GAO Again Unable to Render an Opinion on the U.S. Government's Annual Financial Statements
WASHINGTON, D.C. (March 28, 2019)—The U.S. Government Accountability Office (GAO) once again could not render an opinion on the federal government’s consolidated financial statements. Shortcomings in the fiscal year 2018 statements prompted Comptroller General Gene Dodaro, the head of the GAO, to call for a renewed commitment by the Defense Department (DOD) and other agencies, along with continued leadership by the Treasury Department and the Office of Management and Budget (OMB), to help overcome long-standing financial reporting challenges.
“The federal government must be able to adequately track all revenues and expenses, along with its assets and liabilities. Meaningful efforts to improve government operations depend on having access to sound information,” Dodaro said. “Our latest audit report makes clear the hurdles to providing policymakers with accurate, timely and complete financial information.”
Many of the same deficiencies affected past financial statements, including problems with DOD’s financial management and auditability, the federal government’s inability to account for transactions between agencies, and weaknesses in the process for preparing the consolidated financial statements. Such deficiencies threaten the federal government’s ability to accurately report a significant amount of its financial information.
Twenty-two of the 24 Chief Financial Officers Act agencies received unmodified or "clean" opinions on their respective entities' fiscal year 2018 financial statements. However, about 31 percent of the federal government’s reported total assets as of September 30, 2018, and about 17 percent of the federal government’s reported net cost for fiscal year 2018, involved federal entities that were unable to receive an opinion on their fiscal year 2018 financial statements or whose fiscal year 2018 financial information was not audited. Persistent problems have prevented DOD and the Department of Housing and Urban Development from receiving clean opinions on their financial statements.
GAO also 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 2018 and 2017 Statements of Long-Term Fiscal Projections; the 2018, 2017, 2016, 2015, and 2014 Statements of Social Insurance; and the 2018 and 2017 Statements of Changes in Social Insurance Amounts.
In GAO’s audit report, Dodaro raised concern about the federal government’s improper payment problem, which GAO reported as a material weakness. Such payments grew to an estimated $151 billion for fiscal year 2018. Other material weaknesses reported by GAO this year include information security across government and loans receivable and loan guarantee liabilities.
Dodaro added that the financial report, along with simulations by the Congressional Budget Office and GAO, show that the federal government is on an unsustainable long-term fiscal path. GAO has urged Congress to develop a plan to address the long-term outlook, one that will accommodate near-term economic needs and national priorities. He stressed the importance of safeguarding the full faith and credit of the United States, noting that GAO has recommended that Congress change its approach to the debt limit so that decisions about borrowing are tied to spending and revenue decisions at the time when those decisions are made.
In addition, Dodaro pointed out financial and other risks that could affect the federal government’s financial position and condition. Those risks include the Pension Benefit Guaranty Corporation’s long-term challenges, federal support of the housing finance market, the U.S. Postal Service’s poor financial condition, and the funding structure of some government insurance programs. GAO discusses these and other risks in its 2019 High Risk List.
The annual preparation and audit of individual federal entity financial statements are critical to ensuring individual federal entity accountability, facilitating financial management, and assessing the reliability and effectiveness of agency systems. Dodaro expressed his appreciation to the Inspectors General for their hard work and professionalism in auditing the annual financial statements of their respective departments and agencies.
GAO's audit reporton the U.S. government's consolidated financial statements is included in the 2018 Financial Report of the United States Government, which is prepared by Treasury in coordination with OMB. GAO has also prepared a guide to provide users with a better understanding of the financial report.
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The Government Accountability Office, known as the investigative arm of Congress, is an independent, nonpartisan agency that exists to support Congress in meeting its constitutional responsibilities. GAO also works to improve the performance of the federal government and ensure its accountability to the American people. The agency examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO provides Congress with timely information that is objective, fact-based, nonideological, fair, and balanced. GAO's commitment to good government is reflected in its core values of accountability, integrity, and reliability.