This is the accessible text file for CG speech number GAO-13-388CG entitled 'Entering 2013: Perspectives on Fiscal and Performance Challenges Facing Government' which was released on February 15, 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. Entering 2013: Perspectives on Fiscal and Performance Challenges Facing Government: AGA National Leadership Conference: February 12, 2013: Washington DC: Gene L. Dodaro: Comptroller General of the United States: GAO-13-224CG: Outline: I. Context – Budget Environment: * Near-term: recent steps; competing demands; * Long-term challenge; * Debt limit. II. How the Accountability Community can Help: * Prevent & detect improper payments; * Improve financial information; * Act to narrow the tax gap; * Fix known high risk areas; * Address areas of overlap/duplication and opportunities for cost savings/revenue enhancement. Context: Overall Budget Environment Near-term and Longer-Term: * Budget Control Act and the American Taxpayer Relief Act, will help in the near-term. * Currently face competing demands: - Need to sustain economic growth; - Need for significant actions to change the long-term fiscal path. * Long-term path is still unsustainable. - Spending side driven by demographics and health care spending. 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: 5,800. Year: 2005; Daily average number of people turning 66 each year: 6,000. Year: 2006; Daily average number of people turning 66 each year: 6,200. Year: 2007; Daily average number of people turning 66 each year: 6.700. 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. Baby boomers turning 65: 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: 1000. 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. 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: GAO analysis of U.S. Census Bureau data. [End of figure] Debt Limit: What it is and What it isn’t: * Debt limit does not limit the ability to enact spending and tax laws; not a limit on running deficits or incurring obligations. * Debt limit is an after-the-fact measure: it imposes a limit on ability to pay obligations already incurred. * GAO analysis shows delays in raising debt limit lead to higher borrowing costs; delays in 2011 $1.3 billion increase for the year. * Treasury uses extraordinary actions to manage near the debt limit: where provided for under law, law principal and interest is restored; GAO tests this as part of its routine annual audit of federal debt. * GAO: tie debt limit to spending and revenue decisions that create debt—-at the time those decisions are debated. How the Accountability Community Can Help: * Prevent and detect Improper Payments; * Improve Financial Information; * Act to narrow the Tax Gap; * Fix known High Risk Areas; * Address overlap and duplication; identify opportunities for cost saving and enhanced revenue. Governmentwide Improper Payments: Estimates Are Decreasing but Are Not Complete: * FY 2012 improper payment estimate: $107.7 billion, a decrease of $8 billion from the revised prior-year estimate. * Attributable to 75 programs spread among 18 agencies. * Decrease largely from reduced error rates for Medicaid, SSA’s Old Age and Survivors and Disability Insurance, and lower outlays for Unemployment Insurance and Earned Income Tax Credit. * 4 agencies did not report estimates for 10 risk-susceptible programs/activities. * 6 programs that provided estimates in FY 2012 were not included in OMB’s governmentwide totals because estimation methodologies were not OMB-approved. Table: Governmentwide Improper Payments: Top 10 Program Improper Payment Estimates by Dollar Amount: Program: Medicare Fee-for-Service; Agency: HHS; Reported Improper Payment Estimates: Amount: $29.6 billion; Error rate (percent of outlays: 8.5%. Program: Medicaid; Agency: HHS; Reported Improper Payment Estimates: Amount: $19.2 billion; Error rate (percent of outlays: 7.1%. Program: Medicare Advantage (Part C); Agency: HHS; Reported Improper Payment Estimates: Amount: $13.1 billion; Error rate (percent of outlays: 11.4%. Program: Earned Income Tax Credit; Agency: Treasury; Reported Improper Payment Estimates: Amount: $12.6 billion; Error rate (percent of outlays: 22.7%. Program: Unemployment Insurance; Agency: DOL; Reported Improper Payment Estimates: Amount: $10.3 billion; Error rate (percent of outlays: 11.4%. Program: Supplemental Security Income; Agency: SSA; Reported Improper