This is the accessible text file for CG Presentation number GAO-09- 846CG entitled 'The Recovery Act And TARP: GAO’S Oversight Role' which was released on June 23, 2009. 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. The Recovery Act And TARP: GAO’S Oversight Role: NASACT’S NSAA Annual Conference: Savannah, Georgia: June 17, 2009: By Gene L. Dodaro: Acting Comptroller General: U.S. Government Accountability Office: GAO-09-846CG: Outline: * American Recovery & Reinvestment Act: * Financial Institutions and Markets: * Long-Term Fiscal Outlook and Risk: American Recovery & 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). GAO responsibilities include: * conducting bimonthly reviews of selected states’ and localities’ use of the funds; * commenting on recipient reports on the number of jobs created or preserved; * reviewing areas such as trade adjustment assistance, new education incentive grants, and efforts to increase small business lending; * monitoring downturn’s long-term effect on states (health care costs). State and Local Reporting Strategy for Bimonthly Reviews: * Longitudinal study of 16 states and the District of Columbia: - A number of localities within selected states. * Program-specific review across states: - April report focused on 3 largest: increased Medicaid FMAP funding; Highway Infrastructure Investment; State Fiscal Stabilization Funds; - Forthcoming reports to cover additional programs. Figure: Map of the United States, highlighting the following states: [Refer to PDF for image] 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] Reporting Objectives: 1. States’ and localities’ use of funds. 2. States’ and localities’ up-front safeguards and ongoing monitoring, audits, and evaluations. 3. States’ and localities’ plans to evaluate the impact of funds. Figure: Timing of Federal Recovery Act Funding Made Available to States and Localities: [Refer to PDF for image: vertical bar graph] Fiscal year: 2009; Available funding: $48.9 billion. Fiscal year: 2010; Available funding: $107.7 billion. Fiscal year: 2011; Available funding: $63.4 billion. Fiscal year: 2012; Available funding: $23.3 billion. Fiscal year: 2013; Available funding: $14.4 billion. Fiscal year: 2014; Available funding: $9.1 billion. Fiscal year: 2015; Available funding: $5.7 billion. Fiscal year: 2016; Available funding: $2.5 billion. Source: GAO analysis of CBO and FFIS data, April 2009. [End of figure] Figure: Composition of State and Local Recovery Act Funding: [Refer to PDF for image: two pie-charts] Fiscal year 2009: Health: 64%; Education and Training: 18%; Transportation: 8%; Income Security: 6%; Community Development: 3%; Energy and Environment: 1%. Fiscal year 2012: Health: 1%; Education and Training: 19%; Transportation: 30%; Income Security: 17%; Community Development: 16%; Energy and Environment: 17%. Source: GAO analysis of CBO and FFIS data, April 2009. [End of figure] American Recovery & Reinvestment Act: Single Audits and Risks: * Under the current approach, certain risks associated with Recovery Act programs may not receive full consideration. Also, timing of audit reporting is problematic. * Unique challenges associated with Recovery Act funding: - Sudden increase in funds that most recipients are experiencing; - New government programs and programs that are new for the recipient entity; - Need for timely and efficient oversight in response to the Recovery Act’s accountability requirements. American Recovery & Reinvestment Act: GAO Recommendations on Audit Process: To provide additional leverage as an oversight tool for Recovery Act programs, the Director of OMB should adjust the current audit process to: * Focus the risk assessment auditors use to select programs to test for compliance with 2009 federal program requirements on Recovery Act funding; * Provide for review of the design of internal controls during 2009 over programs to receive Recovery Act funding, before significant expenditures in 2010; and; * Evaluate options for providing relief related to audit requirements for low-risk programs to balance new audit responsibilities associated with the Recovery Act. Other GAO Recommendations: * Administrative support to help states with oversight; * Methodologies to determine jobs created and retained; * Communication