Funnell (2003) contests that the struggle between the Executive and the Auditors-General has most critically shaped VFM audit function. However, this introduces a paradox. If the VFM audit is a by-product of the NPM, and the Auditors-General have merely supported
the State Government’s privatisation and liberalisation of government entities (Power 1997, 2000; Gendron et al. 2001; Lapsley 2008, 2010; Skaerbaek 2009), why is there a body of empirical studies of the VFM audit in Australian and New Zealand that suggests that the audit is both the product and cause of protracted struggles between the Executive and Auditor-General? Authors such as Funnell (2003), English (2003) and Pallot (2003) argue that, rather than promoting VFM audit, NPM reforms were used to curtail the audit mandate and independence of Auditors-General. However, these attempts have not always been successful, particularly when the audit office has been able to mobilise other external stakeholders as allies.
Pallot (2003) examines the various ways in which the Auditor-General’s Office has facilitated or challenged public sector reforms in New Zealand. Pallot’s primary themes are the New Zealand Treasury’s attempt to displace democratic accountability with managerial accountability, and the reactions of the New Zealand Auditor-General’s Office. Pallot points out that a compromise had to be reached between the public sector audit function and the Auditor-General’s Office of New Zealand because of pressure from the New Zealand Treasury to divide the public sector audit function into two organisations—Audit New Zealand and Auditor-General of New Zealand. This reorganisation resulted in a broader framework that fitted within the NPM reform based on public choice theory, agency theory and theories of property rights.
At the beginning of the reform process, the Audit Office of New Zealand acceded to the New Zealand Treasury reforms. In the last stages of the struggle, the Auditor-General managed to maintain a well-established position within the Parliament and the Executive though mobilising the public as allies. New Zealand rejected key elements of the NPM reforms and removed the Executives who were responsible. Pallot (2003) describes this transformation as the replacement of ‘public managerialism’ with ‘public governance’, and this resulted in the restoration of much of the influence of the Auditors-General, combined with the strategies to retain and protect the VFM audit practice that Jacobs (1998) describes.
The struggles between the Auditor-General and the Executive around practices of VFM audit were also evident in Australia. English (2003) describes the reforms undertaken by the Kennett Government (State of Victoria) to the VAGO from 1997 to 2000 and argues that the reform of the Victorian Auditor-General’s Office and VFM audit reflected the personal political motivations of the Executive. English highlights the fact that the Auditor- General had criticised the government through VFM audit reports, and the State Government consequently restricted the Auditor-General’s audit mandate. English suggests that the Kennett Government’s reform process transformed the Victorian Auditor-General’s role into that of a messenger between the Victorian Parliament and the auditors. English argues that private sector auditors could not provide audit reports that met the expected audit scope, depth, quality and impartiality to discharge the responsibility for public accountability in a similar manner to the Victorian Auditor-General.
Funnell (2003) argues from a broader conceptual level that NPM or managerialist government reforms and constitutional accountability in Australia, by contracting out government services to the private sector, violated and concealed public sector accountability and audit requirements. The practice of VFM audit was constrained by these circumstances, which rendered Auditors-General helpless except to divulge violations of public sector accountability to the general public and Parliament (Funnell 2003). Therefore, Funnell’s (2003) and English’s (2003) perspectives state that the NPM reforms enabled the Executive to radically reduce the scope and effect of the VFM audit. However, English is marginally more optimistic because she illustrates how the public resistance to (and the ultimate removal of) the Kennett Executive Government resulted in the restoration of most of the Auditor-General’s powers. Elements of this optimism are evident in a later paper by Funnell and Wade (2012) that suggests that, at the Commonwealth level, the Auditor- General’s Office has managed to maintain the legitimacy and influence of their VFM work, despite challenges from the Executive. Yet this demonstrates that the relationship between NPM and VFM is ambiguous and multifaceted (Power 2000; Jacobs 1998; English 2003; Pallot 2003).
In order to extend and develop understandings of VFM audit, further attention must be given to developing the backstage practices associated with audit methodologies. While some initial work—such as by Radcliffe (1999), Gendron et al. (2007) and Skaerbaek (2009)—introduces the importance of VFM audit methodologies, these need further consideration to underpin understandings of the development of practices of auditability (Power 2003). However, in order to extend understandings of the balance between internal and external forces on the development of VFM audit practice, further attention needs to be focused on how audit methodologies develop, change and are operationalised receptive to the audit environment.