A CRITICAL ANALYSIS ON VALUE FOR MONEY AUDIT ON PUBLIC SECTOR OF AN ORGANIZATION (A CASE STUDY OF SELECTED PARASTATALS IN ENUGU STATE)

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

Value for Money (VFM) audit, also known as performance audit, is a specialized form of auditing that goes beyond traditional financial and compliance audits to evaluate whether an organization has acquired, utilized, and managed its resources in an economical, efficient, and effective manner. These three elements—economy, efficiency, and effectiveness—constitute the “three E’s” of VFM auditing. Economy means acquiring resources of appropriate quality at the lowest possible cost (spending less). Efficiency means obtaining the maximum output from the resources used (spending well). Effectiveness means achieving the intended objectives and outcomes (spending wisely). VFM audit is particularly important in the public sector, where organizations are entrusted with public funds and are expected to deliver services to citizens, not to maximize profits. Unlike financial audits that focus on whether transactions are properly authorized and recorded, VFM audits assess whether public resources are being used to achieve intended results (INTOSAI, 2019; Premchand, 2019).

Traditional financial audits focus on whether financial statements are accurate and whether transactions comply with laws and regulations (regularity audit). While these are essential, they do not address whether public funds were used wisely. A government parastatal could be fully compliant with all financial regulations—every payment properly authorized, every receipt recorded—yet still waste public money by paying inflated prices (poor economy), producing output at unnecessarily high cost (poor efficiency), or failing to achieve intended outcomes (poor effectiveness). VFM audit fills this gap by examining these qualitative dimensions of public spending. For citizens and taxpayers, VFM audit provides assurance that their money is not only accounted for but also used well. The adoption of VFM audit in the public sector has been promoted by international organizations such as the International Organization of Supreme Audit Institutions (INTOSAI) and development partners seeking to improve public financial management (Mellett, 2019; Chan, 2018).

The Nigerian public sector has witnessed various reforms aimed at improving financial management, accountability, and service delivery. These include the adoption of the International Public Sector Accounting Standards (IPSAS), the implementation of the Treasury Single Account (TSA), the Government Integrated Financial Management Information System (GIFMIS), and the Integrated Payroll and Personnel Information System (IPPIS). Despite these reforms, concerns remain about whether public funds are being used economically, efficiently, and effectively. Reports of waste, inefficiency, and poor service delivery in government parastatals are common. Value for Money audit has been identified as a tool that can address these concerns by providing independent assessments of whether public resources are achieving value. However, the extent to which VFM audit is practiced in Nigerian public sector organizations, particularly at the state level, and its impact on accountability and performance, requires empirical investigation (Adebayo and Oyedokun, 2019; Okafor and Udeh, 2020).

Enugu State has a number of government parastatals—state-owned enterprises and agencies—established to deliver specific services to citizens. These include parastatals in sectors such as housing (Enugu State Housing Development Corporation), water (Enugu State Water Corporation), transportation (Enugu State Transport Company), education (Enugu State Universal Basic Education Board), health (Enugu State Hospital Management Board), and others. These parastatals receive significant funding from the state government (budget allocations), internally generated revenue, and sometimes grants from development partners. As public entities, they are accountable to the Enugu State Government, the State House of Assembly, the Office of the Auditor-General, and the citizens of Enugu State for the use of public funds. The effectiveness of their operations—whether they deliver value for money—is a matter of public concern (Enugu State Government, 2019; Eze and Nwafor, 2020).

The concept of Value for Money audit has three interconnected components. Economy focuses on minimizing the cost of inputs while maintaining appropriate quality. Questions asked in an economy audit include: Are goods and services being procured at the lowest possible prices? Are there unnecessary costs? Are there cheaper alternatives? Are competitive bidding processes followed? For a parastatal, poor economy might include paying inflated prices for supplies, overstaffing, or excessive administrative costs. Efficiency focuses on maximizing output from given inputs (or minimizing inputs for given outputs). Questions asked include: Are resources being used productively? Is there waste? Are processes optimized? Could the same output be achieved with fewer resources? For a parastatal, poor efficiency might include low worker productivity, underutilized equipment, or high fuel consumption per unit of service. Effectiveness focuses on whether the organization is achieving its intended objectives and outcomes. Questions asked include: Are programs achieving their goals? Is the parastatal delivering services to citizens? Are customers satisfied? Are outcomes (e.g., reduced housing deficit, clean water, reliable transport) being achieved? For a parastatal, poor effectiveness might include failing to complete housing units, water supply interruptions, or unreliable transport services (INTOSAI, 2019; Mellett, 2019).

The mandate for VFM audit in the Nigerian public sector is derived from several sources. The Constitution of the Federal Republic of Nigeria (1999, as amended) empowers the Auditor-General of the Federation (and by extension, state Auditors-General) to audit the accounts of all government entities. The Audit Act provides for both regularity (compliance) and performance (VFM) audits. The Financial Reporting Council of Nigeria (FRCN) has issued standards for public sector auditing that incorporate VFM concepts. The International Standards of Supreme Audit Institutions (ISSAI) issued by INTOSAI provide detailed guidance on conducting VFM audits. Despite this legal and professional framework, VFM audit in Nigeria has historically been underutilized, with most audit resources devoted to financial and compliance audits. State-level VFM audit is even less developed, with many state Auditor-General offices lacking the capacity, resources, and mandate to conduct comprehensive VFM audits (Oyo-Ita, 2019; FRCN, 2014).

