■Continued the removal of asbestos and the renovation of the 42-year-old GAO building, including the completion of the renovation of the fourth floor. PERFORMANCE INFORMATION GAO carefully monitors its performance, seeking to improve its services and efficiency. Several important performance measures are discussed earlier in this report, such as the measurable financial benefits resulting from GAO's work, the number of products produced, and the number of testimonies delivered. Additional GAO performance measures are addressed in a separate publication entitled 1994 Annual Report of Key Performance Indicators. GAO's ongoing quality management initiatives are expected to lead to further refinements and improvements in GAO's measurement system. Other publications provide summaries of GAO's work and the status of its recommendations, including Abstracts of Reports and Testimony: Fiscal Year 1994; Index of Reports and Testimony: Fiscal Year 1994; Supplement to the Comptroller General's 1994 Annual Report, which summarizes GAO staff assigned to congressional committees during fiscal year 1994; and the Annual Report to the Chairmen, House and Senate Committees on Appropriations, on the Status of Open Recommendations. QUALITY CONTROLS Quality is the hallmark of GAO's work. To ensure that GAO maintains a high level of quality, management maintains a quality control program and seeks advice and evaluation from outside sources. Through an internal review program, GAO ensures its quality control policies and procedures are providing reasonable assurance that its audit and evaluation work conforms with applicable professional requirements, including government auditing standards. The Comptroller General establishes auditing standards for all levels of government. The standards were updated in 1994 based on the advice of the Government Auditing Standards Advisory Council. GAO's Quality Control Review Board provides external perspectives and advice on the effectiveness of GAO's assessments of the quality of its audit and evaluation work. The Board meets periodically, confers with the Comptroller General, and provides advice on GAO's products and future work. The Board is comprised of the following distinguished individuals from outside GAO: Elliot L. Richardson (Chairman) is an attorney with Milbank, Tweed, Hadley & McCloy; former Secretary of Commerce, Defense, and Health, Education, and Welfare; former Attorney General; former Under Secretary of State; and former Ambassador-at-Large. John C. Burton is a certified public accountant (CPA) and the Arthur Young Professor of Accounting at Columbia University, former Chief Accountant of the Securities and Exchange Commission, and former Dean of the Graduate School of Business at Columbia University. David F. Linowes is a CPA and the Boeschenstein Professor Emeritus and professor of political economy and public policy at the University of Illinois. He is also the former Chairman of the President's Commission on Privatization; Chairman, Presidential Commission on the Nation's Energy Resources; Chairman, Federal Privacy Protection Commission; and National Partner, Laventhol & Horwath. John Rhinelander is an attorney with Shaw, Pittman, Potts, and Trowbridge; former Under Secretary of the Department of Housing and Urban Development; and former General Counsel of the Department of Health, Education, and Welfare. He has also held other legal positions, including adviser to the SALT I delegation, the Department of State, and the Secretary of the Navy. Periodic congressional oversight is crucial to the effective operation of any agency, and it is particularly important to GAO because of its significant role in serving Congress. In late October 1993, the House Committee on Government Operations held an oversight hearing on GAO's operations. Also in 1993, the Senate Committee on Governmental Affairs contracted with the National Academy of Public Administration to do a broad review of GAO. In a report on its review, released in October 1994, the Academy made several recommendations that GAO is using to improve its operations. The Committee has indicated that it will use the report as a basis for oversight hearings in the next Congress. AUDIT ADVISORY COMMITTEE In addition to the external Quality Control Review Board, which counsels GAO on its audit and evaluation work, the Comptroller General established an external group in late 1992 to advise GAO on its internal financial operations and controls. The Audit Advisory Committee, which met three times during the y year, discusses, reviews, and reports to the Comptroller General on the effectiveness of GAO's (1) financial reporting and auditing processes, (2) internal controls over financial operations, and (3) processes to ensure compliance with selected provisions of applicable laws and regulations that could significantly affect GAO's operations. The Committee is comprised of three distinguished