GAO-07-251CG, Modernizing Accountability Organizations in Times of Fiscal Constraint, National Intergovernmental

GAO-07-251CG, Modernizing Accountability Organizations in Times of Fiscal Constraint, National Intergovernmental

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National Intergovernmental Audit ForumModernizing Accountability Organizations in Times of Fiscal ConstraintThe Honorable David M. WalkerComptroller General of the United StatesDecember 1, 2006GAO-07-251CGThe Case for ChangeThe federal government is on a “burning platform,” and the status quo way of doing business is unacceptable for a variety of reasons, including:• Past fiscal trends and significant long-range challenges Rising public expectations for demonstrable results and enhanced responsiveness Selected trends and challenges having no boundaries Additional resource demands due to Iraq, Afghanistan, incremental homeland security needs, and recent natural disasters in the United States Numerous government performance/accountability and high risk challenges Outdated federal organizational structures, policies, and practices2GAO-07-251CGComposition of Federal Spending1966 19862006*20%28%32%29%34%43%21%14%9%20%7%15%19%10%1%Social Security Medicare & MedicaidDefenseAll other spendingNet interest*Preliminary.Source: Office of Management and Budget and the Department of the Treasury.Note: Numbers may not add to 100 percent due to rounding.3GAO-07-251CGHow Big is OurGrowing Fiscal Burden?Our total fiscal burden can be translated and compared as follows:Total fiscal exposures $49.9 trillion1Total household net worth $53.3 trillionBurden/Net worth ratio 94 percent2BurdenPer person $165,000Per full-time ...

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National Intergovernmental Audit Forum
Modernizing Accountability Organizations in Times of Fiscal Constraint
GAO-07-251CG
The Honorable David M. Walker Comptroller General of the United States
December 1, 2006
The Case for Change
The federal government is on a “burning platform,” and the status quo way of doing business is unacceptable for a variety of reasons, including:
AGO
 Past fiscal trends and significant long-range challenges • Rising public expectations for demonstrable results and enhanced responsiveness • Selected trends and challenges having no boundaries • Additional resource demands Ir , Af idnicsraestmeersntianlthhoemUenliatneddsSetactueristyduneeetods,aaqndregcheanntisntaatnu,ral• Numerous gover hi risk challenges nment performance/accountability and gh • Outdat ures, and practiceesdfederalorganizationalstructpolicies,
-07-251CG2
inteNetertsmilerP*eeDsnefhteofusyrrTaee:.NotersNumbtonyam1otddaceerp00tuedntnira.yoSruec:fOficeofManagemeatnBdnegdunatthdDeertpantme
1986
9% 19%
21%
Medicare & Medicaid
1966
29%28%
14%20% 10%
2006*
20% 32%
.ng
Social Security All other spending
34%43%
7%15% 1%
Composition of Federal Spending
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g.2006)2005(AuSatet:senUtideIn,mecoBusaureC.Susne3(;.U)ncesurahInealtdnH,yaevtr,oP2s:tetaSeditUnehtniegarevoC00)6;nadohsuhe6.5D(Aug.2,2ehtS.UeC.susndsoleprteorbydoPevem,adntr,yeau,BurIncoinarevoCehtnieghlteaHncrasuInecruG:s.)60oSs.si
Our total fiscal burden can be tr anslated and compared as follows:
$53.3 trillion 94 percent
Total fiscal exposures
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$165,000 $395,000 $435,000
$49.9 trillion
5(00g.Au002;6)dna)4(eruBouafEconomicAnalyis,sPreosanlnIndamecoyslautOmetpeS:6002rebble,ta006:2,2O(tc3Q,,02.03i  sB giH4wo15GC07-2GAO-Bul enrd?GruOiworF gnacsiushoolehTolta1htrendowtrden2Per46,326BudlhuoesohhoniaedeMomncI$3emocnidlohesuwortNetden/Buritohar3,23oN29:set1(Fe)radeRelrvselbeepsrnolaicnomepercapita4$it-llufekrowemrsapoisDrepPnersoPer.U.SppodotatlestimatedusinguclaetalasncerB2)deur0620();91,tp.(eS:62Q200100,leB.Tab,stnuoccAsdnuFofwloFd,arBoes,inNIPAtablecEnomociAanylisthyBueaureforekrerstropbdefullau;ewo-timCne.U.SuBerussf6,/030ethmronoitalu/9fosa
Current Fiscal Policy Is Unsustainable
The “Status Quo” is Not an Option • We face large and growing structural deficits largely due to known demographic trends and rising health care costs • GAO’s simulations show that balancing the budget in 2040 could require actions as large as • Cutting total federal spending by 60 perc ent or • Raising federal taxes to 2 times today's level
Faster Economic Growth Can Help, but It Cannot Solve the Problem • Closing the current long-term fiscal gap based on reasonable assumptions would require real average annual economic growth in the double digit range every ye ar for the next 75 years • During the 1990s, the economy grew at an average 3.2 percent per year • As a result, we cannot simply gr ow our way out of this problem. Tough choices will be required
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The Way Forward: A Three-Pronged Approach
1. Strengthen Budget and Legislative Processes and Controls
2. Improve Financial Reporting and Performance Metrics
3. Fundamental Reexamination & Transformation for the 21stCentury (i.e., entitlement programs, other spending, and tax policy)
AO-07-251CG
Solutions Require Active Involvement from both the Executive and Legislative Branches
6
G
Selected State and Local Fiscal Challenges
States have many of their own fiscal challenges, including: • Unsustainable Medicaid cost increases
• Unfunded liabilities of state retirement systems (e.g., pensions and health)
• Education funding squeezed by competing demands
• Infrastructure maintenance and expansion needs given unparalleled sprawl and congestion
• Emergency preparedness response and recovery needs (e.g., natural disaster, terrorist incident, pandemic flu)
GAO has ongoing work examining our total national fiscal exposure (federal, state, and local)
AO-07-251CG7
GAO-07-25
Accountability Organization Maturity Model
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Facilitating Foresight
Increasing Insight
Enhancing Economy Efficiency, Ethics, Equity, and Effectiveness
Assuring Accountability
Combating Corruption
8
GA
Key Oversight Concepts
Oversight is a key constituti onal responsibility of the Congress
Oversight is critical to providing the necessary checks and balances to maximize th e government’s performance, assure it’s accountability, and prevent the abuse of government power
History shows that oversight decreases with one-party rule
Oversight should be focuse d on improving performance and assuring accountability
It is essential that oversight be balanced and constructive by highlighting what is working well—including best practices—as well as identifying shortcomings to prevent repetition of mistakes
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G
The Oversight Role of the Accountability Community
The current federal audit oversight structure includes:
• GAO
• 62 statutory inspector general (IG) offices
• About 6,000 CPA firms that annually perform more than 34,000 audits of entities receiving federal funding (single audits)
While the Single Audit Act has provided oversight of more than $300 billion in annual federal grants, questions have been raised about the usefulness and effectiveness of oversight for federal funds
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Three Suggested Areas of Congressional Oversight
Targets for near-term oversight (e.g., reducing the tax gap)
Policies and programs that are in need of fundamental reform and re-engineering (e.g., reviewing U.S. and coalition efforts to stabilize and rebuild Iraq and Afghanistan)
Governance issues that shou ld be addressed to help ensure an economical, efficient, effective, ethical, and equitable federal governm ent capable of responding to the various challenges and capitalizing on related opportunities in the 21st century (e.g., reviewing the effectiveness of the federal audit and accountability community, including the oversight, structure, and division of responsibility)
O-07-251CG11