GAO Cannot Provide Audit Opinion on U.S. Government's Annual Financial Report
WASHINGTON, D.C. (January 12, 2017) —The U.S. Government Accountability Office (GAO) did not render an opinion on the federal government’s consolidated financial statements for fiscal year 2016 due to deficiencies that have plagued prior financial statements—persistent financial management problems at the Department of Defense (DOD), the government’s inability to account for and reconcile certain transactions, an ineffective process for preparing the consolidated financial statements, and significant uncertainties. These shortcomings hamper the government’s ability to reliably report much of its financial information.
“Given the federal government’s mounting fiscal challenges, it’s essential that it be able to accurately account for its costs, outlays, and assets,” said Gene Dodaro, Comptroller General of the United States and head of the GAO. “But GAO’s latest audit report on the consolidated financial statements underscores how much more has to be done to provide policymakers with reliable financial and performance data—information that is crucial for the difficult spending decisions that lie ahead.”
For 2016, almost all of the 24 Chief Financial Officers Act agencies received unmodified or "clean" opinions on their respective entities' fiscal year 2016 financial statements. However, DOD and the Department of Housing and Urban Development have continuing impediments to receiving a clean opinion on their financial statements, and the Department of Agriculture received a clean opinion for only one of its financial statements.
Dodaro expressed concern about the continued rise in improper payments, which exceeded $144 billion in fiscal year 2016. This compares to about $137 billion reported for fiscal year 2015. Other material weaknesses in internal control reported by GAO this year involved information security across government and tax collection activities.
Dodaro urged continuing commitment by DOD and other federal agencies, along with sustained leadership by the U.S. Department of the Treasury and the Office of Management and Budget, to ensure more accurate and complete financial reporting across government.
GAO could not render an opinion on the federal government’s sustainability financial statements due to significant uncertainties surrounding the achievement of projected reductions in Medicare cost growth and a material weakness in internal control over financial reporting. These sustainability financial statements consist of the 2016 and 2015 Statements of Long-Term Fiscal Projections; the 2016, 2015, 2014, 2013, and 2012 Statements of Social Insurance; and the 2016 and 2015 Statements of Changes in Social Insurance Amounts.
More broadly, GAO continues to be troubled by the long-term fiscal projections in the financial report and those prepared annually by the Congressional Budget Office and GAO, all of which show that, absent policy changes, the federal government’s fiscal path is unsustainable. The projected growth of debt could limit the federal government’s flexibility to address emerging issues and unforeseen events, such as financial crises, cyberattacks, or pandemics. On January 17 GAO plans to issue the first in what is planned to be an annual review of the federal government’s fiscal health.
Dodaro thanked the various Inspectors General for their efforts to audit 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 2016 Financial Report of the United States Government, which is prepared by the Department of the Treasury, and is available on GAO's website. GAO has been unable to render an opinion on the accrual-based consolidated financial statements since such statements were first prepared in 1997.
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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