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Presentation by The Honorable David M. Walker: 

Comptroller General of the United States: 

"Enhancing Performance, Accountability, and Foresight" 

Speech before the 10th Asian Organization of Supreme Audit Institutions 
(ASOSAI) Assembly: 

Shanghai, China: 

September 13, 2006: 

United States Government Accountability Office: 

GAO-06-1118CG: 

It's a pleasure to be here today. Asia has a long and impressive 
history. But just as important, Asia's future has never looked 
brighter. Today, the nations around the Pacific Rim are playing a 
pivotal role in the world's economy. For example, China is 
industrializing at a rapid pace and is now a leading supplier of 
consumer goods to the United States and many other countries. 

My first trip to China was in 1983. But my first official visit as 
Comptroller General was in 2001, when I met with my colleague Mr. Li 
Jinghua. As you know, Dr. Li is the head of the Chinese National Audit 
Office (CNAO) and our host here in Shanghai. On that 2001 trip, Dr. Li 
and I were honored to have a meeting with then-Premier Zhu Rongji. Our 
discussion was very productive, and I was impressed by the Premier's 
strong interest in fighting corruption and transforming the Chinese 
government to meet the demands of the 21st century. 

At the end of our conversation, Premier Zhu asked me for one priority 
recommendation for his consideration. I thought for a few seconds and 
then said, "Make the CNAO's reports public." After all, transparency is 
a powerful force that can help fight corruption, improve performance, 
and ensure accountability. 

The Premier listened carefully, but I knew that achieving such openness 
in China wouldn't be easy. After all, for centuries, Chinese government 
agencies had done much of their business behind closed doors and beyond 
the public view. But to his great credit, Premier Zhu acted quickly on 
my suggestion, and Dr. Li implemented it. As a result, many CNAO 
reports are made public. And, as Dr. Li can tell you, that single step 
has made a huge difference for CNAO and for China. 

Today, I'd like to speak to you about a role that more supreme audit 
institutions (SAI) need to add to their portfolio of capabilities. That 
role is providing government officials with foresight about key 
emerging issues. Such forward thinking should supplement and complement 
traditional audit responsibilities. 

Before addressing the issue of foresight, I'd like to touch on how SAIs 
can maximize their effectiveness and credibility. Over the years, I've 
found three elements are essential to maximizing value and mitigating 
risk. These three elements are incentives, transparency, and 
accountability. (See app. I, table 1). They apply equally to the public 
and private sectors and can provide a benefit to many areas, from 
governance systems to tax systems to health care systems. 

For SAIs, the incentives element requires, among other things, an 
adequate degree of auditor independence and an adequate level of 
auditor resources. The transparency element involves a commitment to 
keeping elected officials and average citizens informed about what SAIs 
do and how they do business. For example, GAO has adopted public 
protocols for dealing with clients, agencies, and fellow accountability 
organizations. We also make all our nonclassified reports public, and 
I'd urge other SAIs to do the same. Finally, the accountability element 
means that government auditors must have adequate access authority. At 
the same time, SAIs themselves need to be subject to independent 
financial audits and external peer reviews. 

These three elements--incentives, transparency, and accountability-- 
are critically important, and I consider them, along with our agency's 
core values, in every major initiative, internal or external, that GAO 
undertakes. For example, the three elements have resulted in GAO 
adopting four key performance elements to better assess how we're doing 
today and how we're positioned for the future. These four dimensions 
are results, client feedback, employee feedback, and external partner 
or alliance organization feedback. I'd be happy to speak with any of 
you about these during the conference. 

Returning to the issue of foresight, nearly a century ago, one of my 
favorite U.S. Presidents, Theodore Roosevelt, said, "We have to, as a 
nation, exercise foresight  and if we do not exercise that foresight, 
dark will be the future." 

Unfortunately, many in today's world, including in the United States, 
are consumed with the here and now. Far too little thought is given to 
what's come before or what lies ahead. 

* Too many individuals tend to focus on their next paycheck. 

* Too many company executives focus on the next quarterly earnings 
report. 

* Too many politicians focus on the next election cycle rather than the 
next generation. 

* And too many countries focus on their immediate and sovereign needs 
while forgetting that we're all inhabitants of planet Earth. 

It's vital for all organizations to understand the big picture, to 
learn from the past, and to prepare for the future. We need to actively 
manage the opportunities and risks that come with change. After all, 
change isn't necessarily a bad thing. In fact, change is essential for 
progress and innovation. 

I think it's important to understand how myopia or shortsightedness can 
undermine a nation's willingness and ability to act. In the case of the 
United States, strong economic growth, modest inflation levels, 
relatively low interest rates, and our current superpower status have 
given many policymakers and the American public a false sense of 
security about our nation's current position and future prospects. Even 
though we know that a demographic tsunami is building silently 
offshore--I'm referring to the impending retirement of our baby boom 
generation--America continues to party on and pile up record levels of 
debt. 

The reality is that we face an aging population, rising health care 
costs, and relatively low revenues as a percentage of the economy. 
Unless we change course, the United States faces decades of deficits 
and debt. 

