Updating Government Auditing Standards – The 2018 Yellow Book

Image of the U.S. GAO Yellow BookToday we issued a new revision of the Generally Accepted Government Auditing Standards, also known as the “Yellow Book,” which supersedes the 2011 revision of the standards.

What kind of training and experience make a competent auditor? How is audit quality control to be maintained? How can an auditor tell if he or she has come across material waste and abuse?

The Yellow Book has answers to these questions.

Government auditors are required to objectively evaluate government operations, gather sufficient, appropriate evidence, and report the result. To do this, auditors rely on these standards to provide a framework for conducting high-quality audits with competence, integrity, objectivity, and independence.

Today’s WatchBlog looks at the updates to the 2018 Yellow Book. Listen to our podcast, then read on for more.

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What’s new?

Some of the key changes to the Yellow Book include:

  • a new format that differentiates requirements from application guidance;
  • updated independence requirements for auditors who prepare the financial statements of an audited entity;
  • revised peer review requirements for audit organizations;
  • new guidance to address waste and abuse as defined under government auditing standards; and
  • updated internal control guidance for performance audits.

To ensure that the new standards meet the needs of government auditors, U.S. Comptroller General Gene Dodaro established an advisory council consisting of representatives from federal, state, and local governments, as well as the private sector and academia, to review the proposed changes.

The 2018 revision reflects the advisory council’s input, as well as feedback received during the public comment period on the 2017 exposure draft of the proposed revisions.

The 2018 Yellow Book is available on our website.


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Are Acquisition Reforms Leading to Better Outcomes at DOD?

Over the past two decades, we’ve issued annual “Quick Looks” at the Department of Defense’s largest and most expensive acquisition programs. Our work continued this year with a review of DOD’s 86 major weapons programs, which totaled more than $1.66 trillion.

Four Photos Showing Various DOD Weapons Programs

That’s a big portfolio—and a significant investment of taxpayer dollars. If you’ve been following our work here at GAO, you know that, historically, major acquisition programs at DOD have been affected by schedule delays, cost growth, and other inefficiencies. Reforms set into motion more than 8 years ago aimed to curtail many of these issues—and have succeeded to some degree. In this year’s Quick Look, we probed yet again at how these reforms are continuing to shape DOD’s successes, failures, and future.

Today’s WatchBlog dives into our 16th DOD Quick Look. Listen to our podcast, and then read on for more.

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Improved cost performance

DOD’s current portfolio is bigger and more expensive than it was last year. Despite this growth, newer programs—those initiated since the reforms we mentioned earlier—performed better cost-wise in 2017. Still, it is too early to say if this trend will continue. A lot depends on how these programs fare once they enter production when, as illustrated below, cost growth is most likely to spike.

Graphs Showing DOD's Portfolio Increased in Cost and Size; Most Cost Growth Occurred after Production Start

More competition, better cost estimates

Programs that strategically used competition this year, including competitive award of contracts, reported decreases in total acquisition cost estimates. These programs have implemented key reforms aimed at leveraging competition to promote a more affordable and efficient acquisition process. Of the programs that awarded development, test, or production contracts this year, 61 percent did so competitively.

Persistent knowledge gaps remain

As we’ve reported in prior years, DOD programs are still not fully implementing knowledge-based acquisition practices. These steps ensure technologies are mature, designs are stable, and production processes are in control, which help to reduce a program’s risk of cost growth, schedule overruns, and performance shortfalls. In fact, most of the 45 current programs that proceeded into system development, through critical design reviews, and into production this year did so without completing key knowledge-based practices. And only one of the 12 future programs gearing up to enter DOD’s portfolio plan to fully meet these practices when they start system development.

Table Showing DOD Programs Continue to Not Fully Implement Key Knowledge-Based Acquisition Practices

We’ll be sure to track how this lack of knowledge affects DOD’s programs in the years to come. However, as this year’s Quick Look indicates, DOD remains at risk of undesirable cost and schedule outcomes, despite all of the department’s positive strides.

So, the reforms are working for the time being. Though it is still too early to tell if the changes we saw this year will continue in the long run.


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All Together Now!

At GAO, we all live in a grey, rectangular building. But today, we’re feeling far out about the 50th anniversary of the release of Yellow Submarine, a full-length, animated psychedelic trip with the Beatles. In it, the Fab Four sings and sails through many seas to help save Pepperland from the Blue Meanies.

Okay, so we might not be as hip as that technicolor team, but we’re happy to use this cultural anniversary to take you on a magical tour of some of our recent work, which you might even find pretty groovy. All together now!