with state and local recipients; * Recipient reports and data collection requirements. Grant Applications: Concern whether existing grants.gov infrastructure could handle influx of applications as key deadlines approach—-OMB directed agencies to develop alternatives, but: * No centralized source of information on how and when to use alternatives; * Recommended OMB improve policies to help minimize disruptions to the grants application process and increase likelihood that applicants can successfully apply. HIT Policy Committee & SBA: * Appointment of 13 members to the Health Information Technology Policy Committee on April 3, 2009. * On April 16 reported on Small Business Administration efforts to, among other things, increase liquidity in the secondary markets for SBA loans. Challenges for federal, state and local officials: * Expectations for “an unprecedented level of transparency and accountability;” * Qualified personnel need to implement proper controls and accountability at all levels of government; * Close and ongoing coordination needed among federal, state, and local governments; * Accountability community: special responsibility to ensure collective efforts are well-coordinated. [End of section] Financial Institutions and Markets: GAO Role in Financial Rescue: * Troubled Asset Relief Program (TARP) oversight. * Auditors of FDIC’s Deposit Insurance Fund, FHFA, TARP, and U.S. Government Financial Statements. * Financial Regulatory System. * INTOSAI Task Force on Global Financial Crisis. * Emergency Economic Stabilization 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. Figure: Troubled Asset Relief Program (TARP) Initiatives and Projected Combined Assistance as of June 2009 (TARP: $643.1 billion): [Refer to PDF for image: illustrated wheel with TARP as the hub, with each of the following initiatives represented as spokes] TARP: The Department of the Treasury: Direct Payment: Making Homes Affordable Plan: $50.0 billion. Investment: Capital Purchase Program: $218 billion; Systemically Significant Failing Institution Program: $70.0 billion; Targeted Investment Program: $40.0 billion; Capital Assistance Program: TBD; Unlocking Credit for Small Business: $15.0 billion. Insurance of guarantee: Auto Supplier Support Program: $5.0 billion; Asset Guarantee Program: $12.5 billion. Loan: Automotive Industry Financing Program: $77.6 billion; Consumer and Business Lending Initiative: $55.0 billion. Loan and investment combination: Total of $500 billion to $1.0 trillion, with Federal Reserve and FDIC involvement combining the following three initiatives: Consumer and Business Lending Initiative; Public Private Investment Program; Asset Guarantee Program. Loan, investment, and insurance combination: Public Private Investment Program: $100 billion. [End of figure] FDIC’s Deposit Insurance Fund: Most recent audit of financial statements completed May 2009: Clean opinion but: * Reported losses from actual and anticipated failures of $42 billion; * Reported Fund reserves of $17 billion were well below statutory minimum level; * Highlighted additional exposures to Fund from potential financial institution failures and systemic risk initiatives. Consolidated Financial Statement Issues: * Ultimate effect of federal government's actions will be reflected in the U.S. government's consolidated financial statements for fiscal year 2009 and beyond. * Nature and magnitude of these actions have created new challenges for, among other things, federal financial reporting. Looking Ahead: * Housing: - Analysis of Proposals for the Structure of Fannie Mae and Freddie Mac; - Review of Treasury's efforts to establish a loan modification program. * Financial Regulation: - Framework for Modernizing the Financial Regulatory System. 