This is the accessible text file for CG Presentation number GAO-07-
1192CG entitled 'Keeping America Great: The Role of the Accountability 
Profession' which was released on August 14, 2007. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov.

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States Government Accountability Office: 
GAO: 

Keeping America Great: 
The Role of the Accountability Profession: 

The Honorable David M. Walker: 
Comptroller General of the United 
States:  

The National Association of State Auditors, Comptrollers, and 
Treasurers: 
Nashville, TN: 

GAO-07-1192CG: 

The Case for Change: 

The federal government is on a “burning platform,” and the status quo 
way of doing business is unacceptable for a variety of reasons, 
including: 

* Past fiscal trends and significant long-range challenges; 

* Selected trends and challenges having no boundaries; 

* Additional resource demands due to Iraq, Afghanistan, incremental 
homeland security needs, and recent natural disasters in the United 
States; 

* Numerous government performance/accountability and high risk 
challenges; 

* Outdated federal organizational structures, policies, and practices; 

* Rising public expectations for demonstrable results and enhanced 
responsiveness. 

Composition of Federal Spending:  

[See PDF for image] - graphic text: 

There are three pie charts, containing the following compositions of 
spending by category: 

Year: 1966;
Defense: 43%;
Social Security: 15%; 
Medicare and Medicaid: 1%; 
Net Interest: 7%; 
All Other: 34%. 

Year: 1986;
Defense: 28%;
Social Security: 20%; 
Medicare and Medicaid: 10%; 
Net Interest: 14%; 
All Other: 29%. 

Year: 2006;
Defense: 20%;
Social Security: 21%; 
Medicare and Medicaid: 19%; 
Net Interest: 9%; 
All Other: 32%. 

Source: Office of Management and Budget and the Department of the 
Treasury. 

Note: Numbers may not add to 100 percent due to rounding. 

[End of figure] 

Federal Spending for Mandatory and Discretionary Programs: 

[See PDF for image] - graphic text: 

There are three pie charts, containing the following compositions of 
spending by category: 

Year: 1966;
Discretionary: 67%; 
Mandatory: 26%; 
Net Interest: 7%.  

Year: 1986;
Discretionary: 44%; 
Mandatory: 42%; 
Net Interest: 14%.  

Year: 2006;
Discretionary: 38%; 
Mandatory: 53%; 
Net Interest: 9%.  

Source: Office of Management and Budget.  

[End of figure]  

Figure: Surplus or Deficit as a Sharpe of GDP Fiscal Years 1962-2006: 

[See PDF for image] - graphic text: 

This is a bar graph depicting on-budget, off-budget, and unified 
surplus or deficit spending as a share of GDP. The vertical axis 
depicts percent of GDP from -7 to +3. The horizontal axis depicts 
fiscal years 1962 through 2006.

Source: Office of Management and Budget, Department of the Treasury and 
the Congressional Budget Office. 

[End of figure] 

Table: Fiscal Year 2005 and 2006 Deficits and Net Operating Costs:  

On-Budget Deficit, Fiscal Year 2005 ($ Billion): (494); 
On-Budget Deficit, Fiscal Year 2006 ($ Billion): (434); 

Unified Deficit[a], Fiscal Year 2005 ($ Billion): (318); 
Unified Deficit[a], Fiscal Year 2006 ($ Billion): (248); 

Net Operating Cost[b], Fiscal Year 2005 ($ Billion): (760); 
Net Operating Cost[b], Fiscal Year 2006 ($ Billion): (450);  

Sources: Office of Management and Budget and Department of the 
Treasury.  

[a] Includes $173 billion in Social Security surpluses for fiscal year 
2005 and $185 billion for fiscal year 2006; $2 billion in Postal 
Service surpluses for fiscal year 2005 and $1 billion for fiscal year 
2006.  

[b] Fiscal year 2005 and 2006 net operating cost figures reflect 
significant but opposite changes in certain actuarial costs. For 
example, changes in interest rates and other assumptions used to 
estimate future veterans’ compensation benefits increased net operating 
cost by $228 billion in 2005 and reduced net operating cost by $167 
billion in 2006. Therefore, the net operating costs for fiscal years 
2005 and 2006, exclusive of the effect of these actuarial cost 
fluctuations, were ($532) billion and ($617) billion, respectively.  

