GAO Details Weaknesses in Governmentwide Quest for Clean Books

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Despite two decades of progress on financial management, the government as a whole “urgently” needs to improve, the Government Accountability Office said on Thursday.

In publishing its consolidated financial statements for fiscal 2014 and 2015, Congress’ watchdog reported that “certain material weaknesses in internal control over financial reporting and other limitations on the scope of … work resulted in conditions that prevented GAO from expressing an opinion on the accrual-based consolidated financial statements.” Three major departments accounted for the most questionable financials—the Defense, Housing and Urban Development, and Agriculture departments—by receiving “disclaimers of opinion.” They accounted for 34 percent of total assets as of Sept. 30, 2015, and 19 percent of the government’s total net costs.

In the Health and Human Services Department, “significant uncertainties” were found primarily related to the achievement of projected reductions in Medicare cost growth, and a material weakness in internal control over financial reporting. That prevented GAO from expressing an opinion on sustainability financial statements on HHS’ Statement of Social Insurance on accounts worth about $27.9 trillion. “Material weaknesses and other scope limitations discussed in the audit report limited GAO’s tests of compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements for fiscal year 2015,” auditors wrote.

Other agencies presenting risks to the government’s overall financial health are the Postal Service and the Pension Benefit Guaranty Corp, analysts noted.

At the Pentagon, GAO pointed to “serious financial management problems at DoD that prevented its financial statements from being auditable.” In interagency accounting, GAO cited the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal entities. Finally, the watchdog criticized the efforts of Treasury and the Office of Management and Budget to effectively prepare the consolidated financial statements, calling for stronger leadership.

Concretely what’s at stake, GAO stressed, is the government’s ability to control improper payments, identify and resolve information security control deficiencies and manage information security risks, and effectively manage its tax collection activities. 

Both Treasury and OMB said they are taking the necessary steps to improve the usability of the financial statements.

GAO held out great promise for the governmentwide 2014 Digital Accountability and Transparency Act to standardize agency data consistently and accessibly to aid in fiscal decision making. “But to fully and effectively implement the DATA Act, the federal government will need to address complex policy and technical issues,” GAO said. “Central among these are defining and developing common data elements across multiple reporting areas and standing up the necessary supporting systems and processes to enable reporting of the federal spending data required.”

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