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Closing Comments

For more than a decade, GAO has been running fiscal simulations to tell more about this longer-term story. The Congressional Budget Office (CBO) has also published long-term simulations for many years.

The federal government faced large and growing structural deficits—and hence rising debt—before the instability in financial markets and the economic downturn. Under the projections included in the Financial Report and under the most recent CBO and GAO simulations using a range of assumptions, these structural deficits—driven on the spending side primarily by rising health care costs and known demographic trends—lead to continuing increases in federal debt held by the public as a share of GDP, which is unsustainable.

In closing, even though progress has been made in improving federal financial management activities and practices, much work remains given the federal government’s long-term fiscal challenges and the need for the new Congress, the administration, and federal managers to have reliable, useful, and timely financial and performance information to effectively meet these challenges.

The recent economic recession and the federal government’s actions to stabilize financial markets and promote economic recovery continued to significantly affect the federal government’s financial condition. The accrual-based consolidated financial statements for fiscal year 2010 include, as they did for fiscal year 2009, substantial assets and liabilities resulting from these actions. The valuation of certain assets and liabilities is based on assumptions and estimates that are inherently subject to substantial uncertainty arising from the uniqueness of certain transactions and the likelihood of future changes in general economic, regulatory, and market conditions. As such, there will be differences between the estimated values as of September 30, 2010, and the actual results, and such differences may be material. These differences will also affect the ultimate cost of the federal government’s market stabilization and economic recovery actions. Going forward, a great amount of attention will need to continue to be devoted to ensuring (1) that sufficient internal controls and transparency are established and maintained for all financial stabilization and economic recovery initiatives; and (2) that all related financial transactions are reported on time, accurately, and completely.

Further, sound decisions on the current and future direction of all vital federal government programs and policies are more difficult without reliable, useful, and timely financial and performance information. In this

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