Federal Financial Accountability

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Issue Summary

 

GAO has been auditing the federal government’s consolidated financial statements since FY 1997 (as well as various other federal financial statements). However, GAO continues to be unable to render an audit opinion on the government’s accrual-based consolidated financial statements—which present historical information such as assets, liabilities, revenue, and net cost.

This is primarily due to:

  1. Serious financial management problems at the Department of Defense
  2. The federal government's inability to adequately account for intragovernmental activity and balances between federal agencies
  3. Weaknesses in the federal government’s process for preparing the consolidated financial statements

In addition, the Small Business Administration was unable to obtain an opinion on its FYs 2020 through 2022 financial statements, and the Department of Education was unable to obtain an opinion on its FY 2022 financial statements, because of weaknesses related to loans and loan guarantees. Further, GAO continues to be unable to render an audit opinion on the government’s sustainability financial statements (which present projections of federal receipts and spending over the next 75 years) primarily due to significant uncertainties related to projected Medicare cost growth.

The federal government has made significant strides in improving financial management since key reforms were enacted in the 1990s. For example, 20 of the 24 agencies covered by the Chief Financial Officers Act of 1990 received unmodified (“clean”) opinions on their FY 2022 financial statements—up from six agencies in FY 1996. (Unmodified audit opinions are when the auditors conclude that the financial statements are presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles.)

Accounting and financial reporting standards have continued to evolve to provide greater transparency and accountability over the federal government’s operations and financial condition. In addition to addressing the weaknesses reported in our audit of the federal government’s consolidated financial statements, there are a number of areas where financial management can be improved, including standardizing the responsibilities of chief financial officers, preparing financial management plans, better linking performance and cost information for decision-making, and strengthening improper payment and fraud risk management reporting.

U.S. Government’s Consolidated Financial Statements

Federal Entity Financial Statements

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