This is the accessible text file for CG Presentations number GAO-07- 420CG entitled 'Improving Performance, Accountability, and Transparency in the Federal Government' which was released on January 31, 2007. 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. United States Government Accountability Office: Improving Performance, Accountability, Transparency In The Federal Government: The Honorable David M. Walker: Comptroller General of the United States: The Government Performance Summit: The Center for Government Performance and the Performance Institute: January 29, 2007: Composition of Federal Spending: [See PDF for image] - graphic text 3 pie charts with 5 items each. 1966: Defense: 43.0%; Social Security: 15.0%; Medicare & Medicaid: 1.0%; Net interest: 7.0%; All other spending: 34.0%. 1986: Defense: 28.0%; Social Security: 20.0%; Medicare & Medicaid: 10.0%; Net interest: 14.0%; All other spending: 29.0%. 2006*: Defense: 20.0%; Social Security: 21.0%; Medicare & Medicaid: 19.0%; Net interest: 9.0%; All other spending: 32.0%. *Preliminary Source: Office of Management and Budget and the Department of the Treasury. Note: Numbers may not add to 100 percent due to rounding. [End of Figure] Surplus or Deficit as a Share of GDP Fiscal Years 1962-2006: [See PDF for image] - graphic text: Line/Stacked Bar combo chart with 1 line (Unified) and 43 bars. Fiscal year: 1962; On-budget: -1%; Off-budget: -0.2%; Unified: -1.3%. Fiscal year: 1963; On-budget: -0.7%; Off-budget: -0.1%; Unified: -0.8%. Fiscal year: 1964; On-budget: -1%; Off-budget: 0.1%; Unified: -0.9%. Fiscal year: 1965; On-budget: -0.2%; Off-budget: No data; Unified: -0.2%. Fiscal year: 1966; On-budget: -0.4%; Off-budget: -0.1%; Unified: -0.5%. Fiscal year: 1967; On-budget: -1.6%; Off-budget: 0.5%; Unified: -1.1%. Fiscal year: 1968; On-budget: -3.2%; Off-budget: 0.3%; Unified: -2.9%. Fiscal year: 1969; On-budget: -0.1%; Off-budget: 0.4%; Unified: 0.3%. Fiscal year: 1970; On-budget: -0.9%; Off-budget: 0.6%; Unified: -0.3%. Fiscal year: 1971; On-budget: -2.4%; Off-budget: 0.3%; Unified: -2.1%. Fiscal year: 1972; On-budget: -2.2%; Off-budget: 0.3%; Unified: -2%. Fiscal year: 1973; On-budget: -1.2%; Off-budget: No data; Unified: -1.1%. Fiscal year: 1974; On-budget: -0.6%; Off-budget: 0.1%; Unified: -0.4%. Fiscal year: 1975; On-budget: -3.5%; Off-budget: 0.1%; Unified: -3.4%. Fiscal year: 1976; On-budget: -4.1%; Off-budget: -0.2%; Unified: -4.2%. Fiscal year: 1977; On-budget: -2.5%; Off-budget: -0.2%; Unified: -2.7%. Fiscal year: 1978; On-budget: -2.5%; Off-budget: -0.2%; Unified: -2.7%. Fiscal year: 1979; On-budget: -1.5%; Off-budget: -0.1%; Unified: -1.6%. Fiscal year: 1980; On-budget: -2.7%; Off-budget: No data; Unified: -2.7%. Fiscal year: 1981; On-budget: -2.4%; Off-budget: -0.2%; Unified: -2.6%. Fiscal year: 1982; On-budget: -3.7%; Off-budget: -0.2%; Unified: -4%. Fiscal year: 1983; On-budget: -6%; Off-budget: No data; Unified: -6%. Fiscal year: 1984; On-budget: -4.8%; Off-budget: No data; Unified: -4.8%. Fiscal year: 1985; On-budget: -5.3%; Off-budget: 0.2%; Unified: -5.1%. Fiscal year: 1986; On-budget: -5.4%; Off-budget: 0.4%; Unified: -5%. Fiscal year: 1987; On-budget: -3.6%; Off-budget: 0.4%; Unified: -3.2%. Fiscal year: 1988; On-budget: -3.9%; Off-budget: 0.8%; Unified: -3.1%. Fiscal year: 1989; On-budget: -3.8%; Off-budget: 1%; Unified: -2.8%. Fiscal year: 1990; On-budget: -4.8%; Off-budget: 1%; Unified: -3.9%. Fiscal year: 1991; On-budget: -5.4%; Off-budget: 0.9%; Unified: -4.5%. Fiscal year: 1992; On-budget: -5.5%; Off-budget: 0.8%; Unified: -4.7%. Fiscal year: 1993; On-budget: -4.6%; Off-budget: 0.7%; Unified: -3.9%. Fiscal year: 1994; On-budget: -3.7%; Off-budget: 0.8%; Unified: -2.9%. Fiscal year: 1995; On-budget: -3.1%; Off-budget: 0.9%; Unified: -2.2%. Fiscal year: 1996; On-budget: -2.3%; Off-budget: 0.9%; Unified: -1.4%. Fiscal year: 1997; On-budget: -1.3%; Off-budget: 1%; Unified: -0.3%. Fiscal year: 1998; On-budget: -0.3%; Off-budget: 1.1%; Unified: 0.8%. Fiscal year: 1999; On-budget: No data; Off-budget: 1.4%; Unified: 1.4%. Fiscal year: 2000; On-budget: 0.9%; Off-budget: 1.5%; Unified: 2.4%. Fiscal year: 2001; On-budget: -0.3%; Off-budget: 1.6%; Unified: 1.3%. Fiscal year: 2002; On-budget: -3.1%; Off-budget: 1.5%; Unified: -1.5%. Fiscal year: 2003; On-budget: -4.9%; Off-budget: 1.5%; Unified: -3.5%. Fiscal year: 2004; On-budget: -4.9%; Off-budget: 1.3%; Unified: -3.6%. Fiscal year: 2005; On-budget: -4%; Off-budget: 1.4%; Unified: -2.6%. Fiscal year: 2006; On-Budget: -3.3; Off-budget: 1.4; Unified: -1.9. Source: Office of Management and Budget, Department of the Treasury, and Congressional Budget Office. [End of figure] Fiscal Year 2005 and 2006 Deficits and Net Operating Costs: Dollars in billions. On-Budget Deficit[A]; Fiscal Year 2005: ($494); Fiscal Year 2006: ($434). Unified Deficit; Fiscal Year 2005: ($318); Fiscal Year 2006: ($248). Net Operating Cost[B]; Fiscal Year 2005: ($760); Fiscal Year 2006: (450). Sources: The Office of Management and Budget and the Department of the Treasury. [A] Includes $173 billion in Social Security surpluses for fiscal year 2005 and $185 billion for fiscal year 2006; $2 billion in Postal Service surpluses for fiscal year 2005 and $1 billion for fiscal year 2006. [B] Fiscal year 2005 and 2006 net operating cost figures reflect significant but opposite changes in certain actuarial costs. For example, changes in interest rates and other assumptions used to estimate future veterans' compensation benefits increased net operating cost by $228 billion in 2005 and