The Government Accountability Office (GAO) reports that it was unable to give its required opinion on the federal government's 2011-2012 consolidated financial statements because they were, and I'm paraphrasing here, "just too messed up."
According to its 270 page report, U.S. Government's Fiscal Years 2012 and 2011 Consolidated Financial Statements, the GAO was unable to evaluate the government's annual financial reports "because of widespread material internal control weaknesses, significant uncertainties, and other limitations."
Specifically, the weaknesses, uncertainties and limitations encountered by the GAO included:
- 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 agencies; and
- The federal government's ineffective process for preparing the consolidated financial statements.
"Although we've seen significant improvements in federal financial management and accountability over the years, our report on the U.S. government's 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 in a press release.
Under the Chief Financial Officer and Federal Financial Reform Act of 1990 (CFO Act), 24 large federal agencies are required to submit biannual financial statements to Congress and the president's Office of Management and Budget.
While the GAO reported that the "vast majority" of the 24 agencies had received clean, or "unqualified" financial audits, the Departments of Defense (DOD) and Homeland Security (DHS) had consistently failed to do so.
The DOD, through its newly created Financial Improvement and Audit Readiness Directorate, hopes to achieve unqualified audit reports by 2017.
The DHS managed to achieve its first-ever qualified (approved with reservations) audit opinion on its department-wide financial statements. DHS' goal is to obtain a fully unqualified audit opinion on its fiscal year 2013 financial statements.
Perhaps most troubling, the GAO report cited financial weaknesses involving an estimated $107.7 billion in improper government benefit payments, government-wide information insecurity, tax collection activities, and loans receivable and loan guarantee liabilities.
Noting that the oldest baby-boomers were now getting Social Security and Medicare benefits and that spending for these programs is projected to rise dramatically in the coming decades, Comptroller General Dodaro gloomily summarized the situation. "While Congress and the administration have taken steps recently to improve the near-term outlook," he said, "the comprehensive fiscal projections in the 2012 Financial Report make clear that our federal government's long-term fiscal path remains unsustainable without further policy changes."