The benefits of VFM audit for public sector organizations are substantial. Improved accountability: VFM audit reports provide evidence to the legislature and the public about whether resources are being used well, enabling oversight and answerability. Better decision-making: VFM audit findings help management identify areas for improvement (e.g., renegotiating supplier contracts, improving processes, reallocating resources). Enhanced performance: Recommendations from VFM audits lead to operational improvements, cost savings, and better service delivery. Deterrence: The knowledge that VFM audits will occur creates a deterrent effect, reducing waste and inefficiency. Public trust: When citizens see that their money is being audited for value, trust in government increases. International standing: Countries that practice VFM audit are viewed more favorably by international development partners. For Enugu State parastatals, effective VFM audit could lead to significant improvements in service delivery and resource utilization (INTOSAI, 2019; Premchand, 2019).

The challenges of conducting VFM audit in the public sector, particularly at the state level, are significant. Difficulty in measuring effectiveness: Defining and quantifying outcomes (e.g., “improved housing,” “clean water,” “quality education”) is challenging. Lack of reliable performance data: Many parastatals do not have systems to track outputs and outcomes, making VFM audit difficult. Resistance from management: Management may see VFM audit as threatening, especially if it reveals poor performance. Lack of auditor skills: VFM audit requires different skills than financial audit, including performance measurement, data analysis, and evaluation methodology. Cost and time: VFM audits are generally more resource-intensive than financial audits. Risk of politicization: Findings of poor performance can be politically sensitive; auditors may face pressure to suppress findings. Weak follow-up: Even when VFM audits are conducted, recommendations may be ignored, limiting impact. For Enugu State parastatals, these challenges may limit the effectiveness of VFM audit (Eze and Nwafor, 2019; Okafor and Udeh, 2020).

The role of the Office of the Auditor-General in VFM audit is critical. The Auditor-General of Enugu State is constitutionally mandated to audit the accounts of all state government entities, including parastatals. The Auditor-General can conduct VFM audits as part of the annual audit cycle or as special audits. The audit report is submitted to the Enugu State House of Assembly, which reviews it through its Public Accounts Committee. The committee can summon accounting officers (e.g., Managing Directors of parastatals) to explain findings, recommend sanctions, and require corrective action. However, the effectiveness of this oversight depends on the capacity and independence of the Auditor-General’s office, the technical expertise of the Public Accounts Committee, and the political will to enforce accountability (Oyo-Ita, 2019; Ogbeifun, 2019).

The concept of economy in VFM audit relates to cost minimization. For a parastatal, economy audit might examine: (a) procurement practices—are contracts awarded competitively? Are prices reasonable compared to market rates? (b) staffing—is the parastatal overstaffed? Are salaries market-competitive? (c) administrative costs—are travel, training, office expenses necessary and reasonable? (d) utilities—is electricity, water, telephone usage efficient? Poor economy (e.g., paying inflated prices due to lack of competition) represents a waste of public funds. VFM audit identifies such waste and recommends corrective action (INTOSAI, 2019; Premchand, 2019).

The concept of efficiency in VFM audit relates to productivity. For a parastatal, efficiency audit might examine: (a) output per employee—how many housing units per staff? How many passengers per driver? (b) asset utilization—are vehicles and equipment used effectively? Is there idle capacity? (c) process efficiency—are there bottlenecks, delays, or rework? (d) cost per unit of output—cost per housing unit constructed, cost per liter of water produced, cost per passenger-kilometer. Poor efficiency (e.g., low productivity, high unit costs) indicates that resources are not being used optimally. VFM audit identifies inefficiencies and recommends improvements (Mellett, 2019; Chan, 2018).

The concept of effectiveness in VFM audit relates to goal achievement. For a parastatal, effectiveness audit might examine: (a) achievement of output targets—were planned housing units completed? Was water production target met? (b) achievement of outcome targets—has the housing deficit been reduced? Is water quality safe? Are customers satisfied? (c) service delivery—are services accessible to citizens? Are there complaints? (d) impact—has the parastatal’s activities improved citizens’ lives? Poor effectiveness (e.g., failing to achieve targets despite spending budget) indicates that resources are being wasted on ineffective programs. VFM audit identifies these failures and recommends strategic changes (INTOSAI, 2019; Okafor and Udeh, 2021).

The relationship between VFM audit and financial audit is complementary. Financial audit answers: “Did the parastatal spend according to budget and regulations?” VFM audit answers: “Did the parastatal spend wisely?” A parastatal could pass a financial audit (no irregularities) but fail a VFM audit (waste, inefficiency, ineffectiveness). Therefore, VFM audit provides additional assurance beyond financial compliance. For Enugu State parastatals, combining financial and VFM audits would provide a more complete picture of performance (Premchand, 2019; Chan, 2018).

The role of the legislature in VFM audit oversight is critical. The Public Accounts Committee (PAC) of the Enugu State House of Assembly reviews VFM audit reports, summons accounting officers, questions them on findings, and recommends sanctions or corrective actions. However, PAC effectiveness depends on: (a) technical expertise of committee members (understanding VFM concepts), (b) independence from the executive branch (political independence), (c) resources (staff, consultants), (d) follow-up (monitoring implementation of recommendations), and (e) sanctions (ability to impose penalties for non-compliance). Weak PACs undermine the value of VFM audits (Nwankwo and Okeke, 2020; Oyo-Ita, 2019).

