The usefulness of the government’s consolidated financial statements, though improved in recent years, remains hampered by “material weaknesses,” primarily at the departments of Defense and Health and Human Services, that prevent auditors from rendering an audit opinion, the Government Accountability Office reported.
In its mandatory audit of the government’s fiscal 2013 and fiscal 2012 consolidated financial statements released Thursday, the congressional watchdog pointed to three issues affecting the government’s estimate of its assets, liabilities and costs that urgently need improvement. They include “serious financial management problems” at the Defense Department; a governmentwide inability to adequately account for and reconcile intragovernmental activity and balances between federal entities; and an “ineffective process” for preparing the consolidated financial statements.
GAO noted that the Pentagon accounts for about 33 percent of the government’s total assets and about 16 percent of fiscal 2013 spending, but the agency has been given a “disclaimer of opinion” on its consolidated financial statements. Similarly, uncertainties in the growth rate of Medicare and Social Security, which account for 68.8 percent of the value of future expenditures in excess of future revenue, are responsible for HHS’ disclaimer of opinion.
Further crimping the government’s broader ability to get a grip on finances is an inability to determine the full extent of improper payments and actions to prevent them; unresolved information security control deficiencies; and effective management of tax collection activities, GAO said.
“Reliable financial and performance information is even more critical as federal managers likely face increasingly tight budget constraints and need to operate their respective entities as efficiently and effectively as possible,” the report said, “The comprehensive long-term fiscal projections … show that—absent policy changes—the federal government continues to face an unsustainable long-term fiscal path.”