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149CG entitled 'An Accountability Update From Washington' which was
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United States Government Accountability Office:
GAO:
An Accountability Update From Washington:
The Honorable David M. Walker:
Comptroller General of the United States:
AICPA Peer Review Program Conference: Atlanta, GA:
October 1, 2007:
GAO-08-149CG:
The Need for Good Governance, Transparency, and Accountability:
Good governance, transparency, and accountability are critical in:
* The private sector, to promote efficiency and effectiveness in the
capital and credit markets, and overall economic growth, both
domestically and internationally.
* The public sector, for the effective and credible functioning of a
healthy democracy, and in fulfilling the government’s responsibility to
citizens and taxpayers.
* The independent (not-for-profit) sector, to promote the proper use of
resources consistent with the organizations mission and applicable laws
and to maintain the trust and confidence of contributors.
* All sectors, to support a health healthy that provides economic
opportunities and benefits to citizens.
Sorting out the needs—as well as the effective and appropriate
governance and accountability mechanisms for different sectors and
types of organizations—will be essential, both on a domestic and
international scale.
Accountability Risks in the Federal Government:
In the U.S., government accountability professionals face many
challenges:
* A number of “high-risk areas” and “major management challenges.”
* Current trends and challenges that have no boundaries.
* A range of fiscal and other sustainability challenges that grow over
time.
* The failure to link resources and authorities to results (outcomes).
* Rising expectations for demonstrable results and enhanced
responsiveness.
* A number of outdated federal policies, programs, structures, and
activities.
Our challenge is huge and growing bigger each year.
Table: GAO's High-Risk List 2007:
Addressing Challenges in Broad-based Transformations:
* Strategic Human Capital Management[a]: Year Designated: 2001;
* Managing Federal Real Property[a]: Year Designated: 2001;
* Protecting the Federal Government’s Information Systems and the
* Nations’ Critical Infrastructures: Year Designated: 1997;
* Implementing and Transforming the Department of Homeland Security:
Year Designated: 2003;
* Establishing Appropriate and Effective Information-Sharing Mechanisms
to Improve Homeland Security: Year Designated: 2005;
* DOD Approach to Business Transformation[a]: Year Designated: 2005;
- DOD Business Systems Modernization: Year Designated: 1995;
- DOD Personnel Security Clearance Program; Year Designated: 2005;
- DOD Support Infrastructure Management; Year Designated: 1997;
- DOD Financial Management; Year Designated: 1995;
- DOD Supply Chain Management; Year Designated: 1990;
- DOD Weapon Systems Acquisition; Year Designated: 1990;
* FAA Air Traffic Control Modernization; Year Designated: 1995;
* Financing the Nation’s Transportation System[a] (New); Year
Designated: 2007;
* Ensuring the Effective Protection of Technologies Critical to U.S.
National Security Interests[a] (New): Year Designated: 2007;
* Transforming Federal Oversight of Food Safety[a] (New): Year
Designated: 2007;
Managing Federal Contracting More Effectively:
* DOD Contract Management: Year Designated: 1992;
* DOE Contract Management: Year Designated: 1990;
* NASA Contract Management: Year Designated: 1990;
* Management of Interagency Contracting: Year Designated: 2005;
Assessing the Efficiency and Effectiveness of Tax Law Administration:
* Enforcement of Tax Laws[a]: Year Designated: 1990;
* IRS Business Systems Modernization: Year Designated: 1995;
Modernizing and Safeguarding Insurance and Benefit Programs:
* Modernizing Federal Disability Programs[a]: Year Designated: 2003;
* Pension Benefit Guaranty Corporation Single-Employer Pension
Insurance Program: Year Designated: 2003;
* Medicare Program[a]: Year Designated: 1990;
* Medicaid Program[a]: Year Designated: 2003;
* National Flood Insurance Program[a]: Year Designated: 2006.
[a] Legislation is likely to be necessary, as a supplement to actions
by the executive branch, in order to effectively address this high-risk
area.
Source: GAO.
[End of table]
Three Suggested Areas of Congressional Oversight Going Forward:
* Targets for near-term oversight (e.g., reducing the tax gap).
* Policies and programs that are in need of fundamental reform and re-
engineering (e.g., reviewing U.S. and coalition efforts to stabilize
and rebuild Iraq and Afghanistan).
* Governance issues that should be addressed to help ensure an
economical, efficient, effective, ethical, and equitable federal
government capable of responding to the various challenges and
capitalizing on related opportunities in the twenty-first century
(e.g., reviewing the effectiveness of the federal audit and
accountability community, including the oversight, structure, and
division of responsibility).
Congressional Oversight Areas Related to the Accountability Community:
* Review the Single Audit Act and propose reforms to ensure continuing
effective oversight of the more than $400 billion in annual federal
grants awarded to nonfederal entities.