We All Live…

Image showing U.S. GAO's Yellow BookYou probably can’t help yourself from humming along to the tune of the title track. Here at GAO, we’re more likely singing, “We all live by the Yellow Book.” One of the most important tools an auditor needs is the Generally Accepted Government Auditing Standards—fondly dubbed the “Yellow Book” due to its cover’s color (and not to be confused with the “Green Book,” our Standards for Internal Control in the Federal Government).

What kind of training and experience is required for competent auditors? The Yellow Book offers guidance on this and many more questions regarding how government auditors objectively evaluate government operations.

Yellow Book standards provide a framework for conducting high-quality audits with competence, integrity, objectivity, and independence—all pretty happening concepts.

Yellow Submarine

And speaking of yellow, bright yellow submarines aren’t the stealthiest things in the sea. Columbia class submarines, on the other hand, are. Or at least that’s how they’re designed to be: stealthy and essential for maintaining a key U.S. nuclear capability. However, in a report published late last year, we found that several key technologies need to be further developed and tested before the $267 billion submarines will be ready to start production and dip beneath the “sky of blue and sea of green…in the land of submarines.”

Image Showing Columbia Class Submarine Critical Technologies

The Sea of Green…Infrastructure

Pepperland may not have had to deal with stormwater runoff all that often because it was underwater. But, many U.S. cities do. Runoff can be a major source of river pollution. While traditional stormwater remedies can be expensive for local communities, green infrastructure can be a less expensive option, using natural processes and materials (like green roofs) to slow stormwater so it can be absorbed and filtered by the soil. In 2016, EPA launched a pilot project to help communities develop long-term green infrastructure plans. To help EPA partner with communities,  we recommended that EPA document the agreements it develops with community stakeholders on how they will collaborate in developing these plans.

Image Showing How Green Infrastructure Allows Stormwater to Replenish Groundwater

Lucy in the Sky with Diamonds

It’s a bird…it’s Lucy in the Sky With Diamonds…no, it’s the F-35B aircraft, landing in Japan. In early 2017, the Marine Corps transferred F-35B aircraft to Iwakuni, Japan—representing the first overseas stationing of the F-35 since its development. We found the Marine Corps records F-35 aircraft operational lessons learned on its own service-specific website, but DOD does not formally share these lessons across the Marine Corps, the Air Force, and the Navy.

Photograph of an F-35B Aircraft

Check out our report for more on operational lessons learned from the transfer, such as supply chain challenges.

Figure 2: Examples of the Types of Challenges Reported with the F-35 Supply Chain in Japan

Baby You’re A Rich Man

Image Showing 100 Dollar BillsIn the film, the Beatles save the day, showing the Blue Meanies that we’re all rich when our lives are filled with music. But let’s be fair: money pays the bills, and those green paper rectangles don’t grow on trees or under the sea. The Bureau of Engraving and Printing produces U.S. currency at its facilities in Washington, D.C., and Fort Worth, Texas.

The Bureau wants to build a new production facility in the D.C. area, which it estimated would cost $1.4 billion. It also estimated that renovating the current facility instead would cost $2 billion. The new facility would have a secure perimeter, like the Fort Worth location, which is not possible at the current D.C. location.

We reviewed the Bureau’s planning and found it generally followed leading practices and included some sound cost estimating practices. However, the overall cost to the government is unknown, as the ability to sell or repurpose the old building would affect the overall cost of the Bureau’s actions.

When all you need is…information on how the federal government spends taxpayer dollars, we’d “Love You To” take your own trip—to our website, where you can spend “A Day In [your] Life” in the groove with facts and data.


  • Questions on the content of this post? Contact Chuck Young at youngc1@gao.gov.
  • Comments on GAO’s WatchBlog? Contact blog@gao.gov.

 

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Roads on Tribal Lands

Roads connect people to education, employment, health care, and other essential services. Roads are especially important on tribal lands because of the remote location of some tribes. But these roads are often unpaved and may not be well maintained, such as this muddy dirt road that is part of a school bus route.

Photograph of a Muddy Dirt Road That is Part of a School Bus Route

Today’s WatchBlog explores our report on road conditions on tribal lands and how this relates to students getting to school. Check out our video for a glimpse of what it’s like to ride a school bus on tribal lands, then read on for more.

Most BIA- and Tribe-Owned Roads Unpaved

School bus routes on tribal lands include paved and unpaved roads, and segments of those routes can be owned by many different entities, such as the state, county, tribe, and Bureau of Indian Affairs. According to BIA, the majority of roads owned by tribes or BIA are dirt.         

Even if we know the surface material, it is unclear how good or poor the roads are. We found that data on the condition of roads were incomplete, inconsistent, or outdated. We made several recommendations to improve data on roads.

