GAO-09-510CG

CHALLENGES FACING T

ADMINISTRATION AND 

111TH CONGRESS

Before the JFMIP 2009

Federal Financial Management Confere

Washington, DC

March 12, 2009

By Gene L. Dodaro

Acting Comptroller General
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Assisting the New Admin

& the New Congres
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Financial Markets a

Economic Recover

• Financial Regulatory System• GAO Role in Financial Rescue • Auditors of Bank Insurance Fund, FHFA, T

Government Financial Statements

• American Recovery and Reinvestment Act
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Modernizing the U.S. Fin

Regulatory System

Financial Regulation: A Framework for Crafting 

Proposals to Modernize the Outdated U.S. FinRegulatory System

• Explains the origins of the current fi

regulatory system

• Describes market developments an

pose challenges to the current syste

• Presents an evaluation framework t

and others can use to craft or evaluregulatory reform efforts. 

(GAO-0
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Outdated Regulatory S

Risks posed by:• Emergence of large, complex, and inter

financial conglomerates

• Less-regulated entities are playing incre

roles in the financial system

• New and complex products pose challe

stability and consumer protection
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For Crafting or Assessing Re

Reform Proposals: GAO Fram

9 Essential Characteris

• Clearly defined regulatory goals in statute • Appropriately comprehensive• Systemwide focus• Flexible and adaptable• Efficient and effective• Consistent consumer and investor protectio• Regulators provided with independence, pr

authority, and accountability

• Consistent financial oversight• Minimal taxpayer exposure
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Financial Institutions and 

• Emergency Economic Stability Act of 2008 • GAO given statutory oversight role• GAO’s TARP reports recommendations fo

• Monitoring the use of funds to meet the • Articulating a better communication stra• Ensuring effective Treasury manageme
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American Recovery & Reinve• Signed February 17, 2009• Purpose:

• preserve and create jobs and promote • assist those most impacted by the rece• invest in science and health-care techn• invest in infrastructure• stabilize state and local government bu

• Total cost, tax and spending: $787 billion, i

• over $580 billion in additional spending 
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American Recovery & Reinvest

Federal Auditor Responsibilities• IGs: review federal program and agency implementati• Recovery Transparency and Accountability Board• GAO: range of responsibilities include:

• conducting bimonthly reviews of selected state an

funds

• commenting on the estimates of the number of jo

number of jobs retained

• reviewing areas such as trade adjustment assista

incentive grants, and efforts to increase small bus
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American Recovery & Reinvest

Preparing for Our Responsibilities• Selection of states and localities• Outreach to IGs, state and local governme

• recent meetings of IGs and GAO staff • teleconferences with State Auditors • teleconference with Local Auditors

• Ongoing coordination
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Other Urgent Issue

Timely Action Is Crit

• U.S. efforts in Iraq, Afghanistan, and Pakis• Defense readiness, spending, and care for • Protecting the homeland and preparing for 

emergencies

• Improving U.S. image abroad• Food safety • Transition to digital TV
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2009 High-Risk Lis

30 items grouped into four categories:

• Broad-Based Transformation Challe

(e.g., DOD, DHS, surface transportaoversight)

• Federal Contracting• Tax Law Administration• Insurance and Benefit Programs 

(e.g., Medicare, Medicaid, PBGC, flo
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Latest High-Risk List Add

• Modernizing the Outdated U.S. Financial Reg• Protecting Public Health through Enhanced O

Medical Products

• Transforming EPA’s Processes for Assessing 

Toxic Chemicals
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Long-Term Challeng

• Today’s focus—understandably—is on

• Dealing with financial system stress • Addressing the economic downturn

• BUT.... Underlying issues still need to be a

• Long-term fiscal challenge• Sustaining progress on federal financia
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Long-Term Fiscal Chal

-20-15-10

-5

05

2005 2010 2015 2020 2025 2030 2035 

Fiscal year

Percent of GDP

Combined 

Surplus/Deficit

Source: GAO January 2009 analysis.aFederal surplus/deficit is from GAO’s Alternative Simulation using the Trustees’ assumptions.
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Long-Term Fiscal Challe

Driven by Health Care Spe

05

1015202530

2008 2020 2030 2040 2050 2060 

Social Security

Medicaid

Medicare

Source: GAO analysis of data from the Office of the Chief Actuary, Social Security Administration, Office of the Services, and the Congressional Budget Office.Note: Social Security and Medicare projections based on the intermediate assumptions of the 2008 Trustees’ RCBO’s January 2009 short-term Medicaid estimates and CBO’s December 2007 long-term Medicaid projections consistent with the 2008 Trustees intermediate assumptions.

Percent of GDP
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Federal Financial Manag

Need to Continue Pro

• Significant improvements in federal financia

but still a long way to go

• Important to ensure that information for dec

reliable
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Federal Financial Manag

Key Challenges

• Improve internal control—enhanced accountab

improper payments

• Obtain clean opinion on U.S. government’s con

statements

• Improve extent and reliability of cost information 

federal program operations

• Implement more-effective federal financial man• Improve federal contract and grant accountabil• Streamline and enhance relevance and effectiv

accountability requirements and practices 

• Maintain credibility and accountability as the fed

takes on significant new responsibilities
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On the Web

Web site: www.gao.gov/cghome.htm

Contact

Chuck Young, Managing Director, Public AffairsYoungC1@gao.gov (202) 512-4800 

U.S. Government Accountability Office441 G Street NW, Room 7149Washington, D.C. 20548

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