individuals from outside GAO: ■Sheldon S. Cohen (Chairman) is a CPA and an attorney with Morgan, Lewis & Bockius; former Commissioner and Chief Counsel of the Internal Revenue Service; and Secretary and Trustee of the National Academy of Public Administration. Alan B. Levenson is an attorney with Fulbright & Jaworski and a former senior official at the Securities and Exchange Commission. Katherine D. Ortega is a CPA, former Treasurer of the United States, former Commissioner of the Copyright Royalty Tribunal, and former member of the President's Advisory Committee on Small and Minority Business. FINANCIAL RESOURCES AND RESULTS OF OPERATIONS The cost of operating GAO during fiscal years 1994 and 1993 was about $429 million and $436 million, respectively. More than 97 percent of its operations were financed through appropriations from Congress. The remainder came from reimbursements from other government agencies, including reimbursements for financial audits done by GAO. The percentage of operating expenses financed by appropriations has been about the same for the last 5 years. During fiscal year 1994, expenses for salaries and related benefits totaled MANAGEMENT REPORT ON INTERNAL CONTROLS GAO is committed to fulfilling the internal control objectives of the Federal Managers' Financial Integrity Act (FMFIA) of 1982. GAO's internal control structure, which includes controls over financial reporting, is designed to provide reasonable assurance that obligations and costs are in compliance with applicable laws and regulations; I funds, property, and other assets are safeguarded against loss from unauthorized acquisition, use, or disposition; and I revenues and expenditures applicable to GAO's operations are properly recorded and accounted for to enable GAO to prepare accounts and reliable financial reports and to maintain accountability over its assets. GAO management assesses compliance with its controls through a series of comprehensive internal reviews, applying the evaluation criteria in OMB's guidance (Circular A-123, Internal Control Systems, and Circular A-127, Financial Management Systems) for implementing FMFIA. The results of these reviews are discussed with GAO's Audit Advisory Committee, and action is taken promptly to correct deficiencies as they are identified. It should be noted that any internal control structure has inherent limitations, including the possibility of the circumvention or overriding of controls. GAO has assessed its internal control structure as of September 30, 1994, based on criteria for effective internal controls in the federal government mentioned above. On the basis of this assessment, GAO believes that it has an effective internal control structure in place as of September 30, 1994. GAO's independent auditors have been asked to provide Ian opinion on GAO's assertion on the internal control structure over financial reporting and a report citing any material conflicts between the more comprehensive GAO report on internal controls dated December 15, 1994, voluntarily prepared under FMFIA, and the results of their examination of GAO's assertion. 1994 FMFIA IMPROVEMENTS During the year, GAO management improved the administration of certain trust funds and the system for tracking its recommendations in reports to Congress. GAO took steps to improve the operation and management of two trust funds: (1) Davis-Bacon Act receipts and payments and (2) assets of American citizens who die abroad. Internal controls over the trust funds were substantially strengthened and documented with additional improvements to take effect during 1995. Also in 1994, GAO updated and revised its policies and procedures to follow up on the implementation of recommendations made to Congress. These improvements ensure that follow-up activities are appropriate and properly documented and that key recommendations receive special emphasis. GAO's 1994 PRINCIPAL STATEMENTS The accompanying principal statements summarize GAO's financial position, disclose the cost of operations and the changes in net position during fiscal years 1994 and 1993, present all significant cash flows during the 2 fiscal years, and provide a comparison of budget and actual expenses. The basis of accounting used for the principal statements is described in the notes to those statements. While GAO is not subject to the Chief Financial Officers Act of 1990 or FMFIA, it is fully committed to the principles and objectives of both acts and has elected to comply with their requirements. The audit of the statements was performed by the independent auditors KPMG Peat Marwick LLP. The independent auditors' report on the principal statements, internal controls, and compliance with certain laws and regulations accompanies the principal statements. Jam L. Hand Assistant Comptroller General for Operations Assistant Comptroller General for Planning and Reporting Chalet. Barker Comptroller General of the United States |