes the existence of acceptable standards/criteria. It is often necessary for auditors to develop such standards if they do not exist.
(iii) Effectiveness – this is the concept that measures the degree to which predetermined goals and objectives for a particular activity or program are achieved. Of all the meanings attached to the word effectiveness, probably the most common is related to the achievement of goals.