[End of table]  

Table: Major Fiscal Exposures ($ trillions): 

Explicit liabilities (Publicly held debt, Military & civilian pensions 
& retiree health, Other): 
2000: $6.9; 
2006: $10.4; 
Percent increase: 52. 

Commitments & contingencies (e.g., PBGC, undelivered orders): 
2000: 0.5; 
2006: 1.3
Percent increase: 140.  

Implicit exposures, 2000: 13.0; 
Implicit exposures, 2006: 38.8; 
Implicit exposures, Percent increase: 197; 
Future Social Security benefits, 2000: 3.8; 
Future Social Security benefits, 2006: 6.4; 
Future Social Security benefits, Percent increase: [Empty]; 
Future Medicare Part A benefits, 2000: 2.7; 
Future Medicare Part A benefits, 2006: 11.3; 
Future Medicare Part A benefits, Percent increase: [Empty]; 
Future Medicare Part B benefits, 2000: 6.5; 
Future Medicare Part B benefits, 2006: 13.1; 
Future Medicare Part B benefits, Percent increase: [Empty]; 
Future Medicare Part D benefits, 2000: 0; 
Future Medicare Part D benefits, 2006: 7.9; 
Future Medicare Part D benefits, Percent increase: [Empty]; 
Total, 2000: $20.4; 
Total, 2006: $50.5; 
Percent increase: 147.  

Source: 2000 and 2006 Financial Report of the United States 
Government.  

Note: Totals and percent increases may not add due to rounding. 
Estimates for Social Security and Medicare are at present value as of 
January 1 of each year and all other data are as of September 30.  

[End of table] 

Table: Understanding the Size of Major Reported Fiscal Exposures:  

Our fiscal burden can be translated and compared as follows (for year 
2006):  

Major reported fiscal exposures: $50.5 trillion; 
Total household net worth: $53.3 trillion; 
Ratio of fiscal exposures to worth ratio: 95 percent. 

Burden: 
Per person: $170,000; 
Per full-time worker: $400,000; 
Per household: $440,000. 

Income: 
Median household income: $46,326; 
Disposable personal income per capita[4]: $31,519.  

Sources: GAO analysis of data from the Department of the Treasury, 
Federal Reserve Board, U.S. Census Bureau and Bureau of Economic 
Analysis. 

[End of table]  

Potential Fiscal Outcomes Under Baseline Extended (January 2001); 
Revenues and Composition of Spending as a Share of GDP.  

[See PDF for image] - graphic text. 

This is a line/stacked bar graph with one line (revenue) and four 
stacked bars containing four spending items (Net interest, Social 
Security, Medicare and Medicaid, and All other spending). The vertical 
axis represents Percent of GDP and the horizontal axis represents 
fiscal years 2005, 2015[a], 2030[a], and 2040[a]. 

Source: GAO’s January 2001 analysis.  

[a] All other spending is net of offsetting interest receipts.  

[End of graph]  

Potential Fiscal Outcomes Under Alternative Simulation; Revenues and 
Composition of Spending as a Share of GDP.  

[See PDF for image] - graphic text. 

This is a line/stacked bar graph with one line (revenue) and four 
stacked bars containing four spending items (Net interest, Social 
Security, Medicare and Medicaid, and All other spending). The vertical 
axis represents Percent of GDP and the horizontal axis represents 
fiscal years 2006, 2015, 2030, and 2040.  

Source: GAO’s August 2007 analysis.  

Notes: AMT exemption amount is retained at the 2006 level through 2017 
and expiring tax provisions are extended. After 2017, revenue as a 
share of GDP returns to its historical level of 18.3 percent of GDP 
plus expected revenues from deferred taxes, i.e. taxes on withdrawals 
from retirement accounts. Medicare spending is based on the Trustees 
April 2007 projections adjusted for the Centers for Medicare and 
Medicaid Services alternative assumption that physician payments are 
not reduced as specified under current law. 

[End of graph] 

State and Local Governments Face Increasing Fiscal Challenges: 

[See PDF for image] - graphic text. 

This is a line graph with two lines (Operating Surplus/Deficit Measure 
and Net-lending/Net-borrowing). The vertical axis represents Percent of 
GDP from -6 to +2 and the horizontal axis represents fiscal years 1980 
through 2050. 

Sources: Historical data from National Income and Product Accounts. 
Historical data from 1980–2006, GAO projections from 2007–2050 using 
many CBO projections and assumptions, particularly for next 10 years. 