reduced net operating cost by $167 billion in 2006. [End of Figure] Major Reported Long-Term Fiscal Exposures ($ trillions): Explicit liabilities (Publicly held debt, military & civilian pensions & retiree health, other); 2000: $6.9; 2006: $10.4; Percent Increase: 52%. Commitments & Contingencies: e.g., PBGC, undelivered orders; 2000: $0.5; 2006: $1.3; Percent Increase: 140%. Implicit exposures; 2000: $13.0; 2006: $38.8; Percent Increase: 197%. Implicit exposures: Future Social Security benefits; 2000: $3.8; 2006: $6.4; Percent Increase: [Empty]. Implicit exposures: Future Medicare Part A benefits; 2000: $2.7; 2006: $11.3; Percent Increase: [Empty]. Implicit exposures: Medicare Part B benefits; 2000: $6.5; 2006: $13.1; Percent Increase: [Empty]. Implicit exposures: Medicare Part D benefits; 2006: $7.9; Percent Increase: [Empty]. Total; 2000: $20.4; 2006: $50.5; Percent Increase: 147%. Source: 2000 and 2006 Financial Report of the United States Government. Note: Estimates for Social Security and Medicare are at present value as of January 1 of each year and all other data are as of September 30. Totals may not add due to rounding. Percentage increases are based on actual data and may differ from increases calculated from rounded data shown in table. [End of table] Understanding the Size of Major Reported Fiscal Exposures: Our fiscal burden can be translated and compared as follows: Major reported fiscal exposures: 2006: $50.5 trillion; Total household net worth: 2006: $53.3 trillion: * Ratio of fiscal exposures to net worth: 95 percent. Burden: Per person: $170,000; Per full-time worker: $400,000; Per household: $440,000. Income: Median household income: $46,326; Disposable personal income per capita: $31,519. Ratio of household burden to median income: 9.5. Sources: GAO analysis of data from the Department of the Treasury, Federal Reserve Board, U.S. Census Bureau and Bureau of Economic Analysis: [End of table] Composition of Spending as a Share of GDP Under Baseline Extended (January 2001): [See PDF for image] - graphic text: Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars per group. 2005; Net interest: 0.8%; Social Security: 4.3%; Medicare & Medicaid: 3.7%; All other spending: 8.0%; Revenue: 20.3%. 2015[A]; Net interest: 0%; Social Security: 5.1%; Medicare & Medicaid: 4.9%; All other spending: 5.6%; Revenue: 20.4%. 2030[A]; Net interest: 0%; Social Security: 6.6%; Medicare & Medicaid: 9.4%; All other spending: 4.0%; Revenue: 20.4%. 2040[A]; Net interest: 0%; Social Security: 6.7%; Medicare & Medicaid: 9.0%; All other spending: 4.4%; Revenue: 20.4%. Source: GAO's January 2001 analysis. [A] All other spending is net of offsetting interest receipts. [End of figure] Composition of Spending as a Share of GDP: Assuming Discretionary Spending Grows with GDP After 2006 and All Expiring Tax Provisions are Extended: [See PDF for image] - graphic text: Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars per group. 2005; Net interest: 1.5%; Social Security: 4.2%; Medicare & Medicaid: 3.9%; All other spending: 10.5%; Revenue: 17.5% 2015; Net interest: 2.5%; Social Security: 4.5%; Medicare & Medicaid: 5.3%; All other spending: 9.8%; Revenue: 17.5% 2030; Net interest: 7%; Social Security: 6.7%; Medicare & Medicaid: 8.5%; All other spending: 9.8%; Revenue: 17.6% 2040; Net interest: 14%; Social Security: 7.6%; Medicare & Medicaid: 10.3%; All other spending: 9.8%; Revenue: 17.6% Source: GAO's August 2006 analysis. [End of figure] Social Security, Medicare, and Medicaid Spending as a Percent of GDP: [See PDF for image] - graphic text: Area graph with 81 Groups and 3 items per Group. Percent of GDP: Year: 2000; Social Security: 4.23%; Medicaid: 1.20%; Medicare: 2.29%. Year: 2001; Social Security: 4.33%; Medicaid: 1.30%; Medicare: 2.44%. Year: 2002; Social Security: 4.40%; Medicaid: 1.40%; Medicare: 2.53%. Year: 2003; Social Security: 4.35%; Medicaid: 1.50%; Medicare: 2.57%. Year: 2004; Social Security: 4.27%; Medicaid: 1.50%; Medicare: 2.63%. Year: 2005; Social Security: 4.26%; Medicaid: 1.48%; Medicare: 2.69%. Year: 2006; Social Security: 4.21%; Medicaid: 1.46%; Medicare: 3.33%. Year: 2007; Social Security: 4.19%; Medicaid: 1.47%; Medicare: 3.36%. Year: 2008; Social Security: 4.20%; Medicaid: 1.52%; Medicare: 3.41%. Year: 2009; Social Security: 4.24%; Medicaid: 1.57%; Medicare: 3.45%. Year: 2010; Social Security: 4.28%; Medicaid: 1.62%; Medicare: 3.50%. Year: 2011; Social Security: 4.34%; Medicaid: 1.67%; Medicare: 3.56%. Year: 2012; Social Security: 4.42%; Medicaid: 1.73%; Medicare: 3.67%. Year: 2013; Social Security: 4.51%; Medicaid: 1.79%; Medicare: 3.81%. Year: 2014; Social Security: 4.61%; Medicaid: 1.86%; Medicare: 3.96%. Year: 2015; Social Security: 4.71%; Medicaid: 1.93%; Medicare: 4.12%. Year: 2016; Social Security: 4.81%; Medicaid: 2.01%; Medicare: 4.29%. Year: 2017; Social Security: 4.92%; Medicaid: 2.10%; Medicare: 4.44%. Year: 2018; Social Security: 5.02%; Medicaid: 2.20%; Medicare: 4.61%. Year: 2019; Social Security: 5.13%; Medicaid: 2.20%; Medicare: 4.78%. Year: 2020; Social Security: 5.24%; Medicaid: 2.30%; Medicare: 4.96%. Year: 2021; Social Security: 5.35%; Medicaid: 2.30%; Medicare: 5.14%. Year: 2022; Social Security: 5.45%; Medicaid: 2.40%; Medicare: 5.33%. Year: 2023; Social Security: 5.55%; Medicaid: 2.40%; Medicare: 5.51%. Year: 2024; Social Security: 5.65%; Medicaid: 2.50%; Medicare: 5.71%. Year: 2025; Social Security: 5.75%; Medicaid: 2.60%; Medicare: 5.90%. Year: 2026; Social Security: 5.85%; Medicaid: 2.60%; Medicare: 6.08%. Year: 2027; Social