This is the accessible text file for CG Presentation number GAO-10- 652CG entitled 'Leadership Challenges Given Today's Fiscal Realities' which was released on April 28, 2010. 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. Oversight and Accountability in a Time of Fiscal Stress: Excellence in Government Conference: Washington, D.C. April 19, 2010: Gene L. Dodaro: Acting Comptroller General: GAO-10-653CG: * Long-Term Fiscal Challenges: * American Recovery and Reinvestment Act Implementation: * Emergency Economic Stabilization Act Experience: * Examples of the Need for Transformation: Long-Term Fiscal Challenges: Figure: Debt Held by the Public Under Two Fiscal Policy Simulations: (Percent of GDP): [Refer to PDF for image: line graph] Historical high: 109% in 1946. Year: 2000; Baseline Extended: 35.1%; Alternative: 35.1%. Year: 2001; Baseline Extended: 33.0%; Alternative: 33.0%. Year: 2002; Baseline Extended: 34.1%; Alternative: 34.1%. Year: 2003; Baseline Extended: 36.2%; Alternative: 36.2%. Year: 2004; Baseline Extended: 37.3%; Alternative: 37.3%. Year: 2005; Baseline Extended: 37.5%; Alternative: 37.5%. Year: 2006; Baseline Extended: 36.5%; Alternative: 36.5%. Year: 2007; Baseline Extended: 36.2%; Alternative: 36.2%. Year: 2008; Baseline Extended: 40.1%; Alternative: 40.1%. Year: 2009; Baseline Extended: 53.0%; Alternative: 53.0%; Year: 2010; Baseline Extended: 60.3%; Alternative: 60.7%. Year: 2011; Baseline Extended: 65.3%; Alternative: 68.0%. Year: 2012; Baseline Extended: 66.6%; Alternative: 72.8%. Year: 2013; Baseline Extended: 66.3%; Alternative: 76.2%. Year: 2014; Baseline Extended: 65.6%; Alternative: 79.6%. Year: 2015; Baseline Extended: 65.4%; Alternative: 83.7%. Year: 2016; Baseline Extended: 65.5%; Alternative: 88.3%. Year: 2017; Baseline Extended: 65.5%; Alternative: 93.0%. Year: 2018; Baseline Extended: 65.7%; Alternative: 98.2%. Year: 2019; Baseline Extended: 66.1%; Alternative: 103.8%. Year: 2020; Baseline Extended: 66.7%; Alternative: 109.8%. Year: 2021; Baseline Extended: 67.5%; Alternative: 116.0%. Year: 2022; Baseline Extended: 68.5%; Alternative: 122.0%. Year: 2023; Baseline Extended: 69.8%; Alternative: 128.3%. Year: 2024; Baseline Extended: 71.4%; Alternative: 134.7%. Year: 2025; Baseline Extended: 73.3%; Alternative: 141.4%. Year: 2026; Baseline Extended: 75.6%; Alternative: 148.6%. Year: 2027; Baseline Extended: 78.2%; Alternative: 156.2%. Year: 2028; Baseline Extended: 84.4%; Alternative: 172.5%. Year: 2030; Baseline Extended: 88.0%; Alternative: 181.2%. Year: 2031; Baseline Extended: 91.8%; Alternative: 190.3%. Year: 2032; Baseline Extended: 96.0%; Alternative: 199.8%. Year: 2033; Baseline Extended: 100.5%. Year: 2034; Baseline Extended: 105.2%. Year: 2035; Baseline Extended: 110.2%. Year: 2036; Baseline Extended: 115.5%. Year: 2037; Baseline Extended: 121.0%. Year: 2038; Baseline Extended: 126.8%. Year: 2039; Baseline Extended: 132.8%. Year: 2040; Baseline Extended: 139.1%. Year: 2041; Baseline Extended: 145.5%. Year: 2042; Baseline Extended: 152.2%. Year: 2043; Baseline Extended: 159.1%. Year: 2044; Baseline Extended: 166.2%. Year: 2045; Baseline Extended: 173.5%. Year: 2046; Baseline Extended: 181.0%. Year: 2047; Baseline Extended: 188.7%. Year: 2048; Baseline Extended: 196.8%. Source: GAO. [End of figure] Table: Pressures on the Federal Budget in the Near Term: 2008: Oldest members of the baby-boom generation became eligible for early Social Security retirement benefits. 2008: Medicare Hospital Insurance (HI) outlays exceeded cash income. 2010: Social Security runs first cash deficit since 1984[A]. 2011: Oldest members of the baby-boom generation become eligible for Medicare. 2014: 45 percent of Medicare outlays funded by general revenue[B]. 