[End of graph] 

State and Local Fiscal Challenges Add to the Federal Government’s 
Fiscal Challenge: 

[See PDF for image] - graphic text. 

This is a line graph with two lines (Federal Surplus/Deficit and 
Combined Surplus/Deficit). The vertical axis represents Percent of GDP 
from -20 to +5 and the horizontal axis represents fiscal years 2000 
through 2050. 

Source: Historical data from National Income and Product Accounts, GAO 
Analysis. 

Note: Historical data from 2000–2006, projections from 2007–2050; state 
and local balance measure is similar to the federal unified budget 
measure. Federal Simulation Assumptions: Discretionary spending grows 
with GDP after 2007. AMT exemption amount is retained at the 2006 level 
through 2017 and expiring tax provisions are extended. After 2017, 
revenue as a share of GDP returns to its historical level of 18.3 
percent of GDP plus expected revenues from deferred taxes, i.e. taxes 
on withdrawals from retirement accounts. Medicare spending is based on 
the Trustees’ April 2007 projections adjusted for the Centers for 
Medicare and Medicaid Services’ alternative assumption that physician 
payments are not reduced as specified under current law. 

[End of graph] 

Social Security, Medicare, and Medicaid Spending as a Percent of GDP:  

[See PDF for image] - graphic text.  

This is a line graph with three stacked lines (Social Security, 
Medicaid, and Medicare). The vertical axis represents Percent of GDP 
and the horizontal axis represents fiscal years 2000 through 2080.  

Source: GAO analysis based on data from the Office of the Chief 
Actuary, Social Security Administration, Office of the Actuary, Centers 
for Medicare and Medicaid Services, and the Congressional Budget 
Office.  

Notes: Social Security and Medicare projections based on the 
intermediate assumptions of the 2006 Trustees’ Reports. Medicaid 
projections based on CBO’s August 2006 short-term Medicaid estimates 
and CBO’s December 2005 long-term Medicaid projections under mid-range 
assumptions.  

[End of graph] 

Federal Tax Expenditures Exceeded Discretionary Spending for Half of 
the Last Decade:  

[See PDF for image] - graphic text.  

This is a line graph with three lines (Mandatory spending; Sum of tax 
expenditure revenue loss estimates; and Discretionary spending). The 
vertical axis represents Dollars in billions (in real 2005 dollars) and 
the horizontal axis represents fiscal years 1982 through 2005.  

Source: GAO analysis of OMB budget reports on tax expenditures, fiscal 
years 1976-2007.  

Note: Summing tax expenditure estimates does not take into account 
interactions between individual provisions. Outlays associated with 
refundable tax credits are included in mandatory spending. 

[End of graph] 

Current Fiscal Policy Is Unsustainable:  

The “Status Quo”is Not an Option: 
* We face large and growing structural deficits largely due to known 
demographic trends and rising health care costs. 
*  GAO’s simulations show that balancing the budget in 2040 could 
require actions as large as: 
- Cutting total federal spending by 60 percent or; 
- Raising federal taxes to 2 times today's level. 

Faster Economic Growth Can Help, but It Cannot Solve the Problem: 
* Closing the current long-term fiscal gap based on reasonable 
assumptions would require real average annual economic growth in the 
double digit range every year for the next 75 years. 
* During the 1990s, the economy grew at an average 3.2 percent per 
year. 
* As a result, we cannot simply grow our way out of this problem. Tough 
choices will be required.  

The Way Forward: A Three-Pronged Approach: 

1. Improve Financial Reporting, Public Education, and Performance 
Metrics. 
2. Strengthen Budget and Legislative Processes and Controls. 
3. Fundamentally Reexamine & Transform for the 21st Century (i.e., 
entitlement programs, other spending, and tax policy).  

Solutions Require Active Involvement from both the Executive and 
Legislative Branches.  

The Way Forward: Improve Financial Reporting, Public Education, and 
Performance Metrics: 

Improve transparency & completeness of President’s budget proposal: 
- Return to 10-year estimates in budget both for current policies and 
programs and for policy proposals; 
- Include in the budget estimates of long-term cost of policy proposals 
and impact on total fiscal exposures; 
- Improve transparency of tax expenditures; 
* Consider requiring President’s budget to specify & explain a fiscal 
goal and a path to that goal within 10-year window—or justify an 
alternative deadline; 
* Require annual OMB report on existing fiscal exposures [liabilities, 
obligations, explicit & implied commitments]; 
* Require enhanced financial statement presentation and preparation of 
summary annual report that is both useful and used; 
* Increase information on long-range fiscal sustainability issues in 
Congressional Budget Resolution & Budget Process; 
* Develop key national (outcome-based) indicators (e.g. economic, 
security, social, environmental) to chart the nation’s posture, 
progress, and position relative to the other major industrial 
countries. 

