Performance audits or performance auditing is the public sector version of "Operational Audits" or "Operational Auditing," that are conducted to determine if an entity's operations, programs, or projects are run effectively and efficiently. The Government Accounting Office (GAO) defines a performance audit in its Government Accounting Standards, or Yellow Book, as:

An objective and systematic examination of evidence for the purpose of providing an independent assessment of the performance of a government organization, program, activity, or function in order to provide information to improve public accountability and facilitate decision-making by parties with responsibility to oversee or initiate corrective action.

A performance audit has two parts: (1) an economy and efficiency review, and (2) a program review. The economy and efficiency review determines if resources have been used efficiently. The program review, on the other hand, determines whether the resources were used effectively, that is, for the purpose intended...