Enhancing Performance, Accountability, and Foresight

This is a Comptroller General speech given before the Caribbean Organization of Supreme Audit Institutions (CAROSAI) on October 23, 2006.

The ties between the Caribbean and the United States are strong. Obviously, we're part of the same hemisphere. But we also share important economic ties and active trading arrangements. Since becoming Comptroller General in 1998, I've visited most of CAROSAI's member countries, either officially or as a tourist. I've also participated in several highly productive gatherings with my Caribbean colleagues.

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 our 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. 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. They also apply to countries and SAIs.

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."

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 growing debt burdens.

Importantly, some nations have begun to face up to their long-term fiscal challenges. Specifically, two nations 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. In this regard, I'm pleased that one of the themes for next year's INTOSAI Congress in Mexico City relates to the fiscal sustainability issue.

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 economy, efficiency, ethics, equity, 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 several SAIs around the world are using the Yellow Book in their work.

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 ethical standards and quality control systems while providing clarification on the differences between audit and non-audit services. 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 appendix). 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 and informed actions 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.