The challenges facing Enugu State parastatals that VFM audit can address include: (a) inadequate service delivery – citizens not receiving expected services (housing, water, transport, education, health), (b) wasteful spending – funds spent on unnecessary or overpriced items, (c) inefficient operations – high costs, low productivity, (d) asset mismanagement – vehicles, equipment not maintained or underutilized, (e) procurement irregularities – contracts awarded without competition, inflated prices, (f) staffing issues – overstaffing, low productivity, (g) poor maintenance – infrastructure deteriorating due to inadequate maintenance budgets. VFM audit can identify these problems and recommend solutions (Eze and Nwafor, 2020; Okafor and Udeh, 2020).

Finally, this study focuses on selected parastatals in Enugu State as a case study because they represent government organizations where value for money is a significant concern. By critically analyzing VFM audit in these parastatals, the study can provide insights applicable to other state-level public entities in Nigeria and other developing economies. The findings will contribute to the literature on public sector auditing and provide practical recommendations for strengthening VFM audit practice, enhancing accountability, and improving public service delivery (Yin, 2018; Creswell and Creswell, 2018).

1.2 Statement of the Problem

Selected parastatals in Enugu State, like many government organizations in Nigeria, face persistent challenges in demonstrating value for money in their use of public funds. Despite receiving significant budget allocations and generating internally generated revenue, many parastatals struggle to deliver quality services to citizens efficiently and effectively. Evidence suggests problems including: (a) high operating costs relative to output (poor efficiency), (b) failure to achieve service delivery targets (poor effectiveness), (c) procurement irregularities (poor economy), (d) inadequate asset management, (e) poor maintenance of infrastructure, and (f) citizen complaints about service quality. Traditional financial audits, while identifying some irregularities, do not address these value-for-money concerns. Value for Money (VFM) audit is intended to fill this gap by evaluating economy, efficiency, and effectiveness. However, it is unclear to what extent VFM audits are conducted for Enugu State paratastals, what findings have emerged, what impact they have had on improving performance, and what challenges limit their effectiveness. There is a lack of recent, systematic, empirical research that critically analyzes Value for Money audit on public sector organizations in Enugu State. Therefore, this study is motivated to critically analyze Value for Money audit on selected parastatals in Enugu State, assess its effectiveness, identify challenges, and propose recommendations for strengthening VFM audit practice.

1.3 Aim of the Study

The aim of this study is to critically analyze Value for Money (VFM) audit on the public sector, using selected parastatals in Enugu State as case studies.

1.4 Objectives of the Study

The specific objectives of this study are to:

1. Examine the Value for Money audit practices (economy, efficiency, effectiveness audits) applied to selected parastatals in Enugu State.
2. Assess the findings of VFM audits on selected parastatals regarding economy (procurement costs, staffing levels), efficiency (productivity, cost per output), and effectiveness (output achievement, service delivery outcomes).
3. Determine the impact of VFM audit findings and recommendations on the performance and accountability of selected parastatals.
4. Identify the challenges affecting the conduct and effectiveness of VFM audit in Enugu State parastatals (capacity, data availability, political interference, follow-up).
5. Propose recommendations for strengthening VFM audit practice to enhance accountability and performance in public sector organizations.

1.5 Research Questions

The following research questions guide this study:

1. What are the Value for Money audit practices (economy, efficiency, effectiveness audits) applied to selected parastatals in Enugu State?
2. What are the findings of VFM audits on selected parastatals regarding economy (procurement costs, staffing), efficiency (productivity, cost per output), and effectiveness (output achievement, service delivery outcomes)?
3. What impact have VFM audit findings and recommendations had on the performance and accountability of selected parastatals?
4. What are the major challenges affecting the conduct and effectiveness of VFM audit in Enugu State parastatals (capacity, data availability, political interference, follow-up)?
5. What recommendations can be made to strengthen VFM audit practice to enhance accountability and performance in public sector organizations?

1.6 Research Hypotheses

The following hypotheses are formulated in null (H₀) and alternative (H₁) forms:

Hypothesis One

• H₀: Value for Money audit has no significant effect on the economy (procurement cost reduction) of selected parastatals in Enugu State.
• H₁: Value for Money audit has a significant effect on the economy (procurement cost reduction) of selected parastatals in Enugu State.

Hypothesis Two

• H₀: There is no significant relationship between VFM audit findings and improvements in operational efficiency (productivity, cost per output) in selected parastatals.
• H₁: There is a significant relationship between VFM audit findings and improvements in operational efficiency (productivity, cost per output) in selected parastatals.

Hypothesis Three

• H₀: VFM audit recommendations have not significantly improved the effectiveness (output achievement, service delivery) of selected parastatals.
• H₁: VFM audit recommendations have significantly improved the effectiveness (output achievement, service delivery) of selected parastatals.

Hypothesis Four

• H₀: Challenges such as lack of auditor capacity, poor data availability, political interference, and weak follow-up do not significantly affect the effectiveness of VFM audit in Enugu State parastatals.
• H₁: Challenges such as lack of auditor capacity, poor data availability, political interference, and weak follow-up significantly affect the effectiveness of VFM audit in Enugu State parastatals.