Taking care of these roads can be challenging due to funding constraints, overlapping jurisdictions, and adverse weather—such as drought, heavy rain, high winds, and snow. The image below of school districts in Arizona on Navajo Nation shows the jurisdictions of who owns and who maintains roads for the schools, as well as where roads wash out in adverse weather. (To use the interactive features of the figure, download the pdf report of GAO-17-423 and go to p.25.)

GIF Showing GAO Analysis of Navajo Nation Division of Transportation and Coconino County, Arizona Data and MapInfo

A Barrier to School Attendance

Indian students in elementary and secondary school are absent more than non-Indian students, according to the Department of Education, and road conditions can be a barrier to attendance. When the school bus or the student cannot get to the bus stop due to road conditions, the student may miss part or all of the school day.

Infographic Showing School Bus on the Navajo Nation (Utah) and the National Rate of Students Chronically Absent, School Year 2013-14

Road conditions on tribal lands can also present various safety risks to students and transportation staff. Some roads may have few or no sidewalks, shoulders, or guardrails, among other features.

Figure Showing School Bus Route Traversing a Wooden Bridge on the Pine Ridge Reservation

Poor road conditions also contribute to the wear and tear on vehicles, increasing costs for vehicle maintenance and transportation.

Figure Showing Windshield and Side Mirror Bracket Repairs on a School Bus Serving Routes on Gravel Roads on the Rosebud Reservation

We found the Bureau of Indian Education’s schools generally do not collect data on transportation-related causes for absences, despite broader federal guidance that recommends doing so. BIE’s attendance system lists causes, but transportation-related causes are currently not among them. Thus, BIE lacks insight into the effect of road conditions and cannot target appropriate interventions. We recommended BIE provide guidance to schools to collect data on student absences related to these conditions.

Check out our report to learn more about tribal roads.


  • Questions on the content of this post? Contact Rebecca Shea at SheaR@gao.gov.
  • Comments on GAO’s WatchBlog? Contact blog@gao.gov.
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Climate Change Adaptation at U.S. Military Bases around the World

Pentagon ThumbnailThe vast global network of bases used by the U.S. military faces significant risks from the weather effects associated with climate change. DOD has made efforts to adapt its overseas bases to these effects, but does it have the information and plans it needs?

Today’s WatchBlog explores our report on DOD’s efforts to adapt its overseas bases to the weather effects associated with climate change.

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The Nation’s Precarious Fiscal Future

Photograph Showing $100 BillsThe United States faces a highly challenging fiscal future. Absent change in policy, the federal fiscal path is unsustainable—debt is growing faster than the economy (GDP). This springs from the continuing gap between the amount of money the federal government collects in revenue, and the amount it spends—i.e., the federal deficit.

Today we issued an update on the fiscal condition of the U.S. government as of the end of FY 2017—and its likely fiscal future if policies don’t change.

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Lead Paint in Housing

Example of a Home with Peeling Lead PaintWas your home built before 1978? If so, there’s a chance that it contains some lead paint.

The Department of Housing and Urban Development estimates that roughly 35 percent of U.S. homes contain some lead-based paint.

So, what does this mean for you—and for your kids?

For National Healthy Homes Month, today’s WatchBlog explores our new report on lead paint in housing.

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Diversifying the Pipeline of STEM Talent

Education Thumbnail imageEducation programs in science, technology, engineering, and mathematics (STEM) play an important role in preparing students for careers in STEM fields. Over the last decade, the federal government has taken important steps toward diversifying the pipeline of STEM talent in the United States, primarily by supporting STEM education opportunities for historically underrepresented groups in these fields. In 2016, the federal government spent $2.9 billion on 163 STEM education programs across all grade levels—from preschool to graduate school.

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After Showing Improvement, Trends for NASA’s Major Projects Slip Back

Image of earth and the moonEvery year, we look at NASA’s major projects to see how well they’re making progress against their cost and schedule goals—which we call our “Quick Look” review.

This year, these projects included a satellite that will study polar ice sheets, a lander that will collect data on Mars’s crust, and a project planning to demonstrate that sonic booms can be lowered to levels acceptable for commercial use of supersonic flight. All of these projects have life-cycle costs estimated to be at least $250 million.

Today’s WatchBlog explores our 10th annual Quick Look at the status of NASA’s major projects.

Listen to our podcast, then read on for more.

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Understanding Derivatives One Swap at a Time

Did you ever agree to swap your PB&J sandwich for your friend’s bologna sandwich? If so, you did a nonfinancial swap.

Since the 1980s, bankers have applied that basic concept to create financial contracts to swap a wide range of stuff—from interest rates to commodities to credit risk—you name it.
Commercial firms use swaps to manage risk. For example, airline companies use swaps to lock in their fuel prices to protect their profits against rises in fuel prices.

Swaps and other over-the-counter financial contracts whose value is derived from something else (called derivatives) have ballooned into a multitrillion-dollar market worldwide.

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