As Comptroller General of the United States and my nation's chief 
accountability officer, I've been speaking out on this issue to ensure 
that we do change course. Things are far from hopeless, but we need to 
act, and act soon!  

Importantly, some nations have begun to face up to their long-term 
fiscal challenges. Specifically, two nations in the Asia-Pacific region 
have made difficult decisions that involved short-term pain in the 
interest of long-term gain. I'm speaking about Australia and New 
Zealand. Like the United States, these two countries have aging 
populations. However, unlike the United States, these two countries 
have already stepped up to the plate and dealt with their long-range 
fiscal imbalances, including their overburdened and underfunded public 
pension and health care programs. In my view, SAIs can play an 
important professional and nonpolitical role in encouraging such 
prudent and sustainable policy choices. 

As we all know, SAIs have traditionally been in the oversight business. 
Clearly, our financial audits are an important check on waste, fraud, 
and abuse. Many SAIs also undertake program evaluations and best- 
practice studies, which are designed to improve government efficiency 
and effectiveness. At the same time, SAIs may perform a range of 
insight activities designed to help identify which programs and 
policies work, which ones don't, and possible ways forward. 

One key to an effective accountability system is strong government 
auditing standards. As most of you know, in the United States these 
standards are found in the so-called "Yellow Book," which is 
promulgated by GAO. This publication specifies the essential 
characteristics of sound audit work. The Yellow Book also describes the 
professional qualifications that government auditors should possess. 
I'm proud to say that many Asian SAIs are using the Yellow Book in 
their work, including Indonesia, Mongolia, and Vietnam. 

For the fifth time since 1972, GAO is updating the U.S. government's 
auditing standards. With the advice of experts from government, private 
accounting firms, and colleges and universities, GAO is, among other 
things, proposing changes to strengthen and modernize audit quality 
systems and ethical standards. We expect the final standards to be 
issued next year. 

But audit work is only one of a hierarchy of functions SAIs can and 
should be undertaking. Envision a pyramid with five layers. (See app. 
I, fig. 1.) The bottom layer is fighting corruption, and directly above 
it is ensuring accountability. These are the foundations of our 
profession. All SAIs, whatever their budgets or experience, should be 
pursuing these objectives. 

The performance and insight roles I mentioned earlier make up the 
middle layers of the pyramid. These roles require a more diverse set of 
skills and capabilities. 

At the top of the pyramid is a function that more mature and 
experienced SAIs should be undertaking. I'm talking about providing 
policymakers with foresight about the future. SAIs are uniquely 
positioned to educate public officials about key emerging trends and 
challenges in a professional, objective, fact-based, nonpartisan, fair, 
and balanced manner. By encouraging early action on issues while 
they're still manageable, SAIs can help their governments take more 
timely action and avoid crises down the line. 

Today, GAO is working hard to help members of Congress better 
understand the trends and challenges facing the United States and its 
position in the world. We're also trying to help lawmakers grasp the 
long-term and collateral implications of current policy paths. 

Our goal is for Congress to expand its horizon, improve its peripheral 
vision, and enhance its ability to act in a timely and evidence-based 
manner. We want policymakers to better understand where we are, how we 
may look 30 or even 40 years out, and how various policies and programs 
can have ripple effects collaterally, across borders, and over time. 

In this spirit and in an effort to lead by example, GAO has published 
an unprecedented report called "21st Century Challenges" that asks a 
series of probing, sometimes provocative, questions about current 
government policies, programs, and operational practices. The report 
brings home how much of the U.S. government reflects organizational 
models, labor markets, life expectancies, transportation systems, 
security strategies, and other conditions that are rooted in the past. 
Clearly, the U.S. government isn't alone in this respect. In this 
report, we've also sought to communicate important foresight concepts 
in language used and understood by policymakers. By the way, you can 
find this report free on GAO's Website at www.gao.gov. I recommend it 
to you. 

Today, our Congress and President need to decide which federal programs 
and policies remain priorities, which should be overhauled, and which 
have simply outlived their usefulness. I'm sure many other countries 
could also benefit from this kind of review. 

To give you one example in the tax area: Just this summer, the U.S. 
government announced it will stop collecting a three-percent tax on 
long-distance telephone calls. This doesn't seem particularly startling 
until you realize that the tax had been introduced in 1898 to help pay 
for the Spanish-American War --a war that only lasted a few months! 

So, what's been the reaction of policymakers to our 21st Century 
Challenges report? I'm pleased to say we're seeing some hopeful signs 
in several areas that GAO has highlighted. For example, our government 
is taking seriously the need to plan ahead for the possibility of a 
global influenza pandemic. 

We're also finally starting to see greater concern about America's long-
range fiscal problems. Recently proposed legislation would convene a 
commission of leaders to study entitlement and tax reform issues and 
recommend changes. 

Most nations face similar long-term challenges. But the truth is in 
today's world, no nation, including the United States, should try to go 
it alone. In fact, most nations face a range of common challenges that 
know no geographic or political boundaries. I'd include here economic 
globalization, new security threats, diseases such as AIDS and avian 
flu, environmental concerns like climate change, and natural disasters. 
In fact, I spoke last year in Jakarta on tsunami relief just months 
before two major hurricanes devastated my own country. My point here is 
that SAIs can and should help evaluate these challenges and develop 
solutions. 