The Way Forward: Strengthen Budget and Legislative Processes and 
Controls: 

* Restore discretionary spending caps & PAYGO rules on both spending 
and tax sides of the ledger; 
* Develop mandatory spending triggers [with specific defaults], and 
other action-forcing provisions (e.g., sunsets) for both direct 
spending programs and tax preferences; 
* Develop, impose & enforce modified rules for selected items (e.g., 
earmarks, emergency designations, and use of supplementals); 
* Require long-term cost estimates (e.g. present value) for any 
legislative debate on all major tax and spending bills, including 
entitlement programs. Cost estimates should usually assume no sunset; 
* Extend accrual budgeting to insurance & federal employee pensions; 
develop techniques for extending to retiree health & environmental 
liabilities; 
* Consider biennial budgeting; 
* Consider expedited line item rescissions from the President that 
would only require a majority vote to override the proposed 
rescission(s). 

The Way Forward: Fundamentally Reexamine & Transform: 

* Restructure existing entitlement programs; 
* Reexamine and restructure the base of all other spending; 
* Review & revise existing tax policy, including tax preferences and 
enforcement programs; 
* Expand scrutiny of all proposed new programs, policies, or 
activities; 
* Reengineer internal agency structures and processes, including more 
emphasis on long-term planning, integrating federal activities, and 
partnering with others both domestically and internationally; 
* Strengthen and systematize Congressional oversight processes; 
* Increase transparency associated with government contracts and other 
selected items; 
* Consider a capable, credible, bi-partisan budget, entitlement, and 
tax reform commission. 

Key National Indicators:  

* What: A portfolio of economic, social, and environmental outcome- 
based measures that could be used to help assess the nation’s and other 
governmental jurisdictions’ position and progress; 
* Who: Many countries and several states, regions, and localities have 
already undertaken related initiatives (e.g., Australia, New Zealand, 
Canada, United Kingdom, Oregon, Silicon Valley (California) and 
Boston); 
* Why: Development of such a portfolio of indicators could have a 
number of possible benefits, including; 
- Serving as a framework for related strategic planning efforts; 
- Enhancing performance and accountability reporting; 
- Informing public policy decisions, including much needed baseline 
reviews of existing government policies, programs, functions, and 
activities; 
- Facilitating public education and debate as well as an informed 
electorate; 
* Way Forward: Consortium of key players housed by the National 
Academies domestically and related efforts by the OECD and others 
internationally.  

Key National Indicators: Where the United States Ranks: 

The United States may be the only superpower, but compared to most 
other OECD countries on selected key economic, social, and 
environmental indicators, on average, the U.S. ranks 16 out of 28. 

OECD Categories for Key Indicators (2006 OECD Factbook): 

* Population/Migration;
* Energy;
* Environment;
* Labor Market;
* Education;
* Public Finance;
* Science & Tech.;
* Quality of Life;
* Macroeconomic Trends;
* Economic Globalization
* Prices.  

Source: 2006 OECD Factbook. 

21st Century Challenges Report: 

* Provides background, framework, and questions to assist in 
reexamining the base; 

* Covers entitlements & other mandatory spending, discretionary 
spending, and tax policies and programs; 

* Based on GAO’s work for the Congress. 

Source: GAO. 

Twelve Reexamination Areas: 

Mission Areas: 

* Defense; 
* Education & Employment; 
* Financial Regulation & Housing; 
* Health Care; 
* Homeland Security; 
* International Affairs; 
* Natural Resources, Energy & Environment; 
* Retirement & Disability; 
* Science & Technology; 
* Transportation. 

Crosscutting Areas: 

* Improving Governance; 
* Reexamining the Tax System. 

Generic Reexamination Criteria and Sample Questions: 

Relevance of purpose and the federal role: 
* Why did the federal government initiate this program and what was the 
government trying to accomplish? 
* Have there been significant changes in the country or the world that 
relate to the reason for initiating it? 

Measuring success: 
* Are there outcome-based measures? If not, why? 
* If there are outcome-based measures, how successful is it based on 
these measures? 