Security: 5.93%; Medicaid: 2.70%; Medicare: 6.26%. Year: 2028; Social Security: 6.01%; Medicaid: 2.70%; Medicare: 6.43%. Year: 2029; Social Security: 6.08%; Medicaid: 2.80%; Medicare: 6.60%. Year: 2030; Social Security: 6.14%; Medicaid: 2.80%; Medicare: 6.77%. Year: 2031; Social Security: 6.19%; Medicaid: 2.90%; Medicare: 6.93%. Year: 2032; Social Security: 6.24%; Medicaid: 2.90%; Medicare: 7.08%. Year: 2033; Social Security: 6.27%; Medicaid: 3.00%; Medicare: 7.22%. Year: 2034; Social Security: 6.29%; Medicaid: 3.10%; Medicare: 7.37%. Year: 2035; Social Security: 6.31%; Medicaid: 3.10%; Medicare: 7.52%. Year: 2036; Social Security: 6.32%; Medicaid: 3.20%; Medicare: 7.67%. Year: 2037; Social Security: 6.33%; Medicaid: 3.30%; Medicare: 7.80%. Year: 2038; Social Security: 6.32%; Medicaid: 3.30%; Medicare: 7.92%. Year: 2039; Social Security: 6.32%; Medicaid: 3.40%; Medicare: 8.03%. Year: 2040; Social Security: 6.31%; Medicaid: 3.40%; Medicare: 8.14%. Year: 2041; Social Security: 6.30%; Medicaid: 3.50%; Medicare: 8.25%. Year: 2042; Social Security: 6.29%; Medicaid: 3.60%; Medicare: 8.36%. Year: 2043; Social Security: 6.28%; Medicaid: 3.60%; Medicare: 8.46%. Year: 2044; Social Security: 6.27%; Medicaid: 3.70%; Medicare: 8.58%. Year: 2045; Social Security: 6.26%; Medicaid: 3.70%; Medicare: 8.70%. Year: 2046; Social Security: 6.26%; Medicaid: 3.80%; Medicare: 8.82%. Year: 2047; Social Security: 6.25%; Medicaid: 3.80%; Medicare: 8.93%. Year: 2048; Social Security: 6.25%; Medicaid: 3.90%; Medicare: 9.03%. Year: 2049; Social Security: 6.24%; Medicaid: 3.90%; Medicare: 9.14%. Year: 2050; Social Security: 6.24%; Medicaid: 4.00%; Medicare: 9.25%. Year: 2051; Social Security: 6.24%; Medicaid: 4.06%; Medicare: 9.36%. Year: 2052; Social Security: 6.24%; Medicaid: 4.13%; Medicare: 9.47%. Year: 2053; Social Security: 6.24%; Medicaid: 4.19%; Medicare: 9.59%. Year: 2054; Social Security: 6.25%; Medicaid: 4.26%; Medicare: 9.71%. Year: 2055; Social Security: 6.25%; Medicaid: 4.33%; Medicare: 9.84%. Year: 2056; Social Security: 6.26%; Medicaid: 4.39%; Medicare: 9.98%. Year: 2057; Social Security: 6.27%; Medicaid: 4.46%; Medicare: 10.12%. Year: 2058; Social Security: 6.27%; Medicaid: 4.53%; Medicare: 10.26%. Year: 2059; Social Security: 6.28%; Medicaid: 4.60%; Medicare: 10.40%. Year: 2060; Social Security: 6.29%; Medicaid: 4.68%; Medicare: 10.55%. Year: 2061; Social Security: 6.29%; Medicaid: 4.75%; Medicare: 10.70%. Year: 2062; Social Security: 6.30%; Medicaid: 4.83%; Medicare: 10.84%. Year: 2063; Social Security: 6.31%; Medicaid: 4.90%; Medicare: 10.99%. Year: 2064; Social Security: 6.32%; Medicaid: 4.98%; Medicare: 11.14%. Year: 2065; Social Security: 6.33%; Medicaid: 5.06%; Medicare: 11.30%. Year: 2066; Social Security: 6.34%; Medicaid: 5.14%; Medicare: 11.47%. Year: 2067; Social Security: 6.35%; Medicaid: 5.22%; Medicare: 11.64%. Year: 2068; Social Security: 6.35%; Medicaid: 5.30%; Medicare: 11.81%. Year: 2069; Social Security: 6.36%; Medicaid: 5.38%; Medicare: 11.96%. Year: 2070; Social Security: 6.36%; Medicaid: 5.47%; Medicare: 12.12%. Year: 2071; Social Security: 6.37%; Medicaid: 5.55%; Medicare: 12.28%. Year: 2072; Social Security: 6.37%; Medicaid: 5.64%; Medicare: 12.44%. Year: 2073; Social Security: 6.37%; Medicaid: 5.73%; Medicare: 12.60%. Year: 2074; Social Security: 6.38%; Medicaid: 5.82%; Medicare: 12.75%. Year: 2075; Social Security: 6.38%; Medicaid: 5.91%; Medicare: 12.92%. Year: 2076; Social Security: 6.38%; Medicaid: 6.01%; Medicare: 13.08%. Year: 2077; Social Security: 6.39%; Medicaid: 6.10%; Medicare: 13.25%. Year: 2078; Social Security: 6.39%; Medicaid: 6.20%; Medicare: 13.41%. Year: 2079; Social Security: 6.39%; Medicaid: 6.29%; Medicare: 13.58%. Year: 2080; Social Security: 6.39%; Medicaid: 6.39%; Medicare: 13.75%. Source: GAO analysis based on data from the Office of the Chief Actuary, Social Security Administration, Office of the Actuary, Centers for Medicare and Medicaid Services, and the Congressional Budget Office. Notes: Social Security and Medicare projections based on the intermediate assumptions of the 2006 Trustees' Reports. Medicaid projections based on CBO's August 2006 short-term Medicaid estimates and CBO's December 2005 long-term Medicaid projections under mid-range assumptions. [End of figure] Federal Tax Expenditures Exceeded Discretionary Spending for Half of the Last Decade: Federal Tax Expenditures Exceeded Discretionary Spending for Half of the Last Decade: Dollars in billions (in real 2005 dollars) 1400: [See PDF for Image] - graphic text: Fiscal year: 1982; Mandatory spending: $601.60; Sum of tax expenditure revenue loss estimates: $463.30; Discretionary spending: $585.80. Fiscal year: 1983; Mandatory spending: $628.50; Sum of tax expenditure revenue loss estimates: $499.60; Discretionary spending: $608.00. Fiscal year: 1984; Mandatory spending: $599.60; Sum of tax expenditure revenue loss estimates: $529.70; Discretionary spending: $629.70. Fiscal year: 1985; Mandatory spending: $644.80; Sum of tax expenditure revenue loss estimates: $568.70; Discretionary spending: $688.40. Fiscal year: 1986; Mandatory spending: $653.40; Sum of tax expenditure revenue loss estimates: $618.80; Discretionary spending: $688.90. Fiscal year: 1987; Mandatory spending: $645.00; Sum of tax expenditure revenue loss estimates: $577.10; Discretionary spending: $680.10. Fiscal year: 1988; Mandatory spending: $665.30; Sum of tax expenditure revenue loss estimates: $448.10; Discretionary spending: $689.30. Fiscal year: 1989; Mandatory spending: $694.40; Sum of tax expenditure