2016: Social Security begins running consistent annual cash deficits. 2017: Medicare HI trust fund exhausted. Income sufficient to pay about 81 percent of benefits[B]. 2020: Debt held by the public under GAO's Alternative simulation exceeds the historical high reached in the aftermath of World War II. Source: GAO analysis. Notes: [A] Based on CBO's January 2010 baseline projections. [B] Based on 2009 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementer}, Medical Insurance Trust Funds (May 12, 2009). [End of table] Figure: Federal and Combined Federal, State, and Local Deficits as Shares of GDP: Percent of GDP: [Refer to PDF for image: multiple line graph] Fiscal year: 2000; Federal only: 2.4%; Federal, state, and local: 2.1% Fiscal year: 2001; Federal only: 1.3%; Federal, state, and local: 0.5%. Fiscal year: 2002; Federal only: -1.5%; Federal, state, and local: -2.7%. Fiscal year: 2003; Federal only: -3.5%; Federal, state, and local: -4.5%. Fiscal year: 2004; Federal only: -3.6%; Federal, state, and local: -4.4. Fiscal year: 2005; Federal only: -2.6%; Federal, state, and local: -3.1%. Fiscal year: 2006; Federal only: -1.9%; Federal, state, and local: -2.3%. Fiscal year: 2007; Federal only: -1.2%; Federal, state, and local: -1.9%. Fiscal year: 2008; Federal only: -2.9%; Federal, state, and local: -4.1%. Fiscal year: 2009; Federal only: -3.4%; Federal, state, and local: -4.8%. Fiscal year: 2010; Federal only: -3.4%; Federal, state, and local: -4.6%. Fiscal year: 2011; Federal only: -3.7%; Federal, state, and local: -4.8%. Fiscal year: 2012; Federal only: -3.8%; Federal, state, and local: -4.9%. Fiscal year: 2013; Federal only: -4.2%; Federal, state, and local: -5.4%. Fiscal year: 2014; Federal only: -4.6%; Federal, state, and local: -5.8%. Fiscal year: 2015; Federal only: -4.81%; Federal, state, and local: -6.1%. Fiscal year: 2016; Federal only: -5.2%; Federal, state, and local: -6.6%. Fiscal year: 2017; Federal only: -5.5%; Federal, state, and local: -7%. Fiscal year: 2018; Federal only: -5.8%; Federal, state, and local: -7.3%. Fiscal year: 2019; Federal only: -5.9%; Federal, state, and local: -7.5%. Fiscal year: 2020; Federal only: -6.2%; Federal, state, and local: -7.8%. Fiscal year: 2021; Federal only: -6.5%; Federal, state, and local: -8.2%. Fiscal year: 2022; Federal only: -7%; Federal, state, and local: -8.8%. Fiscal year: 2023; Federal only: -7.4%; Federal, state, and local: -9.3%. Fiscal year: 2024; Federal only: -8%; Federal, state, and local: -9.9%. Fiscal year: 2025; Federal only: -8.5%; Federal, state, and local: -10.4%. Fiscal year: 2026; Federal only: -9%; Federal, state, and local: -11.1%. Fiscal year: 2027; Federal only: -9.5%; Federal, state, and local: -11.7%. Fiscal year: 2028; Federal only: -10.1%; Federal, state, and local: -12.2%. Fiscal year: 2029; Federal only: -10.6%; Federal, state, and local: -12.91%; Fiscal year: 2030; Federal only: -11.3%; Federal, state, and local: -13.6%. Fiscal year: 2031; Federal only: -11.9%; Federal, state, and local: -14.4%. Fiscal year: 2032; Federal only: -12.4%; Federal, state, and local: -15%. Fiscal year: 2033; Federal only: -13%; Federal, state, and local: -15.7%. Fiscal year: 2034; Federal only: -13.6%; Federal, state, and local: -16.3%. Fiscal year: 2035; Federal only: -14.2%; Federal, state, and local: -17%. Fiscal year: 2036; Federal only: -4.85%; Federal, state, and local: -17.8%. Fiscal year: 2037; Federal only: -15.3%; Federal, state, and local: -18.4%. Fiscal year: 2038; Federal only: -16%; Federal, state, and local: -19.1%. Fiscal year: 2039; Federal only: -16.5%; Federal, state, and local: -19.8%. Fiscal year: 2040; Federal only: -17.2%; Federal, state, and local: -20.5%. Source: GAO. Note: federal data