Increasingly, the process of developing solutions will require 
collaboration and partnering for progress. Progress will depend on a 
willingness to collaborate with others, inside and outside of 
government, domestically and internationally. Frankly, all of us need 
to increase our efforts to join forces and apply our collective 
knowledge, experience, and expertise to solve shared problems. There's 
no question in my mind we can and should learn from each other. 

This is why GAO has been working so closely with its counterparts in 
other countries and with international accountability organizations, 
such as INTOSAI, IFAC, and IAASB. We all need to be working toward 
global convergence on major accounting and auditing standards as well 
as reporting models. This isn't just desirable, it's essential. In a 
world that grows smaller every day, accounting and reporting practices 
should be equally understandable to an auditor in Belgium, Bhutan, the 
Bahamas, Belize, Botswana, Bahrain, or Brazil. 

I'm happy to say that INTOSAI is making significant strides when it 
comes to international partnering. As I noted earlier, I'm a big 
believer in partnering for progress in order to share success stories 
and avoid common mistakes. We've also seen progress in developing 
ethical codes for government auditors and establishing best practices 
on vital issues like public debt management, environmental auditing, 
and privatization. 

As many of you know, I was honored to chair INTOSAI's strategic 
planning task force, and I know firsthand the contributions that 
regional members like Korea and other task force members have made to 
this historic effort. I'm confident INTOSAI's new strategic plan will 
help raise the organization and its members to new heights in the 
coming years. 

A strategic plan is just one of many tools that SAIs have at their 
disposal to promote a forward focus. Other tools include key national 
indicators and scenario planning. Unfortunately, not all governments, 
including my own, have taken full advantage of these tools. 

The value of a strategic plan is probably obvious to everyone in this 
room. By thinking more comprehensively, governments can better set 
priorities and target their efforts, not just over months or years but 
over decades. In our case, GAO's strategic plan defines our agency's 
mission, goals, and objectives. Our plan also includes a range of key 
public policy trends and challenges that warrant attention from 
lawmakers and our agency. The plan also incorporates our agency's core 
values as the foundation for everything we do. In my view, an entity 
that doesn't have a strategic plan has little hope of maximizing value 
and mitigating risk. 

Key national indicators are another tool that can help governments 
focus on performance and the future. Key national indicators allow 
policymakers to better assess a nation's status, its progress over 
time, and its position relative to other nations on issues like public 
safety, health care, housing, education, and the environment. Such 
indicators can help guide strategic planning, enhance performance and 
accountability reporting, and encourage more informed decision making 
and oversight. 

Key indicator systems are now used by various supranational and 
international entities, including the European Union, the Organization 
for Economic Co-operation and Development (OECD), and the United 
Nations. For years now, several countries, including Australia, Canada, 
and the United Kingdom, and even some U.S. states and municipalities 
have been using indicators to prioritize and target public resources. 
It's time the U.S. federal government and other countries developed 
their own systems. 

We at GAO are working with our National Academies of Sciences, the 
OECD, and others to help make key national indicators a reality in the 
United States and elsewhere. Furthermore, INTOSAI has adopted key 
national indicators as one of two main themes for its 2007 Congress in 
Mexico City. 

U.S. civilian agencies, including GAO, have started using another 
foresight tool long familiar to our defense agencies: scenario 
planning. For years, GAO has used this technique to analyze America's 
long-range fiscal imbalance. More recently, we've used scenario 
planning concepts to assess our nation's preparedness for natural 
disasters like hurricanes and earthquakes. 

In closing, enhancing government effectiveness and focusing on 
foresight are important but often thankless jobs. Frankly, these vital 
tasks have too few real and devoted advocates. But when you return 
home, I hope you'll consider the things I've said in connection with 
your own SAI's work. It's time that policymakers focus more on real 
results and on the future. In my view, it's the best way to ensure a 
brighter tomorrow for our citizens, our countries, and our planet. 

Thank you for your time and attention. 

[End of section] 

Appendix: 

Table 1: Illustrative Key Elements for Successful Supreme Audit 
Institutions: 

Key Elements: Incentives; 
Examples: Independence; Resources. 

Key Elements: Transparency; 
Examples: Protocols; Public Reporting. 

Key Elements: Accountability; 
Examples: Enforcement of Access Rights; Peer Review. 

[End of table] 

Figure 1: Supreme Audit Institution Maturity Model: 

Pyramid figure with Facilitating Foresight at the top, 
Increasing Insight follows, 
Enhancing Economy Efficiency, Transparency and Effectiveness follows, 
Assuring Accountability follows, 
Ends with Combating Corruption at its base. 

On the Web: 

Web site: [Hyperlink, http://www.gao.gov/cghome.htm].  

Contact: 

Paul Anderson, Managing Director, Public Affairs, AndersonP1@gao.gov, 
(202) 512-4800, U.S. Government Accountability Office, 441 G Street NW, 
Room 7149, Washington, D.C. 20548: 

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