Targeting benefits: 
* Is it well targeted to those with the greatest needs and the least 
capacity to meet those needs? 

Affordability and cost effectiveness: 
* Is it using the most cost-effective or net beneficial approaches when 
compared to other tools and program designs? 

Best practices: 
* Is the responsible entity employing prevailing best practices to 
discharge its responsibilities and achieve its mission? 

Selected Sustainability Challenges: 

* Fiscal Deficits and Debt Burdens; 

* Health Care Quality, Access, and Costs; 

* Defense, Including Iraq, and Homeland Security Strategies; 

* Social Insurance Commitments; 

* Tax Gaps and Policies; 

* Energy, Environment, and Resource Protection; 

* Immigration Policies.  

Social Security and Medicare’s Hospital Insurance Trust Funds Face Cash 
Deficits: 

[See PDF for image] - graphic text. 

This is a bar graph with vertical bars representing the Medicare HI 
Cash Flow and Social Security Cash Flow for each fiscal year. The bars 
indicate a Medicare HI cash deficit beginning in 2007 and a Social 
Security cash deficit in 2017. The vertical axis of the graph depicts 
billions of 2007 dollars from -900 to +200. The horizontal axis depicts 
fiscal years from 2005 through 2040. 

Source: GAO analysis of data from the Office of the Chief Actuary, 
Social Security Administration and Office of the Actuary, Centers for 
Medicare and Medicaid Services. 

Note: Projections based on the intermediate assumptions of the 2007 
Trustees’ Reports. The CPI is used to adjust from current to constant 
dollars. 

[End of graph] 

Key Dates Highlight Long Term Challenges of the Social Security System: 

OASI:
Date: 2009;
Event: Cash surplus begins to decline;
Date: 2018;
Event: Annual benefit costs exceed cash revenue from taxes; 
Date: 2028; 
Event: Trust fund ceases to grow because even taxes plus interest fall 
short of benefits; 
Date: 2042; 
Event: Trust fund exhausted. 

DI:
Date: 2005;
Event: Annual benefit costs exceed cash revenue from taxes; 
Date: 2013; 
Event: Trust fund ceases to grow because even taxes plus interest fall 
short of benefits; 
Date: 2026; 
Event: Trust fund exhausted. 

OASDI:
Date: 2009;
Event: Cash surplus begins to decline;
Date: 2017;
Event: Annual benefit costs exceed cash revenue from taxes; 
Date: 2027; 
Event: Trust fund ceases to grow because even taxes plus interest fall 
short of benefits; 
Date: 2041; 
Event: Trust fund exhausted. 

Source: Social Security Administration, The 2007 Annual Report of the 
Board of Trustees of the Federal Old-Age and Survivors Insurance and 
Disability Insurance Trust Funds(Washington, DC: April 2007). 

[End of table] 

GAO Criteria for Evaluating Social Security Reform Proposals: 

Reform proposals should be evaluated as packages that strike a balance 
among individual reform elements and important interactive effects. 

Comprehensive proposals can be evaluated against three basic criteria: 
* Financing sustainable solvency; 
* Balancing adequacy and equity in the benefits structure; 
* Implementing and administering reforms. 

Possible Way Forward on Social Security Reform: 

Make little or no changes to those who are near retirement or already 
retired and make a number of adjustments that would affect younger 
workers: 

* Phase-in an increase in the normal retirement age and index it to 
life expectancy; 
* Consider phasing-in an increase in the early retirement age and index 
it to life expectancy with a modified disability access provision; 
* Modify income replacement and/or indexing formulas for middle and 
upper income earners; 
* Strengthen the minimum benefit; 
* Consider a modest adjustment to the COLA formula; 
* Increase the taxable wage base, if necessary; 
* Consider supplemental individual accounts and mandatory individual 
savings on a payroll deduction basis (e.g., a minimum 2 percent payroll 
contribution and a program designed much like the Federal Thrift 
Savings Plan with a real trust fund and real investments). 

Growth in Health Care Spending: Health Care Spending as a Percentage of 
GDP: 

[See PDF for image] - graphic text.

This is a bar graph of the percent of health care spending as a 
percentage of GDP with the vertical axis representing percent from 0 to 
25 and the horizontal axis representing years 1975, 1985, 1995, 2005, 
and 2015. 

Year: 1975;
Health care spending: 8.1. 

Year: 1985;
Health care spending: 10.4. 
 
Year: 1995;
Health care spending: 13.7. 

