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United States General Accounting Office: 


Statement before the Group of States Against Corruption (GRECO) 
Evaluation Team: 

For Release on Delivery: 
Expected at 11:30 a.m. EDT: 
Wednesday, June 5, 2002: 	 

U.S. General Accounting Office: 

The Role of GAO in Assisting Congressional Oversight: 

Statement of J. Christopher Mihm: 
Director, Strategic Issues: 


Members of the Evaluation Team of the Group of States Against 

I am pleased to appear before you today to discuss the role of the 
United States General Accounting Office (GAO) in assisting the United 
States Congress in conducting oversight of the executive branch. GAO's 
mission is to support the Congress in meeting its constitutional 
responsibilities and to help improve the performance and 
accountability of the federal government for the benefit of the 
American people. 

GAO is an independent, professional, nonpartisan agency in the 
legislative branch that is commonly referred to as the investigative 
arm of the Congress. The Congress created GAO in 1921 in the Budget 
and Accounting Act in order to assist it in the discharge of its core
constitutional powers—the power to investigate and oversee the 
activities of the executive branch, the power to control the use of 
all federal funds, and the power to make laws. We have seen our role 
evolve over the decades as the Congress has expanded our statutory 
authority and called on us with greater frequency for oversight, 
insight, and foresight in addressing the growing complexity of 
government and our society. All of GAO's efforts on behalf of the 
Congress are guided by three core values: 

Accountability: We help the Congress oversee federal programs and 
operations to ensure accountability to the American people. GAO's 
analysts, auditors, lawyers, economists, information technology 
specialists, investigators, and other multidisciplinary professionals 
seek to enhance the economy, efficiency, effectiveness, and 
credibility of the federal government both in fact and in the eyes of 
the American people. GAO accomplishes its mission through a variety of 
activities, including financial audits, program reviews, 
investigations, legal support, and policy analyses. 

Integrity: We set high standards for ourselves in the conduct of GAO's 
work. Our agency takes a professional, objective, fact-based, 
nonpartisan, nonideological, fair, and balanced approach to all 
activities. Integrity is the foundation of reputation, and the GAO 
approach to work ensures both. 

Reliability: We at GAO want our work to be viewed by the Congress and 
the American public as reliable. We produce high quality reports, 
testimonies, briefings, legal opinions, and other products and 
services that are timely, accurate, useful, clear, and candid. 

GAO examines a broad range of federal activities and programs, 
publishes thousands of reports and other documents annually, and 
provides a number of other services to the Congress. We also look at 
national and international trends and challenges to anticipate their 
implications for public policy. By making recommendations to improve 
the practices and operations of government agencies, we contribute not 
only to the increased effectiveness of federal spending, but also to 
the enhancement of the taxpayers' trust and confidence in their 
federal government.[Footnote 1] In keeping with our mission and 
responsibilities, we have identified four strategic goals and related 
objectives that will guide our work to serve the Congress in fiscal 
years 2002-2007.[Footnote 2] Our four strategic goals are as follows: 

* 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; 

* provide timely, quality service to the Congress and the federal 
government to respond to changing security threats and the challenges 
of global interdependence; 

* help transform the federal government's role and how it does 
business to meet 21st century challenges; and; 

* maximize the value of GAO by being a model federal agency and a 
world-class professional services organization. 

We develop and present this information in a number of ways to support 
the Congress, including:[Footnote 3] 

* evaluations of federal programs, policies, operations, and 

* oversight of government operations through financial and other 
management audits to determine whether public funds are spent 
efficiently, effectively, and in accordance with applicable laws; 

* investigations to assess whether illegal or improper activities are 

* analyses of the financing for government activities; 

* constructive engagements in which GAO works proactively with 
agencies, when appropriate, to help guide their efforts toward 
achieving positive results; 

* legal opinions to determine whether agencies are in compliance with 
applicable laws and regulations; 

* policy analyses to assess needed actions, develop options, and note 
the implications of possible actions; and; 

* additional assistance to the Congress in support of its oversight, 
appropriations, legislative, and other responsibilities. 

