This is a Comptroller General speech given before the 10th Asian Organization of Supreme Audit Institutions (ASOSAI) Assembly in Shanghai, China on September 13, 2006. My first trip to China was in 1983. But my first official visit as Comptroller General was in 2001, when I met with my colleague Mr. Li Jinghua. As you know, Mr. Li is the head of the Chinese National Audit Office (CNAO) and our host here in Shanghai. On that 2001 trip, Mr. Li and I were honored to have a meeting with then-Premier Zhu Rongji. Our discussion was very productive, and I was impressed by the Premier's strong interest in fighting corruption and transforming the Chinese government to meet the demands of the 21st century. At the end of our conversation, Premier Zhu asked me for one priority recommendation for his consideration. I thought for a few seconds and then said, "Make the CNAO's reports public." After all, transparency is a powerful force that can help fight corruption, improve performance, and ensure accountability. 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 traditional audit responsibilities. Over the years, I've found three elements are essential to maximizing value and mitigating risk. These three elements are incentives, transparency, and accountability. 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. I think it's important to understand how myopia or shortsightedness can undermine a nation's willingness and ability to act. In the case of the United States, strong economic growth, modest inflation levels, relatively low interest rates, and our current superpower status have given many policymakers and the American public a false sense of security about our nation's current position and future prospects. Even though we know that a demographic tsunami is building silently offshore--I'm referring to the impending retirement of our baby boom generation--America continues to party on and pile up record levels of debt. 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 debt.

Importantly, some nations have begun to face up to their long-term fiscal challenges. Specifically, two nations in the Asia-Pacific region 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. 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 efficiency 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 many Asian SAIs are using the Yellow Book in their work, including Indonesia, Mongolia, and Vietnam. But audit work is only one of a hierarchy of functions SAIs can and should be undertaking. Envision a pyramid with five layers. 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 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 action and avoid crises down the line.

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