Acca aaa s21 Notes

September 2021 to June 2022 exams
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2. The use of performance information
In many countries, government departments produce statistical information concerning the 
performance of that department. For example, a local council in the UK (a local council is responsible 
for provision of services such as refuse collection, street lighting, road maintenance, etc) will produce 
information not only on its financial performance but also on other areas such as the amount of refuse 
recycled or time taken to respond to requests to repair streetlights. 
2.1. Objectives
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Improvement.
Targets are set and performance measured against those targets to try and 
determine how management can be improved. For example, if recycling targets are not being 
met then councils may use performance information to determine which categories of waste are 
not being recycled and then introduce new systems to (hopefully) improve actual recycling 
against target.
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Monitoring.
Performance information is used to report on the achievement of targets. In this 
sense, local government may have to report back to central government to obtain the necessary 
funding for next year’s budgets. Similarly, performance information can be used as a 
management tool to determine the amount of performance related pay.
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Reporting.
Including performance information in accounts or other external reports partly as a 
means of showing progress against targets but also as a means of advertising how well those 
targets have been met. For example, meeting a recycling target will be reported not simply to 
show that the target has been met but also to generate good publicity for the council. 
Taxpayers will therefore be happy with the activities of the council and ultimately this means 
that the councillors in charge of the council are re-elected(!). 
From the audit perspective, this means that auditors will have to treat performance information with a 
high degree of scepticism. There will be management bias to show good results not only to maintain 
or increase funding but also so councillors retain their posts. 
In other words, a lot of performance information may be available, but it may be produced to meet 
the three objectives above, not because there is any standard (such as an IFRS) which requires 
production in a specific format. Comparability between different information providers (that is 
different councils, schools or hospitals etc.) will be difficult as the actual information produced will the 
different and different standards will be used to produce that information anyway.