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. (GAO-09-216, Jan. 8, 2009) Outdated Regulatory System: 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. For 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. Global Financial Crisis Task Force: * Created by International Governing Board in November 2008; * Purpose: - enhance the knowledge base of NAOs on financial and economic matters related to the crisis; - be a source of information to help governments and the global community respond to the crisis. * Membership: U.S.A. is lead, other countries include: Austria: Cyprus: Canada: Chile: China: Denmark: Estonia: Hungary: Indonesia: Italy: Japan: Korea: Mexico: Morocco: Netherlands: Poland: Russia: Slovakia: Spain: Sweden: United Kingdom: Venezuela: [End of section] Long-Term Challenges: Today’s focus—understandably—is on: * Dealing with financial system stress; * Addressing the economic downturn. But... Underlying issues still need to be addressed: * Long-term fiscal challenge; * Sustaining progress on federal financial management. Long-Term Fiscal Challenge: Figure: Debt Held by the Public as a Share of GDP Under Two Fiscal Policy Simulations: [Refer to PDF for image: multiple line graph] Historical high: 109% in 1946. Year: 2005; Baseline extended: 37.5; Alternative: 37.5. Year: 2006; Baseline extended: 37.1; Alternative: 37.1. Year: 2007; Baseline extended: 36.9; Alternative: 36.9. Year: 2008; Baseline extended: 40.8; Alternative: 40.8. Year: 2009; Baseline extended: 54.8; Alternative: 54.9. Year: 2010; Baseline extended: 60.1; Alternative: 60.6. Year: 2011; Baseline extended: 62; Alternative: 64.1. Year: 2012; Baseline extended: 61.6; Alternative: 66.3. Year: 2013; Baseline extended: 60.7; Alternative: 68.4. Year: 2014; Baseline extended: 60.1; Alternative: 71.1. Year: 2015; Baseline extended: 59.5; Alternative: 74. Year: 2016; Baseline extended: 59; Alternative: 77.3. Year: 2017; Baseline extended: 58.5; Alternative: 80.6. Year: 2018; Baseline extended: 56.1; Alternative: 82.3. Year: 2019; Baseline extended: 56.1; Alternative: 86.6. Year: 2020; Baseline extended: 56.2; Alternative: 91.2. Year: 2021; Baseline extended: 56.5; Alternative: 96. Year: 2022; Baseline extended: 57.1; Alternative: 101.2. Year: 2023; Baseline extended: 58; Alternative: 106.7. Year: 2024; Baseline extended: 59.2; Alternative: 112.5. Year: 2025; Baseline extended: 60.8; Alternative: 118.8. Year: 2026; Baseline extended: 62.6; Alternative: 125.3. Year: 2027; Baseline extended: 64.7; Alternative: 132.3. Year: 2028; Baseline extended: 67.2; Alternative: 139.7. Year: 2029; Baseline extended: 70.1. Alternative: 147.5. Year: 2030; Baseline extended: 73.1; Alternative: 155.6. Year: 2031; Baseline extended: 76.6; Alternative: 164.2. Year: 2032; Baseline extended: 80.4; Alternative: 173.2. Year: 2033; Baseline extended: 84.4; Alternative: 182.5. Year: 2034; Baseline extended: 88.7; Alternative: 192.1. Year: 2035; Baseline extended: 93.2; Alternative: 202. Year: 2036; Baseline extended: 98; Alternative: 212.4. Year: 2037; Baseline extended: 103.2; Alternative: 223.1. Year: 2038; Baseline extended: 108.5; Alternative: 234.1. Year: 2039; Baseline extended: 114.1; Alternative: 245.4. Year: 2040; Baseline extended: 119.9; Alternative: 257.1. Year: 2041; Baseline extended: 125.9; Alternative: 269.1. Year: 2042; Baseline extended: 132.2; Alternative: 281.4. Year: 2043; Baseline extended: 138.6; Alternative: 294.1. Year: 2044; Baseline extended: 145.3; Alternative: 306.9. Year: 2045; Baseline extended: 152.2; Alternative: 320.2. Year: 2046; Baseline extended: 159.3; Alternative: 333.8. Year: 2047; Baseline extended: 166.6; Alternative: 347.7. Year: 2048; Baseline extended: 174.2; Alternative: 362. Year: 2049; Baseline extended: 182.1; Alternative: 376.8. Year: 2050; Baseline extended: 190.2; Alternative: 391.9. Source: GAO. March 2009 simulations. Note: Data from GAO's simulations based on the 2008 Trustees' assumptions for Social Security and Medicare. We also run simulations using CBO's Social Security and Medicare projections; the results are not materially different. [End of figure] Figure: Federal and Combined Federal, State, and Local Surpluses and Deficits as a Share of GDP: [Refer to PDF for image: line graph] Fiscal year: 2005; Federal surplus/deficit: -2.6%; Combined surplus/deficit: -3.1. Fiscal year: 2006; Federal surplus/deficit: -1.9%; Combined surplus/deficit: -2.3%. Fiscal year: 2007; Federal surplus/deficit: -1.2%; Combined surplus/deficit: -1.9%. Fiscal year: 2008; Federal surplus/deficit: -3.2%; Combined surplus/deficit: -4.3%. Fiscal year: 2009; Federal surplus/deficit: -8.2%; Combined surplus/deficit: -9.9%. Fiscal year: 2010; Federal surplus/deficit: -5.0%; Combined surplus/deficit: -7%. Fiscal year: 2011; Federal surplus/deficit: -4.7%; Combined