This is the accessible text file for CG Presentation number GAO-09-
505CG entitled 'Key Fiscal Challenges Facing The Accountability 
Community' which was released on April 7, 2009. 

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Key Fiscal Challenges Facing The Accountability Community: 

Before the 2009 AGA Southeast Region Professional Development 
Conference: 

Nashville, TN: 

April 2, 2009: 

By Gene L. Dodaro: 
Acting Comptroller General: 

GAO-09-505CG: 

Outline: 

* Financial Markets and Economic Recovery: 

* Transition – New President and Congress: 

* Long Term Fiscal Outlook and Risks: 

American Recovery and Reinvestment Act: 

* Signed February 17, 2009. 

* Purpose: 
- preserve and create jobs and promote recovery; 
- assist those most impacted by the recession; 
- invest in science and health-care technology; 
- invest in infrastructure; 
- stabilize state and local government budgets. 

* Total cost, tax and spending: $787 billion, including over $580 
billion in additional spending (CBO Estimate). 

* Inspectors General review federal program and agency implementation. 

* Recovery Accountability and Transparency Board. 

* GAO responsibilities include: 
- conducting bimonthly reviews of selected state and localities; 
- commenting on the estimates of the number of jobs; 
- reviewing areas such as trade adjustment assistance, new education 
incentive grants, and efforts to increase small business lending. 

Figure: Map of the United States: 

[Refer to PDF for image] 

The following states are highlighted on the map: 
Arizona; 
California; 
Colorado; 
District of Columbia; 
Florida; 
Georgia; 
Illinois; 
Iowa; 
Massachusetts; 
Michigan; 
Mississippi; 
New Jersey; 
New York; 
North Carolina; 
Ohio; 
Pennsylvania; 
Texas. 

Source: GAO analysis. 

[End of figure] 

Challenges for the federal, state and local accountability community: 

* Expectations for “an unprecedented level of transparency and 
accountability”; 

* Qualified personnel need to implement proper controls and 
accountability at all levels of government; 

* Close federal, state, and local government coordination needed; 

* Experience has shown that the risk for fraud and abuse grows when 
billions of dollars are going out quickly, eligibility requirements are 
being established or changed, and new programs are being created. 

Financial Institutions and Markets: 

* GAO Role in Financial Rescue. 

* Auditors of Bank Insurance Fund, FHFA, TARP, and U.S. Government 
Financial Statements. 

* Financial Regulatory System. 

* Emergency Economic Stability Act of 2008 created $700 billion TARP in 
October 2008. 

* GAO given statutory oversight role. 

* GAO’s TARP reports recommendations follow 3 themes: 

- Monitoring the use of funds to meet the Act’s objectives; 

- Articulating a better communication strategy; 

- Ensuring effective Treasury management structure. 

Modernizing the U.S. Financial Regulatory System: 

Financial Regulation: A Framework for Crafting and Assessing Proposals 
to Modernize the Outdated U.S. Financial Regulatory System. 

* Explains the origins of the current financial regulatory system; 

* Describes market developments and changes that pose challenges to the 
current system; 

* Presents an evaluation framework that Congress and others can use to 
craft or evaluate potential regulatory reform efforts; 

Regulatory System Outdated: 

Risks posed by: 

* Emergence of large, complex, and interconnected financial 
conglomerates; 

* Less-regulated entities are playing increasingly critical roles in 
the financial system; 

* New and complex products pose challenges to system stability and 
consumer protection. 

Crafting or Assessing Regulatory Reform Proposals: GAO Framework — 9 
Essential Characteristics: 

* Clearly defined regulatory goals in statute; 

* Appropriately comprehensive; 

* Systemwide focus; 

* Flexible and adaptable; 

* Efficient and effective; 

* Consistent consumer and investor protections; 

* Regulators provided with independence, prominence, authority, and 
accountability; 

* Consistent financial oversight; 

* Minimal taxpayer exposure. 

Transition: Assisting The New Administration & The New Congress: 

Figure: Photographs of the White House and the U.S. Capitol buildings. 

