OMB highlights report card of clean audits

For the first time in two decades, independent auditors said financial books were in order at 23 of 24 applicable federal agencies, the Office of Management and Budget announced Friday.

The Pentagon is now the only department whose finances continued to warrant a disclaimer, while the State and Homeland Security departments have progressed to "qualified" ratings. All others, according to OMB's list, now are "clean."

"These results are not just about numbers on a ledger," Controller Danny Werfel wrote in an OMB blog post. "They are about this administration's commitment to watching every dollar that goes out the door and making sure that we have the proper controls, practices and safeguards in place on those dollars."

Since passage of the 1990 Chief Financial Officers Act, major agencies have been required to produce audited financial statements. The Pentagon, in particular, has struggled to make progress toward a congressional deadline of auditability by 2017.

"Most notable was the progress made at the National Aeronautics and Space Administration and the Department of Homeland Security," Werfel said. "For several years, NASA has worked to remedy challenges they faced reporting certain unique assets, such as space exploration equipment. This year, their efforts paid off and they moved from a position where the auditors could not express an opinion on their financial statements to a clean opinion. DHS was also able to make progress."

Improvements at Defense, according to Werfel, are visible in Secretary Leon Panetta's recent vow to accelerate the deadline for auditability to 2014. He added that the Pentagon is improving the information it uses to manage mission-critical assets, has added resources dedicated to obtaining auditable financial statements and has "established a strong, visible governance structure."

Robert Shea, a principal at the firm Grant Thornton LLP who was associate director at OMB during the George W. Bush administration, said, "The only thing that's changed is that DHS moved from a disclaimer to qualified so that it now can issue an opinion. It's always an achievement to get clean opinions about complex government agencies," Shea said. "But we've done it for successive years. The 800-pound gorilla remains the Defense Department. Until progress is made there, it won't materially change what we know about the finances of the federal government."

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