Performance Auditing: The Experiences of the United States Government Accountability Office
Published: 2013-09-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: GAO's mission is to support the U.S. 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. Each year, GAO presents its findings, conclusions, and recommendations in reports and testimony before Congress. In fiscal year 2012, GAO issued more than 650 reports and testified 159 times before various congressional committees. Last fiscal year, financial benefits from GAO's work totaled $55.8 billion U.S. dollars, a $105 return on every dollar invested in GAO. In addition to financial benefits, GAO also documented 1,440 other benefits that shaped legislation, improved services to the public and strengthened government operations.
GAO and its counterparts, such as the European Court of Auditors, have unprecedented opportunities to help our respective governments plan ahead and address increasingly complex issues in meeting the challenges posed by global interconnections and worldwide fiscal difficulties. The experiences of GAO with respect to performance auditing illustrate how audit organizations can help decision makers address these challenges.
section_title: What GAO Found
paragraphs: Performance audits as well as traditional financial and compliance audits are essential tools that national audit offices have to help their respective governments identify and address challenging national and global problems. Performance auditing provides objective analysis so that management and those charged with governance and oversight can use the information to improve program performance and operations, reduce costs, facilitate decision making by parties with responsibility to oversee or initiate corrective action, and contribute to public accountability.
Increasingly complex issues, risks and problems that governments around the world confront are expanding the perspective of performance auditing. These issues, risks and problems such as modernizing outdated financial regulatory systems and protecting public safety, cut across geographic boundaries, government programs, levels of government and sectors. As government agencies increasingly rely on collaboration with private and nongovernmental entities and delegate responsibilities for implementing public policy initiatives to these entities, the line between the governmental and the nongovernmental sectors continues to blur.
From GAO's experience, performance auditing has a vital role in providing decision makers and citizens with the information, analysis, and recommendations they need to respond to this increasingly complex and interconnected environment.
To most effectively contribute to fundamental improvements in the performance of 21st century government, GAO has found that auditors need to be more and more focused on governance, including assessing and recommending how to improve connections across organizations, levels of government, sectors, and policy tools. While many of GAO's individual engagements examine the challenges a specific agency or program faces, three GAO-wide initiatives--the High Risk program; the annual reports on overlap, duplication, and fragmentation; and the reviews of the implementation of the Government Performance and Results Act Modernization Act of 2010--offer government-wide perspectives on the progress needed to respond effectively to 21st century governance challenges.

section_title: Letter
paragraphs: Thank you for the opportunity to contribute to this important hearing and  to share the experiences of the United States Government Accountability  Office (GAO) with respect to performance auditing. GAO’s mission is to  support the U.S. 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. GAO and its  counterparts, such as the European Court of Auditors, have  unprecedented opportunities to help our respective governments plan  ahead and address the increasingly complex challenges posed by global  interconnections and worldwide fiscal difficulties.
subsections: section_title: GAO’s Work and Performance Auditing
paragraphs: GAO was established just over 90 years ago. After World War I, the U.S.  Congress wanted better information on, and control over, government  spending. In1921, the Budget and Accounting Act required the President  to issue an annual federal budget. This law also established GAO—then  known as the General Accounting Office—as an independent agency to  investigate how federal dollars are spent. In its early years, GAO did  mainly voucher auditing. After World War II, however, GAO began to do  more comprehensive financial audits that examined the economy and the  efficiency of government operations.
In the 1960s, the expectations of the types of information GAO could  provide evolved further. As a result, GAO began performance auditing  and program evaluations to determine whether government programs  were meeting their objectives. In the Legislative Reorganization Act of  1970 and the Congressional Budget and Impoundment Control Act of  1974, Congress highlighted the role that GAO audits of government  program results can play in support of its oversight and legislative  functions. The 1974 language specifically requires the Comptroller  General to review and evaluate the results of government programs and  activities. As noted in a 1976 statement by then Assistant Comptroller  General Ellsworth Morse, “managers and policy makers, particularly in  government, want—and need—more from auditors than stereotyped  opinions on financial statements. They want independently and  objectively obtained and evaluated information on operations and  performance and expert advice on such things as how improvements can  be made, how money can be saved or used to better advantage and how  goals or objectives can be achieved in better fashion and at less cost.” In  short, they want auditing focused on performance.
The U.S. Government Auditing Standards which govern our work  describe performance audits as providing objective analysis so that  management and those charged with governance and oversight can use  the information to improve program performance and operations, reduce  costs, facilitate decision making by parties with responsibility to oversee  or initiate corrective action, and contribute to public accountability.  Performance audits evaluate evidence against stated criteria, such as  specific requirements, measures, or defined business practices. This  definition of performance auditing is consistent with international auditing  standards.