The GAO documents that are referenced in the footnotes throughout my 
statement provide details on the full scope of our responsibilities, 
activities, and accomplishments. Today, I will highlight five specific 
ways that we support the Congress and seek to meet our strategic goals 
that are most relevant to today's discussion. 

Specific Recommendations for Improvements and Cost Savings: 

Each year, we issue well over 1,000 audit and evaluation products to 
assist the Congress in its decision making and oversight 
responsibilities. As one indicator of the degree to which the Congress 
relies on us for information and analysis, GAO officials were called 
to testify 151 times before committees of the Congress in fiscal year 
2001. Our audit and evaluation products issued in fiscal year 2001 
contained over 1,560 new recommendations targeting improvements in the 
economy, efficiency, and effectiveness of federal operations and 
programs that could yield significant financial and other benefits in 
the future. History tells us that many of these recommendations will 
contribute to important improvements. At the end of fiscal year 2001, 
79 percent of the recommendations we made 4 years ago had been 
implemented. We use a 4-year interval because our historical data show 
that agencies often need this length of time to complete action on our 

Actions on the recommendations in our products have a demonstrable 
effect on the workings of the federal government. During fiscal year 
2001, we recorded hundreds of accomplishments providing financial and 
other benefits that were achieved based on actions taken by the 
Congress and federal agencies, and we made numerous other 
contributions that provided information or recommendations aiding 
congressional decision making or informing the public debate to a 
significant extent. For example, our findings and recommendations to 
improve government operations and reduce costs contributed to 
legislative and executive actions that yielded over $26.4 billion in 
measurable financial benefits. We achieve financial benefits when our 
findings and recommendations are used to make government services more 
efficient, improve the budgeting and spending of tax dollars, or 
strengthen the management of federal resources. Not all actions on our 
findings and recommendations produce measurable financial benefits. We 
recorded 799 actions that the Congress or executive agencies had taken 
based on our recommendations to improve the government's 
accountability, operations, or services. The actions reported for 
fiscal year 2001 include actions to combat terrorism, strengthen 
public safety and consumer protection, improve computer security 
controls, and establish more effective and efficient government 

Performance and Accountability Series and High-Risk Update: 

In 1990, we began an effort to identify for the Congress those federal 
programs, functions, and operations that are most at risk for waste, 
fraud, abuse, and mismanagement. Every 2 years since 1993, with the 
beginning of each new Congress, we have published a summary assessment 
of those high-risk programs, functions, and operations. In 1999, we 
added the Performance and Accountability Series to identify the major 
performance and management issues confronting the primary executive 
branch agencies.[Footnote 4] In our January 2001 Performance and 
Accountability Series and High-Risk Update, we identified 97 major 
management challenges and program risks at 21 federal agencies as well 
as 22 high-risk areas and the actions needed to address these serious 
problems.[Footnote 5] Figure 1 shows the list, as of May 2002, of high-
risk issues including the Postal Service's transformational efforts 
and long-term outlook, which we added to the high-risk list in April 

Figure 1: GAO's High-Risk List as of May 2002: 

Addressing Governmentwide High-Risk Areas: 

High-risk area: Strategic Human Capital Management; 
Year designated high risk: 2001. 

High-risk area: Information Security Weaknesses; 
Year designated high risk: 1997. 

Ensuring Major Technology Investments Improve Services: 

High-risk area: FAA Air Traffic Control Modernization; 
Year designated high risk: 1995. 

High-risk area: IRS Tax Systems Modernization; 
Year designated high risk: 1995. 

High-risk area: DOD Systems Modernization Efforts; 
Year designated high risk: 1995. 

Providing Basic Financial Accountability: 

High-risk area: DOD Financial Management; 
Year designated high risk: 1995. 

High-risk area: Forest Service Financial Management; 
Year designated high risk: 1999. 

High-risk area: FAA Financial Management; 
Year designated high risk: 1999. 

