The federal fiscal house is not in order


The government has again failed to maintain its books for a proper audit, says the Government Accountability Office, citing problems with the Defense Department's financial management and other agencies' financial processes.

In a Jan. 17 report (.pdf), GAO says it is unable to fully audit government financials and could not give a clean opinion on the consolidated financial statements for fiscal 2011 and fiscal 2012. It says the government has a serious need for strong fiscal management because federal managers face increasingly tight budget constraints and the potential for deep cuts in the near term.

The report again says DoD's management was a key obstacle to issuing an opinion on the consolidated financial statements. It does note that Defense is trying to achieve auditable budgetary resource statements by the end of fiscal 2014.

The DoD holds more than one-third of government assets and is believed to make roughly $107 billion in improper payments. For context, GAO notes that combined federal investment in Fannie Mae and Freddie Mac in fiscal 2011 and 2012 was $109 billion.

For the Homeland Security Department, GAO says that the department achieved its first qualified audit opinion on financial statements in fiscal 2012. While the audit was not complete for assets and could not validate DHS' internal processes, the auditors call this as a positive first step for the department.

Other significant impediments to a clean audit include improper procedures for preparing financial statements, no clearly established method to track interagency spending and a host of improper payments to program beneficiaries and grantees.

While issues are still prevalent, the report says the government has made significant gains in its financial management over the past 16 years since it first began using consolidated statements. The agency said it is important to emphasize the vast majority of the 24 Chief Financial Officers Act agencies received unqualified opinions.

For more:
- read the report, GAO-13-271R (.pdf)

Related Articles:
Besides default, 4 arguments against the debt ceiling
Sequestration planning must intensify, says OMB
White House's fiscal 2014 budget may be late