Whereas 'value for money' audit aims at economy and 'performance' audit seeks efficiency, 'social' audit goes beyond both, to examine the effectiveness of a programme or activity. Examine this statement with suitable illustrations.

Understanding the Three Audit Types

Each type of audit serves a distinct purpose in evaluating public expenditure and program implementation.

1. Value for Money (VFM) Audit

VFM audit, traditionally the first step in public audit, focuses on ensuring that public resources are utilized economically. It asks whether the organization secured inputs (goods, services, personnel) at the lowest possible cost. It emphasizes economy – minimizing the cost of resources acquired. For example, a VFM audit of the National Rural Employment Guarantee Act (NREGA) might examine whether materials were procured at the lowest available market price.

2. Performance Audit

Performance audit builds upon VFM audit by assessing the efficiency with which resources are converted into outputs. It examines whether the organization achieved the maximum possible output from a given level of input. It focuses on optimizing processes and minimizing waste. Continuing with the NREGA example, a performance audit would assess whether the labor days created per unit of expenditure were optimal, considering factors like project planning and execution. The Comptroller and Auditor General (CAG) frequently conducts performance audits of central government schemes.

3. Social Audit

Social audit represents a significant advancement over VFM and performance audits. It goes beyond economy and efficiency to evaluate the effectiveness of a program – whether it achieved its intended social outcomes and benefited the target population. It is a participatory process involving stakeholders, including beneficiaries, to assess the program’s impact. For NREGA, a social audit would involve villagers verifying the accuracy of employment records, assessing the quality of work created, and determining whether the program genuinely alleviated poverty and provided sustainable livelihoods.

Comparative Analysis

The following table summarizes the key differences between the three audit types:

Audit Type	Focus	Key Question	Methodology	Stakeholder Involvement
Value for Money (VFM)	Economy	Were resources acquired at the lowest cost?	Financial analysis, procurement records review	Limited
Performance Audit	Efficiency	Were resources converted into outputs efficiently?	Process analysis, output measurement, benchmarking	Moderate (government officials, experts)
Social Audit	Effectiveness	Did the program achieve its intended social outcomes?	Participatory assessment, beneficiary feedback, field verification	High (beneficiaries, community members, NGOs)

Illustrative Examples

MGNREGA Social Audit: Andhra Pradesh pioneered social audits of MGNREGA, revealing significant discrepancies in employment records and instances of corruption. This led to corrective measures and increased transparency.

National Health Mission (NHM) Audit: CAG’s performance audit of NHM (2013) highlighted inefficiencies in fund utilization and inadequate monitoring mechanisms. While it focused on efficiency, a social audit could have assessed the actual impact on maternal and child health outcomes.

Mid-Day Meal Scheme: While VFM audits ensure proper procurement of food grains, and performance audits assess the delivery of meals, a social audit would evaluate the nutritional impact on children, attendance rates, and overall learning outcomes.

Limitations and Challenges

Social audits, while powerful, face challenges such as ensuring objectivity, managing conflicts of interest, and building capacity among stakeholders. The success of social audits depends on the active participation of communities and the willingness of authorities to act on the findings.