Our efforts today fall into three main areas: oversight, insight, and  foresight. Our oversight activities determine whether government entities  are carrying out their assigned tasks, spending funds for intended  purposes, and complying with laws and regulations. Our insight activities  determine which programs and policies work well and which ones do not.  These efforts include sharing best practices and benchmarking  information horizontally across government and vertically through  different levels of government. Our foresight activities try to identify key  trends and emerging challenges before they reach crisis proportions.
Our work is based on a combination of legislative mandates,  congressional requests, and work done under the Comptroller General’s  authority. We meet regularly with Members of Congress and their staff.  These outreach efforts ensure that GAO stays at the forefront of high- priority issues facing Congress and the nation. We have protocols for how  we respond to congressional requests for our studies. These protocols  ensure that we deal consistently and transparently with all congressional  committees and members. This is especially important since we do our  work for all standing committees of the Congress and about 70 percent of  its subcommittees. Our protocols help us to prioritize incoming requests  and hold us accountable for the commitments we have made to  Congress. In fiscal year 2012, we received 924 congressional requests  and new mandates. Performance audits make up the vast majority of our  audits.
In the 2008 International Peer Review of the Performance Audit Practice  of the United States Government Accountability Office, the International  Peer Review Team pointed out several features that distinguish our  working environment from that of many of our international peers. The  Peer Review noted that we carry out a larger volume of performance  audit engagements each year and that the majority of the engagements  we carry out are requested by Congress and not self-initiated.
The Peer Review also noted that in responding to congressional  requests, we determine the scope and methodology for the work, the  timing and staffing, product content, and the management structure. In  addition, we have adopted a number of practices to balance our objective  of being responsive to Congress while remaining nonpartisan and  independent in serving the long-term interests of the American people.  The Peer Review identified the following two practices as being  particularly notable:
Our strategic planning process involves Congress and other  stakeholders in establishing key themes and high-risk areas that the  government needs to manage well. Our high-risk series of reports,  which I shall discuss shortly, focuses attention on government  programs that pose significant risks of fraud, waste, abuse, and  mismanagement.
Our engagement acceptance process focuses management’s  attention on the risks associated with each request, including risks to  independence, and how the risks will be managed.
Our work leads to real results. Each year, we present our findings,  conclusions, and recommendations in reports and testimony before  Congress. For example, in fiscal year 2012, we issued more than 650  reports and testified 159 times before various congressional committees.  In addition, nearly every one of our reports and testimonies is available on  our website the day it is made public. We make it a point to regularly  measure and report on our performance. Last fiscal year, financial  benefits from our work totaled $55.8 billion U.S. dollars. That is a $105  return on every dollar invested in GAO. We also documented 1,440 other  benefits that shaped legislation, improved services to the public, and  strengthened government operations. A driving force behind these  accomplishments is our focus on following up on the status of our  recommendations. At the end of fiscal year 2012, we found that 80  percent of the recommendations we had made in fiscal year 2008 had  been implemented. We measure over a 4-year period to allow time for  proper implementation. This follow-up provides an additional opportunity  for Congress to consider our work during oversight activities, for agencies  to respond to our recommendations, and for the work needed to  successfully address the issues to be completed.
Clearly, national audit offices can play a key role in providing public  officials with vital information and analyses needed to address country- specific challenges. But it is also true that many of the problems we face  today are global in nature and will require international cooperation with  international solutions.
The International Organization of Supreme Audit Institutions (INTOSAI)  has played an important role in this area. INTOSAI is an umbrella  organization for the external government audit community that provides  an institutionalized framework for the 191-member supreme audit  institutions (SAI) to promote development and transfer of knowledge,  improve government auditing worldwide, and enhance the professional  capacities, standing, and influence of member SAIs in their respective  countries. INTOSAI’s work includes developing international auditing  standards and helping SAIs around the world implement those standards.  The INTOSAI Congress in 2010 adopted a comprehensive set of  international standards for SAIs. Those standards cover the core audit  disciplines of financial, compliance, and performance audits. They provide  an institutionalized framework for transferring knowledge, improving  government auditing worldwide, and enhancing the professional  capabilities and influence of SAIs in their respective countries. Making the  transition to include performance audits as well as traditional financial and  compliance audits expands the range of tools that national audit offices  have to help their respective governments identify and address  challenging domestic and global problems.
section_title: Increasingly Complex Issues Are Expanding the Perspective of Performance Auditing
paragraphs: The issues, risks, and problems that governments around the world  confront are growing increasingly complex and boundary-spanning. That  is, those issues, risks, and problems cut across geographic boundaries,  government programs, levels of government, and sectors. As government  agencies increasingly rely on collaboration with private and  nongovernmental entities and delegate responsibilities for implementing  public policy initiatives to these entities, the line between the  governmental and the nongovernmental sectors continues to blur. For the  United States, policy makers must consider global and local risks,  connections, and supply chains if national policy initiatives, such as  protecting the security of citizens; reforming national tax laws;  modernizing outdated financial regulatory systems; and protecting public  safety in the areas of medical products, food and consumer goods, are to  be effective.