Year: 2005;
Health care spending: 16.0. 

Year: 2015;
Health care spending: 19.2. 

Source: The Centers for Medicare & Medicaid Services, Office of the 
Actuary. 

Note: The figure for 2015 is projected. 

[End of graph] 

Growth in Health Care Spending: Health Care Spending as a Percentage of 
GDP: 
Cumulative Growth in Real Health Care Spending Per Capita and Real GDP 
Per Capita, 1960-2005:

[See PDF for image] - graphic text.

This is a line graph with two lines (Real health care spending per 
capita and Real GDP per capita) with the vertical axis representing 
percentage from 0 to 800 and the horizontal axis representing years 
1960 through 2005. The Real health care spending per capita line 
indicates an average annual growth rate of 4.9%, and the Real GDP per 
capita line indicates an annual growth rate of 2.3%. 

Source: GAO analysis of data from the Centers for Medicare & Medicaid 
Services, Office of the Actuary, and the Bureau of Economic Analysis. 

Note: The most current data available on health care spending per 
capita are for 2005. 

[End of graph] 

Key Dates Highlight Long Term Challenges of the Medicare Program: 

Date: 2007; 
Event: Medicare Part A outlays exceed cash income. 

Date: 2007; 
Event: Estimated trigger date for “Medicare funding warning.”

Date: 2013; 
Event: Projected date that annual “general revenue funding” for Part B 
will exceed 45 percent of total Medicare outlays. 

Date: 2019; 
Part A trust fund exhausted, annual income sufficient to pay about 80% 
of promised Part A benefits. 

Source: 2007 Annual Report of The Boards of Trustees of The Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds(Washington, DC, April 2007). 

[End of table]

Issues to Consider in Examining Our Health Care System: 

* The public needs to be educated about the differences between wants, 
needs, affordability, and sustainability at both the individual and 
aggregate level. 

* Ideally, health care reform proposals will: 
- Align Incentives for providers and consumers to make prudent 
decisions about the use of medical services; 
- Foster Transparency with respect to the value and costs of care, and; 
- Ensure Accountability from insurers and providers to meet standards 
for appropriate use and quality; 

* Ultimately, we need to address four key dimensions: access, cost, 
quality,and personal responsibility. 

Selected Potential Health Care Reform Approaches:  

Reform Approach: Revise the government’s payment systems and leverage 
its purchasing authority to foster value-based purchasing for health 
care products and services; 
Short-term action: [check]; 
Long-term action: [empty]. 

Reform Approach: Consider additional flexibility for states to serve as 
models for possible health care reforms; 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Consider limiting direct advertising and allowing 
limited importation of prescription drugs; 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Foster more transparency in connection with health 
care costs and outcomes; 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Create incentives that encourage physicians to utilize 
prescription drugs and other health care products and services 
economically and efficiently. 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Foster the use of information technology to increase 
consistency, transparency, and accountability in health care; 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Encourage case management approaches for people with 
chronic and expensive conditions to improve the quality and efficiency 
of care delivered and avoid inappropriate care. 
Short-term action: [check]; 
Long-term action: [empty].  

Reform Approach: Reexamine the design and operational structure of the 
nation’s health care entitlement programs—Medicare and Medicaid, 
including exploring more income-related approaches; 
Short-term action: [check]; 
Long-term action: [check]. 

Reform Approach: Revise certain federal tax preferences for health care 
to encourage more efficient use of health care products and services; 
Short-term action: [check]; 
Long-term action: [check]. 

Reform Approach: Foster more preventative care and wellness services 
and capabilities, including fighting obesity and encouraging better 
nutrition; 
Short-term action: [check]; 
Long-term action: [check]. 

Reform Approach: Promote more personal responsibility in connection 
with health care; 
Short-term action: [check]; 
Long-term action: [check]. 

Reform Approach: Limit spending growth for government-sponsored health 
care programs (e.g., percentage of the budget and/or economy); 
Short-term action: [empty]; 
Long-term action: [check]. 

Reform Approach: Develop a core set of basic and essential services. 
Create insurance pools for alternative levels of coverage, as 
necessary; 
Short-term action: [empty]; 
Long-term action: [check]. 

Reform Approach: Develop a set of evidence-based national practice 
standards to help avoid unnecessary care, improve outcomes, and reduce 
litigation; 
Short-term action: [empty]; 
Long-term action: [check]. 