* Schedule a series of oversight hearings to deliberate GAO’s and the
IGs’ roles, responsibilities, results, and proposed reforms.
* Establish a government-wide accountability council to establish
priorities and develop strategies to address federal accountability
issues among GAO, OMB, PCIE, the ECIE, and other oversight
organizations.
Serving The Congress And The Nation Gao's Strategic Plan Framework
Mission:
GAO exists to support the Congress in meeting its constitutional
responsibilities and to help improve the performance and ensure the
accountability of the federal government for the benefit of the
American people.
Themes:
* Changing Security Threats;
* Sustainability Concerns;
* Economic Growth & Competitiveness;
* Global Interdependency;
* Societal Change;
* Quality of Life;
* Science & Technology.
Goals and Objectives:
Provide Timely, Quality Service to the Congress and the Federal
Government to Address Current and Emerging Challenges to the Well-being
and Financial Security of the American People related to:
* Health care needs;
* Lifelong learning;
* Work benefits and protection;
* Financial security;
* Effective system of justice;
* Viable communities;
* Natural resources use and environmental protection;
* Physical infrastructure.
Respond to Changing Security Threats and the Challenges of Global
Interdependence involving:
* Homeland security;
* Military capabilities and readiness;
* Advancement of U.S. interests;
* Global market forces.
Help Transform the Federal Government's Role and How It Does Business
to Meet Twenty-first Century Challenges by assessing:
* Roles in achieving federal objectives;
* Government transformation;
* Key management challenges and program risks;
* Fiscal position and financing of the government.
Maximize the Value of GAO by Being a Model Federal Agency and a World-
Class Professional Services Organization in the areas of:
* Client and customer satisfaction;
* Strategic leadership;
* Institutional knowledge and experience;
* Process improvement
* Employer of choice.
Core Values:
* Accountability;
* Integrity;
* Reliability.
Just One of Our Seven Themes:
Selected Sustainability Challenges:
* Fiscal Deficits and Debt Burdens;
* Health Care Quality, Access, and Costs;
* Defense and Homeland Security Strategies;
* Social Insurance Commitments;
* Tax Gaps and Policies;
* Energy, Environment, and Resource Protection;
* Immigration Policies;
* Infrastructure Needs,
Twenty-first Century Challenges Report:
* Provides background, framework, and questions to assist in
reexamining the base.
* Covers entitlements & other mandatory spending, discretionary
spending, and tax policies and programs.
* Based on GAO’s work for the Congress.
{Source: GAO.]
Twelve Reexamination Area:
Mission Areas:
* Defense;
* Education & Employment;
* Financial Regulation & Housing;
* Health Care;
* Homeland Security;
* International Affairs;
* Natural Resources, Energy & Environment;
* Retirement & Disability;
* Science & Technology;
* Transportation.
Crosscutting Areas:
* Improving Governance;
* Reexamining the Tax System.
Generic Reexamination Criteria and Sample Questions:
* Relevance of purpose and the federal role:
- Why did the federal government initiate this program and what was the
government trying to accomplish?
- Have there been significant changes in the country or the world that
relate to the reason for initiating it?
* Measuring success:
- Are there outcome-based measures? If not, why?
- If there are outcome-based measures, how successful is it based on
these measures?
* Targeting benefits:
- Is it well targeted to those with the greatest needs and the least
capacity to meet those needs?
* Affordability and cost effectiveness:
- Is it using the most cost-effective or net beneficial approaches when
compared to other tools and program designs?
* Best practices:
- Is the responsible entity employing prevailing best practices to
discharge its responsibilities and achieve its mission?
The Objective of Transformation:
To create a more positive future by maximizing value and mitigating
risk within current and expected resource levels.
Accountability Organization Maturity Model:
This figure is a pyramid with the following statements stacked from
base to peak:
Combating Corruption;
Promoting Transparency;
Assuring Accountability;
Enhancing Economy, Efficiency, Ethics, Equity, and Effectiveness;
Increasing Insight;
Facilitating Foresight.
Source: GAO.
Key Oversight Concepts:
* Oversight is a key constitutional responsibility of the Congress;
* Oversight is critical to providing the necessary checks and balances
to maximize the government’s performance, assure it’s accountability,
and prevent the abuse of government power.
* History shows that oversight decreases with one-party rule.
* Oversight should be focused on improving performance and assuring
accountability;
* It is essential that oversight be balanced and constructive by
highlighting what is working well—including best practices—as well as
identifying shortcomings to prevent repetition of mistakes.
* Accountability organizations should employ a “constructive
engagement” approach while maintaining their independence.
* Accountability organizations should also “partner for progress” in
order to maximize value and mitigate risk while leveraging available
resources and minimizing duplication of effort.
Key Oversight Concept: Constructive Engagement;
Constructive engagement involves both a philosophical approach to the
conduct of GAO's work as well as certain types of analyses themselves.