revenue loss estimates: $474.50; Discretionary spending: $698.40. Fiscal year: 1990; Mandatory spending: $782.80; Sum of tax expenditure revenue loss estimates: $480.10; Discretionary spending: $689.60. Fiscal year: 1991; Mandatory spending: $792.10; Sum of tax expenditure revenue loss estimates: $472.00; Discretionary spending: $708.10. Fiscal year: 1992; Mandatory spending: $839.90; Sum of tax expenditure revenue loss estimates: $488.20; Discretionary spending: $691.40. Fiscal year: 1993; Mandatory spending: $850.30; Sum of tax expenditure revenue loss estimates: $494.80; Discretionary spending: $683.10. Fiscal year: 1994; Mandatory spending: $889.70; Sum of tax expenditure revenue loss estimates: $520.20; Discretionary spending: $671.20. Fiscal year: 1995; Mandatory spending: $897.20; Sum of tax expenditure revenue loss estimates: $538.80; Discretionary spending: $661.60. Fiscal year: 1996; Mandatory spending: $937.40; Sum of tax expenditure revenue loss estimates: $541.70; Discretionary spending: $634.60. Fiscal year: 1997; Mandatory spending: $948.60; Sum of tax expenditure revenue loss estimates: $565.70; Discretionary spending: $640.70. Fiscal year: 1998; Mandatory spending: $994.40; Sum of tax expenditure revenue loss estimates: $640.10; Discretionary spending: $638.70. Fiscal year: 1999; Mandatory spending: $1028.10; Sum of tax expenditure revenue loss estimates: $688.60; Discretionary spending: $653.20. Fiscal year: 2000; Mandatory spending: $1064.90; Sum of tax expenditure revenue loss estimates: $720.10; Discretionary spending: $688.10. Fiscal year: 2001; Mandatory spending: $1101.90; Sum of tax expenditure revenue loss estimates: $780.90; Discretionary spending: $710.00. Fiscal year: 2002; Mandatory spending: $1186.60; Sum of tax expenditure revenue loss estimates: $808.80; Discretionary spending: $787.90. Fiscal year: 2003; Mandatory spending: $1243.20; Sum of tax expenditure revenue loss estimates: $775.90; Discretionary spending: $868.50. Fiscal year: 2004; Mandatory spending: $1271.40; Sum of tax expenditure revenue loss estimates: $748.20; Discretionary spending: $920.20. Fiscal year: 2005; Mandatory spending: $1319.80; Sum of tax expenditure revenue loss estimates: $775.70; Discretionary spending: $968.50. Source: GAO analysis of OMB budget reports on tax expenditures, fiscal years 1976-2007. Note: Summing tax expenditure estimates does not take into account interactions between individual provisions. Outlays associated with refundable tax credits are included in mandatory spending. [End of Figure] Health Care Is the Nation's Top Tax Expenditure in Fiscal Year 2005: [See PDF for image] – graphic text: Bar graph with five items. Estimated dollars in billions. Exclusion of employer contributions for insurance premiums and medical care: $118.4[A]; Deductibility of mortgage interest on owner-occupied dwellings: $62.2; Exclusion of pension contributions and earnings: employer-sponsored defined benefit plans: $50.6; Child tax credit: $41.8[B]; Exclusion of pension contributions and earnings: employer-sponsored 401(K) plans: $37.4. Sources: Office of Management and Budget (OMB), Analytical Perspectives, Budget of the United States Government, Fiscal Year 2007. Note: "Tax expenditures" refers to the special tax provisions that are contained in the federal income taxes on individuals and corporations. OMB does not include forgone revenue from other federal taxes such as Social Security and Medicare payroll taxes. [A] If the payroll tax exclusion were also counted here, the total tax expenditure for employer contributions for health insurance premiums would be about 50 percent higher or $177.6 billion. [B] This is the revenue loss and does not include associated outlays of $14.6 billion. [End of figure] 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 percent 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 year 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 grow our way out of this problem. Tough choices will be required. The Way Forward: A Three-Pronged Approach: 1. Improve Financial Reporting, Public Education, and Performance Metrics: 2. Strengthen Budget and Legislative Processes and Controls: 3. Fundamental Reexamination & Transformation for the 21 st Century (i.e., entitlement programs, other spending, and tax policy): Solutions Require Active Involvement from both the Executive and Legislative Branches: The Way Forward: Improve Financial Reporting, Public Education, and Performance Metrics: Improve transparency & completeness of President's budget proposal: * Return to 10-year estimates in budget both for current policies and programs and for policy proposals: * Include in the budget estimates of long-term cost of policy proposals & impact on total fiscal exposures. * Improve transparency of tax expenditures: Consider requiring President's budget to specify & explain a fiscal goal and a path to that goal within 10-year window--or justify an alternative deadline: Require annual OMB report on existing fiscal exposures [liabilities, obligations, explicit & implied commitments] Require enhanced financial statement presentation and preparation of summary annual report that is both useful and used: Increase information on long-range fiscal sustainability issues in Congressional Budget Resolution & Budget Process. Develop key national (outcome-based) indicators (e.g. economic, security, social, environmental) to chart the nation's posture, progress, and position relative to the other major industrial countries: The Way Forward: Strengthen