This is the accessible text file for CG Presentation number GAO-12- 755CG entitled 'Financial Managers: Aiding Accountability and Exercising Stewardship in Challenging Times which was released on May 17, 2012. This text file was formatted by the U.S. Government Accountability Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. Financial Managers: Aiding Accountability and Exercising Stewardship in Challenging Times: AGA-DC & GWSCPA: Spring Educational Conference: Washington, DC: May 16, 2012: Gene L. Dodaro: Comptroller General of the United States: GAO: 17-755CG: Overview: Context for Everything: The Fiscal Sustainability Challenge: * Prolonged squeeze on budgets Accountability for taxpayer resources: * Financial Management Challenges; * Improper payments; * GAO’s High Risk list Value for money: * Evaluation, priorities, results. Federal Financial Managers Need to Step Forward. [End of Overview] Fiscal Sustainability: Figure: Debt Held by the Public: Spring 2012 Simulations: [Refer to PDF for image: line graph] Percentage of GDP: Historical high: 100% in 1946. Fiscal year: 2000; Baseline extended: 34.7%; Alternative: 34.7%. Fiscal year: 2001; Baseline extended: 32.5%; Alternative: 32.5%. Fiscal year: 2002; Baseline extended: 33.6%; Alternative: 33.6%. Fiscal year: 2003; Baseline extended: 35.6%; Alternative: 35.6%. Fiscal year: 2004; Baseline extended: 36.8%; Alternative: 36.8%. Fiscal year: 2005; Baseline extended: 36.9%; Alternative: 36.9%. Fiscal year: 2006; Baseline extended: 36.5%; Alternative: 36.5%. Fiscal year: 2007; Baseline extended: 36.2%; Alternative: 36.2%. Fiscal year: 2008; Baseline extended: 40.3%; Alternative: 40.3%. Fiscal year: 2009; Baseline extended: 53.5%; Alternative: 53.5%. Fiscal year: 2010; Baseline extended: 62.2%; Alternative: 62.2%. Fiscal year: 2022; Baseline extended: 67.3%; Alternative: 67.3%. Fiscal year: 2012; Baseline extended: 71.2%; Alternative: 71.4%. Fiscal year: 2013; Baseline extended: 72.8%; Alternative: 74.9%. Fiscal year: 2014; Baseline extended: 71.6%; Alternative: 76.3%. Fiscal year: 2015; Baseline extended: 68.7%; Alternative: 75.9%. Fiscal year: 2016; Baseline extended: 67.2%; Alternative: 76.9%. Fiscal year: 2017; Baseline extended: 65.8%; Alternative: 78.0%. Fiscal year: 2018; Baseline extended: 64.3%; Alternative: 79.1%. Fiscal year: 2019; Baseline extended: 63.1%; Alternative: 80.5%. Fiscal year: 2020; Baseline extended: 62.0%; Alternative: 82.2%. Fiscal year: 2021; Baseline extended: 61.0%; Alternative: 84.0%. Fiscal year: 2033; Baseline extended: 60.8%; Alternative: 87.0%. Fiscal year: 2023; Baseline extended: 60.7%; Alternative: 90.5%. Fiscal year: 2024; Baseline extended: 61.1%; Alternative: 94.6%. Fiscal year: 2025; Baseline extended: 61.7%; Alternative: 99.4%. Fiscal year: 2026; Baseline extended: 62.6%; Alternative: 104.9%. Fiscal year: 2027; Baseline extended: 63.6%; Alternative: 110.8%. Fiscal year: 2028; Baseline extended: 64.8%; Alternative: 117.1%. Fiscal year: 2029; Baseline extended: 66.3%; Alternative: 123.9%. Fiscal year: 2030; Baseline extended: 67.8%; Alternative: 131.1%. Fiscal year: 2031; Baseline extended: 69.6%; Alternative: 138.6%. Fiscal year: 2032; Baseline extended: 71.4%; Alternative: 146.4%. Fiscal year: 2033; Baseline extended: 73.4%; Alternative: 154.4%. Fiscal year: 2034; Baseline extended: 75.5%; Alternative: 162.7%. Fiscal year: 2035; Baseline extended: 77.7%; Alternative: 171.3%. Fiscal year: 2036; Baseline extended: 80.1%; Alternative: 180.1%. Fiscal year: 2037; Baseline extended: 82.5%; Alternative: 189.1%. Fiscal year: 2038; Baseline extended: 85.0%; Alternative: 198.1%. Fiscal year: 2039; Baseline extended: 87.5%. Fiscal year: 2040; Baseline extended: 90.3%. Fiscal year: 2041; Baseline extended: 93.2%. Fiscal year: 2042; Baseline extended: 96.1%. Fiscal year: 2043; Baseline extended: 99.0%. Fiscal year: 2044; Baseline extended: 102.0%. Fiscal year: 2045; Baseline extended: 105.1%. Fiscal year: 2046; Baseline extended: 108.2%. Fiscal year: 2047; Baseline extended: 111.4%. Fiscal year: 2048; Baseline extended: 114.6%. Fiscal year: 2049; Baseline extended: 117.9%. Fiscal year: 2050; Baseline extended: 121.1%. Fiscal year: 2051; Baseline extended: 124.5%. Fiscal year: 2052; Baseline extended: 127.9%. Fiscal