GAO-09-382CG

GAO’S WORK ON TODAY’S HIG

ISSUES AND LONG –TERM CHA

Before the Arizona Society of CPA

Phoenix, Arizona

February 6, 2009

By Gene L. Dodaro

Acting Comptroller General
GAO-09-382CG

Outline

• Financial Institutions and Markets• GAO’s 2009 High Risk Update• Long-Term Challenges
GAO-09-382CG

Financial Institutions and 

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

Government Financial Statements
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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Proposals to Modernize the Outdated U.S. FinRegulatory System (GAO-09-216, Jan. 8, 2009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.
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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
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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-09-382CG

Financial Institutions and 

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

• Monitoring the use of funds to meet the Act• Articulating a better communication strateg• Ensuring effective Treasury management s
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Improving Financial Lit

• Given the complex nature of financial prod

literacy is more important than ever

• Federal efforts to educate consumers are 

well coordinated

• AICPA initiatives important
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GAO’s High-Risk Progr

• Since 1990—updated biennially for each new C• Initial focus on fraud, waste, abuse, and misma• Evolved to also identify needed broad-based tr
GAO-09-382CG

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 
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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
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GAO’s High-Risk Prog

Making an Impact

• Promoted sustained congressional attentio

problems—oversight and legislative action

• Provided an impetus for the legislative fram

governmentwide management reforms

• Encouraged recent administrations to give 

addressing related challenges
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Transition: Assisting Th

Administration & The New 
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G
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G
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Urgent Issues:

Timely Action Critic

EXAMPLES:• 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
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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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Fiscal Downturn:

Outlook for State and Loc

-6-4-2

02

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 

Percent of GDP

Operating Surp

Source: Historical data from National Income and Product Accounts. Historical data from 1980 – 2007, 

2008 – 2050 using many CBO projections and assumptions, particularly for next 10 years.
GAO-09-382CG

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.
GAO-09-382CG

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 financi

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 accountability a

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-09-382CG

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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