U.S. Government-s 2010 Financial Report Shows Significant Financial Management & Fiscal Challenges

WASHINGTON - The U.S. Government Accountability Office (GAO) cannot render an opinion on the 2010 consolidated financial statements of the federal government, because of widespread material internal control weaknesses, significant uncertainties, and other limitations. Even though significant progress has been made since the enactment of key financial management reforms in the 1990s, our report on the U.S. governments consolidated financial statement illustrates that much work remains to be done to improve federal financial management. Shortcomings in three areas again prevented us from expressing an opinion on the accrual-based financial statements, said Gene Dodaro, Acting Comptroller General of the United States. The main obstacles to a GAO opinion were: (1) serious financial management problems at the Department of Defense (DOD) that made its financial statements unauditable, (2) the federal governments inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal governments ineffective process for preparing the consolidated financial statements. In addition GAO was unable to render an opinion on the 2010 Statement of Social Insurance 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 physician payment rates and to productivity improvements, and provide an illustrative alternative projection to illustrate the uncertainties. Dodaro also cited material weaknesses involving an estimated $125.4 billion in improper payments, information security across government, and tax collection activities. He noted that three major agenciesDOD, the Department of Homeland Security, and the Department of Labordid not get clean opinions. Nineteen of 24 major agencies did get clean opinions on all their statements. Given the federal governments fiscal challenges, its imperative that Congress, the administration, and federal managers have reliable, useful, and timely financial and performance information. Improved accuracy and transparency in financial reporting are urgently needed, Dodaro said. Dodaro commended the commitment and professionalism of the Inspectors General across government who are responsible for auditing the annual financial statements of individual federal entities each year. The fiscal year 2010 Financial Report of the United States Government, which includes financial information from the 24 major federal departments and agencies along with GAOs audit report, is being released today by the Treasury Department. The report is also available on GAOs web site at www.gao.gov/financial.html.