Reform Approach: Pursue multinational approaches to investing in health 
care R&D; 
Short-term action: [empty]; 
Long-term action: [check]. 

[End of table] 

Accountability Risks in the Federal Government: 

In the U.S., government accountability professionals face many 
challenges: 

* A number of “high-risk areas” and “major management challenges”; 

* Current trends and challenges that have no boundaries; 

* A range of fiscal and other sustainability challenges that grow over 
time; 

* The failure to link resources and authorities to results (outcomes); 

* Rising expectations for demonstrable results and enhanced 
responsiveness; 

* A number of outdated federal policies, programs, structures, and 
activities. 

Our challenge is huge and growing bigger each year. 

The Need for Good Governance, Transparency, and Accountability: 

Good governance, transparency, and accountability are critical in: 

* The private sector, to promote efficiency and effectiveness in the 
capital and credit markets, and overall economic growth, both 
domestically and internationally; 

* The public sector, for the effective and credible functioning of a 
healthy democracy, and in fulfilling the government’s responsibility to 
citizens and taxpayers; 

* The independent (not-for-profit) sector, to promote the proper use of 
resources consistent with the organization’s mission and applicable 
laws and to maintain the trust and confidence of contributors; 

* All sectors, to support a healthy economy that provides economic 
opportunities and benefits to citizens. 

Sorting out the needs—as well as the effective and appropriate 
governance and accountability mechanisms for different sectors and 
types of organizations—will be essential, both on a domestic and 
international scale. 

Financial Reporting: Improving Transparency of Long-term Costs Before 
Decisions Are Made: 

* Require supplemental reporting in the President’s annual budget 
submission(e.g., require the President to annually present a Fiscal 
Exposures Statement covering at least 40 years); 

* Require additional executive branch reports(e.g., require the annual 
publication of key financial and performance information and a periodic 
report on long-range fiscal sustainability); 

* Require CBO and JCT to provide additional cost information on major 
spending and tax proposals before adoption; 

* Require GAO to publish an annual report that would include, among 
things: comments on whether the President and CBO/JCT met the new 
reporting requirements specified above; 

* Consider changing the budget treatment in certain areas(e.g., 
expanding use of accrual budgeting); 

* Consider creating budget concepts and reform commission to address 
issues such as PAYGO, budget caps and triggers, the use of 
supplementals, and other matters (e.g., earmarks). 

Social Insurance Reporting: 

Social Insurance programs include: 

* Social Security; 
* Medicare; 
* Railroad Retirement; 
* Black Lung; 
* Unemployment Insurance. 

Proposed Changes in Social Insurance Reporting: 

* FASAB recently issued a preliminary views (PV) document requesting 
public comment on proposals to change social insurance reporting; 

* The PV contains two views for improving social insurance reporting: 
- Primary View; 
- Alternative View; 

* Two years away from a resolution; 

* This is a very important matter. 

Objectives of Social Insurance Reporting: 

All current FASAB members agree that: 

* It is important to provide useful financial information about the 
sustainability of social insurance programs; 

* Social insurance program information should be audited and 
transparent; 

* The Consolidated Financial Report of the United States Government 
should present this information and highlight any long-range fiscal 
imbalances anticipated in these programs. 

Both Views Share Certain Features: 

* Recognize a liability for social insurance benefits (but the two 
views differ significantly on how it should be calculated); 

* Present three key pieces of information:
- A statement of social insurance (SOSI) showing the present values of 
projected future program revenues and scheduled benefits (SOSI is 
currently required); 
- Changes in the present values during the reporting period, and; 

* Other sustainability disclosures (currently required). 

Table: Guiding Principles in Selecting a Proposal: 

Guiding Principle: Recognize the difference between exchange and non-
exchange transactions; 
Alternative View: Yes;
Primary View: No. 

Guiding Principle: Avoid recognizing a liability for scheduled benefits 
that are uncertain, unsustainable, and not legally binding; 
Alternative View: Yes;
Primary View: No. 

Guiding Principle: Recognize only costs for services provided in the 
current year. Future program costs (e.g., social insurance, defense) 
are not recognized; 
Alternative View: Yes;
Primary View: No. 

Guiding Principle: Recognize a liability for earmarked revenue (payroll 
taxes) not yet used to pay benefits;  
Alternative View: Yes;
Primary View: No. 

Guiding Principle: Report on affordability of social insurance and 
other federal programs and annual changes therein (match long-term 
costs and revenues);
Alternative View: Yes;
Primary View: No. 

