This is the accessible text file for CG Presentation number GAO-09-
846CG entitled 'The Recovery Act And TARP: GAO’S Oversight Role' which 
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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] 

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YoungC1@gao.gov (202) 512-4800: 
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