High-risk area: IRS Financial Management; 
Year designated high risk: 1995. 

Reducing Inordinate Program Management Risks: 

High-risk area: Medicare; 
Year designated high risk: 1990. 

High-risk area: Supplemental Security Income; 
Year designated high risk: 1997. 

High-risk area: Earned Income Credit Noncompliance; 
Year designated high risk: 1995. 

High-risk area: Collection of Unpaid Taxes; 
Year designated high risk: 1990. 

High-risk area: DOD Infrastructure Management; 
Year designated high risk: 1997. 

High-risk area: DOD Inventory Management; 
Year designated high risk: 1990. 

High-risk area: U.S. Postal Service Long-Term Outlook and 
Year designated high risk: 2001. 

High-risk area: HUD Single—Family Mortgage Insurance and Rental 
Housing	Assistance Programs; 
Year designated high risk: 1994. 

High-risk area: Student Financial Aid Programs; 
Year designated high risk: 1990. 

High-risk area: Asset Forfeiture Programs; 
Year designated high risk: 1990. 

Managing Large Procurement Operations More Efficiently: 

High-risk area: DOD Weapon Systems Acquisition; 
Year designated high risk: 1990. 

High-risk area: DOD Contract Management; 
Year designated high risk: 1992. 

High-risk area: Department of Energy Contract Management; 
Year designated high risk: 1990. 

High-risk area: NASA Contract Management; 
Year designated high risk: 1990. 

Source: GAO. 

[End of figure] 

Congressional leaders, who have historically referred extensively to 
these series in framing oversight hearing agendas, have strongly urged 
the administration and individual agencies to develop specific 
performance goals to address these pervasive problems. In addition, 
the President's recently issued management agenda for reforming the 
federal government mirrors many of the issues that GAO has identified 
and reported on in these series, including a governmentwide initiative 
to focus on strategic management of human capital. We will be issuing 
a new Performance and Accountability Series and High-Risk Update at 
the start of the new Congress this coming January. 

Audit of the Consolidated Financial Statements of the United States 

The Government Management Reform Act of 1994 requires (1) GAO to 
annually audit the federal government's consolidated financial 
statements and (2) the inspectors general of the 24 major federal 
agencies to annually audit the agencywide financial statements 
prepared by those agencies. Consistent with our approach on a full 
range of management and program issues, our work on the consolidated 
audit is done in coordination and cooperation with the inspectors 
general. The Comptroller General reported on March 29, 2002, on the 
U.S. government's consolidated financial statements for fiscal years 
2001 and 2000. As in the previous 4 fiscal years, we were unable to 
express an opinion on the consolidated financial statements because of 
certain material weaknesses in internal control and accounting and 
reporting issues. These conditions prevented us from being able to 
provide the Congress and the American citizens an opinion as to 
whether the consolidated financial statements are fairly stated in 
conformity with U.S. generally accepted accounting principles. 

While significant and important progress is being made in addressing 
the impediments to an opinion on the U.S. government's consolidated 
financial statements, fundamental problems continue to (1) hamper the 
government's ability to accurately report a significant portion of its 
assets, liabilities, and costs, (2) affect the government's ability to 
accurately measure the full costs and financial performance of certain 
programs and effectively manage related operations, and (3) 
significantly impair the government's ability to adequately safeguard 
certain significant assets and properly record various transactions. 

