Most agencies get clean audits, but big problems persist
Five agencies with $507.5 billion in spending had problems so severe that auditors were unable to form an opinion on their finances.
Eighteen agencies received clean audit opinions for fiscal 2006, and for the second year in a row all 24 major agencies met a deadline to close their books within 45 days of the end of the fiscal year, the Office of Management and Budget announced Thursday.
The 24 agencies named in the 1990 Chief Financial Officers Act had a Nov. 15 deadline to submit the results of their annual financial audits along with annual Performance and Accountability reports. Eighteen of those received unqualified opinions, indicting that auditors were satisfied that the agencies' financial statements were reliable.
Auditors returned disclaimers of opinion, reflecting such major problems in an agency's accounting that its financial statement could not be evaluated, to the Defense, Energy, Homeland Security and State departments, and NASA.
The Transportation Department earned a qualified opinion, meaning auditors identified a particular problem, but were otherwise satisfied with the accounting.
The fiscal 2006 results marked an improvement for the General Services Administration, which secured an unqualified opinion after getting a disclaimer last year. The agency resolved several budgetary accounting problems, including a dispute over whether it could continue to spend funds that had been "parked" there by agencies beyond their expiration.
The State Department fell from earning a qualified opinion last year, indicating limited problems, to a disclaimer. Department officials on Friday declined to release the audit results or respond to questions, but an OMB official said the problem related to accounting for real property.
The Transportation Department went from a clean to a qualified opinion due to problems in accounting for the Federal Aviation Administration's funds for ongoing construction projects. The Transportation inspector general's office said that balance was reported as $4.7 billion, and weighed heavily in Transportation's overall balance sheet.
Even among agencies judged well, auditors identified problems to be addressed. Some were in the area of internal controls, the processes that guard against fraud and error, which agencies for the first time were required to test and report on. The requirement is in OMB's Circular A-123.
Rep. Todd Platts, R-Pa., who has pressed agencies to address their financial management problems from his seat as chairman of the House Government Reform Subcommittee on Management, Finance and Accountability, lauded agencies for meeting the demanding 45-day reporting deadline.
"With this focus on internal controls … I expect to see some of the longstanding financial management issues resolved over time," Platts said. The subcommittee has worked closely with DHS, in particular, over the past year to make progress on recurring financial management problems.
Despite the fact that most agencies received good audit marks, the federal government as a whole is far from obtaining sign-off on its accounting. Fiscal 2006 spending by the five agencies on which an audit opinion could not be formed totaled $507.5 billion, based on administration-reported budget numbers.
The audit results announced this week are likely to change for some agencies, as chief financial officers work with their auditors to resolve questions in the fiscal 2006 books and arrive at a final result. An October Government Accountability Office report found that 11 agencies restated the results of their fiscal 2003 audits; nine of those agencies initially received unqualified opinions.
In the study, GAO concluded that agencies and OMB were not fully transparent in how they restated financial results. They didn't always indicate which results had changed or the causes or results of those adjustments. It was not immediately clear how many agencies took the 2006 audit as an opportunity to restate past results, because of delays in agencies' release of their reports.