What it means
The GAO was created in 1921 under the name General Accounting Office, and was renamed the Government Accountability Office in 2004 to reflect its broader role. It belongs to the legislative branch, not the executive branch, which allows it to review the work of government departments without answering to them.
It is led by the Comptroller General of the United States, who serves a single fixed term of 15 years. Its work takes several forms.
It audits financial statements and programmes, investigates allegations of waste or fraud, evaluates whether policies are achieving their aims, and answers questions from members of Congress. The reports it publishes are public and often include specific recommendations to agencies, together with an estimate of the money that could be saved if they were followed.
The agency also keeps a list of areas that are especially vulnerable to waste, fraud, abuse or mismanagement, and updates it regularly. Because of this, its findings often shape debates about budgets and regulation.
Agencies are asked to report on whether they have acted on its recommendations, and the GAO tracks how many have been adopted and what savings resulted. For businesses, the GAO matters in two ways.
Companies that sell to the federal government can be affected by its audits of contracting and spending, and the GAO also decides bid protests, which are formal challenges by companies that believe a federal contract was awarded unfairly. Protests must generally be filed within strict time limits and are decided within a fixed statutory period.
Analysts, journalists and risk managers also use its reports as a source of detailed, independent information on the cost and performance of federal programmes. The reports are limited to the US federal government, but other countries have comparable national audit offices, and their publications can be just as useful to analysts.
When citing a figure, check the date of the report because programmes and spending change. For finance professionals, the GAO also provides a model of how independent review works.
Its audits are built on clear criteria, reliable evidence and a process in which the audited body can respond before publication. Organisations that set up their own internal audit functions often borrow the same approach.
In practice
Real-world examples.
Example
A defence contractor loses a $300,000,000 contract competition and believes the evaluation was flawed. Its lawyers file a bid protest with the GAO, and the agency reviews whether the procurement followed the rules.
Example
A journalist researching a large federal technology project reads a GAO report that found costs had risen 40% above the original budget, from $500,000,000 to $700,000,000. The article uses the report's figures to question whether the programme should continue, and lawmakers cite it in the next budget hearing.
Example
A risk manager at a company that supplies healthcare equipment to federal agencies reads the GAO's review of purchasing controls. She uses the findings to tighten her own invoicing and compliance procedures.
Case study
Seen in the real world.
Northfield Systems is an illustrative, fictional software company that bid for a federal contract to modernise a records system, worth $45,000,000 over five years. A competitor won, and Northfield's managers believed that the winning bid had not been properly evaluated.
On the advice of its lawyers, Northfield filed a protest with the GAO within the required time limit. The agency reviewed the paperwork and concluded that the evaluators had not followed the criteria set out in the solicitation, and recommended that the agency re-evaluate the bids.
After the re-evaluation, the contract was awarded again, and Northfield did not win, but the process became more transparent. The illustrative lesson is that the protest process can correct errors, and a company that wants to use it must be prepared to act quickly. Northfield spent about $120,000 on legal and consulting fees for the protest, a modest sum compared with the $45,000,000 contract at stake.
Watch out
Common mistakes.
- Confusing the GAO with an executive agency, when it is part of the legislative branch and independent of the departments it reviews.
- Assuming that GAO recommendations are legally binding, when agencies are asked to act on them but are not forced to.
- Missing the strict deadlines for filing a bid protest, which can mean losing the right to challenge a decision.
Questions
People also ask.
What does the GAO do?
It audits, investigates and evaluates federal programmes and spending, decides bid protests on federal contracts, and reports its findings to Congress and the public.
Who leads the GAO?
The Comptroller General of the United States, who is appointed for a single term of 15 years.
Has the GAO always had this name?
No, it was founded in 1921 as the General Accounting Office and was renamed in 2004 to reflect its wider role in judging whether programmes achieve results, and not only whether the accounts add up.
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