This is the accessible text file for CG Presentation number GAO-07-
1214CG entitled 'Transforming Government, Management, and 
Accountability' which was released on August 29, 2007.

The Honorable David M. Walker: Comptroller General of the United States:

Fourth Biennial Pacific Emerging Issues Conference: Waikiki, Hawaii:

August 22, 2007:

GAO-07-1214CG:

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* A number of outdated federal policies, programs, structures, and 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.

GAO’S Key Accountability Partnerships:

Internationally, GAO coordinates with the International Organization of 
Supreme Audit Institutions (INTOSAI) and the Global Working Group (GWG).

On the domestic side, GAO collaborates with the:
* National Intergovernmental Audit Forum (NIAF);
* Domestic Working Group (DWG).

NIAF: Convening Federal, State, and Local Auditors:

GAO administers the NIAF to:
* Provide opportunities for federal, state, and local auditors to meet, 
discuss, and devise effective solutions for audit issues of mutual 
concern, thereby improving accounting and financial reporting in the 
government.

There are also 10 regional forums. On even years there is a Biennial 
Conference in which the National and regional forums meet together.

NIAF Strategic Plan, 2005-2010:

Mission:

The National Intergovernmental Audit Forum (Nation Forum) is an 
association of audit executives from federal, state, and local 
governments. It exists to improve coordination, communication, and 
cooperation among its members, private sector firms, and other 
accountability organizations in order to address common challenges; 
enhance government performance, accountability, and transparency; and 
increase public trust.

Themes:

* Governance;
* Fiscal constraints;
* Human capital;
* Homeland security;
* Technology;
* Interdependence;
* Quality of life issues.

Strategic Goals:

* Foster networking, dialogue, and collaboration on current and 
emerging issues of common interest within the accountability community;
* Enhance the capability, credibility, capacity, effectiveness, and 
professionalism of audit organizations by advancing audit standards, 
sharing best practices, and emphasizing the importance of 
accountability within government and the audit profession;
* Improve the Forum's outreach, management, and impact to assist 
members in transforming government operations.

Core Values:

* Collaboration;
* Professionalism;
* Integrity.

DWG: Convening IGs and State and Local Auditors:

* GAO established DWG to:
- Discuss mutual challenges;
- Share experiences;
- Identify opportunities for collaboration with each other
- Conduct selected DWG projects and promote other cooperative and 
coordinated efforts (e.g., Hurricane Katrina).

* DWG is currently comprised of 6 IGs, 7 state auditors, and 6 local 
auditors.

* DWG’s current projects:
- Governance;
- Long-Term Fiscal Challenges;
- Pandemic Flu;
- Tax Gap.

Consolidated Financial Statements: Obstacles Preventing an Opinion.

Three major impediments, which have existed for the entire 10-year 
period that GAO has been required to perform this annual audit, 
continue to prevent us from rendering an opinion on the U.S. 
government’s consolidated financial statements:

1. The deeply rooted, long-standing, and pervasive financial management 
problems in DOD. 2. The federal government’s inability to adequately 
account for and reconcile significant amounts in intra-governmental 
activity and balances between federal agencies. 3. The federal 
government’s ineffective process for preparing the consolidated 
financial statements.

Consolidated Financial Statements: Possible Ways Forward.

Resolving the weaknesses in the systems, controls, and procedures for 
preparing the consolidated financial statements will require a strong 
commitment from Treasury and OMB. In addition, the following actions 
should be considered and supported:

* Enhanced fiscal sustainability and inter-generational equity 
reporting, including FASAB’s related efforts;
* The reporting of key outcome-based performance information, as well 
as the role of a balance sheet in the federal government reporting 
model;
* The preparation and publication of an easily understandable summary 
annual report that includes in a clear, concise, and transparent 
manner, key financial and performance information embodied in the 
Financial Report of the United States Government.

Financial Reporting: Improving Transparency of Long-term Costs Before 
Decisions Are Made.

* Require supplemental reporting in the President’s annual budget 
submission (e.g., require the President to state a fiscal policy 
philosophy, present a budget path for at least 10 years, and prepare a 
Fiscal Exposures Statement covering at least 40 years in each annual 
budget submission);
* Require additional executive branch reports (e.g., require a summary 
annual report on key financial and performance information, and a 
periodic report on long-range fiscal sustainability);
* Require CBO and JCT to provide additional cost information on major 
spending and tax proposals before adoption;
* Require GAO to publish an annual report that would include, among 
things: comments on whether the President and CBO/JCT met the new 
reporting requirements specified above;
* Consider changing the budget treatment in certain areas (e.g., 
expanding use of accrual budgeting);
* Consider creating budget concepts and reform commission to address 
issues such as PAYGO, budget caps and triggers, the use of 
supplementals, and other matters (e.g., earmarks).

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 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;
* Expanding and strengthening the discussion and guidance on audit 
quality;
* Outlining overarching ethical framework in government audits;
* Modernizing GAGAS and updating for major developments in the 
accountability and audit environment.

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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