In August 2001, the principals of the Joint Financial Management 
Improvement Program (JFMIP)—Secretary of the Treasury O'Neill, Office 
of Management and Budget Director Daniels, Office of Personnel 
Management Director James, and Comptroller General Walker, head of GAO 
and chair of the group—began a series of periodic meetings that have 
resulted in unprecedented substantive deliberations and agreements 
focused on key financial management reforms issues such as better 
defining measures for financial management success. These measures 
include being able to routinely provide timely, accurate, and useful 
financial information and having no material internal control 
weaknesses or material noncompliance with applicable laws, 
regulations, and requirements. In addition, the JFMIP principals have 
agreed to (1) significantly accelerate financial statement reporting 
so that the government's financial statements are more timely and (2) 
discourage costly efforts designed to obtain unqualified opinions on 
financial statements without addressing underlying systems challenges. 
For fiscal year 2004, audited agency financial statements are to be 
issued no later than November 15, with the U.S. government's audited 
consolidated financial statement becoming due by December 15.[Footnote 

Standards Setting, Guidance, and Management Tools: 

GAO also issues a wide range of standards, guidance, and management 
tools intended to assist the Congress and agencies in putting in place 
the structures, processes, and procedures needed to help avoid 
problems before they occur or develop into full-blown crises. For 
example, the Federal Managers' Financial Integrity Act of 1982 (FMFIA) 
requires GAO to issue standards for internal control in government. 
[Footnote 7] Internal control is an integral part of an organization's 
management that provides reasonable assurance that the following 
objectives are being achieved: effectiveness and efficiency of 
operations, reliability of financial reporting, and compliance with 
applicable laws and regulations. As such, the internal control 
standards that GAO issues provide an overall framework for 
establishing and maintaining internal control, and identifying and 
addressing major performance and management challenges and areas at 
greatest risk to waste, fraud, abuse, and mismanagement. A positive 
control environment is the foundation for the standards. Management 
and employees should establish and maintain an environment throughout 
the organization that sets a positive and supportive attitude toward 
internal control and conscientious management. One factor is the 
integrity and ethical values maintained and demonstrated by management 
and staff. Agency management plays a key role in providing leadership 
in this area, especially setting and maintaining the organization's 
ethical tone, providing guidance for proper behavior, removing 
temptations for unethical behavior, and providing discipline when 
appropriate. In addition to setting standards for internal control, 
GAO participates in the setting of the federal government's accounting 
standards and is responsible for setting the generally accepted 
government auditing standards for auditors of federal programs and 
assistance.[Footnote 8] 

GAO also assists congressional and executive branch decision makers by 
issuing guides and tools for effective public management. For example, 
in addition to setting standards for internal control, we have issued 
detailed guidance and management tools to assist agencies in 
maintaining or implementing effective internal control and, when 
needed, to help determine what, where, and how improvements can be 
made.[Footnote 9] We have also issued guidance for agencies to address 
the critical governmentwide high-risk challenge of computer security. 
[Footnote 10] This work draws on lessons from leading public and 
private organizations to show the Congress and federal agencies the 
steps that can be taken to protect the integrity, confidentiality, and 
availability of the government's data and the systems it relies on. 
Similarly, we have published guidance for the Congress and managers on 
dealing with the other governmentwide high-risk issue—human capital. 
[Footnote 11] These guides on human capital are assisting managers in 
adopting a more strategic approach to the use of their organization's 
most important asset—its people. Overall, GAO has undertaken a major 
effort to identify ways agencies can effectively implement the 
statutory framework that the Congress has put in place to create a 
more results-oriented and accountable federal government.[Footnote 12] 

Special Investigations: 

GAO has an investigations unit that focuses on investigating and 
exposing potential criminal misconduct and serious wrongdoing in 
programs that receive federal funds. The primary mission of this unit 
is to conduct investigations of alleged violations of federal criminal 
law and serious wrongdoing and to review law enforcement programs and 
operations, as requested by the Congress and the Comptroller General. 
Through investigations, our special investigations team develops 
examples of misconduct and wrongdoing that illustrate program 
weaknesses, demonstrate potential for abuse, and provide supporting 
evidence for GAO recommendations and congressional action. 
Investigators often work directly with other GAO teams on 
collaborative efforts that enhance the agency's overall ability to 
identify and report on wrongdoing. Key issues in the investigations 
area are: 

* fraudulent activity and regulatory noncompliance in federal 
procurement/contract administration systems; 

* unethical conduct by federal employees and government officials, as 
well as organizational misconduct; 

* fraud and misconduct in grant, loan, and entitlement programs; 

* adequacy of federal agencies' security systems, controls, and 
property as tested through proactive special operations; and; 

* integrity of federal law enforcement and investigative programs. 

