GAO-08-720CG

Working to Improve Accountability Evolving Environment

2008 Maryland Association of CPAs’ Government and Not-for-Profit ConferenceCollege Park, MDApril 18, 2008Gene L. DodaroActing Comptroller General of the United States 
GAO-08-720CG 

Presentation Outlin

• Current and emerging fiscal challe• Auditing and advising in a time of t• Challenges and opportunities for th

accountability community
GAO-08-720CG 

Current and 

Emerging Fisc

Challenges
GAO-08-720CG 

Composition of Federal S

21%

10%

14%

27% 28%

2%

7%

14%

32%

45%

1967 1987 

Defense Social Security

Net interest

All other spending

Source: GAO analysis of data from the Office of Management and Budget.
GAO-08-720CG 

Federal Spending for Man

and Discretionary Progr

(Trends and Projection

0%

20%40%60%80%

100%

1962 1970 1980 1990 2000 

Percent of total outlays

Discretionary

Mandatory

Net interest

Sources: Office of Management and Budget and the Congressional Budget Office.

Net Interest
GAO-08-720CG 

Social Security, Medicare, and 

Spending as a Percent of 

(Current and Projected)

05

1015202530

2008 2020 2030 2040 2050 206

Percent of GDP

Social Secur

Medicaid

Medicare

Source: GAO analysis of data from the Office of the Chief Actuary, Social Security AdministratiMedicare and Medicaid Services, and the Congressional Budget Office.Note: Social Security and Medicare projections based on the intermediate assumptions of the 2projections based on CBO’s January 2008 short-term Medicaid estimates and CBO’s Decembeprojections adjusted to reflect excess cost growth consistent with the 2008 Trustees intermediat
GAO-08-720CG 

Major Fiscal Exposu

($ trillions)

2000 

• Explicit liabilities $6.9• Commitments & contingencies 0.5

13.0

3.89.2

$20.4

• Implicit exposures

• Future Social Security benefits• Future Medicare benefits

Total

Source: 2000 and 2007 Financial Report of the United States Government.Note: Totals and percent increases may not add due to rounding. Estimates for Social present value as of January 1 of each year and all other data are as of September 30. 
GAO-08-720CG 

Perspective on Fiscal B

This fiscal burden can be translated and compare

Total –major fiscal exposures 

Burden/Net worth ratio 

Income

Median household income3 

Burden2

Per household 

Total household net worth1 

Per person Per full-time worker Disposable personal income per capita4 

Source: GAO analysis.Notes: (1) Federal Reserve Board, Flow of Funds Accounts, Table B.100, 2007:Q3 (December 6, 2007); total U.S. population as of 10/1/2007, from the U.S. Census Bureau; full-time workers reported by the Bure

6.5D (Aug. 1, 2007); and households reported by the U.S. Census Bureau, in Income, Poverty, and Health 

2006 (Aug. 2007); (3) U.S. Census Bureau, Income, Poverty, and Health Insurance Coverage in the Unite

of Economic Analysis, Personal Income and Outlays, table 2, (Nov. 29, 2007). 
GAO-08-720CG 

Potential Fiscal Outco

Under Alternative Simulation 

Revenues and Composition of Spending as a 

0

1020304050

2007 2018 2030 

Fiscal year

Net interest Social Security Medicare & Medicaid 

Revenue

Percent of GDP

Source: GAO’s January 2008 analysis.Note: Discretionary spending grows with GDP after 2008. AMT exemption amount is retained at the 2007 level thare extended. After 2018, revenue as a share of GDP returns to its historical level of 18.3 percent of GDP plus e

i.e. taxes on withdrawals from retirement accounts. Medicare spending is based on the Trustees April 2007 projeMedicare and Medicaid Services alternative assumption that physician payments are not reduced as specified un
GAO-08-720CG 

0

20406080

100120

1797 1820 1840 1860 1880 1900 1920 1940 

Debt Held by the Public as 

of GDP (1797-2007

Percent of GNP/GDP

Source: GAO analysis of data from the Department of Commerce, Office of Management and Budget, anNote: Data until 1929 are shown as a percent of gross national product (GNP); data from 1930 to present 
GAO-08-720CG 

