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 [ Background Music ] [ 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. [ Background Music ] [ Narrator: ] To learn more, visit gao.gov and be sure to tune in to the next episode of GAO's Watchdog Report for more from the Congressional Watchdog, the U.S. Government Accountability Office.