GAO-09-952-CG

ENSURING ACCOUNTABILITY IN 

FINANCIAL AND FISCAL ST

NASACT 2009 Annual Confere

Dearborn, Michigan

August 17, 2009

By Gene L. Dodaro

Acting Comptroller General of the United 

U.S. Government Accountability Offi
GAO-09-952-CG

Outline

• American Recovery & Reinvestment Act• Financial Institutions and Markets

• Long-Term Fiscal Outlook
GAO-09-952-CG

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-09-952-CG

American Recovery & Reinves

GAO responsibilities include:

• conducting bimonthly reviews of selecte

localities’ use of 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-09-952-CG

American Recovery & ReinveState and Local Reporting Strategy for Bimo• Longitudinal study of 16 states and the District o

• About two-thirds of population and two-third

intergovernmental assistance funds 

• Localities sampled within selected states
GAO-09-952-CG

American Recovery & Reinves
GAO-09-952-CG

Reporting Objective

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

evaluations

• Plans to evaluate the impact of funds
GAO-09-952-CG

Programs in GAO Review:

87% of estimated Fiscal Year 2009 Federa

Outlays to States and Localit

Source: GAO analysis of data from CBO and Federal Funds Information for States.
GAO-09-952-CG

Projected versus Actual Federal Out

and Localities under the Recov

Source: GAO analysis of data from CBO, Recovery.gov and Federal Funds Information for States.

0

20406080

100120

2009 2010 2011 2012 2013 2014 

Fiscal year

Estimated$37.2 billion in Actuaas of July 24, 2009

Outlays in billions of dollars
GAO-09-952-CG

Composition of State and Local Recover

Fiscal Year 2009 versus Fiscal Ye

Source: GAO analysis of CBO and FFIS data.
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GAO Recommendatio

Overview

• Accountability and Transparency

• Leverage Single Audit as an effective oversight 

 Move to earlier reporting on internal controls  Focus on Recovery Act programs  Give relief for low-risk programs Fund more timely, effective Single Audits 

• Reporting on Impact

• Provide examples of reporting on jobs created a

• Clarify new or existing program performance me

• Communications and Guidance

• Clarify data quality and reconciliation requireme• Specify data certification and approval requirem• Ensure more direct communication on funds flow

Source: GAO.
GAO-09-952-CG

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-09-952-CG

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-09-952-CG

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

accountability and transparency and follow 

• Monitoring the use of funds to meet the 

• Articulating a better communication stra• Ensuring effective Treasury manageme

GAO-09-952-CG

Financial Institutions and M

FDIC’s Deposit Insurance 

Most recent audit of financial statements comClean 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

Through August 7th, 72 federally insured finan

have failed in 2009

• 305 institutions were on the problem ins

March 31, 2009)
GAO-09-952-CG

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-09-952-CG

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-09-952-CG

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-09-952-CG

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-09-952-CG

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: GAO will u

simulations this fall
GAO-09-952-CG

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-09-952-CG

Debt Held by the Public Under th

Fiscal Year 2010 Budg
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Marketable Securities by Year of Matu

30, 2009 (Total Outstanding—$6,6
GAO-09-952-CG

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-09-952-CG

Revenues and Composition of SpendinGDP Under GAO’s Alternative SimulatiSource: GAO’s March 2009 analysis.
GAO-09-952-CG

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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