From a philosophical standpoint, GAO seeks to point out both positive
performance and areas in need of improvement. We also attempt to
consider our findings in a fair and balanced light, with the
appropriate degree of contextual sophistication (e.g., absolute, trend,
and relative performance; inter-relationships between issues).
From the standpoint of a particular study, constructive engagement
typically involves GAO sharing its considerable knowledge and
government-wide perspective, including related methodologies and best
practices, to help agencies help themselves.
Definition of Waste:
Waste involves the taxpayers as a whole not receiving reasonable value
for money in connection with any government funded activities due to an
inappropriate act or omission by players with control over or access to
government resources (e.g., executive, judicial, or legislative branch
employees, contractors, grantees, or other recipients).
Importantly, waste represents a transgression that is less than fraud
and abuse and most waste does not involve a violation of law. Rather,
waste relates primarily to mismanagement, inappropriate actions, or
inadequate oversight.
Examples of Waste:
Illustrative examples of waste in the acquisitions and contracting area
could include:
* Unreasonable, unrealistic, inadequate, or frequently changing
requirements.
* Failure to use competitive bidding in appropriate circumstances.
* Failure to engage in selected pre-contracting activities for
contingent events (e.g., hurricanes, military conflicts).
* Congressional directions (e.g., earmarks), and agency spending
actions where the action would not otherwise be taken based on an
objective value and risk assessment and considering available
resources.
Illustrative Examples of GAO’s Work to Modernize the Accountability
Profession:
* Leading strategic planning and coordination efforts with major
accountability organizations around the world (e.g., INTOSAI, GWG) and
domestically (e.g., NIAF and DWG) that include oversight, insight, and
foresight dimensions;
* Enhancing federal financial reporting (e.g., social insurance,
restricted revenues, fiscal sustainability, generational equity, and
performance) and pursuing publication of a summary annual report;
* Promoting the modernization of the accounting/reporting models (e.g.,
IFAC, FASB, GASB, FASAB) and other assurance models (e.g., IAASB);
* Creating the U.S Auditing Standards Coordinating Forum (i.e., GAO,
PCAOB, ASB), which among other efforts, develops strategies for
overcoming challenges and barriers to modernizing the auditing
profession in the U.S.;
* Monitoring implementation of the Sarbanes-Oxley Act and considering
whether reform elements similar to those in Sarbanes-Oxley make sense
for the federal government;
* Modernizing Generally Accepted Government Auditing Standards (Yellow
Book);
* Pursuing the design and adoption of key national indicators.
GAO’s Goals for Establishing Auditing Standards:
* Develop high quality Government Auditing Standards that are well
understood, highly regarded, widely used, and serve as a model for
other environments such as the private sector and other governments
around the world;
* Provide leadership in modernizing and transforming the accountability
profession in the public and private sectors, both domestically and
internationally;
* Encourage the development of consistent, core auditing standards for
both the public and private sectors, in the U.S. and internationally,
as appropriate;
* Provide a foundation for an accountability profession that is
effective, ethical, and prepared for the challenges of the 21st
century.
GAO’s Role in Coordinating Auditing Standards in the United States:
The Comptroller General established the U.S. Auditing Standards
Coordinating Forum:
* PCAOB, GAO, ASB;
* Three principals meet several times a year;
* Key staff coordinate regularly to implement agenda;
* Rotating chair, based on who is hosting the meeting;
* Still defining role for IAASB.
Purpose of U.S. Auditing Standards Coordinating Forum:
* Maximize complementary standards-setting agendas;
* Minimize duplicative or competing efforts;
* Identify any significant gaps not being addressed;
* Develop strategies for overcoming challenges and barriers to
modernizing the auditing profession in the U.S.;
* Assure consistency where appropriate for core auditing standards,
while seeking to modernize those standards.
GAO’s Influence on International Auditing Standards through INTOSAI
Activities:
GAO is a member of INTOSAI’s Professional Standards Committee (PSC) and
serves on 4 PSC subcommittees:
* PSC steering committee;
* Accounting and reporting subcommittee (chair);
* Financial audit guidelines;
* Internal control.
GAO is assisting in drafting practice notes to 3 ISAs that will provide
additional guidance for public sector auditors:
* Audit Documentation, ISA 230;
* Communication with Those Charged with Governance, ISA 260;
* Audit Risk, ISAs 300, 315, 320, and 320 (GAO provided preliminary
assistance).
GAO’s 2007 Yellow Book Update: Effective for Audits Beginning on or
After January 1, 2008:
Major areas of revisions:
* Bringing performance audits under a professional assurance framework
using concepts of audit risk, significance, and sufficient, appropriate
evidence;
* Emphasizing the critical role of government audits in achieving
credibility and accountability in government;
* Outlining overarching ethical framework in government audits;
* Modernizing GAGAS and updating for major developments in the
accountability and audit environment;
* Strengthening quality assurance and peer review requirements.