Budget and Legislative Processes and Controls: Restore discretionary spending caps & PAYGO rules on both spending and tax sides of the ledger: Develop mandatory spending triggers [with specific defaults], and other action-forcing provisions (e.g., sunsets) for both direct spending programs and tax preferences: Develop, impose & enforce modified rules for selected items (e.g., earmarks, emergency designations, and use of supplementals): Require long-term cost estimates (e.g. present value) for any legislative debate on all major tax and spending bills, including entitlement programs. Cost estimates should usually assume no sunset: Extend accrual budgeting to insurance & federal employee pensions; develop techniques for extending to retiree health & environmental liabilities: Consider biennial budgeting: Consider expedited line item rescissions from the President that would only require a majority vote to override the proposed rescission(s): The Way Forward: Fundamental Reexamination & Transformation: Restructure existing entitlement programs: Reexamine and restructure the base of all other spending: Review & revise existing tax policy, including tax preferences and enforcement programs: Expand scrutiny of all proposed new programs, policies, or activities: Reengineer internal agency structures and processes, including more emphasis on long-term planning, integrating federal activities, and partnering with others both domestically and internationally: Strengthen and systematize Congressional oversight processes: Increase transparency associated with government contracts and other selected items: Consider a capable, credible, bi-partisan entitlement and tax reform commission along the lines proposed by Sen. Voinovich and Cong. Wolf: Key National Indicators: What: A portfolio of economic, social, and environmental outcome-based measures that could be used to help assess the nation's and other governmental jurisdictions' position and progress: Who: Many countries and several states, regions, and localities have already undertaken related initiatives (e.g., Australia, New Zealand, Canaa, United Kingdom, Oregon, Silicon Valley (California) and Boston). Why: Development of such a portfolio of indicators could have a number of possible benefits, including: * Serving as a framework for related strategic planning efforts: * Enhancing performance and accountability reporting: * Informing public policy decisions, including much needed baseline reviews of existing government policies, programs, functions, and activities: * Facilitating public education and debate as well as an informed electorate: Way Forward: Consortium of key players housed by the National Academies domestically and related efforts by the OECD and others internationally. Key National Indicators: Where the United States Ranks: The United States may be the only superpower, but compared to most other OECD countries on selected key economic, social, and environmental indicators, on average, the U.S. ranks: 16 0ut Of 28: OECD Categories for Key Indicators (2006 OECD Factbook): * Population/Migration: * Energy: * Environment: * Quality of Life: * Macroeconomic Trends: * Labor Market: * Education: * Economic Globalization: * Prices: * Science & Tech: * Public Finance: Source: 2006 OECD Factbook. GAO' High-Risk List 2006: Addressing Challenges in Broad-based Transformations: High-Risk Areas: Protecting the Federal Government's Information Systems and the Nation's Critical Infrastructures; Year Designated High Risk: 1997. High-Risk Areas: Strategic Human Capital Management[A]; Year Designated High Risk: 2001. High-Risk Areas: U.S. Postal Service Transformation Efforts and Long- Term Outlook[A]; Year Designated High Risk: 2001. High-Risk Areas: Managing Federal Real Property[A]; Year Designated High Risk: 2003. High-Risk Areas: Implementing and Transforming the Department of Homeland Security; Year Designated High Risk: 2003. High-Risk Areas: Establishing Appropriate and Effective Information- Sharing Mechanisms to Improve Homeland Security; Year Designated High Risk: 2005. High-Risk Areas: DOD Approach to Business Transformation[A]; Year Designated High Risk: 2005. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Supply Chain Management (formerly Inventory Management); Year Designated High Risk: 1990. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Weapon Systems Acquisition; Year Designated High Risk: 1990. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Business Systems Modernization; Year Designated High Risk: 1995. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Financial Management; Year Designated High Risk: 1995. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Support Infrastructure Management; Year Designated High Risk: 1997. High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Personnel Security Clearance Program; Year Designated High Risk: 2005. Managing Federal Contracting More Effectively: High-Risk Areas: DOE Contract Management; Year Designated High Risk: 1990. High-Risk Areas: NASA Contract Management; Year Designated High Risk: 1990. High-Risk Areas: DOD Contract Management; Year Designated High Risk: 1992. Management of Interagency Contracting; Year Designated High Risk: 2005. Assessing the Efficiency and Effectiveness of Tax Law Administration: High-Risk Areas: Enforcement of Tax Laws[A, B]; Year Designated High Risk: 1990. High-Risk Areas: IRS Business Systems Modernization[C]; Year Designated High Risk: 1995. Modernizing and Safeguarding Insurance and Benefit Programs: High-Risk Areas: