GAO-09-847CG

ENSURING ACCOUNTABILITY IN 

FINANCIAL AND FISCAL ST

Association of Government Acco

Professional Development Confe

New Orleans, Louisiana

June 23, 2009

By Gene L. Dodaro

Acting Comptroller General of the United 

U.S. Government Accountability Offi
GAO-09-847CG

Outline

• American Recovery & Reinvestment Act• Financial Institutions and Markets

• Long-Term Fiscal Outlook and Risk
GAO-09-847CG

American Recovery & Reinves

• 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, 

$580 billion in additional spending (CBO Est
GAO-09-847CG

American Recovery & Reinves

GAO responsibilities include:

• conducting bimonthly reviews of selecte

localities’ use of the funds 

• commenting on recipient reports on the 

created or preserved

• reviewing areas such as trade adjustme

new education incentive grants, and effosmall business lending

• monitoring downturn’s long-term effect o

(health care costs)
GAO-09-847CG

American Recovery & Reinvest

State and Local Reporting Strategy for Bimo• Longitudinal study of 16 states and the Dist

• A number of localities within selected st

• Program-specific review across states

• April report focused on 3 largest: increa

FMAP funding; Highway Infrastructure Fiscal Stabilization Funds

• Forthcoming reports to cover additional 
GAO-09-847CG

American Recovery & Reinves
GAO-09-847CG

Reporting ObjectivesDescribe states’ and localities• Use of funds• Up-front safeguards and ongoing monit

evaluations

• Plans to evaluate the impact of funds
GAO-09-847CG

Timing of Federal Recovery Act Fu

Available to States and Loca

0

20406080

100120

2009 2010 2011 2012 2013 2014 

Fiscal year

Dollars in billions

Source: GAO analysis of CBO and FFIS data, April 2009
GAO-09-847CG

Composition of State and L

Recovery Act Funding

8%

18%

3%

64%

1%

6% Health

Education andTrainingTransportationIncome SecurityCommunityDevelopmentEnergy andEnvironment

Fiscal Year 2009 

Source: GAO analysis of CBO and FFIS data, April 2009
GAO-09-847CG

American Recovery & Reinves

Single Audits and Risks• Under the current approach, certain risks a

Recovery Act programs may not receive fuAlso, timing of audit reporting is problemati

• Unique challenges associated with Recove

• Sudden increase in funds that most rec

experiencing

• New government programs and progra

for the recipient entity

• Need for timely and efficient oversight i

Recovery Act’s accountability requirem
GAO-09-847CG

American Recovery & Reinves

GAO Recommendations on Au

• To provide additional leverage as an overs

Recovery Act programs, the Director of OMthe current audit process to:

• Focus the risk assessment auditors use 

programs to test for compliance with 20program requirements on Recovery Act 

• Provide for review of the design of inter

2009 over programs to receive Recovebefore significant expenditures in 2010; 

• Evaluate options for providing relief rela

requirements for low-risk programs to bresponsibilities associated with the Rec
GAO-09-847CG

American Recovery & Reinves

Other GAO Recommendati

• Administrative support to help states with o• Methodologies to determine jobs created a

• Communication with state and local recipie• Recipient reports and data collection requir
GAO-09-847CG

American Recovery & Reinves

Grant Applications

• Concern whether existing grants.gov infras

handle influx of applications as key deadlinOMB to direct agencies to develop alternat

• No centralized source of information on how 

alternatives

• Recommended OMB improve policies to he

disruptions to the grants application proceslikelihood that applicants can successfully a
GAO-09-847CG

American Recovery & Reinves

HIT Policy Committee & SBA• Appointment of 13 members to the Health 

Technology Policy Committee on April 3, 2

• On April 16 reported on Small Business Ad

to, among other things, increase liquidity in markets for SBA loans
GAO-09-847CG

American Recovery & Reinves

Challenges for federal, state and local offic

• Expectations for “an unprecedented level o

and accountability” 

