GAO: Many federal financial books are so sloppy they can’t be audited

The Government Accountability Office says many federal agencies’ financial books are in such bad shape that they cannot be audited.

In a report released last week, the GAO said material weaknesses in accounting procedures “hamper the federal government’s ability to reliably report a significant portion of its assets, liabilities, costs and other related information.”

The GAO said its report on the U.S. government’s consolidated financial statements for fiscal years 2015 and 2016 “underscores that much work remains to improve federal financial management.” The agency couldn’t even express an opinion on the balance sheets because of the weak financial reporting.

GAO noted that 34 percent of the federal government’s reported assets and 18 percent of its reported net cost relate to federal entities that were unable to issue audited financial statements, were unable to receive audit opinions on the complete set of financial statements or received a disclaimer of opinion on their statements.

The GAO called out the Department of Health and Human Services and Department of Defense, in particular, for weak internal controls.

The agency also took a shot at the Department of the Treasury and the Office of Management and Budget, noting that some of the “numerous recommendations” GAO made to those agencies in previous years to address internal control deficiencies remain unaddressed. The secretary of the Treasury and director of OMB are required to annually submit financial statements for the U.S. government, audited by the GAO, to the president and Congress.

-Johnny Kampis, Watchdog.org
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US Treasury Publishes the Financial Report of the United States Government - 2016

The annual Financial Report of the U.S. Government provides to the public a comprehensive overview of the Government's current financial position, as well as critical insight into our long term fiscal outlook.

The Citizen’s Guide to the Fiscal Year 2016 Financial Report of the U.S. Government (Financial Report) summarizes the U.S. Government’s current financial position and condition, and discusses key financial topics, including fiscal sustainability. This Guide and the Financial Report are produced by the U.S. Department of the Treasury in coordination with the Office of Management and Budget (OMB) of the Executive Office of the President. The Secretary of the Treasury, Director of OMB, and Comptroller General of the United States at the Government Accountability Office believe that the information discussed in this Guide is important to all Americans.

Find the Report here....

FY2015 US Federal Financial Statement Audit Due Monday

The audited financial statements of the 24 CFO Act agencies and participating federal organizations & commissions are due to be published on Monday November 16, 2015.

The following urls provide starting points to locate the publications.

http://www.performance.gov/
http://www.gao.gov/key_issues/federal_financial_accountability/issue_summary
http://www.treasury.gov/about/budget-performance/annual-performance-plan/Pages/default.aspx
@FedCFO



  

Treasury Dept IT System Flagged for Security Issues

Serious tech troubles at the Treasury Department are so severe that they could disrupt accounting practices within a system that manages about $16.7 billion of federal debt.

The Government Accountability Office flagged at least 20 problems within the Bureau of the Fiscal Service’s tech system—all of which involve security management issues. Of the deficiencies GAO identified, 14 are brand new and six are problems that were detected in 2012 and were never corrected.

The auditors said the issues constitute a "significant deficiency" for financial reporting purposes. 

The weaknesses "increase the risk of unauthorized access, modification or disclosure of sensitive data and programs, which could result in the disruption of critical operations," Gary Engel, GAO director for financial management and assurance, wrote in an audit last week, NextGov first reported.

The Fiscal Service commissioner addressed the auditor’s findings and said the agency is currently taking actions to resolve the issues.

-Brianna Ehley, TheFiscalTimes.com
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Watchdog: Government Still Has Big Financial Management Problems

The usefulness of the government’s consolidated financial statements, though improved in recent years, remains hampered by “material weaknesses,” primarily at the departments of Defense and Health and Human Services, that prevent auditors from rendering an audit opinion, the Government Accountability Office reported.

In its mandatory audit of the government’s fiscal 2013 and fiscal 2012 consolidated financial statements released Thursday, the congressional watchdog pointed to three issues affecting the government’s estimate of its assets, liabilities and costs that urgently need improvement. They include “serious financial management problems” at the Defense Department; a governmentwide inability to adequately account for and reconcile intragovernmental activity and balances between federal entities; and an “ineffective process” for preparing the consolidated financial statements.

