Transcript Work Conducted for The Congress

International Consortium on
Government Financial Management
May 8, 2006
Gene Dodaro
Chief Operating Officer
United States Government Accountability Office
Outline
• Achieving Federal Transformation
• Remaining Federal Challenges
• Modernizing the Accountability Profession
• Maximizing Key Partnerships
2
Foundation Laid for Federal
Transformation
• 1990-1995 – CFOs, Performance
and Accountability & Audit
Frameworks
• 1996-2000 – Financial Systems &
CIOs
• 2001-Present – Expansion of Audits
3
Transformation in Process
• Achieving Cultural Change
• Establishing Leadership Structure
• Addressing Financial Systems and Operations
• Preparing Auditable Financial Statements
4
Transformation in Process
• Preparing Accountability Reports
• Strengthening Internal Controls
• Developing New Accounting Standards
• Refining Audit Standards and Methods
5
Remaining Federal Challenges
• Addressing Structural Fiscal Imbalance
• Confronting Difficult High Risk Areas
• Improving U.S. Financial Statements
• Modernizing Systems and Controls
6
Remaining Federal Challenges
Addressing Long Term Structural
Fiscal Imbalance
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Federal Surplus or Deficit
as a Share of GDP
Fiscal Years 1797-2005
10 Percent of GNP/GDP
5
0
-5
-10
-15
-20
-25
-30
-35
1797
1820
1840 1860
1880 1900 1920
1940 1960
1980
2005
Fiscal Years
Note: Data until 1929 are shown as a percent of gross national product (GNP); data from 1930 to present are shown as a percent of GDP.
Source: Department of Commerce, Office of Management and Budget, and Congressional Budget Office.
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Estimated Fiscal Exposures
($ trillions)
2000
$6.9
2005
$9.9
0.5
0.9
13.0
35.6
– Future Social Security benefits
3.8
5.7
– Future Medicare Part A benefits
2.7
8.8
– Future Medicare Part B benefits
6.5
12.4
– Future Medicare Part D benefits
--
8.7
• Explicit liabilities
– Publicly held debt
– Military & civilian pensions & retiree health
– Other
• Commitments & contingencies
– E.g., PBGC, undelivered orders
• Implicit exposures
Total
$20.4 $46.4
Source: U.S. government’s consolidated financial statements (CFS).
Note: Estimates for Social Security and Medicare are at present value as of January 1 of each year as reported
in the CFS and all other data are as of September 30.
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How Big is Our
Growing Fiscal Burden?
2000
Total Fiscal Exposures
2005
$20.4 trillion $46.4 trillion
Burden
Per Person
$72,000
$156,000
Per Full-time Worker
$165,000
$375,000
Per Household
$189,000
$411,000
Sources: GAO analysis.
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Composition of Spending as a Share of GDP
Under Baseline Extended
50
Percent of GDP
40
30
Revenue
20
10
0
2005
2015
2030
2040
Fiscal year
Net Interest
Medicare & Medicaid
Social Security
All other spending
Notes: In addition to the expiration of tax cuts, revenue as a share of GDP increases through 2016 due to (1)
real bracket creep, (2) more taxpayers becoming subject to the AMT, and (3) increased revenue from taxdeferred retirement accounts. After 2016, revenue as a share of GDP is held constant.
Source: GAO’s January 2006 analysis.
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Composition of Spending as a Share of GDP
Assuming Discretionary Spending Grows with GDP after 2006
and All Expiring Tax Provisions are Extended
50
Percent of GDP
40
30
Revenue
20
10
0
2005
2015
2030
2040
Fiscal year
Net Interest
Social Security
Medicare & Medicaid
All other spending
Note: This includes certain tax provisions that expired at the end of 2005, such as the increased AMT exemption amount.
Source: GAO’s January 2006 analysis.