Medicare Program[A]; Year Designated High Risk: 1990. High-Risk Areas: HUD Single-Family Mortgage Insurance and Rental Housing Assistance Programs; Year Designated High Risk: 1994. High-Risk Areas: Medicaid Program[A]; Year Designated High Risk: 2003. High-Risk Areas: Modernizing Federal Disability Programs[A]; Year Designated High Risk: 2003. High-Risk Areas: Pension Benefit Guaranty Corporation Single-Employer Insurance Program[A]; Year Designated High Risk: 2003. High-Risk Areas: National Flood Insurance Program; Year Designated High Risk: 2006. Other: High-Risk Areas: FAA Air Traffic Control Modernization; Year Designated High Risk: 1995. Source: GAO. [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. [End of table] 21st Century Challenges Report: Provides background, framework, and questions to assist in reexamining the base: Covers entitlements & other mandatory spending, discretionary spending, and tax policies and programs: Based on GAO's work for the Congress: Source: GAO. Twelve Reexamination Areas: Mission Areas: * Defense: * International Affairs: * Education & Employment: * Natural Resources, Energy & Environment: * Financial Regulation & Housing: * Retirement & Disability: * Health Care: * Science & Technology: * Homeland Security: * Transportation: Crosscutting Areas: * Improving Governance: * Reexamining the Tax System: Generic Reexamination Criteria and Sample Questions: Relevance of purpose and the federal role: Why did the federal government initiate this program and what was the government trying to accomplish? Have there been significant changes in the country or the world that relate to the reason for initiating it? Measuring success: Are there outcome-based measures? If not, why? If there are outcome-based measures, how successful is it based on these measures? Targeting benefits: Is it well targeted to those with the greatest needs and the least capacity to meet those needs? Affordability and cost effectiveness: Is it using the most cost-effective or net beneficial approaches when compared to other tools and program designs? Best practices: Is the responsible entity employing prevailing best practices to discharge its responsibilities and achieve its mission? Illustrative 21ST Century Questions: Management & Human Capital Issues: What are the leadership models that can be used to improve agency management and address transformation challenges? For example, should we create chief operating officer or chief management officer positions with term appointments within selected agencies to elevate, integrate, and institutionalize responsibility and authority for business management and transformation efforts? How should the federal government update its compensation systems to be more market-based and performance-oriented? For example, should poor performers be guaranteed pay increases? How can these systems ensure pay comparability and provide reasonable annual pay adjustments while also competing for critical occupations or in higher cost locations? How can the executive branch and the Congress have a more strategic, crosscutting focus on policy and budget decisions to address goals that cut across conventional agency and program boundaries? Can the governmentwide performance plan required by GPRA be implemented to provide the necessary crosscutting focus? Transformation: Webster's definition: An act, process, or instance of change in structure appearance or character: A conversion, revolution, makeover, alteration, or renovation: Transformation is about creating the future rather than perfecting the past. Effective human capital strategy is key to any successful transformation effort: The Objective of Transformation: To create a more positive future by maximizing value and mitigating risk within current and expected resource levels: Transformation Has Different Dimensions: DOD: DHS: U. S. Postal Service: IRS: DOE: NASA: Information Sharing: Human Capital: Strategy Financial Management: Information Technology: Sourcing Strategy: Disability Programs: Real Property Management: Note: All of the above are on GAO's High Risk List to one extent or the other. Key Transformation Elements: Planning: People: Process: Partnerships: Technology: Environment: The most important of the six is people an agency's human capital. Transformation: A New Model for Government Organizations: Government organizations will need to: Become less hierarchical, process-oriented, stovepiped, and inwardly focused. Become more partnership-based, results-oriented, integrated, and externally focused. Achieve a better balance between results, customer, and employee focus. Work better with other governmental organizations, non-governmental organizations, and the private sector, both domestically and internationally, to achieve results. Focus on maximizing value, managing risk and enhancing responsiveness within current and expected resource levels. Keys to Making Change Happen: Commitment and sustained leadership: Demonstrated need for change (i.e., burning platform): Start at the top and with the new people (transformation takes 7+ years): Process matters (e.g., employee involvement) Don't fight a two-front war: 15-percent rule: Identifiable and measurable progress over time: Communication, communication, communication: Figure out what's right versus what's popular: Patience, persistence, perseverance to pain before you prevail: Keys to Making Change Happen: Several other actions needed: Strategic Plan: Core values: Organizational alignment: Recruiting, development, and succession