1.7 Significance of the Study

This study is significant for several stakeholders. First, the management of selected parastatals in Enugu State will benefit from insights into how VFM audit can identify areas for improvement in economy, efficiency, and effectiveness, enabling better resource utilization and service delivery. Second, the Office of the Auditor-General of Enugu State will gain insights into the challenges and best practices of VFM audit, informing audit planning, methodology, capacity building, and reporting. Third, the Enugu State House of Assembly (particularly the Public Accounts Committee) will benefit from understanding the value of VFM audit findings for legislative oversight, supporting more effective hearings and recommendations. Fourth, the Enugu State Government (Executive) will gain insights into the performance of its parastatals, informing policy, budget allocation, and reform decisions. Fifth, other state governments in Nigeria can use the findings as a benchmark for developing or strengthening VFM audit practices. Sixth, the Office of the Auditor-General of the Federation and the Financial Reporting Council of Nigeria will benefit from understanding state-level VFM audit challenges, informing national guidance and capacity-building programs. Seventh, international development partners (World Bank, IMF, DFID/UKAID) will gain insights into VFM audit implementation challenges at the state level in Nigeria, informing technical assistance. Eighth, academics and researchers in public sector auditing, public financial management, and accountability will benefit from the study’s contribution to the literature on VFM audit in developing economies. Ninth, civil society organizations focused on governance and anti-corruption will gain evidence on the effectiveness (or ineffectiveness) of VFM audit, supporting advocacy for stronger audit practices. Finally, citizens of Enugu State will benefit indirectly as strengthened VFM audit leads to better public services, reduced waste, and greater accountability for public funds.

1.8 Scope of the Study

This study focuses on a critical analysis of Value for Money (VFM) audit on the public sector, using selected parastatals in Enugu State as case studies. Geographically, the research is limited to Enugu State, Nigeria, focusing on selected government-owned parastatals representing different sectors (e.g., housing, water, transport, education, health). The parastatals are state-owned enterprises or agencies established to deliver specific public services. Content-wise, the study examines the following areas: VFM audit practices (economy audit, efficiency audit, effectiveness audit); VFM audit findings (procurement costs, staffing levels, productivity, cost per output, output achievement, service delivery outcomes); impact of VFM audit on performance and accountability; and challenges (auditor capacity, data availability, political interference, follow-up, legal framework). The study targets Auditor-General’s office staff (auditors), parastatal management (Managing Directors, General Managers), finance staff, internal auditors, Public Accounts Committee members, and civil society experts. The time frame for data collection is the cross-sectional period of 2023–2024, though historical VFM audit reports and performance data (e.g., 5-10 years) will be analyzed. The study does not cover federal parastatals (except for comparative context), nor does it cover private sector auditing, nor does it cover financial or compliance audit (except as they relate to VFM audit).

1.9 Definition of Terms

Value for Money (VFM) Audit (Performance Audit): A specialized form of auditing that evaluates whether an organization has acquired, utilized, and managed its resources in an economical, efficient, and effective manner (the “three E’s”).

Economy: Acquiring resources of appropriate quality at the lowest possible cost; spending less (e.g., paying market prices, avoiding waste, competitive procurement).

Efficiency: Obtaining the maximum output from the resources used (or minimizing inputs for given outputs); spending well (e.g., high productivity, low unit costs, optimal asset utilization).

Effectiveness: Achieving the intended objectives and outcomes; spending wisely (e.g., achieving goals, delivering services, satisfying citizens, achieving impact).

Public Sector: The part of the economy owned, controlled, and operated by the government, including ministries, departments, agencies, parastatals, and state-owned enterprises.

Parastatal (State-Owned Enterprise): A government-owned or government-controlled entity established to provide specific public services or carry out specific commercial activities, with some operational autonomy but subject to government oversight.

Enugu State: A state in the South-East geopolitical zone of Nigeria, with its capital in Enugu, selected as the geographical focus for this study.

Auditor-General: The head of the supreme audit institution (state or federal) responsible for auditing the financial statements and performance of government entities.

Performance Indicator: A measurable value that demonstrates how effectively an organization is achieving its objectives (e.g., housing units completed, water production volume, passenger trips, student test scores, patient satisfaction).

Benchmarking: The process of comparing an organization’s performance (e.g., costs, productivity, outcomes) against industry standards, best practices, or peer organizations to identify areas for improvement.

Procurement Audit: An examination of procurement processes to assess whether goods and services are acquired economically (competitive bidding, reasonable prices, compliance with regulations).

Productivity: A measure of output per unit of input (e.g., housing units per employee, passengers per driver, liters of water per kilowatt-hour).

Cost per Output: Total cost divided by quantity of output (e.g., cost per housing unit, cost per liter of water, cost per student); a measure of efficiency.

Service Delivery Outcome: The ultimate result of a parastatal’s activities for citizens (e.g., improved housing quality, access to clean water, reliable transportation, educated children, improved health).

Public Accounts Committee (PAC): A committee of the legislature (State House of Assembly) responsible for reviewing audit reports, summoning accounting officers, and recommending sanctions for financial or performance irregularities.

INTOSAI: The International Organization of Supreme Audit Institutions, which issues International Standards of Supreme Audit Institutions (ISSAI) including standards for VFM audit.

Economy, Efficiency, and Effectiveness (3 E’s): The three dimensions of VFM audit, evaluating whether resources are used at low cost (economy), with high productivity (efficiency), and to achieve objectives (effectiveness).

Supreme Audit Institution (SAI): The government body responsible for auditing public sector entities; in Enugu State, the Office of the Auditor-General of Enugu State.

Performance Audit Criteria: The standards or benchmarks against which performance is assessed (e.g., legal requirements, policy objectives, industry standards, best practices).

Audit Evidence: Information used by the auditor to support VFM findings, including documents, data, interviews, observations, and surveys.

Value for Money (VFM) Audit Report: The formal output of a VFM audit, containing findings, conclusions, and recommendations on economy, efficiency, and effectiveness.