One example of these collaborations between our investigations team 
and audit and evaluations teams is the use of forensic audit 
techniques to identify instances of fraud, waste, and abuse at various 
agencies. This approach combines financial auditor and special 
investigator skills with data mining and file comparison techniques to 
identify unusual trends and inconsistencies in agency records that may 
indicate fraudulent or improper activity. For example, by comparing a 
list of individuals who received government grants and loans to a list 
of people whose social security numbers indicate they have died, we 
identified people improperly receiving benefits. Data mining 
techniques have also been used to identify unusual government purchase 
card activity that, upon further investigation, were determined to be 
abusive and improper purchases.[Footnote 13] 

Overall, in 2001 GAO referred 61 matters to the Department of Justice 
and other law enforcement and regulatory agencies for investigation, 
and its special investigations accounted for $1.8 billion in financial 

GAO also maintains a system for receiving reports from the public on 
waste, fraud, and abuse in federally funded programs. Known as the GAO 
FraudNET, the system received more than 800 cases in 2001. Reports of 
alleged mismanagement and wrongdoing covered topics as varied as 
misappropriation of funds, security violations, and contractor fraud. 
Most of the matters reported to GAO were referred to inspectors 
general of the executive branch for further action or information. 
Other matters that indicate broader problems or systemic issues of 
congressional interest are referred to GAO's investigations unit or 
other GAO teams. 

In summary, as a congressional "watchdog," GAO has broad
responsibilities for assisting the Congress in its oversight of 
executive branch activities. We are pleased and honored that for over 
80 years, the Congress has relied on GAO for help in meeting its 
constitutional responsibilities and we look forward to continuing to 
work with and support the Congress in its efforts to improve the 
performance and accountability of the federal government for the 
benefit of the American people. 

This concludes my statement. I would be pleased to respond to any 
questions that the Evaluation Team may have. 

Contact and Acknowledgments: 

For further information on this statement, please contact J. Christopher
Mihm, Director, Strategic Issues on (202) 512-6806 or at Individuals making key contributions to this statement 
included Dan Blair, Rebecka Derr, Sandy McGraw, Dottie Self, and Lisa 

[End of section] 


[1] U.S. General Accounting Office, Fiscal Year 2003 Budget Request: 
U.S. General Accounting Office, [hyperlink,] (Washington, D.C.: May 8, 
2002). The testimony and all other products referenced in this 
statement are available at [hyperlink,]. 

[2] For GAO's current strategic plan, which is being updated to 
reflect the goals shown above, see U.S. General Accounting Office, 
Strategic Plan 2000-2005 (Washington, D.C.: Spring 2000). GAO's 
strategic planning and performance and accountability publications are 
available at [hyperlink,]. 

[3] For additional information on GAO's current products and 
performance, see U.S. General Accounting Office, Performance and 
Accountability Highlights (Washington, D.C.: Spring 2002). 

[4] For information on our criteria for identifying high-risk and 
major performance and management issues, see U.S. General Accounting 
Office, Determining Performance and Accountability Challenges and High 
Risks, [hyperlink,] 
(Washington, D.C.: Nov. 2000). 

[5] U.S. General Accounting Office, 2001Performance and Accountability 
Series, [hyperlink,] through 
262 (Washington, D.C.: Jan. 2001); U.S. General Accounting Office, 
High-Risk Series: An Update, [hyperlink,] (Washington, D.C.: Jan. 2001); 
and U.S. General Accounting Office, Major Management Challenges and 
Program Risks: A Governmentwide Perspective, [hyperlink,] (Washington, D.C.: Jan. 2001). 