are from GAO’s Alternative simulation. [End of figure] Not Just a U.S. Challenge: * Financial market stress in other major industrial nations. * Public debt levels in other major industrial countries have also increased dramatically. * Projections show many countries on a path of rising debt to GDP ratios. Moving Forward: * Budget Controls. * Creation of Commission. * Continued Public Education, Discussion, and Debate. [End of section] American Recovery and Reinvestment Act Implementation: American Recovery & Reinvestment Act: * Signed February 17, 2009: * Purpose: - Preserve/create jobs and promote recovery; - Assist those most hurt by the recession; - Invest in infrastructure; - Stabilize state and local government budgets; * Total cost (tax and spending): $862 billion, including over $626 billion in additional spending (CBO Estimate). Figure: Projected Versus Actual Federal Outlays to States and Localities Under the Recovery Act: [Refer to PDF for image: vertical bar graph] Year: 2010; Estimated: $48.9 billion; Actual Federal outlays as of March 31, 2010: $52.9 billion. Year: 2011; Estimated: $107.7 billion; Actual Federal outlays as of March 31, 2010: $50.9 billion. [$103.8 billion in actual Federal Outlays as of March 31, 2010] Year: 2011; Estimated: $63.4 billion. Year: 2012; Estimated: $23.3 billion. Year: 2013; Estimated: $14.4 billion. Year: 2014; Estimated: $9.1 billion. Year: 2015; Estimated: $5.7 billion. Year: 2016; Estimated: $2.5 billion. Source: GAO analysis of data from CBO, Recovery.gov and Federal Funds Information for States. [End of figure] Figure: GAO's Monitoring of Selected States: [Refer to PDF for image: map of the U.S.] The following states are highlighted on the map: 1. Arizona; 2. California; 3. Colorado; 4. Florida; 5. Georgia; 6. Illinois; 7. Iowa; 8. Massachusetts; 9. Michigan; 10. Mississippi; 11. New Jersey; 12. New York; 13. North Carolina; 14. Ohio; 15. Pennsylvania; 16. Texas; 17. Washington, D.C. Source: GAO analysis. [End of figure] Recovery Act: GAO's Reporting Objectives: GAO's reports on states and localities focus on: * Use of funds; * Safeguards and internal controls; * The impact of funds. GAO also comments on jobs created and retained as reported by recipients. Recovery Act Challenges for Officials at All Levels of Government: * Expectations for transparency and accountability; * Qualified personnel need to implement proper accountability; * Close and ongoing coordination needed. GAO Recommendations: GAO has made 28 recommendations to 5 federal agencies (DOT, HUD, Education, DOL, and OMB) regarding: * Accountability and Transparency; * Reporting on Impact and Guidance; * Resource Allocation and Capacity. [End of section] Emergency Economic Stabilization Experience: Troubled Asset Relief Program (TARP): * 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. Status of Troubled Asset Relief Program Outstanding Balances: * As of April 9, 2010, Treasury had disbursed about $381 billion of the almost $700 billion in program funds, and had received repayments of about $181 billion. * A total of about $198 billion remains outstanding (see table below). Table: Status of TARP Funds as of April 9, 2010 (dollars in billions): Program: Capital Purchase Program Gross Outstanding Balance: $66.7[A]. Program: AIG; Gross Outstanding Balance: $47.5. Program: Targeted Investment Program; Gross Outstanding Balance: $0.0. Program: Consumer & Business Lending Initiative: Term Asset-backed Securities Loan Facility & Small Business and Community Lending Initiative; Gross Outstanding Balance: $0.1. Program: Automotive Industry Financing Program; Gross Outstanding Balance: $75.1. Program: Public-Private Investment Program; Gross Outstanding Balance: $8.2. Program: Totals; Gross Outstanding Balance: $197.6. [A] Amount outstanding for CPP excludes about $2.3 billion which Treasury has written off. [End of table] Status of U.S. Government Ownership of Selected Companies: Figure: U.S. Government Ownership (Common Equity) Percentages: [Refer to PDF for image: horizontal bar graph] Company: AIG; U.S. Government Ownership (Common Equity): 79.8%. Company: GM; U.S. Government Ownership (Common Equity): 60.8%. Company: GMAC; U.S. Government Ownership (Common Equity): 56.0%. Company: Citigroup; U.S. Government Ownership (Common Equity): 27.1%. Company: Chrysler; U.S. Government Ownership (Common Equity): 9.9%. AIG, GM, and Chrysler—As of Sept. 30, 2009; GMAC and Citigroup — As of Dec. 31, 2009. All percentages relate to TARP, except for AIG which relates to the U.S. Government's beneficial interest in a trust. Also, the percentages only represent common equity and do not reflect additional financial instruments held by the U.S. Government in these entities (e.g., preferred stock, warrants, and direct loans). [End of figure] GAO's Ongoing and Future Monitoring Efforts: * Capital Purchase Program, * Home Affordable Modification Program, * Automobile Industry Financing Program, * AIG, * Small Business Lending Initiatives, * Stress tests, and, * Decision to Extend TARP. Examples of Need for Transformation: * Financial Regulation; * Postal Service; * FDA: Medical Device Safety. 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) Financial 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. U.S. Postal Service Financial Viability: * The Postal Service's business model is not viable due to its inability to reduce costs sufficiently in response to continuing mail volume and revenue declines. * Mail volume is projected to decline by about 27 billion pieces over the next decade, while revenues will stagnate, and costs will rise. * Given its financial problems and outlook, the Postal Service cannot support its current level of service and operations. Figure: Actual and Projected Total Mail Volume, Fiscal Years 1971 through 2020: [Refer to PDF for image: line graph] Fiscal year: 1971; Mail pieces: 87.0 billion. Fiscal year: 1972; Mail pieces: 87.2 billion. Fiscal year: 1973; Mail pieces: 89.7 billion. Fiscal year: 1974; Mail pieces: 90.1 billion. Fiscal year: 1975; Mail pieces: 89.3 billion. Fiscal year: 1976; Mail pieces: 89.8 billion. Fiscal year: 1977; Mail pieces: 93.2 billion. Fiscal year: 1978; Mail pieces: 96.9 billion. Fiscal year: 1979; Mail pieces: 99.8 billion. Fiscal year: 1980; Mail pieces: 106.3 billion. Fiscal year: 1981; Mail pieces: 110.1 billion. Fiscal year: 1982; Mail pieces: 114.0 billion. Fiscal year: 1983; Mail pieces: 119.4 billion. Fiscal year: 1984; Mail pieces: 131.5 billion. Fiscal year: 1985; Mail pieces: 140.1 billion. Fiscal year: 1986; Mail pieces: 147.4 billion. Fiscal year: 1987; Mail pieces: 153.9 billion. Fiscal year: 1988; Mail pieces: 161.0 billion. Fiscal year: 1989; Mail pieces: 161.6 billion. Fiscal year: 1990; Mail pieces: 166.3 billion. Fiscal year: 1991; Mail pieces: 165.9 billion. Fiscal year: 1992; Mail pieces: 166.4 billion. Fiscal year: 1993; Mail pieces: 171.2 billion. Fiscal year: 1994; Mail pieces: 178.0 billion. Fiscal year: 1995; Mail pieces: 180.7 billion. Fiscal year: 1996; Mail pieces: 183.4 billion. Fiscal year: 1997; Mail pieces: 190.9 billion. Fiscal year: 1998; Mail pieces: 196.9 billion. Fiscal year: 1999; Mail pieces: 201.6 billion. Fiscal year: 2000; Mail pieces: 207.9 billion. Fiscal year: 2001; Mail pieces: 207.5 billion. Fiscal year: 2002; Mail pieces: 202.8 billion. Fiscal year: 2003; Mail pieces: 202.2 billion. Fiscal year: 2004; Mail pieces: 206.1 billion. Fiscal year: 2005; Mail