Debt Held by the Pu

Under GAO’s Alternative S

0

50

100150200

2000 2010 2020 2

Fiscal year

Percent of GDP

Source: GAO’s January 2008 analysis.
GAO-08-720CG 

Foreign Ownership Share of F

Held by the Public Has Inc

62%

10%

28%

40%

15%

FY 20

Total Debt Held 

Public: $5.04 tr

Foreign and international investors Federal ReserveDomestic investors and state and local gov

Source: Department of the Treasury.Note: Totals and percent increases may not add due to rounding

FY 1996

Total Debt Held by the 

Public: $3.73 trillion
GAO-08-720CG 

Combined Governm

Fiscal Challenge

-20-15-10

-5

05

2000 2005 2010 2015 2020 2025 2030 2035 

Fiscal year

Fe

Surplu

Combined 

Surplus/Deficit

Percent of GDP

Source: Historical data from National Income and Product Accounts, GAO Analysis.Note: Historical data from 2000 – 2006, projections from 2007 – 2050; state and local balance measure imeasure. Federal Simulation Assumptions: Discretionary spending grows with GDP after 2007. AMT exelevel through 2017 and expiring tax provisions are extended. After 2017, revenue as a share of GDP retof GDP plus expected revenues from deferred taxes, i.e. taxes on withdrawals from retirement accounts. Trustees’ April 2007 projections adjusted for the Centers for Medicare and Medicaid Services’ alternative are not reduced as specified under current law.
GAO-08-720CG 

Consumer Debt Has Inc

as a Share of GDP (1960

0.05.0

10.015.020.025.0

1960 1965 1970 1975 1980 1985 1990 19

Source: Federal Reserve Board, Bureau of Economic Analysis. 

Percent of GDP
GAO-08-720CG 

Personal Saving Has De

as a Share of GDP (1960

0.02.04.06.08.0

10.0

1960 1965 1970 1975 1980 1985 1990 

Source: Bureau of Economic Analysis. 

Percent of GDP
GAO-08-720CG 

GAO’s Range of Tools to 

Fiscal Sustainability and Governmen

GAO’s reports focus on:

• The long-term fiscal outlook• The urgency and importance o

stewardship

• Understanding basic budgeting • Deciphering the consolidated f

statement

http://www.gao.gov/special.pubs/long
GAO-08-720CG 

Auditing and Adv

in a Time of Trans
GAO-08-720CG 

Upcoming Transitio

This November:• A new president will be elected—the 

since 1952 that there is neither an inPresident nor Vice President runnin

• Every House seat and a third of all S

are up for election

• Eleven states and two territories wil

gubernatorial elections
GAO-08-720CG 

Presidential Transition 

• Enacted in 1964 for an orderly t

executive power

• Provides federal funding for:

• Office space• Equipment• Payment of salaries and tr

expenses for transition tea
GAO-08-720CG 

Presidential Transition 

Funding and Knowledge 

• To address potential conflicts of inte

appearance, the President-elect anPresident-elect agree to:

• Disclose all non-federal funding received • Make available to GSA and GAO such in

auditing purposes

• Disclose publicly the names and recent e

history of all transition personnel and sou

• In 2000, amendments recognized th

importance of GAO briefings for incofficials
GAO-08-720CG 

GAO’s Evolving Strategy 

the Congress and the N

• Continue identifying major risks, 21s

challenges, and opportunities

• Press forward on key management • Sustain attention on the nation’s lon

imbalance
GAO-08-720CG 

GAO’s High-Risk Pro

• Covers four areas:

• Broad-based transformations• Federal contracting• Tax law administration• Insurance and benefit programs

• Provides impetus for government-w• Promotes sustained congressional • Influences the President’s manage
GAO-08-720CG 

Broad-based Transform

Government-Wide

• Strategic human capital manageme• Managing federal real property• Protecting the federal government’s 

systems and the nation’s critical infr

• Financing the nation’s transportation • Ensuring the effective protection of t

critical to U.S. national security inter

• Transforming federal oversight of fo
GAO-08-720CG 

Broad-based Transform

Agency-Specific

• Implementing and transforming DHS 

establishing appropriate and effectivsharing mechanisms

• DOD’s approach to business transfo• FAA’s air traffic control modernizatio• The 2010 Census
GAO-08-720CG 