Follow-up Audit: An audit conducted to assess whether previous VFM audit recommendations have been implemented and whether intended improvements have been achieved.

Service Delivery: The provision of public services (housing, water, transport, education, health) to citizens by government entities.

Citizen Satisfaction: The degree to which citizens are satisfied with the quality, accessibility, and reliability of public services; a measure of effectiveness.

CHAPTER TWO: LITERATURE REVIEW

2.1 Conceptual Framework

A conceptual framework is a structural representation of the key concepts or variables in a study and the hypothesized relationships among them. It serves as the analytical lens through which the researcher organizes the study, selects appropriate methodology, and interprets findings. In this study, the conceptual framework is built around two primary constructs: Value for Money (VFM) Audit (the independent variable) and Public Sector Performance and Accountability (the dependent variable). Additionally, the framework identifies the specific dimensions of each construct and the mediating and moderating variables that influence the relationship (Miles, Huberman, and Saldaña, 2020).

2.1.1 Dependent Variables: Public Sector Performance and Accountability

Public sector performance and accountability, the dependent variable in this study, refers to the effectiveness, efficiency, and economy with which public resources are used, and the obligation of public officials to account for their use. For the purpose of this study, public sector performance and accountability are conceptualized along four key dimensions that are relevant to the operations of selected parastatals in Enugu State. Each dimension is directly addressed by Value for Money audit (INTOSAI, 2019; Premchand, 2019).

The first dimension is economy in resource acquisition. This refers to the minimization of input costs while maintaining appropriate quality. For parastatals, economy is measured by: (a) procurement efficiency – are goods and services procured at competitive prices? Is there evidence of overpayment? (b) staffing economy – is the parastatal overstaffed? Are salaries and allowances reasonable? (c) administrative economy – are travel, training, office expenses necessary and cost-effective? (d) utility economy – are electricity, water, telephone costs reasonable and usage efficient? (e) contract economy – are service contracts (security, cleaning, maintenance) priced competitively? Poor economy indicates waste of public funds. VFM audit assesses economy by comparing procurement prices to market rates, benchmarking staffing levels against norms, and analyzing expense trends (Chan, 2018; Mellett, 2019).

The second dimension is efficiency in resource utilization. This refers to obtaining maximum output from given inputs. For parastatals, efficiency is measured by: (a) labor productivity – output per employee (e.g., housing units per staff, passengers per driver, water liters per worker), (b) asset utilization – usage rates of vehicles, equipment, buildings (e.g., vehicle kilometers per liter of fuel, occupancy rates), (c) process efficiency – cycle times, delays, rework (e.g., time to complete a housing unit, response time to water complaints), (d) cost per unit of output – cost per housing unit constructed, cost per liter of water produced, cost per passenger-kilometer, (e) energy efficiency – fuel or electricity consumption per unit of output. Poor efficiency indicates that resources are being used suboptimally. VFM audit assesses efficiency by comparing actual productivity to benchmarks, analyzing cost trends, and identifying process bottlenecks (Okafor and Udeh, 2020; INTOSAI, 2019).

The third dimension is effectiveness in achieving outcomes. This refers to the extent to which the parastatal achieves its intended objectives and delivers services to citizens. For parastatals, effectiveness is measured by: (a) output achievement – did the parastatal achieve its planned targets (e.g., number of housing units completed, water production target, passenger trips)? (b) outcome achievement – did the parastatal achieve its intended outcomes (e.g., reduced housing deficit, improved water quality, reduced travel time)? (c) service delivery quality – are services reliable, accessible, and responsive to citizen needs? (d) citizen satisfaction – are citizens satisfied with the parastatal’s services? (e) impact – has the parastatal’s activities improved citizens’ lives? Poor effectiveness indicates that resources are being wasted on programs that do not achieve results. VFM audit assesses effectiveness by comparing actual outputs to targets, conducting customer surveys, and evaluating impact (Premchand, 2019; Mellett, 2019).

The fourth dimension is accountability and answerability. This refers to the obligation of parastatal management to answer to stakeholders (government, legislature, citizens) for their use of public resources and achievement of results. Accountability is measured by: (a) financial reporting – are financial statements submitted on time and audited? (b) performance reporting – does the parastatal report on outputs and outcomes? (c) response to audit findings – does management implement audit recommendations? (d) legislative oversight – does the Public Accounts Committee review audit findings and hold management accountable? (e) public disclosure – are financial and performance reports accessible to citizens? Poor accountability indicates that management is not being held responsible for poor performance. VFM audit supports accountability by providing independent evidence of performance (or lack thereof) to oversight bodies (Ogbeifun, 2019; Oyo-Ita, 2019).

These four dimensions—economy, efficiency, effectiveness, and accountability—are interrelated. Poor economy leads to higher costs, which affects efficiency. Poor efficiency leads to higher unit costs, which may be passed to citizens or require subsidies. Poor effectiveness means that even if economy and efficiency are good, the parastatal is not achieving its mission. Accountability ensures that poor performance is addressed. For selected parastatals in Enugu State, VFM audit addresses all four dimensions (Miles et al., 2020; Creswell and Creswell, 2018).

2.1.2 Independent Variables: Value for Money (VFM) Audit

Value for Money (VFM) Audit, the independent variable in this study, refers to the systematic evaluation of whether an organization has acquired, utilized, and managed its resources in an economical, efficient, and effective manner. For the purpose of this study, VFM audit is conceptualized along four key dimensions that are relevant to the operations of selected parastatals in Enugu State. Each dimension represents a specific focus area of VFM audit (INTOSAI, 2019; Premchand, 2019).

