Federal government still can't pass an audit
The annual audit of the federal government's books has been published, and the verdict is as one might expect: Uncle Sam's accounting is a mess.
According to the Government Accountability Office:
As in past years, we were unable to render an audit opinion—i.e., a conclusion on whether the financial information is reliable—on the government’s FY18 consolidated financial statements. Many of the same deficiencies that have affected past financial statements continue to get in the way of the government having reliable, useful, and timely financial information, including:
*Problems with the Department of Defense’s financial management and auditability;
*The federal government’s inability to adequately account for certain transactions between agencies; and
*Weaknesses in the process for preparing the consolidated financial statements.
In addition to these impediments, we identified other material weaknesses in controls over financial reporting—problems that could lead to significant errors in the consolidated financial statements—including:
*The federal government’s improper payments problem, which grew to an estimated $151 billion for FY18;
*Information security across government; and
*Loans receivable and loan guarantees liabilities.
Not that it's all bad news:
Twenty-two of the 24 Chief Financial Officers Act agencies received clean opinions on their agency financial statements. Persistent problems have prevented DOD and the Department of Housing and Urban Development from receiving clean opinions on their financial statements.
That major problems exist in government accounting isn't a surprise. Sprawling bureaucracies tend to be untidy affairs, even when it comes to balance sheets.
But that's no reason to give up on audits. As the GAO notes:
For one thing, the consolidated financial statements can give us a big-picture, high-level overview of government finances, and can serve as a window into the federal government’s overall financial position and long-term fiscal outlook. For another thing, audit preparations by individual agencies can help those agencies to identify accounting problems, manage costs, and make more effective decisions as a result.
Resolving the problems outlined in our audit report is important to keeping the U.S. government accountable to taxpayers—especially in light of the big-picture challenges it is soon likely to face. Tune in later this spring to learn more about the nation’s precarious financial future in our 2018 Fiscal Health report.
Yes -- keep the audits coming. They offer excellent roadmaps to reform.