As anticipated, the federal government flunked its audit for fiscal 2006, with $797 billion, or 53 percent, of its reported assets and an additional $790 billion, or 27 percent, of net costs, on the balance sheets of five agencies that could not be fully audited.
This marks the 10th year in a row in which the government's consolidated audit statement received a judgment of "no comment" from auditors. The Defense, State and Homeland Security departments, as well as NASA, received disclaimers on their 2006 audits. The Energy Department, which was only partially auditable due to a disclaimer in 2005, earned a qualified opinion -- a step up from no opinion but still short of a clean bill of health.
The difficulty of valuing complex, one-of-a-kind systems contributed to the problems at those agencies. After new accounting rules for property went into effect in 2003, about $325.1 billion in military equipment appeared on the books for the first time, according to a Treasury Department analysis.
In fiscal 2006, the government's total reported assets increased $48.6 billion, to $1.5 trillion.
As it did last year, the Government Accountability Office cited three major shortcomings: financial management problems at the Defense Department, an inability to account for and to reconcile balances that cross agency lines and an ineffective process for preparing financial statements.
The consolidated report also showed that the Transportation Department and Smithsonian earned qualified opinions on their audits, indicating significant problems.
In a letter reporting the audit results, Comptroller General David M. Walker called for the adoption of another report in the annual arsenal -- a new statement that would provide "a long-term look at the sustainability of current social insurance and other federal programs."
Walker has spent the past 15 months crisscrossing the country in what he has called a "fiscal wake-up tour" to speak about the problems the nation faces with its social insurance programs.
Fiscal 2006 was the first year for which a statement of social insurance, which covers outlays for Social Security, Medicare, railroad retirement and black lung disease benefits, was considered a key financial statement. The statement showed projected outlays for those programs exceeding revenues by about $39 trillion over the next 75 years, Walker said.
Combined with other long-term projected expenses, he said, the total government exposure was about $50 trillion at the end of fiscal 2006, up $4 trillion from the previous year and up $20 trillion since 2000.