GAO noted that the Pentagon accounts for about 33 percent of the government’s total assets and about 16 percent of fiscal 2013 spending, but the agency has been given a “disclaimer of opinion” on its consolidated financial statements. Similarly, uncertainties in the growth rate of Medicare and Social Security, which account for 68.8 percent of the value of future expenditures in excess of future revenue, are responsible for HHS’ disclaimer of opinion.

Further crimping the government’s broader ability to get a grip on finances is an inability to determine the full extent of improper payments and actions to prevent them; unresolved information security control deficiencies; and effective management of tax collection activities, GAO said.

-Charles S. Clark, GovExec.com
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GAO Cannot Audit Federal Government, Cites Department Of Defense Problems

WASHINGTON -- The Government Accountability Office said Thursday that it could not complete an audit of the federal government, pointing to serious problems with the Department of Defense.

Along with the Pentagon, the GAO cited the Department of Homeland Security as having problems so significant that it was impossible for investigators to audit it. The DHS got a qualified audit for fiscal year 2012, and is seeking an unqualified audit for 2013.

The report released by the GAO on Friday indicates serious accounting problems at two of the largest government agencies: the Pentagon and the Department of Homeland Security. The Department of Defense has a net cost of $799.1 billion to the federal budget, while the Department of Homeland Security has a net cost of $48.7 billion.

"The U.S. Government Accountability Office (GAO) cannot render an opinion on the 2012 consolidated financial statements of the federal government because of widespread material internal control weaknesses, significant uncertainties, and other limitations," the agency said. "As was the case in 2011, the main obstacles to a GAO opinion on the accrual-based consolidated financial statements were: 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 agencies. The federal government’s ineffective process for preparing the consolidated financial statements."

In the report, the GAO also said that the federal government could not reconcile transfers between federal agencies and had an ineffective process for preparing financial statements.

The report lists the Department of Defense as having the third-largest cost to the federal government, at 21 percent. That value is slightly behind the costs of the Department of Health and Human Services and the Social Security Administration, which both have high costs because they run the large social insurance programs Medicare and Social Security.

- Luke Johnson, Ryan Grim, HuffingtonPost.com
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AGA Research Report: Government-wide Financial Reporting

AGA Research Report Addresses Root Causes of a Material-Weakness Cited in the Audit of the U.S. Department of the Treasury's Process for Compiling the Consolidated Financial Statements of the U.S. Government

 
Research team offers short-term and long-term recommendations to help the U.S. government achieve a "clean" audit opinion 
 
ALEXANDRIA, Va., Jul 18, 2012 (BUSINESS WIRE) -- Over the past 15 years, the U.S. Department of the Treasury (Treasury), in cooperation with the Office of Management and Budget (OMB), has issued the annual Financial Report of the U.S. Government (FR), presenting the financial position and condition of the nation. For each of those years, the U.S. Government Accountability Office (GAO) has issued a disclaimer of audit opinion on the Consolidated Financial Statements (CFS) of the federal government, which is included in the FR.


The Association of Government Accountants (AGA) undertook an independent research study to develop recommendations and a plan of action to address a GAO-cited material weakness that contributes to GAO's disclaimer of opinion on the federal government CFS. Specifically, this long-standing, unresolved issue pertains to the identified weaknesses in the current reconciliation and compilation processes Treasury employs to consolidate some 150 federal agencies' financial data into the CFS.

View the Report (PDF)

The report is the product of AGA's Corporate Partner Advisory Group (CPAG) research project sponsored by Ernst & Young, Grant Thornton, Kearney & Company, KPMG and PwC.

GAO: Fiscal Year 2011 U.S. Government Financial Statements

The Federal Government Faces Continuing Financial Management and Long-Term Fiscal Challenges, by Comptroller General Gene L. Dodaro, before the House Committee on Oversight And Government Reform: Government Organization, Efficiency And Financial Management Subcommittee.
GAO-12-444T, March 1.

http://www.gao.gov/products/GAO-12-444T
Highlights - http://www.gao.gov/assets/590/589003.pdf


READ MORE and Download the Report Here...

Federal financial report is in, but GAO offers no opinion

The federal government's consolidated financial report for 2011 is out and the picture isn't pretty. The Government Accountability Office found once again that it can't render an opinion on that statement. That's despite the fact that several departments received their own clean financial statements.