[Refer to PDF for image] 

[End of figure] 

Figure: Screen shot of the home page of the GAO Website [hyperlink, 
http://www.gao.gov]. 

[Refer to PDF for image] 

Highlighted in the screen shot is the link to GAO's Oversight of the 
Recovery Act page (GAO.gov/recovery). 

[End of figure] 

Figure: Screen shot of GAO's Oversight of the Recovery Act page 
[hyperlink, http://www.gao.gov/recovery/index.html]. 

[Refer to PDF for image] 

Links on the page include: 

* Following the Money: GAO's Oversight of the Recovery Act. 

* Bimonthly reviews. 

* Other GAO Mandates. 

* Major Cost-Saving Opportunities. 

* Video Message from Gene Dodaro, Acting Comptroller General. 

[End of figure] 

Figure: Screen shot of the 2009 Congressional and Presidential 
Transition page of the GAO Website [hyperlink, 
http://www.gao.gov/transition_2009/]. 

[Refer to PDF for image] 

Links on the page include: 

* Urgent Issues. 

* Agency-by-Agency Issues. 

* Management Challenges Across the Government. 

* Major Cost-Saving Opportunities. 

* Upcoming Reports on Major Issues. 

* Long-Term Fiscal Outlook. 

* Working with GAO. 

[End of figure] 

Other Urgent Issues: Timely Action Is Critical: 

* U.S. efforts in Iraq, Afghanistan, and Pakistan; 

* Defense readiness, spending, and care for service members; 

* Protecting the homeland and preparing for public health emergencies; 

* Improving U.S. image abroad; 

* Food safety; 

* Transition to digital TV. 

Long-Term Challenges: 

* Today’s focus—understandably—is on: 

- Dealing with financial system stress; 

- Addressing the economic downturn; 

* But: Underlying long-term fiscal challenge still needs to be 
addressed: 

- Long-term fiscal challenge; 

- Sustaining progress on federal financial management. 

Figure: Long-Term Fiscal Challenge: 

[Refer to PDF for image] 

This figure is a multiple line graph depicting the following data in 
percent of GDP: 

Year: 2005; 
Federal Surplus/Deficit[A]: -2.6%; 
Combined Surplus/Deficit: -3.1%. 		 

Year: 2010; 
Federal Surplus/Deficit[A]: -5.04%; 
Combined Surplus/Deficit: -7%. 

Year: 2015; 
Federal Surplus/Deficit[A]: -5.19%; 
Combined Surplus/Deficit: -6.9%. 

Year: 2020; 
Federal Surplus/Deficit[A]: -6.77%; 
Combined Surplus/Deficit: -8.7%. 

Year: 2025; 
Federal Surplus/Deficit[A]: -9.23%; 
Combined Surplus/Deficit: -11.5%. 

Year: 2030; 
Federal Surplus/Deficit[A]: -12.02%; 
Combined Surplus/Deficit: -14.8%. 

Year: 2035; 
Federal Surplus/Deficit[A]: -15.07%; 
Combined Surplus/Deficit: -18.4%. 

Year: 2040; 
Federal Surplus/Deficit[A]: -18.25%; 
Combined Surplus/Deficit: -22.1%. 

Year: 2045; 
Federal Surplus/Deficit[A]: -21.55%; 
Combined Surplus/Deficit: -25.9%. 

Year: 2050; 
Federal Surplus/Deficit[A]: -25.02%; 
Combined Surplus/Deficit: -30%. 

Source: GAO January 2009 analysis. 

[A] Federal surplus/deficit is from GAO’s Alternative Simulation using 
the Trustees’ assumptions. 

[End of figure] 

Figure: Long-Term Fiscal Challenge Driven by Health Care Spending: 

[Refer to PDF for image] 

This figure is a stacked line graph depicting the following data in 
percent of GDP: 

Year: 2008; 
Social Security: 4.32%; 
Medicaid: 1.44%; 
Medicare: 3.24%; 
Total: 9.00%. 

Year: 2009; 
Social Security: 4.35%; 
Medicaid: 1.59%; 
Medicare: 3.28%; 
Total: 9.22%. 

