GAO Follows the Money—Everything You Should Know About Our Audits of Federal Financial Statements

What is the value of auditing federal financial statements?  

Last fiscal year, the U.S. federal government spent about $7 trillion. With this level of investment, it’s essential to ensure accountability, transparency, and effective oversight of taxpayer dollars. Financial statement audits are one of the most powerful tools for doing this. They provide Congress and taxpayers with a timely, independent assessment of key information about the government’s financial performance and use of funds.  

Financial statement audits offer a disciplined approach to strengthening financial management and building public trust. They often result in recommendations on how to improve the quality of day-to-day financial information. This quality is important because it allows managers to make better informed decisions and deal with the range of issues they face in overseeing taxpayer dollars. 

Federal financial statement audits:  

1. Assess whether financial statement information is reliable and in accordance with generally accepted accounting principles. 

2. Identify weaknesses in controls that could lead to fraud, mismanagement, or payment errors (also known as improper payments). 

3. Identify instances where laws are not being followed, such as those that limit agency spending. 

4. Determine whether government property and equipment are accounted for and safeguarded. 

5. Verify whether the government properly accounted for taxpayer dollars. 

What are federal agencies required to report? 

Each year, federal agencies are required to prepare financial statements and have them audited. These financial statements include what the government owns and owes, as well as how taxpayer dollars were used.  

Federal agencies typically get their financial statement audits done by mid-November (about 45 days after the end of the government’s fiscal year). This timing is important. It provides Congress with up-to-date information that can inform budget and appropriation decisions, as well as assess agencies’ performance.  

Financial audits are a big bang for your buck! The cost of these audits is relatively nominal. On average, to audit their fiscal year 2024 financial statements, agencies spent less than $50 for every million dollars of agency cost. In return, audits help agencies strengthen their financial management, improve their day-to-day financial information, and better manage their finances—all of which can protect and save taxpayers’ dollars. 

Why does GAO audit other agencies’ financial statements? 

Our small but influential agency was founded in 1921. At that time, Congress saw a need for independent oversight of the use of federal funds, which had grown with World War I. So, Congress gave GAO a broad mandate to investigate how federal funds are spent. GAO’s primary role was checking the legality and adequacy of individual government expenditures. As the size of government grew post-Great Depression and World War II, Congress transitioned our responsibilities to more modernized financial audits.  

In the 1990s—on the heels of repeated findings of fraud, waste, abuse, and mismanagement in federal programs—Congress required: 

•  The 24 major agencies to annually prepare audited financial statements  

•  The Department of the Treasury to annually prepare government-wide (consolidated) financial statements.  

• GAO to annually audit the government-wide financial statements. We also audit the financial statements for certain agencies every year.  

Requiring agencies to have their financial statements audited annually brought needed oversight, accountability, and transparency to federal financial management. It also brought federal agencies in line with what private sector companies, as well as state and local governments, do.  

GAO’s audits of federal financial statements have also provided substantial benefits. In our nearly 30 years of auditing, we’ve helped focus attention on issues, such as improper payments, and saved taxpayers billions of dollars. 

What have our audits found?  

Since we began these audits in the late 1990s, we’ve seen significant improvements in reporting and transparency. For example, in fiscal year 1996, only six of 24 major agencies received “clean” audit opinions of their financial statements. Significant improvements in financial management led to over 20 of 24 major agencies receiving clean opinions for fiscal years 2011 through 2020. However, audits identified several new emerging financial management challenges in recent years, with 15 major agencies receiving clean opinions on their financial statements for fiscal year 2025.  

We’ve also unearthed widespread financial management weaknesses across the government. For example, our audits have uncovered significant control issues in payment processes that can result in improper payments—payments that should not have been made or were made in the wrong amount. For fiscal year 2025, the federal government reported about $186 billion in improper payments.  

Financial statement audits have also uncovered government-wide technology issues that are making it harder for agencies to track spending and prevent cyberattacks and data breaches. Our work in these areas has led to the enactment of various laws aimed at reducing improper payments, improving cybersecurity, and protecting sensitive data. 

What did our most recent audit find? 

This year, we saw improvements: 

• The Department of Education received a “clean” audit opinion on its balance sheet after 3 years of receiving disclaimers. 

• The Marine Corps received a clean audit opinion for the third year in a row. It is the only military service component to have a clean opinion. 

• The Small Business Administration addressed three material weaknesses related to its financial reporting. 

But we also continued to see critical weaknesses. For example, again this year, we saw: 

• Serious financial management problems at the Department of Defense. 

• Problems in accounting for transactions between federal agencies. 

• Weaknesses in the processes for preparing the government-wide financial statements. 

Why does this matter? Policymakers need accurate and reliable financial information to make important decisions, like when the government needs to raise the debt limit to pay our bills. It’s not hard to imagine the consequences of basing those decisions on inaccurate and unreliable information.  

Financial audits signal whether the agencies’ financial information can be relied on for making decisions. Furthermore, taxpayers expect, quite reasonably, that agencies properly account for their tax dollars. Financial statement audits provide taxpayers this assurance or identify where agencies need to improve their financial management in order to do so.   

GAO is always looking to evolve its approach. Even though we have this track record of success, we are always evolving and modernizing our approach—including leveraging technology to provide taxpayers with more efficient audits. We also continue to work with the federal government auditing community to make federal financial audits more risk-based.  

Where can I learn more about GAO’s financial statement audits? 

You can get the latest about our audits of the government-wide and several agencies’ financial statements on our Federal Financial Accountability webpage. You can also read more about our most recent audit of the government-wide financial statements in our 2026 report. Our next report issues in early 2027. 

• GAO’s fact-based, nonpartisan information helps Congress and federal agencies improve government. The WatchBlog lets us contextualize GAO’s work a little more for the public. Check out more of our posts at GAO.gov/blog. 

• Got a comment, question? Email us at blog@gao.gov.