The first dimension is economy audit. This refers to the examination of whether the parastatal acquires resources (goods, services, staff) at the lowest possible cost while maintaining appropriate quality. Key areas examined include: (a) procurement – competitive bidding practices, price reasonableness, contract management, (b) staffing – staffing levels compared to norms, salary scales, allowances, (c) administrative expenses – travel, training, office expenses, (d) utilities – electricity, water, telephone usage and costs, (e) contract services – security, cleaning, maintenance contracts. The economy audit asks: Is the parastatal paying too much for what it buys? Could it obtain the same goods or services at lower cost? What are the causes of any overpayment? The audit may compare prices to market rates, benchmark against other parastatals, or analyze spending trends (Chan, 2018; Okafor and Udeh, 2020).

The second dimension is efficiency audit. This refers to the examination of whether the parastatal obtains maximum output from its inputs. Key areas examined include: (a) labor productivity – output per employee (e.g., housing units per staff member, water production per worker), (b) asset utilization – usage rates of vehicles, equipment, buildings, (c) process efficiency – cycle times, delays, waste, rework, (d) cost per unit of output – cost per housing unit, cost per liter of water, cost per passenger, (e) energy efficiency – fuel or electricity consumption per unit of output. The efficiency audit asks: Is the parastatal producing as much as it should with the resources it uses? Are there ways to produce more with the same resources or use fewer resources to produce the same output? What are the causes of inefficiency? The audit may use benchmarking, process mapping, or productivity analysis (INTOSAI, 2019; Mellett, 2019).

The third dimension is effectiveness audit. This refers to the examination of whether the parastatal achieves its intended objectives and outcomes. Key areas examined include: (a) output achievement – comparison of actual outputs to planned targets (e.g., housing units completed vs. target), (b) outcome achievement – assessment of whether intended outcomes (e.g., reduced housing deficit, improved water quality) are being achieved, (c) service delivery quality – reliability, accessibility, responsiveness, (d) citizen satisfaction – surveys of citizens served by the parastatal, (e) impact – longer-term changes in citizens’ lives attributable to the parastatal’s activities. The effectiveness audit asks: Is the parastatal achieving what it set out to achieve? Is it delivering services that meet citizen needs? Are there unintended consequences (positive or negative)? What factors are affecting effectiveness? The audit may use logic models, theory of change, or outcome mapping (Premchand, 2019; Okafor and Udeh, 2021).

The fourth dimension is recommendations and follow-up. This refers to the process of developing actionable recommendations based on audit findings and tracking management’s implementation. Key elements include: (a) recommendation formulation – specific, measurable, achievable, relevant, time-bound (SMART) recommendations, (b) management response – management’s action plan to address findings, (c) follow-up audit – subsequent audit to assess implementation, (d) impact assessment – whether recommendations have led to improved economy, efficiency, or effectiveness. The follow-up process asks: Has management taken corrective action? Have audit recommendations been implemented? Has performance improved as a result? Without effective follow-up, VFM audits have limited impact. For Enugu State parastatals, follow-up is often weak (Ogbeifun, 2019; Oyo-Ita, 2019).

These four dimensions—economy audit, efficiency audit, effectiveness audit, and follow-up—are sequential and complementary. Economy audit identifies cost savings; efficiency audit identifies productivity improvements; effectiveness audit identifies strategic gaps; follow-up ensures implementation. For selected parastatals in Enugu State, comprehensive VFM audit requires all four dimensions (Miles et al., 2020; Creswell and Creswell, 2018).

The conceptual framework posits a positive relationship between the conduct of VFM audit (independent variable) and public sector performance and accountability (dependent variable). Specifically, parastatals that undergo regular, high-quality VFM audits are expected to have better economy (lower procurement costs, appropriate staffing), better efficiency (higher productivity, lower unit costs), better effectiveness (higher output and outcome achievement), and stronger accountability (implementation of audit recommendations, oversight). However, this relationship is moderated by several factors, including auditor capacity, management cooperation, political will, and follow-up enforcement, which are discussed in the theoretical framework (INTOSAI, 2019; Premchand, 2019).

2.2 Theoretical Framework

A theoretical framework is a collection of interrelated concepts, definitions, and propositions that present a systematic view of phenomena by specifying relationships among variables, with the purpose of explaining and predicting those phenomena. In this study, five major theories are adopted to explain the relationship between Value for Money audit and public sector performance and accountability: the Agency Theory, the Stewardship Theory, the Public Interest Theory, the Performance Management Theory, and the Accountability Theory. These theories collectively provide a robust lens for understanding how VFM audit enhances performance and accountability, why its effectiveness varies, and under what conditions it is most beneficial (Jensen and Meckling, 1976; Davis, Schoorman, and Donaldson, 1997; Posner and Sunstein, 2018; Behn, 2003; Romzek and Dubnick, 1987).

2.2.1 Agency Theory

Agency Theory, developed by Jensen and Meckling (1976), describes the relationship between principals (those who delegate authority) and agents (those who act on behalf of principals). In the context of public sector parastatals, the principals are the citizens of Enugu State (and their elected representatives in the State House of Assembly) who provide public funds through taxes and allocations. The agents are the public officials—the Managing Directors, General Managers, and other staff of the parastatals—who are entrusted with managing those funds and delivering services. Agency Theory posits that agents may not always act in the best interests of principals due to information asymmetry (agents have more information about their costs, operations, and performance than principals do) and divergent interests (agents may pursue personal goals such as career advancement, perquisites, or corruption rather than citizen welfare). This divergence creates agency costs, which include monitoring costs (expenditures to oversee agent behavior), bonding costs (expenditures by agents to assure principals of their fidelity), and residual loss (the value lost when agent decisions deviate from principal interests) (Jensen and Meckling, 1976; Premchand, 2019).