Guiding Principle: Present information on intergenerational equity for 
social insurance and other federal programs; 
Alternative View: Yes;
Primary View: No. 

[End of table] 

What Needs To Happen? 

* The public needs to be informed about the fiscal imbalance faced by 
our federal government; 
- Improved financial reporting; 
- Summary annual report; 
- Discussion forums; 
- Improved financial literacy; 
* What you can do: 
- Get informed and involved; 
- Communicate with key opinion leaders and your elected officials; 
- Comment on your preferred accounting and reporting option to FASAB; 
- Revisit your personal financial planning; 
* We’re already ahead on social insurance accountability reporting–and 
we want to stay there –but how we go about this matters. 

Illustrative Examples of GAO’s Work to Modernize the Accountability 
Profession: 

* Leading strategic planning and coordination efforts with major 
accountability organizations around the world (e.g., INTOSAI, GWG) and 
domestically (e.g., NIAF and DWG) that include oversight, insight, and 
foresight dimensions; 

* Enhancing federal financial reporting (e.g., social insurance, 
restricted revenues, fiscal sustainability, generational equity, and 
performance) and pursuing publication of a summary annual report; 

* Promoting the modernization of the accounting/reporting models (e.g., 
IFAC, FASB, GASB, FASAB) and other assurance models (e.g., IAASB);  

* Creating the U.S Auditing Standards Coordinating Forum (i.e., GAO, 
PCAOB, ASB), which among other efforts, develops strategies for 
overcoming challenges and barriers to modernizing the auditing 
profession in the U.S.;  
* Monitoring implementation of the Sarbanes-Oxley Act and considering 
whether reform elements similar to those in Sarbanes-Oxley make sense 
for the federal government; 

* Modernizing Generally Accepted Government Auditing Standards (Yellow 
Book); 

* Pursuing the design and adoption of key national indicators. 

The Future Accounting/Reporting and Audit Reporting Model: 

We need to review and revise the existing accounting/reporting model to 
reflect several dimensions: 

* Generic provisions; 
* Industry information; 
* Entity-specific information (i.e., value and risk). 

We need to recognize the difference between certain types of financial 
and other information: 

* Historical cost; 
* Readily marketable assets; 
* Non-readily marketable assets; 
* Projection information; 
* Performance information. 

The Future Accounting/Reporting and Audit Reporting Model: 

We need to review and revise the existing audit reporting model to 
accomplish at least four objectives: 

* Recognize that the opinion should address whether the financial 
statements are fairly presented in all material respects and prepared 
in accordance with authoritative accounting principles (e.g., 
promulgated by FASB, GASB, FASAB, IFAC); 

* Expand the auditor’s report to include key value and risk-based 
performance and projection information over time and as appropriate; 

* Update the audit reporting model to link it with the new financial 
reporting model, and provide appropriate degrees of assurance for each 
type of information to improve value and reduce risk; 
* We need to move beyond “going concern opinions” to provide more 
timely and meaningful information to the users of financial statements 
in appropriate circumstances (e.g. US government). 

We need to ultimately go global in connection with all major accounting 
and audit matters. 

We need to coordinate domestic efforts in the interim (e.g., U.S. 
Auditing Standards Coordinating forum). 

Moving the Debate Forward: 

* The Sooner We Get Started, the Better; 
- The miracle of compounding is currently working against us; 
- Less change would be needed, and there would be more time to make 
adjustments; 
* Our demographic changes will serve to make reform more difficult over 
time; 
* Need Public Education, Discussion, and Debate; 
- The role of government in the 21st Century; 
- Which programs and policies should be changed and how; 
- How government should be financed. 

Four National Deficits:  

* Budget; 
* Balance of Payments; 
* Savings; 
* Leadership.  

Key Leadership Attributes Needed for These Challenging and Changing 
Times:  

* Courage; 
* Integrity; 
* Creativity: 
* Stewardship: 
* Partnership.  

[End of presentation] 

On the Web: 
Web site: [hyperlink, http://www.gao.gov/cghome.htm]: 

Contact:  

Susan Becker, Acting Manager, Public Affairs: BeckerS@gao.gov:
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: 

Copyright:  

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. The published product may be 
reproduced and distributed in its entirety without further permission 
from GAO. However, because this work may contain copyrighted images or 
other material, permission from the copyright holder may be necessary 
if you wish to reproduce this material separately.