In Fiscal Year 2011, 20 of the 24 individual CFO Act agencies received unqualified opinion on all of their financial statements, Dacey said. One agency received an unqualified opinion on all of its statements with the exception of its statements on social insurance and changes of social insurance. Another agency received a qualified opinion.


The three main obstacles to GAO giving an opinion on the accrual based financial statements:


1.Serious financial problems at the Department of Defense have prevented its statements from being auditable.

2.The federal government has been unable to adequately account for and reconcile intergovernmental activity and balances between agencies.

3.The federal government has an ineffective process for preparing consolidated financial statements.

-Michael O'Connell, FederalNewsRadio.com
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AGA to Conduct Research on the Consolidated Financial Statements of the U.S. Government

Research will identify potential solutions and develop plans of action to facilitate the reconciliation of the Government’s budgetary and financial information, and consequently mitigate long-standing material weaknesses contributing to the disclaimer of audit opinion on the Federal Government’s Consolidated Financial Statements (CFS) .


Alexandria, VA – As part of its ongoing efforts to conduct timely and relevant research to benefit governmental accounting, auditing, and financial management, the Association of Government Accountants (AGA) will be researching long-standing financial management weaknesses in the processes used to compile the federal government's financial statements.

AGA's research is expected to produce recommendations and a suggested plan of action to address some of the key material audit weaknesses contributing to the disclaimer of opinion on Consolidated Financial Statements (CFS) of the U.S. Government. The project will also outline optimal preparation and compilation architecture for the government-wide entity. In so doing, AGA hopes that its research will benefit the Federal financial management community as a whole and facilitate Treasury's responsibilities as preparer of the CFS.

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Recent GAO Publications

The Government Accountability Office (GAO) recently released the following reports, correspondences and testimony:


Secure Border Initiative: Controls over Contractor Payments for the Technology Component Need Improvement.
GAO-11-68, May 25.
http://www.gao.gov/products/GAO-11-68
Highlights - http://www.gao.gov/highlights/d1168high.pdf

Management Report: Improvements Needed in Controls over the Preparation of the U.S. Consolidated Financial Statements.
GAO-11-525, May 26.
http://www.gao.gov/products/GAO-11-525
Highlights - http://www.gao.gov/highlights/d11525high.pdf

Reimbursable Space Act Agreements: NASA Generally Adhering to Fair Reimbursement Controls, but Guidance on Waived Cost Justifications Needs Refinement.
GAO-11-553R, May 26.
http://www.gao.gov/products/GAO-11-553R

Department of State's Counternarcotics Performance Management System.
GAO-11-564R, May 26.
http://www.gao.gov/products/GAO-11-564R

Government should adopt web-based financial reporting, industry tells House panel

The government should adopt web-based financial reporting and establish a central website for the public distribution of federal financial information, panelists urged a House panel Feb. 16.

"Financial reporting information needs to switch from a paper-based, static reporting model to more electronic, dynamic and readily available online availability," said Jonathan Breul, executive director of the IBM Center for the Business of Government. Breul testified before the House oversight and Government Reform government organization, efficiency and financial management subcommittee, chaired by Rep. Todd Platts (R-Pa.).

Breul, along with panel member Mike Hettinger, an executive director at Grant Thornton, assisted with a December 2010 paper (.pdf) commissioned by the Federal Accounting Standards Advisory Board on improving the relevancy of the annual consolidated financial report of the federal government. Among the 10 recommendations were calls for replacing paper-based reporting with electronic measures and establishing a public website.

Electronic reporting "is essential if we are to move in the direction of improving the availability and transparency of government information," Hettinger said.

-David Perera, FierceGovernmentIT.com
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Experts push financial reporting overhaul

As the administration and Congress begin the battle of the budget, a task group report suggests the numbers might be even more complicated than most of the country realizes.


"Let's be honest. This is one of the most important, and most boring hearings in Congressional history," Rep. Jim Cooper (D-Tenn.) said during the Oversight and Government Reform Subcommittee on Government Organization, Efficiency and Financial Management's first in a series of hearings on financial reform Wednesday.

The subcommittee heard from three experts about recommendations from the Federal Accounting Standards Advisory Board (FASAB).

