Real-time Auditing: A Tool to Enhance Good Governance and Accountability for Public Funds

Author: Phillip R. Herr, Ph.D., Senior Adviser, Center for Audit Excellence

Overview

Real-time audits can complement and add to the scope of work undertaken by national, state and local audit organizations, providing timely insights and enhancing oversight and decision-making. As reflected in the INTOSAI Journal’s recent discussion of responses to the COVID-19 pandemic, real-time audits helped to track contracts, funding, and services. Against the backdrop of the pandemic as well as tracking government interventions after financial crises and responding to natural disaster recovery efforts, real-time auditing experience offers lessons learned about how Supreme Audit Institutions (SAIs) can contribute to good governance and accountability for public funds. 

All organizations need to periodically adapt to remain relevant and audit offices are not an exception. Audit offices are uniquely situated to provide insights into government spending and project outcomes. As such they benefit from public trust to provide objective, fact-based reports. However, audit offices must also periodically reinvent themselves as technology and software advances, permitting data mining on increasingly available information on program outcomes; likewise, gains from carefully employing artificial intelligence (AI) offer other possibilities. These advances also mean that policy makers and the public can become impatient for audit results to become available. 

Audit organizations are also competing for talent. The opportunity to work on real-time challenges that can have a more immediate impact on program operations can help with hiring and retaining team members.

Attributes of Real-time Audits

Real-time audits do not look back on prior years except to provide context and background and, as the term implies, provide active oversight of ongoing programs. This can encourage corrections while emergency programs are being implemented or insights before programs are underway. Real-time audits can focus on financial, compliance, or performance or a combination of these three. Some audit offices focus on various stages of a project or program’s life cycle, as discussed below, depending on the unique challenges each auditee faces. As such, real-time audits may last three- to six-months or audit offices may take a longer-term view and report periodically over several years on progress and challenges. 

Pre-award reviews 

• Reviewing beneficiary eligibility before contract decisions are made. 
• Determining if award decisions adhere to established criteria and procurement practices.

Reviews of new or ongoing programs

• Monitoring outputs, outcomes, and data as auditees complete tasks to assess progress against timelines, benchmarks, and budgets.
• Conducting field visits to document that services are being delivered as stipulated in contracts.
  • For example, assessing if supplies such as vaccines being handled, stored, and safeguarded properly. This can be complemented by reviewing contracts, bills, and available stock.
• Forming teams that monitor, plan and undertake case studies, perform analytics on trends, and meet with implementing officials to cross-check information in real time. 

Real-time Auditing Advantages and Contributions to Good Governance

Real-time audits can be very useful when crises occur or timely information is required to safeguard government-purchased supplies and assets; monitor public health service delivery; track disaster recovery efforts and rebuilding following hurricanes, earthquakes and natural disasters; monitor financial stabilization efforts; undertake more routine audits of ongoing programs deemed at high risk of waste, fraud, and abuse; and review newly created high-profile programs to determine whether appropriate financial and management safeguards have been established. Reporting on real-time audits can identify and correct problems quickly and identify opportunities to build in additional safeguards, as warranted. 

The U.S. Government Accountability Office (GAO) has implemented a variety of real-time audits, leveraging expertise to ensure efficiency and effectiveness in various sectors. For example, during the 2008-2009 financial crisis, GAO teams actively monitored and reported on Recovery Act ¹efforts every 60 days, forming cross-functional teams to track spending and outcomes across 16 states and collecting data from multiple federal and state agencies on broader outcomes. More recently, GAO tracked the federal COVID-19 response funded by the Coronavirus Aid, Relief, and Economic Security act (CARES) and coordinated with other SAIs and domestic audit offices.

GAO’s real-time audits are characterized by their timeliness and the formation of cross-functional teams. These teams leverage subject matter expertise, such as in housing and transportation, as well technical support from engineers, attorneys, and methodologists. This approach ensures that audits are thorough and provide valuable insights. The following table offers some examples of real-time auditing benefits.

Real-time Audit Approaches

SAIs can conduct real-time audits on systems, problems, and results. As outlined in INTOSAI guidance², these approaches can be pursued from a top-down or bottom-up perspective, depending on the objectives and scope. 

• A systems-oriented approach does not focus primarily on the policy or goals, but on well-functioning management systems as a condition for effective and efficient policies. (GUID 3910:54)
• A problem-oriented approach verifies stated problems and analyzes causes. (GUID 3910:52)
• A results-oriented approach studies actual performance, results and outcomes and relates those to criteria based on policy goals and objectives. Findings often focus on a deviation from criteria and recommendations aim to eliminate such deviations. (GUID 3910:51) 

Focusing Real-time Audits on Program Operations

When conducting real-time audits, auditors need to consider various operational risks, such as financial mismanagement, fraud, poor procurement practices, vague contract provisions, and internal control deficiencies. It is also essential to take a fair and balanced approach, being open to information that auditees are adhering to laws and regulations, meeting performance goals, and finding innovative ways to deliver services.

