U.S. Government's 2014 Financial Report Underscores Continuing Financial Management and Fiscal Challenges

WASHINGTON, D.C. (February 26, 2015) — The federal government’s serious material internal control weaknesses, along with significant uncertainties, and other limitations continued to prevent the U.S. Government Accountability Office (GAO) from  rendering an opinion on the  federal government’s consolidated financial statements. As in past years, three main obstacles prevented GAO from rendering an opinion on the accrual-based consolidated financial statements for fiscal year 2014:

• Serious financial management problems at the Department of Defense (DOD) that made its financial statements unauditable.
• The federal government's inability to adequately account for and reconcile intragovernmental activity and balances between federal entities.
• The federal government's ineffective process for preparing the consolidated financial statements.

“In the face of continuing fiscal constraints in government, every tax dollar must be spent as efficiently and effectively as possible,” said Gene L. Dodaro, Comptroller General of the United States and head of the GAO. “Our report on the U.S. government’s consolidated financial statements highlights the urgent need for further progress to ensure that Congress, agency officials, and federal managers operate with solid financial and performance information. Reliable, complete information is vital, not only to help individual agencies work better but to assist policymakers in tackling our government’s long-term fiscal challenges.”

Importantly, nearly all of the 24 Chief Financial Officers Act agencies received unmodified or "clean" opinions on their respective entities' fiscal year 2014 financial statements.  Exceptions included DOD, which has consistently been unable to receive such an audit opinion on its financial statements, and the Agency for International Development. DOD’s goal is to have auditable financial statements department-wide by September 30, 2017.

Efforts are underway to resolve financial management challenges, but strong and sustained commitment by DOD and other federal entities, as well as continued leadership by the U.S. Department of the Treasury and the Office of Management and Budget, are essential to bringing about needed improvements.

GAO was also unable to render an opinion on the 2014 Statement of Social Insurance and the 2014 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 productivity improvements for most categories of Medicare providers.

Dodaro also noted material weaknesses involving more than $120 billion in improper payments, information security across government, and tax collection activities.

GAO has not been able to render an opinion on the accrual-based consolidated financial statements since they were first prepared in 1997. But significant progress has been made and GAO is encouraged by new legislation—the Digital Accountability and Transparency Act of 2014—that seeks to promote transparency and address ongoing governmental management challenges by enhancing the quality and expanding the availability of federal spending data. Better data will provide the public more information, help agencies make fully informed decisions about how federal resources should be allocated, and provide agencies and the audit community with additional data analytic tools to detect and prevent improper payments and fraudulent spending.

GAO continues to focus as well on the government’s broader long-term fiscal picture. “We remain concerned that an imbalance between spending and revenue built into current law and policy will lead to mounting debt held by the public as a share of gross domestic product,” Dodaro said. “Debt outpacing GDP growth is an unsustainable situation that must be addressed.”

Today, the agency also is launching a new webpage to help clarify the risks posed by fiscal exposures—responsibilities, programs, and activities that may legally commit or create the expectation for future federal spending based on current policy, past practices, or other factors. This portion of GAO’s website is intended to inform the public and help policymakers better anticipate changes in future spending and enhance oversight of federal resources. For more information, visit http://www.gao.gov/fiscal_outlook/federal_fiscal_outlook/overview#t=3.

Dodaro thanked the Inspectors General across government, who are responsible for auditing the annual financial statements of individual federal entities, for their commitment and professionalism.

GAO's audit report on the U.S. government's consolidated financial statements is included in the 2014 Financial Report of the United States Government prepared by the Department of the Treasury, and is available on GAO's website at http://www.gao.gov/products/GAO-15-341R.

For more information, contact Chuck Young, 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. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability.