From the U.S. Government Accountability Office, www.gao.gov

Transcript for: An Overview of GAO's Green Book Standards for Internal
Controls

Description: Audio interview by GAO staff with James Dalkin, Director,
Financial Management and Assurance

Related GAO Work: AIMD-00-21.3.1. Government Operations: Standards for
Internal Control in the Federal Government (Supersedes AIMD-98-21.3.1)

Released: September 2013

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[ Narrator: ] Welcome to GAO's Watchdog Report; your source for news and
information from the U.S. Government Accountability Office. It's
September, 2013. The Comptroller General is required by law to prescribe
internal control standards for program and financial management in
federal agencies. Standards for Internal Control in the Federal
Government, also known as the Green Book, sets those standards for
federal agency policies, procedures, and practices. Jim Dalkin, a
director in GAO's Financial Management and Assurance team, has been
working on revisions to the current Green Book. GAO's Sarah Kaczmarek
sat down with Jim to talk about it.

[ Sarah Kaczmarek: ] What is the Green Book and what's the history
behind it?

[ Jim Dalkin: ] It was really initiated in 1982 when the Comptroller
General was required by law to set the standards for internal control in
the federal government. The Green Book was subsequently issued in 1983
to respond to this, and we've gone through various iterations. Soon
we're gonna have a new Green Book, a revised Green Book, to reflect
current changes.

[ Sarah Kaczmarek: ] And how does GAO use the Green Book in audits or
reviews?

[ Jim Dalkin: ] Well, the Green Book really has two audiences, one of
which is management. And management really uses the Green Book as a
roadmap for their agency to ensure they do have strong internal
controls. On the audit side, the auditors really go in and look to see
if there's certain--they judge what has been done by management against
the criteria, and the Green Book really provides some of that criteria
for auditors to use. So both populations are affected by this.

[ Sarah Kaczmarek: ] Well, then what advice do you have for users of the
Green Book?

[ Jim Dalkin: ] Well, the Green Book is somewhat akin to driving a car
with a teenager. If you have a teenager who's driving a car, the first
thing you would think about in Green Book terms would be the control
environment, and that's the tone that you set as management. So, do you
buckle your own seatbelts or do you have both hands on the wheel? So
that's one element of the Green Book. The next element really relates to
risk assessment and you would need to perform a risk assessment if your
teenager was driving on a wind-y road, you might say, "Wait a minute,
there might be some additional precautions," and so that's a second
component. A third component would be control activity. What control
activities would you require your teenager to have? One, you would say,
"Do not tweet or text while driving." Two, you would say, "Use your
seatbelt and both hands on the wheel." So those are the control
activities you'd put in place. The fourth element of Green Book relates
to monitoring, and that would be how you would monitor whether or not
your teenager was actually doing what they said they'd do. In today's
environment, you can actually monitor the speed of the car and whatnot,
so it's changing very rapidly. And the last element really relates to
information and communication. How is it that you communicate to your
child, to your teenager? How do they communicate back to you so that all
the information is shared? And so that's the way I like to think about
Green Book.

[ Sarah Kaczmarek: ] And how has the Green Book changed over the years?

[ Jim Dalkin: ] Well, the Green Book's changed over the years. It's
still green and I'm not sure what the genesis of why it was green, but I
think green means go and I think there was a time where internal
controls were developing and so we went ahead with that and gave the
green light to these internal controls. I think it's changing in a sense
the older Green Book was a little bit smaller. There's this new set of
internal controls that have been developed by the commercial enterprises
called COSO, and so they've actually expanded not only the components of
internal control, but they've added what they call principles. So what
we've done for the Green Book as it applies to government is we have
harmonized or converged with that commercial COSO and we have the same 5
components, but we also have 17 principles that we've added, so it's a
little bit longer, but I think it provides--it's a little bit richer for
the user.

[ Sarah Kaczmarek: ] Finally, for taxpayers interested in government
standards or parents who want to make sure their kids are good drivers,
what's the bottom line here?

[ Jim Dalkin: ] Well, the bottom line really is about accountability and
transparency. I think internal controls are critical if you think of any
of the major events that happened during course of a year where maybe
government funds have to be spent very quickly. It's very important to
have those internal controls so you do have accountability, and that
really represent what the Green Book promotes.

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next episode of GAO's Watchdog Report for more from the Congressional
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