GAO reviewed the 1997 consolidated financial statements of the United States government.

GAO noted that: (1) significant financial systems weaknesses, problems with fundamental recordkeeping, incomplete documentation, and weak internal controls, including computer controls, prevent the government from accurately reporting a large portion of its assets, liabilities, and costs; (2) these deficiencies affect the reliability of the consolidated financial statements and much of the underlying financial information; (3) they also affect the government's ability to accurately measure the full cost and financial performance of programs, effectively and efficiently manage its operations, and ensure compliance with laws and regulations; (4) major problems include the federal government's inability to: (a) properly account for and report billions of dollars of property, equipment, materials, and supplies; (b) properly estimate the cost of most federal credit programs and the related loans receivable and loan guarantee liabilities; (c) estimate and report material amounts of environmental and disposal liabilities and related costs; (d) determine the proper amount of various reported liabilities, including postretirement health benefits for military compensation benefits, accounts payable, and other liabilities; (e) accurately report major portions of the net costs of government operations; (f) determine the full extent of improper payments that occur in major programs and that are estimated to involve billions of dollars annually; (g) properly account for billions of dollars of basic transactions, especially those between governmental entities; (h) ensure that the information in the consolidated financial statements is consistent with agencies' financial statements; (i) ensure that all disbursements are properly recorded; and (j) effectively reconcile the change in net position reported in the financial statements with budget results; (5) these deficiencies prevented GAO from being able to form an opinion on the reliability of the consolidated financial statements; (6) considerable effort is already under way to address these problems; (7) several individual agencies that have been audited for a number of years faced serious deficiencies in their initial audits and have made good progress in resolving them; (8) with a concerted effort, the federal government, as a whole, can continue to make progress toward generating reliable information on a regular basis; and (9) annual financial statement audits are essential to ensuring the effectiveness of the improvements now under way.