Risks and Challenges SAIs May Encounter 

Real-time audits can present several challenges, including access-related issues following a natural disaster or health-related emergency, poor quality data and information management, privacy concerns, and the potential for hasty decision-making. Auditors must be prepared to address these challenges and ensure accurate and complete data collection and analysis.

Managing and Conducting Real-time Audits

Effective management and communication are crucial for conducting and managing real-time audits. Setting key dates, regular check-ins, and tracking progress toward project plans can help ensure timely and accurate reporting. 

Real-time Audit Strategies

SAIs can enhance their audit strategies by using data collection instruments, mixed audit methods, and in-depth case studies. These tools provide valuable insights into program operations and help identify areas for improvement as well as program successes. Sampling considerations and understanding the possibility of generalizing to the universe of program beneficiaries is also crucial. Likewise, time series data can be used to analyze patterns, identify trends, and inform predictions about likely future outcomes as well as any changes that can be recommended.

Managing Data

Prioritizing data quality, focusing on key performance indicators, and ensuring data security and privacy are essential for managing information in real-time audits. Regularly reviewing and adjusting metrics, indicators, and performance materiality thresholds can help to target scarce audit resources. Auditors can use data dashboards to manage information and identify areas where progress is being made and areas where performance has lagged. Data analytics and AI may be able to provide additional insights to target resources.

Things to be Mindful of When Conducting Real-time Audits

Data overload can be a challenge for an audit team. Real-time auditing can generate a large volume of information, overwhelming teams if not managed properly. Filtering relevant insights from noise requires clear objectives and robust data management practices. Privacy and security concerns must also be managed because continuous monitoring may raise unexpected issues. For example, auditors must safeguard beneficiary information, locations of sensitive sites, such as where costly supplies are stored, and be cautious about the potential for creating a sense that audited entities are being micromanaged. 

Auditee resistance is real, and those implementing real-time audits can face pushback. Auditors must also be aware of the Hawthorne Effect. Briefly, the Hawthorne effect refers to the possibility that people change their behavior or performance because they are aware they are being audited. 

Increased audit complexity can also be a potential concern. Real-time audits can be complex in rapidly evolving situations, which can influence ongoing data collection. False positives or negatives can also occur. There is also the risk of teams quickly forming negative judgements based on limited interaction with auditees or too quickly reviewing data and reaching erroneous conclusions, leading to potentially hasty decision-making.

As with any audit, accurate and complete data—the bedrock of the profession—is crucial. Any flaws in data collection and analysis can lead to incorrect assessments or faulty conclusions. 

Working with Auditees

Engaging with auditees to set expectations for how real-time auditing differs from more traditional work. Maintaining transparency and fostering trust is crucial for success in this type of audit. Setting clear expectations for how real-time audits differ from more routine work, explaining data needs, and setting ground rules for the need to conduct timely fieldwork can help ensure cooperation and accurate data collection.

Reporting on Real-time Audits

Timely recommendations, perhaps the key benefit of real-time audits, allow problems to be identified and corrected as they arise. Reporting and engaging with oversight authorities on findings and recommendations or presenting facts to inform public debate allow real-time audit work to have an impact, leading to higher visibility of findings and recommendations.

Reporting timeframes will vary based on the nature and scope of the audit. Factors such as the scale of problems identified, the need for immediate action, and audit staff availability can influence reporting. Some audit offices may prefer to send periodic management letters while others will issue full reports and obtain auditees’ comments.  Setting a positive tone with auditees and identifying best practices can help to improve rapport and lead to better implementation of recommendations.

Conclusion

Real-time audits offer numerous benefits, including enhanced decision-making, improved compliance, cost savings, and greater transparency. By leveraging strengths and addressing challenges, SAIs can conduct effective real-time audits that contribute to better governance and public sector accountability.

1. Recovery Act refers to the American Recovery and Reinvestment Act of 2009. It was a U.S. federal law passed in response to the Great Recession with the goal of stimulating economic activity, creating or saving jobs, and investing in projects to spur long-term growth. ↩︎
2. INTOSAI Guid 3910, Central Concepts for Performance Auditing, 2019. Downloaded April 25, 2025, at https://www.issai.org/wp-content/uploads/2019/08/GUID-3910-Central-Concepts-for-Performance-Auditing.pdf. ↩︎