U.S. Government's 2013 Financial Report Reflects Continuing Financial Management and Fiscal Challenges

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WASHINGTON, D.C. (February 27, 2014) -- The U.S. Government Accountability Office (GAO) cannot render an opinion on the FY2013 consolidated financial statements of the federal government because of continuing serious material internal control weaknesses, significant uncertainties, and other limitations.

While significant improvements occurred during the past year, such as the Department of Homeland Security receiving its first unmodified (clean) opinion, three main obstacles remain to a GAO opinion on the accrual-based consolidated financial statements:

  • 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 entities.
  • The federal government's ineffective process for preparing the consolidated financial statements.

"Federal financial management and accountability have improved significantly since enactment of key federal financial reforms in the 1990's, but GAO's report on the U.S. government's consolidated financial statements makes clear that much still needs to be done and these improvements are urgently needed," said Gene L. Dodaro, Comptroller General of the United States and head of the GAO. "In a time of limited resources, sound financial and performance information is vital both to help federal managers improve efficiency and effectiveness and to help policy makers address our government's overarching long term fiscal problems."

Importantly, almost all of the 24 Chief Financial Officers Act agencies received unmodified or "clean" opinions on their respective entities' fiscal year 2013 financial statements. An exception was DOD which has consistently been unable to receive such an audit opinion on its financial statements.

Following years of unsuccessful efforts to improve financial management within DOD, DOD's Comptroller established the Financial Improvement and Audit Readiness Directorate to develop, manage, and implement a strategic approach for addressing internal control weaknesses and for achieving auditability. DOD's overall goal is to prepare auditable department-wide financial statements by September 30, 2017.

Efforts are underway to resolve financial management challenges but strong and sustained commitment by DOD and other federal entities, as well as continued leadership by the Department of the Treasury and the Office of Management and Budget, are necessary to implement needed improvements.

GAO was unable to render an opinion on the 2013 Statement of Social Insurance and the 2013 Statement of Changes in Social Insurance Amounts 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 Medicare payment rates for physician services and productivity improvements for most other categories of Medicare providers.

Dodaro also cited material weaknesses involving more than $100 billion in improper payments, information security across government, and tax collection activities.

Reliable financial and performance information is even more critical as federal managers likely face increasingly lean budgets and need to operate their respective entities as efficiently and effectively as possible and as decision makers carry out the important task of addressing the federal government's fiscal challenges. Over the long term, the imbalance between spending and revenue that is built into current law and policy will lead to continued growth of debt held by the public as a share of gross domestic product (GDP).

"This situation--in which debt grows faster than GDP--means that the current federal long term fiscal path is unsustainable," Dodaro said.

Dodaro praised the Inspectors General across government, who are responsible for auditing the annual financial statements of individual federal entities, for their commitment and professionalism.

GAO's report on the results of its audit of the U.S. government's fiscal year 2013 consolidated financial statements, which are included in the 2013 Financial Report of the United States Government, prepared by the U.S. Department of the Treasury, is available on GAO's website at

http://www.gao.gov/products/GAO-14-319R.

For more information, contact Chuck Young, GAO Managing Director of Public Affairs, at (202) 512-4800.

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The Government Accountability Office, known as the investigative arm of Congress, is an independent, nonpartisan agency that exists to support Congress in meeting its constitutional responsibilities. GAO also works to improve the performance of the federal government and ensure its accountability to the American people. The agency examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO provides Congress with timely information that is objective, fact-based, nonideological, fair, and balanced. GAO's commitment to good government is reflected in its core values of accountability, integrity, and reliability.

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