Year: 2010; 
Social Security: 4.39%; 
Medicaid: 1.68%; 
Medicare: 3.32%; 
Total: 9.39%. 

Year: 2015; 
Social Security: 4.8%; 
Medicaid: 1.79%; 
Medicare: 3.71%; 
Total: 10.3%. 

Year: 2020; 
Social Security: 5.3%; 
Medicaid: 2.03%; 
Medicare: 4.45%; 
Total: 12.68%. 
	
Year: 2025; 
Social Security: 5.71%; 
Medicaid: 2.27%; 
Medicare: 5.35%; 
Total: 13.33%. 
	
Year: 2030; 
Social Security: 6%; 
Medicaid: 2.55%; 
Medicare: 6.26%; 
Total: 15.1%. 

Year: 2035; 
Social Security: 6.09%; 
Medicaid: 2.84%; 
Medicare: 7.00%; 
Total: 15.93%. 
	
Year: 2040; 
Social Security: 6.02%; 
Medicaid: 3.13%; 
Medicare: 7.58%; 
Total: 16.73%. 
	
Year: 2045; 
Social Security: 5.89%; 
Medicaid: 3.40%; 
Medicare: 8.01%; 
Total: 17.3%. 
	
Year: 2050; 
Social Security: 5.81%; 
Medicaid: 3.64%; 
Medicare: 8.40%; 
Total: 17.85%. 
	
Year: 2055; 
Social Security: 5.77%; 
Medicaid: 3.86%; 
Medicare: 8.78%; 
Total: 18.41%. 
	
Year: 2060; 
Social Security: 5.77%; 
Medicaid: 4.08%; 
Medicare: 9.21%; 
Total: 19.06%. 

Year: 2065; 
Social Security: 5.76%; 
Medicaid: 4.30%; 
Medicare: 9.63%; 
Total: 19.69%. 

Year: 2070; 
Social Security: 5.77%; 
Medicaid: 4.53%; 
Medicare: 10.03%; 
Total: 20.33%. 
	
Year: 2075; 
Social Security: 5.79%; 
Medicaid: 4.75%; 
Medicare: 10.38%; 
Total: 20.92%. 

Year: 2080; 
Social Security: 5.81%; 
Medicaid: 4.96%; 
Medicare: 10.69%; 
Total: 21.46%. 

Source: GAO analysis of 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. 

Note: Social Security and Medicare projections based on the 
intermediate assumptions of the 2008 Trustees’ Reports. Medicaid 
projections based on CBO’s January 2009 short-term Medicaid estimates 
and CBO’s December 2007 long-term Medicaid projections adjusted to 
reflect excess cost growth consistent with the 2008 Trustees 
intermediate assumptions. 

[End of figure] 

Federal Financial Management: Need to Continue Progress: 

* Significant improvements in federal financial management -- but still 
a long way to go. 

* Information for decision-making must be reliable. 

Federal Financial Management: Key Challenges: 

* Improve internal control—greater accountability and fewer improper 
payments; 

* Obtain clean opinion on U.S. government’s consolidated financial 
statements; 

* Improve extent and reliability of cost information for evaluating 
federal program operations; 

* Implement more effective federal financial management systems; 

* Improve federal grant accountability; 

* Streamline and enhance relevance and effectiveness of federal 
accountability requirements and practices. 

2009 High-Risk List: 

30 items grouped into four categories: 

* Broad-Based Transformation Challenges (e.g., DOD, DHS, surface 
transportation, food safety oversight); 

* Federal Contracting; 

* Tax Law Administration; 

* Insurance and Benefit Programs (e.g., Medicare, Medicaid, PBGC, flood 
insurance). 

Latest High-Risk List Additions: 

* Modernizing the Outdated U.S. Financial Regulatory System; 

* Protecting Public Health through Enhanced Oversight of Medical 
Products; 

* Transforming EPA’s Processes for Assessing and Controlling Toxic 
Chemicals. 

The Value Of Public Service. 

[End of section] 

On the Web: 

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

Contact: 

Chuck Young, Managing Director, Public Affairs: 
YoungC1@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.