GAO: Federal government lags on financial accounting

The federal government has not made much progress in accounting for its finances since last year’s annual report. It suffers from major problems in its financial systems, fundamental recordkeeping and financial reporting, the Government Accountability Office said today.Incomplete documentation by agencies, most notably the Defense Department, continued to prevent the federal government from reliably reporting a significant portion of its assets, liabilities, costs and other financial information, and from accurately measuring the full cost and performance of certain programs and activities and properly recording transactions.Agencies did not maintain effective internal controls over financial reporting, including safeguarding assets, and compliance with laws and regulations, GAO said in its audit of the federal government’s consolidated fiscal 2007 financial statement, which the Treasury Department also released Dec. 17.As a result, for the 11th consecutive year, GAO could not give an opinion on the government’s financial statement, consisting of the individual financial reports of individual agencies, said Comptroller General David Walker.“If the federal government was a private corporation and the same report came out this morning, our stock would be dropping and there would be talk about whether the company's management and directors needed a major shakeup,” Walker said during a presentation at the National Press Club. He urged greater transparency and accountability of the federal government's operations, financial condition and fiscal outlook.The serious financial management problems at DOD continue to prevent the federal government from obtaining a financial clean bill of health, the report states. Agencies’ inability to adequately account for and reconcile transactions and balances between agencies and agencies’ ineffective process for preparing the consolidated financial statement are also problematic, the report states.“Until the problems outlined in our audit report are adequately addressed, they will continue to have adverse implications for the federal government and American taxpayers,” Walker said.GAO also found that agencies could not fully determine the extent that improper payments had occurred, identify and resolve information security control weaknesses, and manage information security risks on an ongoing basis. The government also had problems with controls over effectively managing its tax collection activities.The federal government's fiscal exposures totaled about $53 trillion as of Sept. 30, up more than $2 trillion from the same time last year.“This translates into a current burden of about $175,000 per American, or approximately $455,000 per American household,” he said.Walker cited progress, however, in the government’s reporting of its Statement of Social Insurance, which compares the government's expected resources for programs, such as Social Security and Medicare, to what it expects to have to pay in benefits in the next 75 years in current dollar terms.GAO, Treasury and the Office of Management and Budget will produce a summary in mid-January 2008 of the federal government’s consolidated financial statement so that more people might read it and understand the fiscal challenges that are looming, Walker said. Although the federal deficit has decreased in the past three years, it is set to escalate in the long term, most dramatically by unsustainable costs to Medicare as the population ages.Walker said a commercial documentary based on his “Fiscal Wake-Up Tour” will be released in the spring, in time for the 2008 general election campaign to stir debate. During the tour, he traveled the country to warn consumers of the difficult decisions that will have to be made. The film, called “I.O.U.S.A.,” has been accepted for the 2008 Sundance Film Festival, Walker said.