U.S. Government's Annual Financial Report Unable to Pass GAO Audit
WASHINGTON, D.C. (February 25, 2016) — The U.S. Government Accountability Office (GAO) did not render an opinion on the federal government’s consolidated financial statements for FY 2015 because of persistent problems with the Department of Defense’s (DOD) finances, the federal government’s inability to account for and reconcile certain transactions, an ineffective process for preparing the consolidated financial statements, and significant uncertainties. These and other limitations hamper the federal government’s ability to reliably report a significant portion of its financial information.
“The federal government needs to be able to track all revenues and expenses, as well as its assets and liabilities, and that’s particularly important in a tight budget environment,” said Gene L. Dodaro, Comptroller General of the United States and head of the GAO. “Our report on the government’s consolidated financial statements underscores the fact that much more work needs to be done to ensure our policymakers receive the accurate financial information needed to make difficult short-term and long-term spending decisions.”
For 2014, nearly all of the 24 Chief Financial Officers Act agencies received unmodified or "clean" opinions on their respective entities' fiscal year 2014 financial statements. But for 2015, DOD, as well as the Department of Housing and Urban Development and the Department of Agriculture, failed to get clean opinions. DOD’s goal is to have audit-ready financial statements department-wide by September 30, 2017.
Acknowledging that solid efforts are underway to resolve financial management challenges, Dodaro urged strong and sustained commitment by DOD and other federal entities, along with continued leadership by the U.S. Department of the Treasury and the Office of Management and Budget, to ensure more accurate financial reporting.
GAO could not render an opinion on the sustainability financial statements due to significant uncertainties about achieving projected reductions in Medicare cost growth and a material weakness in internal control over financial reporting. These sustainability financial statements consist of the 2015 Statement of Long-Term Fiscal Projections, an effort to provide information on the federal government’s long-term fiscal condition, which was audited for the first time this year; the 2015, 2014, 2013, 2012, and 2011 Statements of Social Insurance; and the 2015 and 2014 Statements of Changes in Social Insurance Amounts.
Dodaro also expressed concern about the continued rise in improper payments. He noted material weaknesses involving upwards of $136 billion in improper payments reported for fiscal 2015. This compares to more than $124 billion in improper payments reported for fiscal year 2014, and more than $105 billion for fiscal year 2013. Other reported material weakness this year involved information security across government and tax collection activities.
GAO remains concerned that the federal government’s long-term fiscal path remains unsustainable without further policy changes. GAO has prepared long-term fiscal simulations that project federal deficits and debt under different sets of policy assumptions. “Growing debt held by the public, which is now about 74 percent of GDP, could limit the federal government’s flexibility to address new or unforeseen challenges, such as another economic downturn or a large-scale disaster,” Dodaro said.
In addition, Dodaro pointed out that delays in raising the debt limit can create uncertainty in the Treasury market. To avoid disruptions to the Treasury market, minimize unnecessary costs, and help inform fiscal policy debate in a timely way, GAO has suggested that Congress consider better linking decisions about the debt limit with decisions about spending and revenue at the time those decisions are made.
Dodaro expressed his appreciation to the Inspectors General throughout government for their hard work and professionalism in auditing the annual financial statements of individual federal entities.
GAO's audit report on the U.S. government's consolidated financial statements is included in the 2015 Financial Report of the United States Government, which is prepared by the Department of the Treasury. GAO's audit report is available on GAO's website at www.gao.gov/products/GAO-16-357R. GAO has not been able to render an opinion on the accrual-based consolidated financial statements since they were first prepared in 1997.
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