year: 2053; Baseline extended: 131.5%. Fiscal year: 2054; Baseline extended: 135.0%. Fiscal year: 2055; Baseline extended: 138.5%. Fiscal year: 2056; Baseline extended: 142.3%. Fiscal year: 2057; Baseline extended: 146.0%. Fiscal year: 2058; Baseline extended: 149.7%. Fiscal year: 2059; Baseline extended: 153.6%. Source: GAO. Note: Data are from GAO's Spring 2012 simulations based on the Trustees' assumptions for Social Security and the Trustees' and the CMS Actuary's assumptions for Medicare. [End of figure] Figure: Daily Average Number of People Turning 65: [Refer to PDF for image: vertical bar graph] Year: 2000; Daily average number of people turning 66 each year: 5,500. Year: 2001; Daily average number of people turning 66 each year: 5,500. Year: 2002; Daily average number of people turning 66 each year: 5,500. Year: 2003; Daily average number of people turning 66 each year: 5,800. Year: 2004; Daily average number of people turning 66 each year: 6,000. Year: 2005; Daily average number of people turning 66 each year: 6,200. Year: 2006; Daily average number of people turning 66 each year: 6,700. Year: 2007; Daily average number of people turning 66 each year: 7,200. Year: 2008; Daily average number of people turning 66 each year: 7,200. Year: 2009; Daily average number of people turning 66 each year: 7,200. Year: 2010; Daily average number of people turning 66 each year: 7,151. Year: 2011; Daily average number of people turning 66 each year: 9,100. Year: 2012; Daily average number of people turning 66 each year: 9,100. Year: 2013; Daily average number of people turning 66 each year: 9,200. Year: 2014; Daily average number of people turning 66 each year: 9,100. Year: 2015; Daily average number of people turning 66 each year: 9,400. Year: 2016; Daily average number of people turning 66 each year: 9,400. Year: 2017; Daily average number of people turning 66 each year: 9,700. Year: 2018; Daily average number of people turning 66 each year: 10,000. Year: 2019; Daily average number of people turning 66 each year: 10,200. Year: 2020; Daily average number of people turning 66 each year: 10,700. [Baby Boomers begin turning 65] Year: 2021; Daily average number of people turning 66 each year: 10,700. Year: 2022; Daily average number of people turning 66 each year: 11,000. Year: 2023; Daily average number of people turning 66 each year: 11,200. Year: 2024; Daily average number of people turning 66 each year: 11,200. Year: 2025; Daily average number of people turning 66 each year: 11,600. Year: 2026; Daily average number of people turning 66 each year: 11,400. Year: 2027; Daily average number of people turning 66 each year: 11,400. Year: 2028; Daily average number of people turning 66 each year: 11,300. Year: 2029; Daily average number of people turning 66 each year: 11,400. Source: U.S. Census Bureau 2009 National Population Projections. Note: Data are from the U.S. Census Bureau's National Population Projections. For this analysis, we used data from the low net international migration series. [End of figure] Figure: State and Local Operating Balance Measure, as a Percentage of Gross Domestic Product: [Refer to PDF for image: line graph] State and Local Operating Balance Measure, as a Percentage of Gross Domestic Product (GDP): [Refer to PDF for image: line graph] Fiscal year: 2005: 0.1%; Fiscal year: 2006: 0.3%; Fiscal year: 2007: 0.1%; Fiscal year: 2008: -0.5%; Fiscal year: 2009: -0.5%; Fiscal year: 2010: 0%; Fiscal year: 2011: -0.4%; Fiscal year: 2012: -0.8%; Fiscal year: 2013: -1.2%; Fiscal year: 2014: -1.4%; Fiscal year: 2015: -1.4%; Fiscal year: 2016: -1.2%; Fiscal year: 2017: -1.2%; Fiscal year: 2018: -1.2%; Fiscal year: 2019: -1.3%; Fiscal year: 2020: -1.3%; Fiscal year: 2021: -1.4%; Fiscal year: 2022: -1.4%; Fiscal year: 2023: -1.5%; Fiscal year: 2024: -1.5%; Fiscal year: 2025: -1.6%; Fiscal year: 2026: -1.6%; Fiscal year: 2027: -1.7%; Fiscal year: 2028: -1.7%; Fiscal year: 2029: -1.8%; Fiscal year: 2030: -1.9%; Fiscal year: 2031: -1.9%; Fiscal year: 2032: -2%; Fiscal year: 2033: -2%; Fiscal year: 2034: -2.1%; Fiscal year: 2035: -2.1%; Fiscal year: 2036: -2.2%; Fiscal year: 2037: -2.2%; Fiscal year: 2038: -2.3%; Fiscal year: 2039: -2.3%; Fiscal year: 2040: -2.4%; Fiscal year: 2041: -2.5%; Fiscal year: 2042: -2.5%; Fiscal year: 2043: -2.6%; Fiscal year: 2044: -2.6%; Fiscal year: 2045: -2.7%; Fiscal year: 2046: -2.7%; Fiscal year: 2047: -2.7%; Fiscal year: 2048: -2.8%; Fiscal year: 2049: -2.8%; Fiscal year: 2050: -2.8%; Fiscal year: 2051: -2.9%; Fiscal year: 2052: -2.9%; Fiscal year: 2053: -2.9%; Fiscal year: 2054: -2.9%; Fiscal year: 2055: -3%; Fiscal year: 2056: -3%; Fiscal year: 2057: -3%; Fiscal year: 2058: -3%; Fiscal year: 2059: -3.1%; Fiscal year: 2060: -3.1%. Source: GAO simulations, updated April 2012. Note: Historical data are from the Bureau of Economic Analysis’s National Income and Product Accounts from 2005 to 2010. Data in 2011 are GAO estimates aligned with published data where available. GAO simulations are from 2012 to 2060, using many Congressional Budget Office projections and assumptions, particularly for the next 10 years. [End of figure] Figure: The Budget Control Act: Focus on Discretionary Spending: [Refer to PDF for image: vertical bar graph] Discretionary Spending as a Share of GDP, 1991-2021: 20-year historical average = 7.5%. Historical: 1991: 9%; 1992: 9%; 1993: 8%; 1994: 8%; 1995: 7%; 1996: 7%; 1997: 7%; 1998: 6%; 1999: 6%; 2000: 6%; 2001: 6%; 2002: 7%; 2003: 8%; 2004: 8%; 2005: 8%; 2006: 8%; 2007: 7%; 2008: 8%; 2009: 9%; 2010: 9%; 2011: 9%; CBO Baseline: 2012: 8.4%; 2013: 7.7%; 2014: 7.2%; 2015: 6.8%; 2016: 6.5%; 2017: 6.3%; 2018: 6.1%; 2019: 5.9%; 2020: 5.8%; 2021: 5.7%. Source: GAO analysis of data from the Congressional Budget Office. OMB Discretionary spending includes much of what many think of as “ government” such as spending on national defense, homeland security, veterans health benefits, national parks, highways and mass transit, and foreign aid. [End of figure] [End of section] Accountability for Taxpayer Dollars: Consolidated Financial Statement (CFS): * Results, Progress; * Moving toward an auditable statement. Improper Payments: * Moving toward effective prevention. High Risk List: addressing root causes and demonstrating progress. CFS FY 2010, 2011: Key Issues Driving the Disclaimer: 3 major impediments consistent over time-—areas on which to focus moving forward: * DOD: unauditable financial statements caused by serious financial management problems; * Intragovernmental activity & balances; * Ineffective preparation process. Statement of Social Insurance (SOSI): significant uncertainties related to achievement of projected reductions in Medicare cost growth reflected in the statements. CFS: Significant Progress and Moving Forward: Progress to FY 2011: * Unqualified audit opinions for 21 CFO Act agencies; * DHS moved to qualified opinion on Balance Sheet and Statement of Custodial Activity; * DoD ongoing initiatives to achieve auditability. Continued progress requires: * Sustained commitment at agency level critical; * Sustained commitment by Treasury & OMB to resolve the intragovernmental and consolidated financial statement preparation issues. Why Reliable Financial Information Matters: * Elected officials confidence that agencies are executing laws & policy decisions made; * Taxpayer confidence that the federal government is good custodian of taxpayer contributions; * Can help inform future decisions on resource allocation and program management. Improper Payments: Eroding Taxpayer Confidence: An improper payment is any payment that should not have been made or was made in an incorrect amount (including overpayments and underpayments). Improper payments also include payments for which insufficient or no supporting documentation was found. OMB and the federal agencies reported improper payment estimates totaling $115.3 billion in fiscal year 2011. This figure was attributable to 79 programs spread among 17 agencies. Table: Improper Payments: Fiscal Year 2011 Largest 10 Estimates by Dollar Amount: Program: Medicare Fee-for-Service; Agency: Health and Human Services; Reported Improper Payment Estimates: $28.8 billion; Error rate (percentages): 8.6%. Program: Medicaid; Agency: Health and Human Services; Reported Improper Payment Estimates: $21.9 billion; Error rate (percentages): 8.1%. Program: Earned Income Tax Credit; Agency: Treasury; Reported Improper Payment Estimates: $15.2 billion; Error rate (percentages): 23.5%. Program: Unemployment Insurance; Agency: Labor; Reported Improper Payment Estimates: $13.7 billion; Error rate (percentages): 12.0%. Program: Medicare Advantage; Agency: Health and Human Services; Reported Improper Payment Estimates: $12.4 billion; Error rate (percentages): 11.0%. Program: Supplemental Security Income; Agency: Social Security Administration; Reported Improper Payment Estimates: $4.6 billion; Error rate (percentages): 9.1%. Program: Old Age, Survivors, and Disability Insurance; Agency: Social Security Administration; Reported Improper Payment Estimates: $4.5 billion; Error rate (percentages): 0.6%. Program: Supplemental Nutrition Assistance; Agency: Agriculture; Reported Improper Payment Estimates: $2.5 billion; Error rate (percentages): 3.8%. Program: National School Lunch; Agency: Agriculture; Reported Improper Payment Estimates: $1.7 billion; Error rate (percentages): 16.0%. Program: Medicare Prescription Drug Benefit; Agency: Health and Human Services; Reported Improper Payment Estimates: $1.7 billion; Error rate (percentages): 3.2%. [End of table] Improper Payments: Building on Current Actions Moving toward Prevention: * Identify the root causes of improper payments; * Develop effective preventive controls to avoid improper payments in the first place; * Develop effective detective controls to identify and recover losses to the government. GAO’s High-Risk List: * Begun in 1990s---areas most in need of reform or most vulnerable to fraud, waste, abuse, and mismanagement: - 30 areas currently on list; next update January 2013. * Qualitative & quantitative factors; * Helps focus attention of both agencies and the Congress on needed actions; * A number tied to financial management. High Risk List: Increased Emphasis on Solutions: * Goal is to have programs move off the list; * Both 2011 Update & Web Site contain expanded information on actions needed to resolve identified issues; * Enhanced ongoing efforts to work with OMB and agencies to address problems while maintaining independence: - CG participated in over 25 meetings with agency and OMB leaders; - Numerous additional meetings with other GAO participants at all levels. [End of section] Value for Money — Evaluation, Priorities, Results: * Fragmentation, Overlap & Duplication. * Government Performance & Results Act. Mandate for GAO Duplication Reviews: Figure: Identification, Consolidation, and Elimination of Duplicative Government Programs: [Refer to PDF for image: illustration] The Comptroller General of the Government Accountability Office shall conduct routine investigations to identify programs, agencies, offices, and initiatives with duplicative goals and activities within Departments and governmentwide and report annually to Congress on the findings, including the cost of such duplication and with recommendations for consolidation and elimination to reduce duplication identifying specific rescissions. Source: Pub. L. No. 111-139, § 21, 124 Stat. 29 (2010), 31 U.S.C. § 712 Note. [End of figure] Summary of 2012 Annual Report (GAO-12-342SP): [Includes illustration of report cover] * 32 areas where agencies, offices, or initiatives have similar or overlapping objectives or provide similar services to the same populations; or where government missions are fragmented across multiple agencies or programs. * 19 additional areas describing other opportunities for agencies or Congress to either reduce the cost of government operations or enhance revenue collections for the Treasury. * Collectively, we identified about130 actions that the executive branch or Congress could take. Depending on the extent of actions taken, these savings and revenues could collectively result in billions of dollars in savings. Figure: Status of 81 Areas in 2011: [Refer to PDF for image: pie-chart] Addressed: 4; (5%); Partially addressed: 60; (74%); Not addressed: 17; (21%). Source: GAO analysis, as of February 10, 2012. [End of figure] The Congress and the executive branch have made some progress in addressing the majority of the 81 areas that we identified; however, additional steps are needed to fully implement the remaining actions to achieve associated benefits. Figure: Status of 176 Actions in 2011: [Refer to PDF for image: pie-chart] Addressed: 23 (13%); Partially addressed: 99 (56%); Not addressed: 54 (31%). Source: GAO analysis, as of February 10, 2012. [End of figure] The majority of 176 actions needed within the 81 areas identified by GAO have been partially addressed. GAO Approach to Identifying Unnecessary Duplication, Overlap, or Fragmentation: We examined the major budget functions and subfunctions of the federal government as identified by the Office of Management and Budget to identify issue areas involving multiple government agencies. We examined key missions and functions of federal agencies—or organizations within large agencies—using key agency documents (e.g., strategic plans). We also considered the work of other agencies such as the Office of Management and Budget and the Congressional Budget Office that identified potential issues of duplication, overlap, and fragmentation. The areas identified in our reports are not intended to represent the full universe of duplication, overlap, and fragmentation within the federal government, but we will have conducted a systematic examination across the government by the time we issue our third annual report in 2013. The Government Performance and Results Act Modernization Act (GPRMA): * Provides opportunities to infuse a more disciplined approach to a broader array of government activities. * Requires senior leadership involvement at the governmentwide and agency levels. These leaders are to be involved in: - identifying and prioritizing key issues, and, - more frequent monitoring and analysis of performance for those key issues. * Requires more: - disclosure on the reliability and accuracy of performance information, and, - transparency of the results being achieved through web-based reporting. GPRMA: Governmentwide and Agency Priority Goals: * Governmentwide: long-term Federal Government priority goals: every 4 years: - OMB w/agencies; - Across government: crosscutting policy areas & management improvements. * Agency level: agency priority goals: - Agency’s priorities; - Ambitious targets achievable within 2 years. GPRMA: Quarterly Priority Progress Reviews Required: Top leadership and program officials required to: * review the progress achieve toward the goals; * assess the contributions of underlying federal organizations, programs, and activities; * categorize goals by their risk of not being achieved; and; * develop strategies to improve performance. What Does 21st Century Governance Look Like? * Issues government confronts growing more complex and boundary-less. * Approaches (policy tools) that government uses to address these issues are wide ranging and increasingly indirect (e.g., loans and loan guarantees, provisions in the tax code). * Citizen confidence in the federal government is at historic lows and citizens are rightly demanding increased transparency and opportunities for active engagement. * All of this must take place in an environment where agencies are stressed to maintain and enhance the basic capacities they need (austerity budgets). [End of section] Financial Management Professionals: Stewardship Obligations: * Recognize that effective & responsive government depends on the system, on commitment---and so on people. * Stewardship for what you control--managing costs & risks: - Front-end critically important—e.g. prevent improper payments rather than recoup them. * Stewardship for resources today and in the future: - Training & succession planning-—e.g. Need for skilled workforce in acquisition and contract management. Stewardship: Stewardship beyond what you control: * Ideas for improved operations, for improved program design; * See programs/activities as part of broader set—-crossing bureau, agency, and levels of government lines: - Contribute to discussion about program priorities and relative effectiveness; -- Between similar programs; between different approaches to a goal (spending, credit, tax provisions). [End of section] GAO on the Web: Web site: [hyperlink, http://www.gao.gov/] Contact: Chuck Young, Managing Director: Public Affairs, youngc1@gao.gov: (202) 512-4800: U.S. Government Accountability Office: 441 G Street NW, Room 7149: Washington, D.C. 20548: Copyright This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. [End of presentation]