In the context of this study, Agency Theory explains the fundamental need for Value for Money audit as a monitoring mechanism to reduce agency costs and improve performance. Traditional financial audit monitors compliance (were the rules followed?). VFM audit goes further by monitoring whether agents used resources economically, efficiently, and effectively—the ultimate test of whether agents are acting in principals’ interests. When VFM audit reveals that a parastatal is paying inflated prices (poor economy), operating with low productivity (poor efficiency), or failing to achieve service delivery targets (poor effectiveness), it provides evidence that agents may be acting in self-interest rather than citizen interest. VFM audit therefore reduces information asymmetry and provides principals with the information needed to hold agents accountable. The theory predicts that parastatals subjected to regular VFM audits will have lower agency costs, better performance, and stronger accountability (Jensen and Meckling, 1976; Okafor and Udeh, 2020).

Agency Theory also explains why management may resist VFM audit. If managers (agents) are engaged in wasteful practices or simply poor performance, VFM audit threatens to expose them. They may therefore: (a) block access to data, (b) fail to act on findings, (c) retaliate against auditors, or (d) create the appearance of VFM audit without substantive implementation (decoupling). For Enugu State parastatals, management resistance may be a significant challenge. The theory suggests that for VFM audit to be effective, auditors must have independence from management, and there must be strong oversight (e.g., by the Public Accounts Committee) to ensure that management cannot suppress findings (Mellett, 2019; Oyo-Ita, 2019).

Empirical research has found that organizations with stronger monitoring (including VFM audit) have lower agency costs and better performance. For selected parastatals in Enugu State, Agency Theory suggests that VFM audit can reduce the information asymmetry between citizens and parastatal management (Jensen and Meckling, 1976).

2.2.2 Stewardship Theory

Stewardship Theory, developed by Davis, Schoorman, and Donaldson (1997), offers a contrasting perspective to Agency Theory. While Agency Theory assumes that agents are self-interested and opportunistic, Stewardship Theory posits that managers and public officials are inherently trustworthy, responsible, and motivated to act in the best interests of the organization and its stakeholders. Stewards derive satisfaction from organizational achievement, collective success, and the responsible management of resources placed in their care. In the public sector context, Stewardship Theory suggests that most public officials are public servants who genuinely want to use public funds efficiently and effectively to deliver services to citizens. They do not require constant monitoring and punitive controls; rather, they need the tools, training, and support to fulfill their stewardship responsibilities (Davis et al., 1997; Mellett, 2019).

In the context of this study, Stewardship Theory explains how VFM audit can support accountability by enabling stewards (public officials) to demonstrate their stewardship. From a stewardship perspective, VFM audit provides the information that stewards need to show that they have been good stewards of public funds. VFM audit findings on economy demonstrate that the parastatal is not wasting money on overpriced goods. Efficiency findings demonstrate that resources are being used productively. Effectiveness findings demonstrate that services are being delivered to citizens. VFM audit, in this view, is not primarily a tool of coercion or surveillance but a tool of enablement and demonstration. This perspective is consistent with a collaborative audit approach, where auditors work with management to identify improvements rather than simply criticize. For Enugu State parastatals, fostering a stewardship culture can make VFM audits more effective (Davis et al., 1997; Okafor and Udeh, 2021).

Stewardship Theory also explains why excessively adversarial or punitive VFM audits can be counterproductive. If auditors are perceived as “gotcha” auditors who focus on blame rather than improvement, management may become defensive, withhold information, and resist recommendations. This undermines VFM audit’s ability to improve performance. Stewardship Theory suggests that VFM audit should be conducted in a collaborative, respectful manner that supports and empowers stewards. For Enugu State parastatals, a collaborative approach may be more effective than an adversarial one (Eze and Nwafor, 2019; Adebayo and Oyedokun, 2019).

Empirical research has found that public sector organizations with a stewardship culture (transparency, accountability, public service motivation) have better financial management outcomes. For selected parastatals in Enugu State, Stewardship Theory suggests that fostering a stewardship culture is as important as strengthening VFM audit methodology (Davis et al., 1997).

2.2.3 Public Interest Theory

Public Interest Theory, rooted in welfare economics and regulatory theory, posits that government intervention (including auditing) is justified when it serves the broader public interest. In the public sector, the public interest is served by transparent, accountable, and efficient management of public funds. VFM audit serves the public interest by: (a) providing citizens with information about how their money is being spent, (b) identifying waste, fraud, and inefficiency, (c) enabling corrective action, and (d) deterring future misconduct. The theory assumes that auditors act as guardians of the public interest, prioritizing citizen welfare over the interests of the audited organization or their own career advancement (Posner and Sunstein, 2018; Chan, 2018).

In the context of this study, Public Interest Theory explains why VFM audit is particularly important in the public sector and why its absence represents a failure of public stewardship. When VFM audit is weak or absent, citizens are denied the assurance that their money is being used well. Waste, inefficiency, and poor service delivery continue unchecked. Public Interest Theory provides a normative standard for evaluating VFM audit: a VFM audit serves the public interest if it: (a) provides information that is accessible and understandable to citizens, (b) identifies significant issues of waste, inefficiency, or ineffectiveness, (c) leads to corrective action, and (d) improves future performance. VFM audits that are technical, inaccessible, ignored, or have no impact do not serve the public interest. For Enugu State parastatals, Public Interest Theory suggests that VFM audit reports should be publicly accessible, written in plain language, and followed up by oversight bodies (Posner and Sunstein, 2018; Ogbeifun, 2019).