surplus/deficit: -6.7%. Fiscal year: 2012; Federal surplus/deficit: -4.4%; Combined surplus/deficit: -6.3%. Fiscal year: 2013; Federal surplus/deficit: -4.8%; Combined surplus/deficit: -6.5%. Fiscal year: 2014; Federal surplus/deficit: -5.0%; Combined surplus/deficit: -6.7%. Fiscal year: 2015; Federal surplus/deficit: -5.2%; Combined surplus/deficit: -6.9%. Fiscal year: 2016; Federal surplus/deficit: -5.5%; Combined surplus/deficit: -7.2%. Fiscal year: 2017; Federal surplus/deficit: -5.7%; Combined surplus/deficit: -7.5%. Fiscal year: 2018; Federal surplus/deficit: -5.9%; Combined surplus/deficit: -7.8%. Fiscal year: 2019; Federal surplus/deficit: -6.3%; Combined surplus/deficit: -8.2%. Fiscal year: 2020; Federal surplus/deficit: -6.8%; Combined surplus/deficit: -8.7%. Fiscal year: 2021; Federal surplus/deficit: -7.2%; Combined surplus/deficit: -9.3%. Fiscal year: 2022; Federal surplus/deficit: -7.6%; Combined surplus/deficit: -9.7%. Fiscal year: 2023; Federal surplus/deficit: -8.2%; Combined surplus/deficit: -10.3%. Fiscal year: 2024; Federal surplus/deficit: -8.7%; Combined surplus/deficit: -10.9%. Fiscal year: 2025; Federal surplus/deficit: -9.2%; Combined surplus/deficit: -11.5%. Fiscal year: 2026; Federal surplus/deficit: -9.2%; Combined surplus/deficit: -12.1%. Fiscal year: 2027; Federal surplus/deficit: -10.3%; Combined surplus/deficit: -12.8%. Fiscal year: 2028; Federal surplus/deficit: -10.8%; Combined surplus/deficit: -13.4%. Fiscal year: 2029; Federal surplus/deficit: -11.5%; Combined surplus/deficit: -14.2%; Fiscal year: 2030; Federal surplus/deficit: -12.0%; Combined surplus/deficit: -14.8%. Fiscal year: 2031; Federal surplus/deficit: -12.7%; Combined surplus/deficit: -15.5%. Fiscal year: 2032; Federal surplus/deficit: -13.2%; Combined surplus/deficit: -16.2%. Fiscal year: 2033; Federal surplus/deficit: -13.9%; Combined surplus/deficit: -17%. Fiscal year: 2034; Federal surplus/deficit: -14.5%; Combined surplus/deficit: -17.7%. Fiscal year: 2035; Federal surplus/deficit: -15.1%; Combined surplus/deficit: -18.4%. Fiscal year: 2036; Federal surplus/deficit: -15.7%; Combined surplus/deficit: -19.1%. Fiscal year: 2037; Federal surplus/deficit: -16.3%; Combined surplus/deficit: -19.8%. Fiscal year: 2038; Federal surplus/deficit: -17.0%; Combined surplus/deficit: -20.6%. Fiscal year: 2039; Federal surplus/deficit: -17.7%; Combined surplus/deficit: -21.4%. Fiscal year: 2040; Federal surplus/deficit: -18.3%; Combined surplus/deficit: -22.1%. Fiscal year: 2041; Federal surplus/deficit: -18.9%; Combined surplus/deficit: -22.9%. Fiscal year: 2042; Federal surplus/deficit: -19.5%; Combined surplus/deficit: -23.6%. Fiscal year: 2043; Federal surplus/deficit: -20.2%; Combined surplus/deficit: -24.4%. Fiscal year: 2044; Federal surplus/deficit: -20.8%; Combined surplus/deficit: -25.1%. Fiscal year: 2045; Federal surplus/deficit: -21.5%; Combined surplus/deficit: -25.9%. Fiscal year: 2046; Federal surplus/deficit: -22.2%; Combined surplus/deficit: -26.7%. Fiscal year: 2047; Federal surplus/deficit: -22.9%; Combined surplus/deficit: -27.5%. Fiscal year: 2048; Federal surplus/deficit: -23.6%; Combined surplus/deficit: -28.3%. Fiscal year: 2049; Federal surplus/deficit: -24,3%; Combined surplus/deficit: -29.2%. Fiscal year: 2050; Federal surplus/deficit: -25.0%; Combined surplus/deficit: -30%. Source: GAO January 2009 analysis. Note: Federal surplus/deficit is from GAO’s Alternative Simulation based on the Trustees’ assumptions for Social Security and Medicare. We also run simulations using CBO’s projections for Social Security and Medicare; the results are not materially different. [End of figure] Some Measures: Impact on Debt held by the public: * FY 2005 actual: $4.6 trillion (37.5% of GDP); * FY 2008 actual: $5.8 trillion (40.8% of GDP); * FY 2009 projected: $8.5 trillion (59.9% of GDP); * FY 2010 projected: $9.9 trillion (67.1% of GDP). Impact on Social Security: * Projected gap between expected outlays & expected revenue widened from $6.6 trillion in 2008 to $7.7 trillion in 2009; * Negative cash flow 2016 (compared to 2017); * Trust fund exhaustion 2037 (compared to 2041). [End of presentation] On the Web: Web site: [hyperlink, http://www.gao.gov/cghome/index.html] 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: