Federal Accountability Issues: Hot Topics

1. CIGIE/GAO Financial Statement Audit Conference Washington, D.C. March 30, 2011 Jeanette M. Franzel Managing Director U.S. Government Accountability Office Federal Accountability Issues: Hot Topics

2. Overview Long-Term Fiscal Projections GAO’s 2011 High-Risk List Overlap, Fragmentation, and Duplication CFO Act/ Agency Financial Audits Other Challenges

3. Federal Budget Surpluses and Deficits under Different Fiscal Policy Simulations Baseline Extended Alternative Source: GAO. Note: Data are from GAO’s January 2011 simulations based on the Trustees’ assumptions for Social Security and the Trustees’ and CMS Actuary’s assumptions for Medicare.

4. Debt Held by the Public under Two Fiscal Policy Simulations Alternative Baseline Extended Historical high= 109 percent in 1946 Source: GAO. Note: Data are from GAO’s January 2011 simulations based on the Trustees’ assumptions for Social Security and the Trustees’ and CMS Actuary’s alternative assumptions for Medicare.

5. Potential Fiscal OutcomesRevenues and Composition of Spending under Alternative Simulation Revenue a Source: GAO. Note: Data are from GAO’s January 2011simulationsbased on the Trustees’ assumptions for Social Security and CMS Actuary’s alternative assumption for Medicare. aThis also includes spending for insurance exchange subsidies and CHIP.

6. Challenges Affecting the Federal Budget in the Near Term Source: GAO and The 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (August 2010) and The 2010 Annual Report of the Board of Trustees of the Federal Old-age And Survivors Insurance and Federal Disability Insurance Trust Funds (August 2010).

7. 2011 High-Risk Update 2011 List – 30 areas total • Two Areas Removed • DOD Personnel Security Clearances • 2010 Census • Three Areas Narrowed in Scope • Strategic Human Capital Management • Managing Federal Real Property • DOD Support Infrastructure Management • One New High-Risk Area • Management of Federal Oil and Gas Resources

8. Financial Management Related AreasGAO’s 2011 High-Risk List Strengthening the Foundation for Efficiency and Effectiveness • Management of Federal Oil and Gas Resources (New) • Modernizing the Outdated U.S. Financial Regulatory System • Restructuring the U.S. Postal Service to Achieve Sustainable Financial Viability • Managing Federal Real Property Transforming DOD Program Management • DOD Approach to Business Transformation • DOD Business Systems Modernization • DOD Financial Management Ensuring Public Safety and Security • Implementing and Transforming the Department of Homeland Security

9. Financial Management Related AreasGAO’s 2011 High-Risk List Managing Federal Contracting More Effectively • DOD Contract Management • DOE’s Contract Management for the National Nuclear Security Administration and Office of Environmental Management • NASA Acquisition Management Assessing the Efficiency and Effectiveness of Tax Law Administration • Enforcement of Tax Laws • IRS Business Systems Modernization Modernizing and Safeguarding Insurance and Benefit Programs • Improving and Modernizing Federal Disability Programs • Pension Benefit Guaranty Corporation Insurance Programs • Medicare Program • Medicaid Program • National Flood Insurance Program

10. GAO Reporting on Overlap, Fragmentation and Duplication in Federal Programs • Section 21 of P.L. 111-139, enacted in February 2010, required that the Comptroller General: • conduct routine investigations to identify programs, agencies, offices, and initiatives with duplicative goals and activities within Departments and government-wide, and • report annually to Congress on the findings, including the cost of such duplication and with recommendations for consolidation and elimination to reduce duplication.

11. GAO Reporting on Overlap, Fragmentation, and Duplication in Federal Programs • Opportunities to Reduce Potential Duplication in Government Programs; Save Tax Dollars, and Enhance Revenue(GAO-11-318 SP, March 1, 2011) • GAO’s first annual report to Congress. • To inform policymakers as they address the rapidly building fiscal pressures facing our national government. • Presents 34 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. • Also summarizes 47 additional areas, describing other opportunities for cost savings and revenue enhancement. • Most issues are focused on activities that are contained within single departments or agencies.

12. CFO Act – Key Accomplishments and Progress Made Cultural change – accountability Governmentwide leadership structure and agency CFOs New accounting and reporting standards Preparing auditable financial statements Strengthening internal control Improving financial management systems Improving performance information Establishing fiscal sustainability reporting Issuing summarized financial reports, including the governmentwide Citizen’s Guide

13. Benefits of Preparing and Auditing Financial Statements • Contributes to reliable, useful, and timely financial information. • An integral part of financial management. • A benchmark that is a widely accepted prerequisite for high-performing finance organizations around the world. • Discipline of preparing financial statements provides a proven framework.

14. Results of the FY 2010 Financial Audits • Three major impediments continue to prevent GAO from rendering an opinion on the U.S. government’s accrual-based consolidated financial statements: • Serious financial management problems at the Department of Defense (DOD) that have prevented DOD’s financial statements from being auditable, • The federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal entities, and • The federal government’s ineffective process for preparing the consolidated financial statements. • GAO was unable to render an opinion on the 2010 Statement of Social Insurance (SOSI)

15. Accountability in an Era of Public Debate about Costs Greater need than ever for Timely and accurate information about costs of specific programs and services Metrics and financial analysis to measure governmentwide performance Reliable cost information can help : Provide accurate comparisons on costs/benefits Inform budgets and planning Identify potential cost control, efficiencies, and waste Set fees to recover the costs of services Measure managers’ performance.

16. Other Dilemmas we are Facing: Improper Payments Full extent of improper payments is still unknown because some agencies have not yet reported estimates for all risk-susceptible programs. Categories of improper payments and the root causes are not consistently identified in programs’ improper payment estimates or included in aggregate estimates. Corrective actions are unique to specific entities and programs across the federal government. Agencies are under constant and increasing pressure to do more with less. In today’s fiscal environment, preventing, reducing, and recovering improper payments becomes an even higher priority.

17. Other Dilemmas we are Facing: Financial System Modernizations • Segmented Approach for Deploying Systems • How to ensure that the 24 month schedule doesn’t cause agencies to drop event-driven objectives for expediency and determine what guidance to provide to agencies. • Oversight and Review of Financial System Projects • How to determine what specific criteria to use for OMB review and approval, ensure appropriate procedures and resources are in place at the agency level, and define and measure the roles and responsibilities of OMB and the FSAB. • Shared Services for Transaction Processing • How to implement the new approach, how the government-wide shared solutions will work with current core financial systems, and what guidance to provide to agencies to encourage their participation in, and adoption of, the new shared solutions. • Compliance with Financial System Requirements • How to update and maintain system requirements and standard business processes and what criteria to use to determine if the approach reduces the cost, risk, and complexity of financial system modernizations. • Process for Certifying Financial Management Software • How to ensure that the discontinuation of FSIO’s testing and certification does not lead to interoperability problems across agency systems, ensure vendor self-certifications comply with the FAR, and determine what guidance to provide to agencies.