Peer Review Decisions:
* Added a requirement that external audit organizations make their most
recent peer review report publicly available (that requirement does not
include letter of comment);
- Can be done by posting the peer review report on an external Web site
or to a publicly available file designed for public transparency of
peer review results;
* Internal audit organizations are required to provide a copy of the
external peer review report to those charged with governance;
* Government audit organizations should also communicate the overall
results and the availability of their external peer review reports to
appropriate oversight bodies;
* Clarified that an audit organization’s noncompliance with the peer
review requirement results in a modified GAGAS statement;
- Of note, noncompliance with the requirements for a system of quality
control does not impact the GAGAS statement but is monitored through
peer review;
* Requirements for system of quality control are consistent with the
AICPA proposed statement on Quality Control Standards except that the
GAGAS requirements state that reviews of the work and the report that
are normally part of supervision in connection with a particular
engagement are not adequate to meet the monitoring controls requirement
when used alone;
* Those audit organizations seeking to enter into a contract to perform
a GAGAS audit or attestation engagement should provide the following to
the party contracting for such services;
- The audit organization’s most recent peer review report and any
letter of comment;
- Any subsequent peer review reports and letters of comment received
during the period of the contract;
* Auditors who are using another audit organization’s work should
request;
- The audit organization’s latest peer review report;
- Any letter of comment.
The Future Accounting/Reporting and Audit Reporting Model:
We need to review and revise the existing accounting/reporting model to
reflect several dimensions:
* Generic provisions;
* Industry information;
* Entity-specific information (i.e., value and risk).
We need to recognize the difference between certain types of financial
and other information:
* Historical cost;
* Readily marketable assets;
* Non-readily marketable assets;
* Projection information•Performance information.
The Future Accounting/Reporting and Audit Reporting Model:
We need to review and revise the existing accounting/reporting model to
reflect several dimensions:
* Generic provisions;
* Industry information;
* Entity-specific information (i.e., value and risk).
We need to recognize the difference between certain types of financial
and other information:
* Historical cost;
* Readily marketable assets;
* Non-readily marketable assets;
* Projection information;
* Performance information.
We need to review and revise the existing audit reporting model to
accomplish at least four objectives:
* Recognize that the opinion should address whether the financial
statements are fairly presented in all material respects and prepared
in accordance with authoritative accounting principles (e.g.,
promulgated by FASB, GASB, FASAB, IFAC);
* Expand the auditor’s report to include key value and risk-based
performance and projection information over time and as appropriate;
* Update the audit reporting model to link it with the new financial
reporting model, and provide appropriate degrees of assurance for each
type of information to improve value and reduce risk;
* We need to move beyond “going concern opinions” to provide more
timely and meaningful information to the users of financial statements
in appropriate circumstances (e.g. US government).
We need to ultimately go global in connection with all major accounting
and audit matters.
We need to coordinate domestic efforts in the interim (e.g., U.S.
Auditing Standards Coordinating forum).
Key National Indicators:
* What: A portfolio of economic, social, and environmental outcome-
based measures that could be used to help assess the nation’s and other
governmental jurisdictions’ position and progress;
* Who: Many countries and several states, regions, and localities have
already undertaken related initiatives (e.g., Australia, New Zealand,
Canada, United Kingdom, Oregon, Silicon Valley (California) and
Boston);
* Why: Development of such a portfolio of indicators could have a
number of possible benefits, including:
- Serving as a framework for related strategic planning efforts;
- Enhancing performance and accountability reporting;
- Informing public policy decisions, including much needed baseline
reviews of existing government policies, programs, functions, and
activities;
- Facilitating public education and debate as well as an informed
electorate.
* Way Forward: Consortium of key players housed by the National
Academies domestically and related efforts by the OECD and others
internationally.
Key National Indicators: Where the United States Ranks:
The United States may be the only superpower, but compared to most
other OECD countries on selected key economic, social, and
environmental indicators, on average, the U.S. ranks 16 out of 28.
OECD Categories for Key Indicators (2006 OECD Factbook):
* Population/Migration;
* Energy;
* Environment;
* Labor Market;
* Education;
* Public Finance;
* Science & Tech.;
* Quality of Life;
* Macroeconomic Trends;
* Economic Globalization
* Prices.
Key Responsibilities for the Accountability Community:
* Ferreting Out Fraud, Waste, and Abuse;
* Seeking More Efficient, Effective, Ethical, and Equitable Government;
* Providing Perspective;
* Leading By Example;
* Building Partnerships;
* Modernizing the Profession.
Key Leadership Attributes Needed for These Challenging and Changing
Times:
* Courage;
* Integrity;
* Creativity;
* Stewardship;
* Partnership.
[End of presentation]
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