Payment Estimates: Amount: $4.7 billion; Error rate (percent of outlays: 9.2%. Program: Old Age, Survivors, & Disability Insurance; Agency: SSA; Reported Improper Payment Estimates: Amount: $3.2 billion; Error rate (percent of outlays: 0.4%. Program: Supplemental Nutrition Assistance Program; Agency: USDA; Reported Improper Payment Estimates: Amount: $2.7 billion; Error rate (percent of outlays: 3.8%. Program: Medicare Prescription Drug; Agency: HHS; Reported Improper Payment Estimates: Amount: $1.6 billion; Error rate (percent of outlays: 3.1%. Program: School Lunch; Agency: USDA; Reported Improper Payment Estimates: Amount: $1.6 billion; Error rate (percent of outlays: 15.5%. [End of table] Governmentwide Improper Payments: Administration and Congressional Action to Address Improper Payments Presidential Memoranda and Executive Orders: * Set goals to reduce and recover improper payments; * Initiated Do Not Pay program. Congressional hearings: * OMB and Inspectors General testimonies; * GAO testimonies. Legislation: * Enacted IPIA 2002, IPERA 2010, IPERIA 2012; - Inspector General reports on IPERA compliance. OMB: * Provided implementation guidance for the Administration’s initiatives and for enacted legislation; * Included reducing improper payments as one of 14 cross-cutting goals under the GPRA Modernization Act. Governmentwide Improper Payments: Improper Payments Elimination and Recovery Improvement Act of 2012: Enacted January 2013; supplements IPIA 2002 and IPERA 2010. Among other things, this law: * Gives statutory authority for the Do Not Pay Initiative; * Requires OMB to: - annually designate “high-priority programs” that will be subject to additional oversight and reporting requirements; - expand guidance for improving agency improper payments estimates; - determine current and historical rates of improper payment recoveries, and recovery targets. Governmentwide Improper Payments: Future Initiatives to Reduce Improper Payments: Agency and program initiatives needed to enhance actions underway across government: * Adopt sound risk assessment and estimation methodologies to better capture magnitude of the problem. * Identify root causes to help develop effective preventive and detective controls to reduce and recover improper payments. GAO initiatives: * Emphasize reviews of programs with high improper payments: - Medicare and Medicaid * Base future audit selection in part on GAO’s program risk assessment; Inspectors General IPERA compliance report findings; program outlays, improper payment estimates and error rates; and GAO audit coverage. [Figure: Refer to PDF for image: illustration] Prior to Enrollment: * Examining information on providers before initiating or continuing billing privileges; * Accrediting providers; * Obtaining surety bonds. Prior to Payment: * Using electronic edits; * Reviewing claims documentation before payment; * Comparing claims to other information(Fraud Prevention System); * Instituting prior authorization. After Payment: * Recovery auditing; * Reviewing claims after payment; * Investigating fraud; * Excluding providers. Corrective Action: * Examine payment errors; * Identifying vulnerabilities to payment error; * Instituting new or revised controls or other program changes. [End of figure] Improving Financial Management CFS FY 2012: 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 and balances; * Ineffective preparation process. Social Insurance Related Statements: significant uncertainties primarily related to achievement of projected reductions in Medicare cost growth reflected in the statements. CFS: Significant Progress and Moving Forward: * Vast majority of the 24 Chief Financial Officers Act agencies received unqualified opinions on their financial statements. * DHS has moved to an audit of all of its financial statements and has received, for the first time in FY 2012, a qualified opinion on such statements. * DOD has ongoing initiatives to achieve auditability. * Treasury has efforts under way to address intragovernmental and consolidated financial statement preparation issues. * Continued progress requires a strong and sustained commitment by federal entities and leadership by Treasury and OMB. CFS Efforts: Department of Defense: * Established the Financial Improvement and Audit Readiness (FIAR) Directorate. * Current FIAR strategy and methodology: - focus on two priorities-—budgetary information and