Public Interest Theory also explains why citizens and civil society should have access to VFM audit reports. Transparency enables citizen oversight and strengthens accountability. The theory suggests that VFM audit reports should be published on the Auditor-General’s website, discussed in the media, and used by civil society organizations for advocacy. For Enugu State parastatals, Public Interest Theory implies that VFM audit should be transparent and citizen-focused (Chan, 2018; Oyo-Ita, 2019).

Empirical research has found that supreme audit institutions that publish accessible VFM audit reports and engage with civil society have greater impact on public sector performance. For selected parastatals in Enugu State, Public Interest Theory suggests that transparency and citizen engagement are essential for VFM audit to serve the public interest (Adebayo and Oyedokun, 2020).

2.2.4 Performance Management Theory

Performance Management Theory, associated with Behn (2003) and others, explains how organizations can use performance information to improve decision-making, accountability, and results. The theory emphasizes the importance of setting clear goals, measuring performance against those goals, using performance data to manage operations, and reporting results to stakeholders. Performance management has multiple purposes: (a) evaluation (judging performance), (b) control (ensuring compliance), (c) budgeting (allocating resources based on performance), (d) motivation (incentivizing improvement), (e) celebration (recognizing success), (f) learning (identifying what works), and (g) improvement (taking corrective action). VFM audit is a form of performance auditing that evaluates whether performance management systems are effective and whether actual performance meets expectations (Behn, 2003; Moynihan, 2008).

In the context of this study, Performance Management Theory explains how VFM audit can detect performance gaps by comparing actual performance to targets, benchmarks, or standards. For Enugu State parastatals, VFM audit evaluates: (a) economy – are procurement costs below market rates? (b) efficiency – is productivity above industry benchmarks? (c) effectiveness – are output targets met? Are outcomes achieved? When actual performance falls significantly below expectations, VFM audit investigates why. In some cases, poor performance is due to poor management; in others, it is due to external factors (e.g., funding cuts, raw material shortages). Performance Management Theory suggests that VFM audit should be integrated into a broader performance management framework, where performance data is routinely collected and analyzed, and VFM audits are triggered by performance anomalies (Behn, 2003; Premchand, 2019).

Performance Management Theory also explains why VFM audit alone is insufficient for performance improvement. Performance data must be used for decision-making. VFM audit findings must be reported to management and the legislature, and corrective action must be taken. For Enugu State parastatals, this means that the Public Accounts Committee must review VFM audit findings, question management, and recommend sanctions or corrective actions. Without follow-through, VFM audit is an academic exercise (Moynihan, 2008; Okafor and Udeh, 2020).

Empirical research has found that organizations that use performance information for decision-making (including VFM audit findings) have better outcomes. For selected parastatals in Enugu State, Performance Management Theory suggests that VFM audit should be linked to performance budgeting, management accountability, and performance reporting (Behn, 2003).

2.2.5 Accountability Theory

Accountability Theory, as developed by Romzek and Dubnick (1987) and others, provides a framework for understanding the different types of accountability relationships in organizations and the mechanisms through which accountability is achieved. The theory distinguishes between: (a) hierarchical accountability (accountability to supervisors within the organization), (b) legal accountability (accountability to laws and regulations), (c) professional accountability (accountability to professional standards and norms), and (d) political accountability (accountability to elected officials or the public). In the public sector context, Accountability Theory emphasizes that effective accountability requires: (a) clear expectations and standards, (b) information about performance, (c) the ability to judge performance against standards, (d) consequences for performance (rewards or sanctions), and (e) the willingness of those in authority to enforce accountability (Romzek and Dubnick, 1987; Bovens, 2007).

In the context of this study, Accountability Theory explains how VFM audit contributes to each element of the accountability framework. VFM audit provides information about performance (economy, efficiency, effectiveness findings). It enables judgment by providing independent, objective assessments against criteria (e.g., procurement market prices, productivity benchmarks, output targets). It creates consequences by reporting findings to those with authority to impose sanctions (Auditor-General, Public Accounts Committee). And it supports enforcement by providing evidence for disciplinary or corrective action. Without VFM audit, accountability is weakened because performance information is unreliable or absent, and there is no independent basis for judging management’s conduct. For Enugu State parastatals, Accountability Theory suggests that VFM audit is a core mechanism for making accountability operational, not just a theoretical concept (Romzek and Dubnick, 1987; Mellett, 2019).

Accountability Theory also explains the importance of answerability as distinct from enforcement. Answerability (providing information and explanations) is necessary but not sufficient for accountability; there must also be consequences for poor performance or violations. For Enugu State parastatals, VFM audit reports provide the information needed for answerability, but the Public Accounts Committee must provide the enforcement (summoning management, recommending sanctions). The theory predicts that accountability will be stronger when both answerability and enforcement are present (Bovens, 2007; Oyo-Ita, 2019).

Empirical research has found that accountability is stronger in public sector organizations where there are clear standards, transparent reporting, independent oversight, and credible sanctions. For selected parastatals in Enugu State, Accountability Theory suggests that improving VFM audit requires not only audit methodology but also strengthening of oversight and enforcement mechanisms (Romzek and Dubnick, 1987).