These issues are, of course, not unique to the United States. The January  2012 report The European Parliament in 2025: Preparing for Complexity,  an initiative of the Secretary-General of the European Parliament,  identified four concepts which give an idea of the increased complexity  likely to be present in 2025:  the political multi-polarity of the globalised world,  the preponderance of multilevel governance,  the increase in the number of factors contributing to the drafting and  implementation of public policies, and  technology as a factor in the speed of change.
The report concluded that “the new multi-polarity of the globalised world,  the multilevel nature of governance, the multiple players interacting in  law-making, are likely to create a new context for the European  Parliament directly or indirectly. This heightened complexity may entail  risks of fragmentation of (economic) governance, regulation and law.  Fragmentation may lead to a loss of coherence, systematic overlaps and  lasting conflicts between jurisdictions, as well as to an institutional  paralysis, and, then, to democratic frustration, as it becomes more and  more difficult to understand who is producing change in regulation and  should be made accountable for success and failures. In order to  contribute actively to prevent the risk of political and regulatory  fragmentation, the European Parliament has to prepare itself for this  upcoming complexity.”
Performance auditing has a vital role in providing decision makers and  citizens with the information, analysis, and recommendations they need to  respond to this increasingly complex and interconnected environment. To  most effectively contribute to fundamental improvements in the  performance of 21st century government, we are finding that auditors  need to be more and more focused on governance—that is, assessing  and improving connections across organizations, levels of government,  sectors, and policy tools. In practice, this has several important  implications for the focus of our work overall, and for our performance  audits in particular. The following are among those implications:
Reviewing government’s results-orientation, such as the extent to  which agencies have an appropriate crosscutting (also often called  whole of government or enterprise) perspective to their intended  results as well as using innovative approaches to better achieve  results.
Evaluating collaborative mechanisms, such as efforts to ensure that  agencies are effectively coordinating their efforts across levels of  government and with other sectors.
Examining the interplay of the range of public policy tools, such as  grants, contracts, tax expenditures and regulations, that are being  used to achieve results to ensure that they are effective and mutually  reinforcing.
Exploring opportunities to use web and social media technologies to  improve government transparency and public reporting to foster  greater public participation and civic engagement.
Assessing government’s capacity to respond to governance  challenges such as agencies’ risk management programs to ensure  that they systematically integrate the identification and management  of risk into strategic and program planning.
While many of our individual engagements examine the challenges a  specific agency or program faces, three GAO-wide initiatives—our High  Risk program; our annual reports on overlap, duplication, and  fragmentation; and our reviews of the implementation of the Government  Performance and Results Act Modernization Act of 2010—offer  government-wide perspectives on the progress needed to respond  effectively to 21st century governance challenges.
High Risk: Our work under our High Risk program documents the  challenges of managing in a complex governance environment. We  began the High Risk program in 1990 and initially focused on bringing  attention to government operations that had greater vulnerabilities to  waste, fraud, abuse, and mismanagement. Those issues remain a central  focus of the High Risk program today. However, in recognition that many  of the high-risk issues we were finding were the product of poor working  relationships across organizational boundaries, especially with third  parties such as contractors, we expanded our focus to include critical  areas needing transformation to address economy, efficiency, and  effectiveness challenges.
By using the tools of performance auditing as well as financial and  compliance audits, we are able to provide forward-looking  recommendations to address the High Risk areas. This is especially  relevant since more than two-thirds of the 30 areas on our 2013 High Risk  List cut across agencies, levels of government, and sectors of the  economy. For example, we designated limiting the federal government’s  fiscal exposure by better managing climate change risks as high risk in  2013 because the federal government is not well positioned to address  the fiscal exposure presented by climate change, and needs a  government-wide strategic approach with strong leadership to manage  related risks. Such an approach includes the establishment of strategic  priorities and the development of roles, responsibilities, and working  relationships among federal, state, and local entities. Recognizing that  each department and agency operates under its own authorities and  responsibilities—and can therefore be expected to address climate  change in different ways relevant to its own mission—existing federal  efforts have encouraged a decentralized approach, with federal agencies  incorporating climate-related information into their planning, operations,  policies, and programs. The challenge is to develop a cohesive approach  at the federal level that also informs action at the state and local levels.  Overall, our High Risk program has served to identify and help resolve  serious weaknesses in program areas that involve substantial resources  and provide critical services to the public.