asset accountability; - overall goal of preparing auditable departmentwide financial statements: FY 2017. * Interim priority for DOD component organizations to achieve audit readiness for Statement of Budgetary Resources (SBR): FY 2014. However, as of November 2012, components still in early phases. * GAO and DOD OIG have raised concerns about the ability of DOD components to implement the FIAR Plan effectively. Department of Defense: U.S. Marine Corps: * As a result of its lessons learned, USMC altered its SBR audit readiness plans, beginning with FY 2012: - to narrow its focus to an audit of current-year budget activity; - as an interim step toward achieving an audit of multiple-year budgetary activity. * DOD officials have stated that they plan for all components to begin their SBR audits with the current-year-activity approach in effort to meet the FY 2014 date. * For sustainable results, USMC needs to address auditors findings and recommendations to strengthen their processes and internal controls. * Lessons learned from USMC may pave the way for other military services. GAO’s High-Risk List: * 30 items on the 2011 list. Website lists actions needed. * Areas include: - Strengthening the Foundation for Efficiency and Effectiveness; - Transforming DOD Program Management; - Ensuring Public Safety and Security; - Managing Federal Contracting More Effectively; - Assessing the Efficiency and Effectiveness of Tax Law Administration; - Modernizing and Safeguarding Insurance and Benefit Programs. - GAO works w/agencies, OMB, and the Congress. - Next update February 14, 2013. Tax Gap: Noncompliance is Spread Across Various Types of Taxes and Taxpayers: Figure: Tax Gap Components: [Refer to PDF for image: pie-chart and sub-chart] Nonfiling: 6%; $28 billion; Underpayment: 10%; $46 billion; Underreporting: 84%; $376 billion, including: * Individual income tax, business income: 48%; $179 billion; * Employment tax: 19%; $72 billion; * Corporate income tax: 18%; $67 billion; Individual income tax, other income: 15%; $56 billion; Estate tax: 0.5%; $2 billion. Source: GAO Analysis of IRS data. [End of figure] Tax Gap: Closing the Gap Will Require Multiple Approaches: No single approach is likely to fully and cost-effectively address tax gap, but the following strategies could help: * enhancing information reporting by third parties; * ensuring high-quality services to taxpayers; * devoting additional resources to IRS enforcement; * expanding compliance checks before IRS issues refunds; * Leveraging external resources such as paid tax preparers and whistleblowers; * modernizing information systems; and; * simplifying the tax code. Mandate for GAO Duplication Reviews: * Enacted in 2010: - Identify overlap and duplication; - Identify opportunities for cost saving and revenue enhancement. * Reports issue in 2011, 2012: identified 132 areas. * 2013 report to be issued in April: - Will also follow up on areas identified in 2011 and 2012 reports. Examples of GAO Duplication, Cost Saving, or Revenue Enhancement Issues in 2011 and 2012 Annual Reports: Duplication, Overlap, or Fragmentation: * Consolidating federal data centers that provide similar services. * Lowering costs for administrative operations support services overseas. * Avoiding investments in overlapping information technology systems. * Minimizing payments for duplicate federal facility risk assessments. * Consolidating overlapping housing assistance programs. Cost Saving or Revenue Enhancement: * Reassessing and adjusting federal user fees. * Marketing excess uranium inventories for commercial use. * Re-evaluating fee rates for Multiple Award Schedules contracts. * Adjusting civil tax penalties for inflation. * Tracking undisbursed balances in expired grant accounts. What does all this Mean for Federal Managers and the Accountability Community: * Important role. * Stewardship for what you control. * 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. GAO on the Web: Web site: [hyperlink, http://www.gao.gov/]. Congressional Relations: Katherine Siggerud, Managing Director, siggerudk@gao.gov: (202) 512-4400: U.S. Government Accountability Office: 441 G Street, NW, Room 7125: Washington, DC 20548: Public Affairs: Chuck Young, Managing Director, youngc1@gao.gov: (202) 512-4800: U.S. Government Accountability Office: 441 G Street, NW, Room 7149: Washington, DC 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]