[6] U.S. General Accounting Office, U.S. Government Financial 
Statements: FY 2001 Results Highlight the Continuing Need to 
Accelerate Federal Financial Management Reform, [hyperlink,] (Washington, D.C.: Apr. 9, 

[7] U.S. General Accounting Office, Standards for Internal Control in 
the Federal Government, [hyperlink,] (Washington, D.C.: 
Nov. 1999). 

[8] See, for example, U.S. General Accounting Office, Government 
Auditing Standards, [hyperlink,] (Washington, D.C.: June 

[9] U.S. General Accounting Office, Internal Control Management and 
Evaluation Tool, [hyperlink,] 
(Washington, D.C.: Aug. 2001). The tool also provides citations of 
related documents we have issued to assist agencies in improving or 
maintaining effective operations. For an example of GAO guidance to 
address a specific internal control issue, see U.S. General Accounting 
Office, Strategies to Manage Improper Payments: Learning from Public 
and Private Sector Organizations, [hyperlink,] (Washington, D.C.: Oct. 2001). 

[10] See, for example, U.S. General Accounting Office, Executive 
Guide: Information Security Management, Learning From Leading 
Organizations, [hyperlink,] 
(Washington, D.C.: May 1998). 

[11] U.S. General Accounting Office, A Model of Strategic Human 
Capital Management, [hyperlink,] (Washington, D.C.: Mar. 15, 
2002) and U.S. General Accounting Office, Human Capital: A Self-
Assessment Checklist for Agency Leaders, [hyperlink,] (Washington, D.C.: Sept. 

[12] For example, for results-oriented management, see U.S. General 
Accounting Office, Agencies' Annual Performance Plans Under the 
Results Act: An Assessment Guide to Facilitate Congressional 
Decisionmaking, [hyperlink,] (Washington, D.C.: 
Feb. 1998); U.S. General Accounting Office, Agencies' Strategic Plans 
Under GPRA: Key Questions to Facilitate Congressional Review, 
[hyperlink,] (Washington, 
D.C.: May 1997); and U.S. General Accounting Office, Executive Guide: 
Effectively Implementing the Government Performance and Results Act, 
[hyperlink,] (Washington, 
D.C.: June 1996). For financial management, see U.S. General 
Accounting Office, The Chief Financial Officers Act: A Mandate for 
Federal Financial Management Reform, [hyperlink,] (Washington, D.C.: Sept. 
1991) and U.S. General Accounting Office, Core Financial System 
Requirements: Checklist for Reviewing Systems Under the Federal 
Management Improvement Act, [hyperlink,] (Washington, D.C.: 
Feb. 2000). For information technology, see U.S. General Accounting 
Office, Executive Guide: Maximizing the Success of Chief Information 
Officers: Learning From Leading Organizations, [hyperlink,] (Washington, D.C.: Feb. 2001) 
and U.S. General Accounting Office, Executive Guide: Measuring 
Performance and Demonstrating Results of Information Technology 
Investments, [hyperlink,] 
(Washington, D.C.: Mar. 1998). 

[13] For recent examples of work on these topics, see U.S. General 
Accounting Office, Education Financial Management: Weak Internal 
Controls Led to Instances of Fraud and Other Improper Payments, 
[hyperlink,] (Washington, D.C.: 
Mar. 28, 2002); U.S. General Accounting Office, Financial Management: 
Internal Control Weaknesses Leave Department of Education Vulnerable 
to Improper Payments, [hyperlink,] (Washington, D.C.: Apr. 3, 
2001); U.S. General Accounting Office, Financial Management: Poor 
Internal Control Exposes Department of Education to Improper Payments, 
[hyperlink,] (Washington, D.C: 
July 24, 2001); U.S. General Accounting Office, Financial Management: 
Poor Internal Controls Expose Department of Education to Improper 
Payments, [hyperlink,] 
(Washington, D.C.: Sept. 28, 2001); and U.S. General Accounting 
Office, Purchase Cards: Control Weaknesses Leave Two Navy Units 
Vulnerable to Fraud and Abuse, [hyperlink,] (Washington, D.C.: Nov. 30,