DOD Business Transfor

DOD’s approach to business transfoincludes multiple high-risk areas:

• Weapons system acquisition• Personnel security clearance p• Support infrastructure managem• Financial management• Supply chain management• Business systems modernizatio
GAO-08-720CG 

2010 Census

Long-standing deficiencies and emechallenges with the Census include:

• Shortcomings in managing info

technology 

• Uncertainty of cost estimates• The elimination of several dres

activities
GAO-08-720CG 

Remaining High-Risk A

Federal Contracting:

• DOD, DOE, and NASA contract mana• Interagency contracting

Tax Law Administration:

• Tax law enforcement• IRS’ business systems modernization

Insurance and Benefit Programs:

• Federal disability programs’ moderniz• PBGC Single-Employer Pension Insu• Medicare and Medicaid• National Flood Insurance Program 
GAO-08-720CG 

Removing High-Risk Desi

The following factors contribute to GAto remove an area from our list:

• Demonstrated top leadership co• Capacity (people and resources)• Action plan• Meaningful progress that is susta• Monitoring and validation proced
GAO-08-720CG 

Adding High Risk Are

• Substantial federal dollars at risk• National significance• Key management function• Inherent risk or systemic problem• Qualitative and quantitative factors (e.g

health or safety and/or national securit

Decisions made with awareness of IG w
GAO-08-720CG 

Examples of CG Forums A

21st Century Challen

Global Competitiveness and Higher Education 

Federal FinancImprovement A

Financial Sustainability and Health Care Financial MarkNational Transportation Policy Risk ManagemDisability Policies & Programs Tax GapEnvironmental Accounting Defense AcquOlder Workers CMO/COO Co
GAO-08-720CG 

Challenges an

Opportunities f

the Accountabi

Community
GAO-08-720CG 

U.S. Government Conso

Financial Statemen

Positive Developments:• GAO issued first unqualified opinion 

year 2007 Consolidated Statement Insurance

• In February 2008, Treasury and OM

first-ever "Citizens’ Guide" summary U.S. government:

http://www.gao.gov/financial/fy2007financ
GAO-08-720CG 

U.S. Government Conso

Financial Statemen

Major impediments:• Serious financial management pro

DOD

• Inability to adequately account for 

intra-governmental activity and bal

• Ineffective process for preparing th

consolidated financial statements
GAO-08-720CG 

Maintain Efforts to Ac

CFO Act Goals

• Continue attention on individual aud

statements and performance and acresults

• 19 of 24 received clean opinions for 

up from 6 in 1996

• Work needed on certain key federal 
GAO-08-720CG 

Long-Standing Finan

Management Systems I

A recent CG Forum on improving finanmanagement systems highlighted seveissues:

• Many agency systems do not comply 

requirements

• Agencies struggle with modernization • Not enough emphasis on the needs o

managers

The final Forum report was released thWednesday (GAO-08-447SP)
GAO-08-720CG 

Why Improving 

Financial Literacy is Imp

Financial literacy is important for threreasons:

• The number and complexity of financi

have grown tremendously

• Technological advances have increas

for targeted marketing to consumers

• Workers today are increasingly respon

managing their own retirement saving

Ensuring that Americans have the knskills to manage their money wisely iimproving the economic health of ou
GAO-08-720CG 

GAO’s Efforts to Incre

Financial Literacy

• Discussing the fiscal condition in GAO rep

and presentations

• Hosting a Comptroller General Forum on 

Literacy in November 2004 (GAO-05-93S

• Reporting and testifying on the progress o

Literacy and Education Commission (GAO

GAO-07-777T)

• Supporting the efforts of the AICPA’s 360

Literacy Campaign
GAO-08-720CG 

Additional Consideration

Accountability Comm

• Estimates of improper payments are 

progress is being made

• Continued support by states needed a

agencies develop or refine estimation for state-administered federal program

• Implementation and use of manage

accounting varies by agency

• Persistent single audit quality proble

grants management and accountab
GAO-08-720CG

Working to Improve Accountability Evolving Environment

2008 Maryland Association of CPAs’ Government and Not-for-Profit ConferenceCollege Park, MDApril 18, 2008Gene L. DodaroActing Comptroller General of the United States 
GAO-08-720CG 

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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