GAO-09-505CG

KEY FISCAL CHALLENGES 

THE ACCOUNTABILITY CO

Before the 2009 AGA Southeast R

Professional Development Confe

Nashville, TN

April 2, 2009

By Gene L. Dodaro

Acting Comptroller Genera
GAO-09-505CG

Outline

• Financial Markets and Economic Recovery• Transition – New President and Congress• Long-Term Fiscal Outlook and Risks
GAO-09-505CG

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

$580 billion in additional spending (CBO Es
GAO-09-505CG

American Recovery & Reinvest

• Inspectors General review federal progra

implementation 

• Recovery Accountability and Transparen• GAO responsibilities include:

• conducting bimonthly reviews of sele

localities 

• commenting on the estimates of the n• reviewing areas such as trade adjus

assistance, new education incentive efforts to increase small business len
GAO-09-505CG

American Recovery & Reinvest
GAO-09-505CG

American Recovery & Reinvest

Challenges for the federal, state and local accountabi

• Expectations for “an unprecedented level of tra

accountability” 

• Qualified personnel need to implement proper c

accountability at all levels of government

• Close federal, state, and local government coo• Experience has shown that the risk for fraud an

when billions of dollars are going out quickly, eare being established or changed, and new procreated
GAO-09-505CG

Financial Institutions and 

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

Government Financial Statements

• Financial Regulatory System
GAO-09-505CG

Financial Institutions and 

• Emergency Economic Stability Act of 2008 

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-09-505CG

Modernizing The U.S. Fi

Regulatory System

Financial Regulation: A Framework for Crafting 

Proposals to Modernize the Outdated U.S. FinRegulatory System (GAO-09-216, Jan. 8, 2009

• 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-09-505CG

Regulatory System Out

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-09-505CG

Crafting or Assessing Regulatory Ref

GAO Framework—9 Essential Cha

• 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-09-505CG

Transition: Assisting Th

Administration & The New 
GAO-09-505CG
GAO-09-505CG

GAO-09-505CG

Other Urgent Issue

Timely Action Critic

• U.S. Efforts in Iraq, Afghanistan, and Pakistan• Defense Readiness, Spending, and Care for Se• Protecting the Homeland and Preparing for Pub

Emergencies

• Improving U.S. Image Abroad• Food Safety • Transition to Digital TV
GAO-09-505CG

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
GAO-09-505CG

Long-Term Fiscal Challe

-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.
GAO-09-505CG

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
GAO-09-505CG

Federal Financial Manag

Need to Continue Pro

• Significant improvements in federal financi

but still a long way to go

• Information for decision-making must be re
GAO-09-505CG

Federal Financial Manag

Key Challenges

• Improve internal control—greater accountability and 

payments

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

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 effectivenes

accountability requirements and practices 
GAO-09-505CG

2009 HIGH-RISK LIS

30 items grouped into four categories:

• Broad-Based Transformation Challe

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

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

(e.g., Medicare, Medicaid, PBGC, flood 
GAO-09-505CG

Latest High-Risk List Add

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

Products

• Transforming EPA’s Processes for Assessing 

Toxic Chemicals
GAO-09-505CG

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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