Good Enough for Government Work? GAO Cannot Evaluate Government Assets and Spending

By on March 1, 2010 in Current Events with 0 Comments

The U.S. Government Accountability Office (GAO) could not render an opinion on the consolidated financial statements of the federal government (other than the Statement of Social Insurance) because of widespread material internal control weaknesses and other limitations.

“While financial management has improved significantly since the
government began preparing consolidated financial statements, for the
13th year in a row now shortcomings in three areas again prevented us
from expressing an opinion,” said Gene L. Dodaro, Acting Comptroller
General of the United States. “I’m referring to serious financial
management problems at the Department of Defense (DOD), the federal
government’s inability to adequately account for and reconcile
intragovernmental activity and balances between agencies, and the
ineffective process the federal government uses to prepare the
consolidated financial statements.”

Dodaro also cited material weaknesses involving improper payments
estimated to be at least $98 billion, information security across
government, and tax collection activities. He noted that four major
agencies-DOD, the Department of Homeland Security, the Department of
State, and NASA—did not get clean opinions.

The material weaknesses discussed in GAO’s audit report hinder the
government’s ability to (1) reliably report on many of its assets,
liabilities, and costs; (2) accurately measure the full cost as well as
the financial and non-financial performance of certain programs and
activities; (3) adequately safeguard significant assets and properly
record various transactions; and (4) have reliable information to
operate efficiently and effectively.

“Long term, the federal government faces huge structural deficits
driven by rising health care costs and demographics. Focused attention
from Congress and the administration is needed to address these problems
and put the government on a more sustainable path,” Dodaro said.

Beginning this year, new financial reporting standards will require a
clearer and more comprehensive assessment of the federal government’s
financial condition over the long term. “Sound data on federal
operations will be essential to the nation’s efforts to return the
country to a sustainable fiscal path,” Dodaro said.

He also singled out meaningful financial regulatory reform as
especially urgent. “Problems in the nation’s financial sector have
exposed major weaknesses in the current U.S. financial regulatory
system. If those weaknesses are not adequately addressed, we could see
similar or even worse crises in the future,” Dodaro cautioned.

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