pieces: 211.7 billion. Fiscal year: 2006; Mail pieces: 213.0 billion. Fiscal year: 2007; Mail pieces: 212.2 billion. Fiscal year: 2008; Mail pieces: 202.7 billion. Fiscal year: 2009; Mail pieces: 177.1 billion. Fiscal year: 2010; Mail pieces: 166.1 billion. Fiscal year: 2011; Mail pieces: 164.0 billion. Fiscal year: 2012; Mail pieces: 164.6 billion. Fiscal year: 2013; Mail pieces: 164.6 billion. Fiscal year: 2014; Mail pieces: 161.6 billion. Fiscal year: 2015; Mail pieces: 158.6 billion. Fiscal year: 2016; Mail pieces: 155.5 billion. Fiscal year: 2017; Mail pieces: 153.3 billion. Fiscal year: 2018; Mail pieces: 151.4 billion. Fiscal year: 2019; Mail pieces: 150.0 billion. Fiscal year: 2020; Mail pieces: 148.9 billion. Source: USPS. Projected fiscal year 2020 volume: About 150 billion mail pieces, the lowest level since fiscal year 1986. [End of figure] * Without major changes in its operations, the Postal Service projects that annual financial losses will escalate over the next decade to $33 billion in fiscal year 2020. Figure: USPS Actual and Projected Net Income (Loss), Fiscal Years 2000 through 2020: [Refer to PDF for image: vertical bar graph] Fiscal year: 2002; Actual: -$0.68 billion. Fiscal year: 2003; Actual: $3.87 billion. Fiscal year: 2004; Actual: $3.07 billion. Fiscal year: 2005; Actual: $1.45 billion. Fiscal year: 2006; Actual: $0.9 billion. Fiscal year: 2007; Actual: -$5.14 billion. Fiscal year: 2008; Actual: -$2.81 billion. Fiscal year: 2009; Actual: -$3.79 billion. Fiscal year: 2010; Projected: -$7.8 billion. Fiscal year: 2011; Projected: -$11.75 billion. Fiscal year: 2012; Projected: -$15.14 billion. Fiscal year: 2013; Projected: -$16.99 billion. Fiscal year: 2014; Projected: -$19.77 billion. Fiscal year: 2015; Projected: -$22.56 billion. Fiscal year: 2016; Projected: -$25.6 billion. Fiscal year: 2017; Projected: -$24.62 billion. Fiscal year: 2018; Projected: -$26.98 billion. Fiscal year: 2019; Projected: -$30.11 billion. Fiscal year: 2020; Projected: -$33.07 billion. Source: USPS. [End of figure] Action by Congress and the Postal Service urgently needed to facilitate progress: (1) more aggressive action needed to realign Postal Service operations and its workforce while increasing revenues within its current authority, using the collective bargaining process to address wages, benefits, and workforce flexibility; and; (2) Congress needs to address legal restrictions and resistance to broader changes in the postal network and workforce. The longer it takes for Congress and the Postal Service to address these challenges, the more difficult they will be to overcome. Need for Transformation: FDA and Medical Product Safety: FDA is an agency in need of considerable transformation: * Serious concerns exist regarding its oversight of the safety of drugs and medical products. * Concerns have been raised by Congress, CRS, IOM, the HHS-OIG, and FDA’s own Science Board. * We added FDA’s oversight of medical products to our High-Risk List in January 2009. Challenges include globalization and data and resource management. We recommended that FDA: * Conduct more inspections of foreign establishments and improve the data it uses to manage its foreign inspection program. * Take steps to establish a comprehensive and reliable basis for substantiating its resource needs. Additional safety related challenges include postmarket safety and Safe Medical Device Act. We recommended that FDA: * Develop a comprehensive plan for transferring certain postmarket safety decisions to another component of the agency. * Expeditiously take steps to reclassify device types to appropriately reflect their true risk level. [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. [End of presentation]