• Qualified personnel need to implement pro

accountability at all levels of government

• Close and ongoing coordination needed am

federal, state, and local governments

• Accountability community: special respons

collective efforts are well-coordinated.
GAO-09-847CG

Financial Institutions and M

GAO Role in Financial Rescue • Troubled Asset Relief Program (TARP) ove• Auditors of FDIC’s Deposit Insurance Fund

and U.S. Government Financial Statements

• Financial Regulatory System• INTOSAI Task Force on Global Financial C
GAO-09-847CG

Financial Institutions and 

• Emergency Economic Stabilization Act of 2

billion TARP in October 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

GAO-09-847CG

Financial Institutions and M

FDIC’s Deposit Insurance Fund• Most recent audit of financial statements co

2009: Clean opinion but

• Reported losses from actual and anticip

$42 billion

• Reported Fund reserves of $17 billion w

statutory minimum level

• Highlighted additional exposures to Fun

financial institution failures and systemi
GAO-09-847CG

Financial Institutions and 

Consolidated Financial Statement Issues• Ultimate effect of federal government's acti

reflected in the U.S. government's consolidstatements for fiscal year 2009 and beyond

• Nature and magnitude of these actions hav

challenges for, among other things, federal 
GAO-09-847CG

Financial Institutions and M

Looking Ahead• Housing 

• Analysis of proposals for the structure o

Freddie Mac

• Review of Treasury's efforts to establish 

modification program

• Financial Regulation

• Framework for Modernizing the Financi

System 
GAO-09-847CG

Modernizing the U.S. Fin

Regulatory System

Financial Regulation: A Framework for Crafting 

Proposals to Modernize the Outdated U.S. FinaRegulatory 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
GAO-09-847CG

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
GAO-09-847CG

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
GAO-09-847CG

Global Financial Crisis Ta

• Created by International Governing Board in No• Purpose: 

• Enhance the knowledge base of NAOs on f

economic matters related to the crisis

• Provide a source of information to help gov

global community respond to the crisis 

• Membership: U.S.A. is lead, other countries inc

Austria Estonia Mexico S

Cyprus Hungary Morocco S

Canada Indonesia Netherlands U

Chile Italy Poland V

China Japan Russia

Denmark Korea Slovakia
GAO-09-847CG

Federal Financial Manage

Need to Continue Prog

• Significant improvements in federal financia

but still a long way to go

• Important to ensure that information for dec

reliable
GAO-09-847CG

Federal Financial Manage

Key Challenges

• Improve internal control—enhanced accountability an

payments

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

statements

• Improve extent and reliability of cost information for e

program operations

• Implement more effective federal financial managem• Improve federal grant accountability• Streamline and enhance relevance and effectiveness 

accountability requirements and practices 
GAO-09-847CG

Long-Term Challenge

• 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
GAO-09-847CG

Long-Term Fiscal Challe

Source: GAO. March 2009 simulationsNotes: Data from GAO’s simulations based on the 2008 Trustees’ assumptions for Social Secursimulations using CBO’s projections for Social Security and Medicare; the results are not materi

Debt Held by the Public as a Share of G

Under Two Fiscal Policy Simulation

0

50

100150200

2005 2010 2015 2020 2025 2030 2035 204

Fiscal year

Percent of GDP

Alternative

Historical High

109 percent in 1946
GAO-09-847CG

-20-15-10

-5

05

2005 2010 2015 2020 2025 2030 2035 2

Fiscal year

Percent of GDP

Federal and Combined Federal, S

Local Deficits as Shares of 

Source: GAO January 2009 analysis.Note: Federal surplus/deficit is from GAO’s Alternative Simulation based on the Trustees’ assumptio

also run simulations using CBO’s projections for Social Security and Medicare; the results are not m

Fe

d

Combined

deficit
GAO-09-847CG

Some Measures 

• Impact on Debt held by the public:

• FY 2005 actual: $4.6 trillion (37.5% 

• FY 2008 actual: $5.8 trillion (40.8% • FY 2009 projected: $8.5 trillion (59.9% • FY 2010 projected: $9.9 trillion (67.1% 

Impact on Social Security: • Projected gap between expected outlays & 

widened from $6.6 trillion in 2008 to $7.7 tr

• Negative cash flow 2016 (compared to 201

• Trust fund exhaustion 2037 (compared to 2
GAO-09-847CG

On the Web

Web site: www.gao.gov/cghome/index.html

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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