planning strategies: Modernizing and integrating institutional, unit and individualized performance measurement and reward systems: Employee empowerment and effective communications: GAO: Leading by Example (Change, Performance, and Human Capital Management): Mission and vision clarification: Core values: accountability, integrity, reliability: Strategic planning: Organizational realignment: Definitions of success: Multi-tasking and matrix management: Procurement, contracting, and acquisition: Human capital: Information technology: Knowledge management: Financial management: Client service/external agency relations and protocols: Enhanced products and services: Constructive engagement with agencies: Partnering with other accountability and "good government"organizations: GAO's Strategic Plan: Serving the Congress and the Nation: GAO's Strategic Plan Framework: Mission: GAO exists to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people. Themes: * Long-Term Fiscal Imbalance; * National Security; * Global Interdependence; * Changing Economy; * Demographics; * Science and Technology; * Quality of Life; * Governance; Goals and Objectives: Provide Timely, Quality Service to the Congress and the Federal Government to. Address Current and Emerging Challenges to the Well-Being and Financial Security of the American People related to. * Health care needs and financing; * Education and protection of children; * Work opportunities and worker protection; * Retirement income security; * Effective system of justice; * Viable communities; * Natural resources use and environmental protection; * Physical infrastructure; Provide Timely, Quality Service to the Congress and the Federal Government to. Respond to Changing Security Threats and the Challenges of Global Interdependence involving. * Emerging threats; * Military capabilities and readiness; * Advancement of U.S. interests; * Global market forces; Help Transform the Federal Government Government's Role and How It Does Business to Meet 21st Century Challenges by assessing. * Roles in achieving federal objectives; * Government transformation; * Key management challenges and program risks; * Fiscal position and financing of the government: Maximize the Value of GAO by Being a Model Federal Agency and a World- Class Professional Services Organization in the areas of. * Client and customer satisfaction; * Strategic leadership; * Institutional knowledge and experience; * Process improvement; * Employer of choice: Core Values: * Accountability; * Integrity; * Reliability; Source: GAO. Selected Performance Measures: Key Dimensions: Results: Clients/customers: People: Partnerships: Context: Absolute: Trend: Compared to Peers: How GAO Has Addressed Its Human Capital Challenges: Administrative: Human capital strategic plan: HQ realignment & field office restructuring: Self-assessment checklist: Human capital profile: Workforce & succession planning: Employee feedback survey & suggestion program: Employee Advisory Council: Enhanced employee communications & participation: Skills & knowledge inventory: Employee preference survey: Frequent flyer miles: Student loan repayment: Recruitment & college relations: Phased retirement initiative: Training/development: Recognition & rewards: Business casual dress & business cards: Enabling technologies: Mentor/buddy programs: Commuting subsidy: Competency-based employee appraisal system: Human Capital Officer: Office of Opportunity & Inclusiveness: Flexitime and telework: Total compensation communications: Broad-banding: Market-based pay studies: Band II restructuring: Legislation Addressing GAO's Human Capital Challenges: Past: Broad-banding authority: Expedited hiring authority (e.g., internship program): Special pay rates: Senior level for technical staff: Targeted early out and buyout authority (3 years): Revised RIF rules: Recent: Targeted early out and buyout authority (permanent): Annual pay adjustment rates controlled by GAO: Pay retention provisions: Relocation benefits: Increased annual leave for upper level employees: Executive exchange program: Re-designation of "General Accounting Office" to "Government Accountability Office" GAO Elements of Reform: Modern, Effective, Credible, and Validated Performance Management System: Focuses on core competencies: Helps to communicate employee performance expectations: Creates a "line of sight" linking institutional team/unit and individual performance: Makes meaningful distinctions in employee performance: Provides for competency-based results automatically and relative peer group standing on request: Modern Classification and Compensation System: Uses pay bands: Is market-based: Is performance-oriented: Safeguards, transparency, and accountability built in: Provisions for employee participation: Pre-and post-implementation consultation and communications strategy incorporated: Internal pre-decisional revenues and reasonable post-decisional transparency: Avenues for adverse action appeals, both internally and externally: Source: GAO. Market-Based and Performance-Oriented Pay Systems: A Phased Approach: [See PDF for Image]- graphic text: 3 vertical fields with 3 subfields each and then developments listed by year. Analysis: Performance; 1999: Best practices study; 2000: Competititve procurement; 2001: Validate competencies and performance standards; 2002: Pilot; 2003: Implement 1st cycle; 2004: Evaluate and refine; 2005: evaluate and refine; 2006: Evaluate and refine. Analysis: Merit pay; 1999: [Empty]; 2000: [Empty]; 2001: [Empty]; 2002: Develop; 