1. International Consortium on Government Financial Management May 8, 2006 Gene Dodaro Chief Operating Officer United States Government Accountability Office

2. 2 Outline Achieving Federal Transformation Remaining Federal Challenges Modernizing the Accountability Profession Maximizing Key Partnerships

3. 3 Foundation Laid for Federal Transformation 1990-1995 – CFOs, Performance and Accountability & Audit Frameworks 1996-2000 – Financial Systems & CIOs 2001-Present – Expansion of Audits

4. 4 Transformation in Process Achieving Cultural Change Establishing Leadership Structure Addressing Financial Systems and Operations Preparing Auditable Financial Statements

5. 5 Transformation in Process Preparing Accountability Reports Strengthening Internal Controls Developing New Accounting Standards Refining Audit Standards and Methods

6. 6 Remaining Federal Challenges Addressing Structural Fiscal Imbalance Confronting Difficult High Risk Areas Improving U.S. Financial Statements Modernizing Systems and Controls

7. 7 Remaining Federal Challenges Addressing Long Term Structural Fiscal Imbalance

8. 8 Federal Surplus or Deficit as a Share of GDP Fiscal Years 1797-2005 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. Percent of GNP/GDP

9. 9 Estimated Fiscal Exposures ($ trillions) 20002005 Explicit liabilities$6.9$9.9 –Publicly held debt –Military & civilian pensions & retiree health –Other Commitments & contingencies0.50.9 –E.g., PBGC, undelivered orders Implicit exposures13.035.6 –Future Social Security benefits3.85.7 –Future Medicare Part A benefits2.78.8 –Future Medicare Part B benefits6.512.4 –Future Medicare Part D benefits--8.7 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.

10. 10 How Big is Our Growing Fiscal Burden? 20002005 Total Fiscal Exposures$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.

11. 11 Composition of Spending as a Share of GDP Under Baseline Extended Revenue Social Security Medicare & Medicaid Net Interest All other spending Percent of GDP 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 tax- deferred retirement accounts. After 2016, revenue as a share of GDP is held constant. Source: GAO’s January 2006 analysis.

12. 12 Composition of Spending as a Share of GDP Assuming Discretionary Spending Grows with GDP after 2006 and All Expiring Tax Provisions are Extended Revenue Social Security Medicare & Medicaid Net Interest All other spending Percent of GDP 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.

13. 13 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

14. 14 The Way Forward Stimulate Public Education Use Budget Controls Improve Accounting and Reporting Re-examine Policies and Programs

15. 15 21 st Century Challenges Report

16. 16 Key National Indicators Portfolio of outcome-based measures Many initiatives underway Consortium housed by National Academies Related efforts by the OECD

17. 17 Remaining Federal Challenges Confronting Difficult High Risk Areas

18. 18 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

19. 19 High-Risk Categories Addressing Broad-based Transformations Managing Contracting More Efficiently Assessing Tax Law Administration Modernizing Insurance Benefit Programs

20. 20 GAO’s High- Risk List High-Risk AreasDesignated High Risk Addressing Challenges in Broad-based Transformations Protecting the Federal Government’s Information Systems and the Nation’s Critical Infrastructures 1997 Strategic Human Capital Management a 2001 U.S. Postal Service Transformation Efforts and Long-Term Outlook a 2001 Managing Federal Real Property a 2003 Implementing and Transforming the Department of Homeland Security2003 Establishing Appropriate and Effective Information-Sharing Mechanisms to Improve Homeland Security 2005 DOD Approach to Business Transformation a 2005 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 1990 1995 1997 2005 Managing Federal Contracting More Effectively DOE Contract Management1990 NASA Contract Management1990 DOD Contract Management1992 Management of Interagency Contracting2005 Assessing the Efficiency and Effectiveness of Tax Law Administration Enforcement of Tax Laws a, b 1990 IRS Business Systems Modernization c 1995 Modernizing and Safeguarding Insurance and Benefit Programs Medicare Program a 1990 HUD Single-Family Mortgage Insurance and Rental Housing Assistance Programs1994 Medicaid Program a 2003 Modernizing Federal Disability Programs a 2003 Pension Benefit Guaranty Corporation Single-Employer Insurance Program a National Flood Insurance Program 2003 2006 Other FAA Air Traffic Control Modernization1995 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. b Two high-risk areas—Collection of Unpaid Taxes and Earned Income Credit Noncompliance—have been consolidated to make this area. c The IRS Financial Management high-risk area has been incorporated into this high-risk area. 20 Added March 2006

21. 21 Remaining Federal Challenges Improving U.S. Government Financial Statements

22. 22 Progress in Agency Audit Results (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.) Audit Results for 24 CFO Act Agencies

23. 23 The Federal Financial Audit Environment Main challenges for the U.S. financial statements: Department of Defense Intergovernmental Transactions Financial Statement Preparation

24. 24 Remaining Federal Challenges Modernizing Systems and Controls

25. 25 Limited FFMIA Progress Auditors’ FFMIA Assessments Fiscal Years 1997 through 2005 Key Problems: Nonintegrated Systems and Weak Information Systems Security CFO Act Agencies Not In Compliance

26. 26 Modernizing the Accountability Profession Defining success in financial management Accelerating reporting Opining on system of internal control Updating Auditing Standards

27. 27 Modernizing the Accountability Profession Monitoring implementation of the Sarbanes- Oxley Act Exploring revised approaches to quality assurance programs

28. 28 Key GAO Partnerships GAO National Audit Forum INTOSAI Good Government Organizations Professional Associations GAO Advisory Groups 28 Others

29. 29 INTOSAI’s Strategic Plan 29

30. 30 Selected Countries that Have Adopted or Adapted the Yellow Book Albania Bangladesh Benin Bolivia Ecuador El Salvador Ethiopia Ghana Guyana Honduras Indonesia Kenya Malawi Mongolia Nepal Panama Senegal South Africa Thailand Uganda Viet Nam Zimbabwe

31. 31 Auditors General Global Working Group 18 countries Discuss common issues and challenges Learn from each other Leverage knowledge and expertise

32. 32 Performance Audit Peer Review GWG Initiative GAO Experience –Seven Country Team –Clean Opinion –Global Good Practices INTOSAI Peer Review Subcommittee

33. 33 Peer Review in the 21 st 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

34. 34 NIAF Strategic Plan

35. 35 Other Examples of Coordination Domestic Working Group GAO meetings with Inspectors General

36. International Consortium on Government Financial Management May 8, 2006 Gene Dodaro Chief Operating Officer United States Government Accountability Office

37. 37 ICGFM