Performance Auditing in Sudanese Public Nonprofit Organizations - The Case of Ministry of Education of Gadarif State

Abstract

Abstract Due to the critique made on financial and compliance auditing reports for their failure to incorporate economy, efficiency and effectiveness a need has arisen for a new audit discipline which principally capable of measuring and assessing such indicators. This critique has led to thei birthcoming ofa new branch of auditing, which come to be known as performance auditing. Although the need for performance auditing has emerged since 1950, academic writings and professional recognition have come late, after Lima (Peru) 1977 conference. Despite the importance of performance auditing to all types of business regardless of their objectives, it l1as gained greater importance in nonprofit oriented organizations whose annual reports carry no figures that are functionally related to their mission. ln response to this situation, an empirical research has been conducted at the Ministry of Education of Gadarif State as a case representing public nonprofit organizations to answer the following three questions that have been formulated into three integrated hypotheses. 1/ Do the financial audit reports prepared by the Auditor General Chamber capable of_ reflecting economy, efficiency and effectiveness across the Ministry of Education and in all respects? 2/ Does the inability of financial audit, if ally, to report on economy, efficiency and effectiveness has led to dissatisfaction among users with _the ability of these reports to reflect Ministry of Education performance? 3/ Does the management information system which has been providing data for financial auditing purposes, could equally do so for performance auditing? To answer the above three questions, a descriptive and analytical methodology has been adopted throughout the study. The researcher has found out that, financial auditing reports failed to incorporate indicators of economy,

efficiency and effectiveness across the Ministry of Education and in all respects. This finding will render the current accounting and audit theory questionable for their ability to provide performance reports about nonprofit organizations having the same informatory power as those provided in profit oriented units. lt was empirically verified that accounting theory has failed to provide a framework for writing such reports in nonprofit organizations. Had the accounting theory made an early theoretical assumption that it will operate and achieve its objectives under economic activities which pursue a measurable profit figure, it could have opened the way towards the development and evolution of performance auditing and at the same time avoid any possible critique. Also, the findings greatly, support the introduction ofperformance auditing in nonprofit making organizations for measuring and evaluating performance. Likewise, the failure of these reports to incorporate economy, efficiency and effectiveness has led to dissatisfaction among users with the ability of such reports to disclose Ministry of Education Performance. This finding implies that, the financial auditing_reports are providing data, which is not relevant to the users needs. Accordingly, the role of accounting as an information provider system, which has been recently emphasized by accounting theory, was missed in nonprofit organizations. Its role was reduced to a mere custodian for safeguarding assets against fraudulent behavior. Thus, the role of accounting will not be upgraded to an information providing system in nonprofit organizations without the introduction of performance auditing. The study has also found that, accounting information system of the Ministry of Education, which initially provides data for financial auditing purposes, is unable to do so for performance auditing. The failure of accounting information

system to provide data to be used for performance evaluation of nonprofit organizations is an indicator ofthe limitation of accounting theory. The theory of accounting has succeeded in developing systems capable of providing information about performance of profit seeking organizations, but it has been found to be deficient to do the same in nonprofit oriented organizations. Accounting theory has its origin in the capitalist economic ideology, which assumes that profit is the only motive for any economic undertakings. However, in the real World there are numbers of organizations, which pursue the general welfare of the society without targeting profit ends. Because of its capitalist origin, accounting theory failed to provide information for measuring and evaluating performance of such organizations. Therefore, to introduce performance auditing for performance measurement the theory has to consider the possibility of designing and implementinga non-financial data processing system.