Tax season has many people diligently filing their returns to avoid being audited. While the federal government is not a tax-paying entity, it actually undergoes an audit of its financial statements every year.
How do we know? Because we perform the audit!
Today, the Department of the Treasury published the 2018 Financial Report of the United States Government, and our audit report on the consolidated financial statements is included.
Ongoing impediments to an audit opinion
As in past years, we were unable to render an audit opinion—i.e., a conclusion on whether the financial information is reliable—on the government’s FY18 consolidated financial statements. Many of the same deficiencies that have affected past financial statements continue to get in the way of the government having reliable, useful, and timely financial information, including:
- Problems with the Department of Defense’s financial management and auditability;
- The federal government’s inability to adequately account for certain transactions between agencies; and
- Weaknesses in the process for preparing the consolidated financial statements.
In addition to these impediments, we identified other material weaknesses in controls over financial reporting—problems that could lead to significant errors in the consolidated financial statements—including:
- The federal government’s improper payments problem, which grew to an estimated $151 billion for FY18;
- Information security across government; and
- Loans receivable and loan guarantees liabilities.
Twenty-two of the 24 Chief Financial Officers Act agencies received clean opinions on their agency financial statements. Persistent problems have prevented DOD and the Department of Housing and Urban Development from receiving clean opinions on their financial statements.
The benefits of auditing
Although we could not give an audit opinion, the annual audit is still valuable.
For one thing, the consolidated financial statements can give us a big-picture, high-level overview of government finances, and can serve as a window into the federal government’s overall financial position and long-term fiscal outlook. For another thing, audit preparations by individual agencies can help those agencies to identify accounting problems, manage costs, and make more effective decisions as a result. Resolving the problems outlined in our audit report is important to keeping the U.S. government accountable to taxpayers—especially in light of the big-picture challenges it is soon likely to face. Tune in later this spring to learn more about the nation’s precarious financial future in our 2018 Fiscal Health report.
More about the annual financial report
As we blogged about last year, Treasury publishes an annual overview of the federal government’s finances—known as the Financial Report of the United States Government. As part of that report, Treasury and the Office of Management and Budget consolidate financial statements from individual federal agencies to provide an overall financial picture of U.S. government operations from the past fiscal year.
Sound complicated? It is! But our guide and the video below should help you better understand it.
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