Overlap, Duplication, and Fragmentation: Our work on overlap,  duplication, and fragmentation provides additional illustrations of the  governance challenges decision makers face. We have issued three  annual reports on overlap, duplication, and fragmentation across the  federal government. These reports provided a comprehensive look at  162 issue areas and identified more than 380 actions that the executive  branch and Congress could take to reduce fragmentation, overlap, and  duplication, as well as other cost savings and revenue enhancement  opportunities.
All told, the three reports have covered virtually every major federal  agency and program including agriculture, defense, economic  development, education, energy, general government, health, homeland  security, international affairs, science and the environment, and social  services. For example, we reported that a fundamental re-examination  and reform of the United States’ surface transportation policies is needed  and identified a number of principles to help the Congress in re-examining  and reforming the nation’s surface transportation policies. These  principles included ensuring the federal role is defined based on identified  areas of national interest and goals, incorporating accountability for  results by entities receiving federal funds, employing the best tools and  approaches to emphasize return on targeted federal investment, and  ensuring fiscal sustainability. Building on those principles, the Moving  Ahead for Progress in the 21st Century Act was signed into law in July  2012, and reauthorized the nation’s surface transportation programs  through the end of fiscal year 2014. The law addressed fragmentation in  those programs and made progress in addressing the issues we raised,  including clarifying federal goals and roles and linking federal programs to  performance to ensure accountability for results. Specifically, it  incorporated accountability for results around clearly identified national  goals, providing the framework for the Department of Transportation and  the states to implement this approach in the coming years. However, as  we reported in January 2013, Congress needs to develop a long-term  plan for funding surface transportation and opportunities exist for a more  targeted federal role focused around evident national interests.
In addition to identifying new areas, and consistent with the commitment  expressed in our prior overlap, duplication, and fragmentation reports, we  monitor the progress executive branch agencies and Congress have  made in addressing the areas previously identified. GAO’s Action  Tracker—available on our website—contains the status of the specific  suggestions for improvement that we identified in our three annual  reports. Overall, the executive branch and Congress have made some  progress in addressing the areas that we identified in our 2011 and 2012  annual reports. Specifically, as of March 6, 2013, the date we completed  our audit work for our most recent report, about 12 percent of the areas  identified in our 2011 and 2012 reports were addressed, 66 percent were  partially addressed, and 21 percent were not addressed. More recently,  both the administration and Congress have taken additional steps,  including proposals in the President’s Fiscal Year 2014 Budget.
The Government Performance and Results Act Modernization Act of  2010: The Government Performance and Results Act Modernization Act  of 2010 (the act) seeks, among other things, to instill a more coordinated  and crosscutting perspective to federal performance through actions such  as requiring the administration to select a set of cross-agency priority  goals. For example, goals concerning workforce development, export  promotion, and sustainability are among the interim goals that the  administration has established. It also requires federal agencies in setting  their own goals to identify other entities that are involved in achieving  those goals.
The act requires GAO to assess implementation and results at several  key points. Through the use of performance audits, we reported in June  2013 that the executive branch has taken a number of steps to implement  key provisions of the act. Nevertheless, our work has shown that the  executive branch needs to do more to fully implement and leverage the  act’s provisions to address governance challenges in several key areas  including:
The Office of Management and Budget and agencies have made  some progress addressing crosscutting issues but are missing  additional opportunities.
Ensuring performance information is useful and used by managers to  improve results remains a weakness, but key performance  management and program evaluation practices hold promise.
Agencies have taken steps to align daily operations with agency  results but continue to face difficulties measuring performance.
Communication of performance information could better meet users’  needs.
Agency performance information is not always useful for  congressional decision making.
Over the past four decades our experience in incorporating performance  auditing into our overall audit approach has enabled us to help address  the complexity facing government. Performance audits, in addition to  financial and compliance audits, have allowed us to meet our mission 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. Performance auditing  provides GAO with the tools necessary to provide the oversight, insight,  and foresight needed to address issues of today.
Mr. Chairman and Members of the Committee, this concludes my  prepared statement. I look forward to responding to any questions that  you may have.
section_title: Contacts and Staff Acknowledgments
paragraphs: If you or your staffs have any questions about this testimony, please  contact J. Christopher Mihm, Managing Director, Strategic Issues, at +1- 202-512-6806 or at mihmj@gao.gov. Individuals who made key  contributions to this testimony are Bill Reinsberg (Assistant Director) and  Jon Stehle.
section_title: Appendix I
paragraphs: This is a work of the U.S. government and is not subject to copyright protection in the United States.  The published product may be reproduced and distributed in its entirety without further permission from  GAO. However, because this work may contain copyrighted images or other material, permission from  the copyright holder may be necessary if you wish to reproduce this material separately.