Significant Financial Management and Fiscal Challenges Reflected in U.S. Government's 2012 Financial Report
WASHINGTON (January 17, 2013) - The U.S. Government Accountability Office (GAO) cannot render an opinion on the 2012 consolidated financial statements of the federal government because of widespread material internal control weaknesses, significant uncertainties, and other limitations.
As was the case in 2011, the main obstacles to a GAO opinion on the accrual- based consolidated financial statements were:
Serious financial management problems at the Department of Defense (DOD) that made its financial statements unauditable.
The federal governments inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies.
The federal governments ineffective process for preparing the consolidated financial statements.
Although weve seen significant improvements in federal financial management and accountability over the years, our report on the U.S. governments consolidated financial statements underscores that further progress is urgently needed, said Gene L. Dodaro, Comptroller General of the United States and head of the GAO. Dodaro noted that the need for reliable financial and performance information is especially critical today, both for federal managers, who likely face increasingly tight budgets and need to operate as efficiently and effectively as possible, and for policymakers dealing with the federal governments broader fiscal challenges.
While the vast majority of the 24 CFO Act Agencies received unqualified opinions, DOD and the Department of Homeland Security (DHS) have consistently been unable to receive such audit opinions. Efforts are under way at both agencies to address this situation.
Following years of unsuccessful financial improvement efforts, DODs Comptroller established the Financial Improvement and Audit Readiness Directorate to develop, manage, and implement a strategic approach for addressing weaknesses and for achieving auditability. DODs overall goal is to prepare auditable departmentwide financial statements by September 30, 2017.
DHS, for the first time, attained a qualified audit opinion on its department-wide financial statements. DHS goal is to obtain an unqualified audit opinion on its fiscal year 2013 financial statements.
The Department of the Treasury, which is responsible for preparing the federal governments financial statements, also has efforts under way, working with federal agencies to help resolve and eliminate material differences in intragovernment activity and balances. In addition, Treasury has taken steps to address certain deficiencies in preparing the consolidated financial statements.
GAO was unable to render an opinion on the 2012 Statement of Social Insurance and the 2012 Statement of Changes in Social Insurance Amounts because of significant uncertainties, primarily related to the achievement of projected reductions in Medicare cost growth. The consolidated financial statements discuss these uncertainties, which relate to reductions in Medicare payment rates for physician services and productivity improvements for most other categories of Medicare providers. These statements provide an alternative projection to illustrate the uncertainties.
Dodaro also cited material weaknesses involving an estimated $107.7 billion in improper payments, information security across government, tax collection activities, and loans receivable and loan guarantee liabilities.
While Congress and the administration have taken steps recently to improve the near-term outlook, Dodaro said, the comprehensive fiscal projections in the 2012 Financial Report make clear that our federal governments long-term fiscal path remains unsustainable without further policy changes. He pointed out that the oldest members of the baby-boom generation are already eligible for Social Security and Medicare benefits and that spending for these programs is projected to rise dramatically in the coming decades.
Dodaro cited the Inspectors General across government, who are responsible for auditing the annual financial statements of individual federal entities each year, for their commitment and professionalism.
GAOs report on the results of its audit of the U.S. governments fiscal years 2012 and 2011 consolidated financial statements, which includes the 2012 Financial Report of the United States Government, prepared by the U.S. Department of the Treasury, is available on GAOs web site at http://www.gao.gov/products/GAO-13-271R.
For more information, contact Chuck Young, GAO Managing Director of Public Affairs, at (202) 512-4800.
#####
The Government Accountability Office, known as the investigative arm of Congress, is an independent, nonpartisan agency that exists to support Congress in meeting its constitutional responsibilities. GAO also works to improve the performance of the federal government and ensure its accountability to the American people. The agency examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO provides Congress with timely information that is objective, fact-based, nonideological, fair, and balanced. GAOs commitment to good government is reflected in its core values of accountability, integrity, and reliability.