2003: First payout and evaluate and refine; 2004: Evaluate and refine; 2005: Evaluate and refine. Analysis: Pay Ranges; 1999: [Empty]; 2000: [Empty]; 2001: [Empty]; 2002: [Empty]; 2003: [Empty]; 2004: Conduct pay study; 2005: Develop implementation policies; 2006: Update and implement pay ranges. Attorneys: Performance; 1999: [Empty]; 2000: [Empty]; 2001: Competitive procurement; 2002: Validate competencies and performance standards; 2003: Implement 1st cycle; 2004: Evaluate and refine; 2005: evaluate and refine; 2006: Evaluate and refine. Attorneys: Merit Pay; 1999: [Empty]; 2000: [Empty]; 2001: [Empty]; 2002: [Empty]; 2003: Develop and first payout at the end of the year; 2004: Evaluate and refine; 2005: evaluate and refine; 2006: Evaluate and refine. Attorneys: Pay ranges; 1999: [Empty]; 2000: [Empty]; 2001: [Empty]; 2002: [Empty]; 2003: [Empty]; 2004: Conduct pay study; 2005: Develop implementation policies; 2006: Update and Implement pay ranges. APSS: Performance; 1999: [Empty]; 2000: [Empty]; 2001: Competitive procurement; 2002: Organize job families; 2003: Conduct position review; 2004: Validate competencies and performance standards; 2005: Implement 1st cycle; 2006: Evaluate and refine. APSS: Merit Pay; 1999: [Empty]; 2000: [Empty]; 2001: [Empty]; 2002: [Empty]; 2003: [Empty]; 2004: [Empty]; 2005: Develop and 1st Payout; 2006: Evaluate and refine. APSS: Pay ranges; 1999: [Empty]; 2000: [Empty]; 2001: [Empty]; 2002: [Empty]; 2003: [Empty]; 2004: [Empty]; 2005: Conduct pay study; 2006: Implement pay ranges. Source: GAO. [End of table] Competency-Based Performance Appraisal: Objective of new system are to provide a: Clear link to our strategic plan, professional standards, protocols and core values: Fair, honest, accurate and non-discriminatory assessment of performance based on standards that are valid, properly applied, and transparent to employees: A sound basis for enhancing the performance capacity of all staff, rewarding high-performing staff, and dealing with "below expected" performers: Figure: Competency Model: [See PDF for Image] - graphic text: An Octagon with the components of the competency model inside it and other areas of importance surrounding it. Competency Model: Achieving Results: Maintaining Client and Customer Focus: Developing People: Thinking Critically: Collaborating with Others: Presenting Information Orally: Presenting Information in Writing Leading Others: Outside the octagon: Succession Planning: Promotions: Recruitment: Work assignments: Performance Management: Pay Decisions: Career Planning: Training: Source: GAO. [End of figure] Classification and Compensation System: Key Guiding Principles: Enable GAO to attract and retain top talent: Result in equal pay for work of equal value over time: Be reflective of the roles and responsibilities that we expect GAO staff to perform: Be reasonable; competitive; performance-oriented; and based on skills, knowledge, and role: Be affordable and sustainable based on current and expected resources levels: Be in conformity with applicable statutory limits: Try to assure a reasonable consistency in ratings and related compensation results within and between teams: Pay Philosophy: Performance-Oriented and Market-Based: Historically: Pay ranges followed the GS schedule: Everyone could advance to the pay cap irrespective of their performance not a matter of if, but when: New Approach: Pay ranges set to be competitive with the labor markets in which GAO competes for talent: Everyone can advance to the pay cap but some staff must have performance in excess of a certain level to advance beyond a certain point in the pay range (e.g., 75th percentile): Pay ranges may overlap in upper part of band pay range to adequately reward expertise, leadership, and performance: Classification and Compensation Review (CCR) Approach-Best Practices: Hired an experienced and top quality firm Watson Wyatt: Followed an industry best practices process and methodology: * Early involvement of Career Stream Focal Points (including Employee Advisory Council representatives) to provide: - Knowledge and expertise on job content: - Insight regarding attraction and retention issues including turnover, recruitment sources, and mid-career hiring: - Hands-on review and confirmation of GAO job matches and 18 selected published survey sources: Multiple authoritative surveys used for determining competitive compensation data: Widely recognized local labor market data index used for local market categories: Extensive involvement throughout the study by the Executive Committee to: * Provide strategic guidance and input: * Confirm and approve job matches from selected published survey sources after consideration of recommendations from Career Stream Focal Points and Watson Wyatt: GAO's Band II Restructuring Effort: Lessons To Be Shared: Study the relative roles and responsibilities of the employees affected before determining the number of bands: Conduct an independent market-based compensation study instead of relying on GS-pay ranges: Design and implement a modern, effective, and credible performance management system that makes meaningful distinctions in performance: Key Leadership Attributes Needed for These Challenging and Changing Times: Courage: Integrity: Creativity: Partnership: Stewardship: On the Web: Web site: [Hyperlink, http://www.gao.gov/cghome.htm: Contact: Paul Anderson, Managing Director, Public Affairs AndersonP1 @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. 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