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Current Fiscal Policy Is
Unsustainable
• The “Status Quo” is Not an Option
• Faster Economic Growth Can Help, But It
Cannot Solve The Problem
• The Sooner the Better
13
The Way Forward
• Stimulate Public Education
• Use Budget Controls
• Improve Accounting and Reporting
• Re-examine Policies and Programs
14
21st Century
Challenges Report
15
Key National Indicators
• Portfolio of outcome-based measures
• Many initiatives underway
• Consortium housed by National Academies
• Related efforts by the OECD
16
Remaining Federal Challenges
Confronting Difficult High Risk Areas
17
GAO High-Risk Program
• Original list included 14 areas
• Since 1990, 30 areas have been added,
18 taken off or consolidated
• 26 areas on the current list
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High-Risk Categories
• Addressing Broad-based Transformations
• Managing Contracting More Efficiently
• Assessing Tax Law Administration
• Modernizing Insurance Benefit Programs
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GAO’s
HighRisk
List
High-Risk Areas
Designated High
Risk
Addressing Challenges in Broad-based Transformations
Protecting the Federal Government’s Information Systems and the Nation’s Critical
Infrastructures
Strategic Human Capital Managementa
U.S. Postal Service Transformation Efforts and Long-Term Outlooka
Managing Federal Real Propertya
Implementing and Transforming the Department of Homeland Security
Establishing Appropriate and Effective Information-Sharing Mechanisms to Improve
Homeland Security
DOD Approach to Business Transformationa
DOD Supply Chain Management (formerly Inventory Management)
DOD Weapon Systems Acquisition
DOD Business Systems Modernization
DOD Financial Management
DOD Support Infrastructure Management
DOD Personnel Security Clearance Program
1997
2001
2001
2003
2003
2005
2005
1990
1990
1995
1995
1997
2005
Managing Federal Contracting More Effectively
DOE Contract Management
NASA Contract Management
1990
1990
DOD Contract Management
Management of Interagency Contracting
1992
2005
Assessing the Efficiency and Effectiveness of Tax Law Administration
Enforcement of Tax Lawsa, b
IRS Business Systems Modernizationc
1990
1995
Modernizing and Safeguarding Insurance and Benefit Programs
Added
March 2006
Medicare Programa
HUD Single-Family Mortgage Insurance and Rental Housing Assistance Programs
Medicaid Programa
Modernizing Federal Disability Programsa
Pension Benefit Guaranty Corporation Single-Employer Insurance Programa
National Flood Insurance Program
1990
1994
2003
2003
2003
2006
Other
FAA Air Traffic Control Modernization
1995
a Legislation
is likely to be necessary, as a supplement to actions by the executive branch, in order to effectively address this high-risk area.
high-risk areas—Collection of Unpaid Taxes and Earned Income Credit Noncompliance—have been consolidated to make this area.
cThe IRS Financial Management high-risk area has been incorporated into this high-risk area.
bTwo
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Remaining Federal Challenges
Improving U.S. Government
Financial Statements
21
Progress in Agency
Audit Results
30
Audit Results for 24 CFO Act Agencies
25
20
15
10
5
0
2005
2000
1996
Unqualified
Qualified
Mixed
Disclaimed
(2005 includes the Department of Homeland Security (DHS), which became a CFO Act Agency
in FY 2005. FEMA, which became part of DHS, is included in prior years.)
22
The Federal Financial Audit
Environment
Main challenges for the U.S. financial
statements:
• Department of Defense
• Intergovernmental Transactions
• Financial Statement Preparation
23
Remaining Federal Challenges
Modernizing Systems and Controls
24
Limited FFMIA Progress
Auditors’ FFMIA Assessments
Fiscal Years 1997 through 2005
CFO Act Agencies Not In Compliance
24
18
12
6
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
Key Problems: Nonintegrated Systems and Weak Information Systems Security
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Modernizing
the Accountability Profession
• Defining success in financial management
• Accelerating reporting
• Opining on system of internal control
• Updating Auditing Standards
26
Modernizing
the Accountability Profession
• Monitoring implementation of the SarbanesOxley Act
• Exploring revised approaches to quality
assurance programs
27
Key GAO Partnerships
National
Audit
Forum
Good
Government
Organizations
INTOSAI
GAO
Professional
Associations
Others
GAO
Advisory
Groups
28
28
INTOSAI’s
Strategic
Plan
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Selected Countries that Have
Adopted or Adapted the Yellow Book
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Albania
Bangladesh
Benin
Bolivia
Ecuador
El Salvador
Ethiopia
Ghana
Guyana
Honduras
Indonesia
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Kenya
Malawi
Mongolia
Nepal
Panama
Senegal
South Africa
Thailand
Uganda
Viet Nam
Zimbabwe
30
Auditors General
Global Working Group
• 18 countries
• Discuss common issues and challenges
• Learn from each other
• Leverage knowledge and expertise
31
Performance Audit Peer Review
• GWG Initiative
• GAO Experience
– Seven Country Team
– Clean Opinion
– Global Good Practices
• INTOSAI Peer Review Subcommittee
32
Peer Review in the
21st Century Should
• Serve the public interest
• Evolve to meet changing circumstances
• Be principle based, not rule based
• Be based on value and risk
• Be integrated with other considerations
• Allow peer reviewer judgment
33
NIAF
Strategic Plan
34
Other Examples of
Coordination
• Domestic Working Group
• GAO meetings with Inspectors General
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International Consortium on
Government Financial Management
May 8, 2006
Gene Dodaro
Chief Operating Officer
United States Government Accountability Office
ICGFM
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