September 21, 2014

GAO Details Problems with U.S. Financial Management

  • The federal budget is an expression of our country's values. Where we choose to spend and at what levels, how and who we tax, and the borrowing we...

Serious financial management problems in some departments and agencies continue to hinder efforts by auditors to assess the government’s books. That in turn hurts the government’s ability to measure the cost and performance of certain programs and to make necessary improvements.

The Government Accountability Office (GAO) recently released a study detailing some of these problems and underscoring the need to address the country’s long-term fiscal challenges. The study reported three “major impediments” that have prevented it from expressing an opinion on the government’s accrual-based consolidated financial statements.

First, GAO singled out the Department of Defense for “serious financial management problems” that prevent audits of the department’s financial statements. The GAO said it was encouraged, however, by the commitment of Pentagon leaders to eventually “achieving auditability.”

The second big problem noted in the new study: Some federal entities are unable to “”adequately account for and reconcile intragovernmental activity and balances.” A third concern for the GAO is the government’s “ineffective process for preparing the consolidated financial statements.”

These weaknesses need to be addressed as quickly as possible. Otherwise, as the GAO points out, they will continue to hamper the government’s ability to reliably report “a significant portion of its assets, liabilities, costs, and other related information.”

On the positive side, the head of the GAO, Comptroller General Gene L. Dodaro, recently told a House subcommittee that federal agencies and Congress – faced with budget pressures – are “creating an environment for fiscal improvements.”

The GAO also notes that the Financial Report of the United States Government includes long-term projections that, like GAO’s simulations, include savings from the Budget Control Act of 2011. While assuming these savings continue well into the future produces an improved fiscal picture, GAO warns, “it does not make the path sustainable.”