Performance audits contribute to public accountability and transparency by providing independent and objective analysis of the efficiency and effectiveness of government programs, operations, and activities. They provide findings, conclusions, and recommendations to assist management and those charged with governance and oversight with improving performance and operations, reducing costs, and making sound decisions.

The primary difference between a financial audit and a performance audit is that a financial audit expresses an opinion on whether management spent the organization’s funds the way they said they did, and a performance audit looks at whether the money was spent in the most efficient, economical, and effective manner. BART undergoes an annual financial audit that is conducted by a Certified Public Accounting firm. Financial audits are typically conducted annually, whereas performance audits look at a broad variety of topics and each topic is not required to be audited on any specific cycle.

We use laws, regulations, organizational policies and procedures, industry standards, expert opinions, terms of contracts and grant agreements, benchmarks, and leading practices as criteria against which to evaluate performance and make recommendations when we identify opportunities for improvement. Performance audits can benefit an organization by identifying, for example:

• Opportunities to reduce costs or increase revenues through operational improvements
• Programs, services, or activities that can be reduced, eliminated, or expanded
• Gaps or overlaps in programs, services, or activities
• Weaknesses in internal controls that can affect the organization’s ability to achieve its mission or increase the risk of fraud, waste, or abuse
• Unnecessarily restrictive laws, regulations, or policies
• Opportunities to increase transparency and accountability
• Opportunities to improve compliance with laws, regulations, contracts, grant agreements, and policies and procedures
• Leading practices that can be implemented to achieve better outcomes

We follow the Government Auditing Standards (also known as the “Yellow Book”), which are established by the U.S. Government Accountability Office (GAO). These standards provide a framework to ensure that:

• Staff who conduct the audits have the required skills and competencies to conduct the audits and do not have conflicts of interests regarding the topic they are auditing
• Audits are conducted in an independent and objective manner
• Findings and recommendations are fully supported by facts
• Information and data used to support audit findings are valid, appropriate, and reliable
• Management has an opportunity to review draft reports for factual accuracy and respond to draft audit findings and recommendations prior to the report being published
• The OIG has an internal quality control process to assess its compliance with the Government Auditing Standards and its policies and procedures for conducting audits
• The OIG undergoes an external quality control review, conducted by reviewers independent of the OIG, at least once every three years after beginning the first performance audit

We use other GAO publications to assist us in conducting our audits:

• Standards for Internal Control in the Federal Government (also known as the “Green Book”), to assess risk and internal controls when conducting our audits
• Assessing Data Reliability as guidance for assessing the reliability (e.g., completeness, accuracy) of data that we expect to use to support our audit findings, conclusions, and recommendations
• Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs to assist us in evaluating the reasonableness of project cost estimates
• Schedule Assessment Guide: Best Practices for Project Schedules as guidance for evaluating project management and program performance

Topics selected for performance audits generally will be based on the results of an entity-wide risk assessment, but may also be selected based on the OIG’s knowledge of certain other risks or by request by the Board of Directors or BART management. Topics will primarily be grouped into the following focus areas:

• Administrative operations (e.g., procurement/contracts, human resources, budget, accounting, grant management, and payroll)
• Asset management
• Construction management (i.e., operational and financial), including toll-funded projects
• Customer service, community relations, and communications
• Employee relations
• Information technology
• Rail operations
• Safety and security

Outcomes considered in selecting audit projects include the potential for:

• Cost savings or increased revenues
• Improvements in public policies and operational practices, particularly through implementation of leading/best practices
• Increased efficiency, effectiveness, and performance of BART operations
• Enhanced accountability systems and transparency of BART operations
• Enhanced reliability of data used for decision making and resource allocations
• Improvements in internal controls

The audit process typically encompasses planning, fieldwork, reporting, and follow up:

Planning:

• Meeting to inform management of preliminary audit scope and objectives
• Gather background information through interviews and research
• Conduct a project-based risk assessment
• Finalize the audit scope and objectives

Fieldwork:

• Gather additional data and information as necessary
• Analyze data for reliability
• Analyze data and information for trends or gaps
• Share initial findings with management and collaborate on potential recommendations
• Formulate findings and recommendations for report

Reporting:

• Write draft report and develop potential graphics to be used in report
• Conduct an internal quality control review to verify the accuracy of the report based on data and information obtained during planning and fieldwork
• Meet with management to review the draft report and obtain additional documentation if needed
• Revise draft report, if necessary, based on management input
• Prepare final draft for management’s response
• Review management’s response for reasonableness
• Publish report with management’s response
• Present report to the Board and State Legislature

Follow Up:

• Receive status reports from management every six months until recommendations are implemented or closed for other reasons
• Review actions taken or planned for reasonableness
• Provide results to Board and State Legislature