"Our focus is to look at financial information of the federal government, particularly how that information is reported and then acted upon," said subcommittee chairman Todd Platts (R-Pa.). "Specifically we are looking at the Consolidated Financial Report (CFR) and how we can make it more useful. The question we are asking is how we take than information and make it more useful, not just to Congress, but to the American people."

Platts said that given the $14 trillion deficit, the public is paying attention to whether Congress is spending tax dollars responsibly - or not.

The task force identified serious problems with the financial information government auditors collect and how they report it. It focused primarily on the CFR, a record of how agencies have spent money and the costs of unfunded but obligated programs such as Medicare.

"The static, paper-based reports the government delivers today contain important information," said Jonathan Breul, a member of the task force and a former Office of Management and Budget official. "However, those reports are not presented or available in a way that makes them easy to use or easy to understand."

The task force conducted a user-needs study which showed citizens, executives and managers in both the private and public sector had difficulty understanding information in federal financial reports.

The task force developed ten recommendations it says will improve the usefulness of the CFR. Four of the recommendations focus on ways to enhance the communication of the data by making it easier to access, search and understand.

FASAB wants to develop a way to link agency financial statements to performance measures to give users a better idea of whether or not the money is being spent wisely. They said numbers lack meaning when there is no context as to whether or not the spending had meaningful results.


Breul said this goal is in line with the recently passed Government Performance and Results Modernization Act. The law calls for OMB to develop governmentwide standards to measure agency performance and identify inefficient programs.

-Meg Beasley, FederalNewsRadio.com
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Simple Tech Tool Could Cut Billions in Spending, Help Both Parties

One way of lowering the tone of rhetoric on political issues would be to make it more fact-based.

If the White House wants to try to find any kind of common ground with Rep. Issa and his Committee on Oversight and Government Reform Investigations, and to achieve its own goal of paring federal spending, it would do well to support one of Issa's pet projects, passage of S. 303, the Federal Financial Assistance Management Improvement Act.

That bill, which enjoys bipartisan support, died in the last Congress when a conference committee could not reconcile Senate and House versions. It would require all government agencies to adopt a uniform financial data standard for both their internal financial information and whatever financial info they collected from the private sector in regulatory filings.

Why is that important? Today, there's a wide range of reporting software and procedures which mean that it becomes difficult, if not impossible, to quickly and easily either find out whether a government agency is efficient or to make the information that companies have to report to government easily understood and scrutinized.

While it wasn't named, most believe the best "standard" for reporting under S. 303 would be the eXtensible Business Reporting Language (XBRL). It has the potential to not only cut government waste and inefficiency, but to help businesses make better decisions and cut their supply chain waste, among other benefits. The US lags behind the rest of the world in widespread implementation of XBRL.

Issa has pointed out that the GAO's annual review of the federal government's consolidated financial statements has never produced a clean audit opinion, because agencies use inconsistent standards.

Beyond the auditing problems, by not standardizing on XBRL the government is denying itself an important tool to improve decision-making and interagency cooperation.

-W. David Stephenson, HuffingtonPost.com
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Platts zeroes in on agency financials

Two upcoming hearings will set the tone for how House Republicans will oversee federal financial management.
 
Congressman Todd Platts (R-Pa.) spoke with Federal News Radio in his first interview since being appointed chairman of the Oversight and Government Reform's Subcommittee on Government Organization, Efficiency and Financial Management.
 
Platts said the first step to ensuring taxpayer money isn't being wasted is seeing how the money is being spent. Starting this week, the subcommittee will hold the first of two hearings on the consolidated financial report - a record of how agencies have handled money.
 
He said the first hearing, scheduled for Feb. 16, will look at how to make the report more useable for Congress, the administration and the public.

Platts said a second hearing with the report's authors - the Department of the Treasury, the Office of Management and Budget and the Government Accountability Office - will take place on March 9.

He added that information from those hearings will guide the subcommittee in subsequent hearings about more focused topics.

Platts said he hopes agencies will view his subcommittee as an ally in their effort to provide the best services they can.

In addition to agency financial reports, Platts said the subcommittee also will look at performance ratings. He said both factors contribute to determining how efficiently money is spent.

Platts said work the subcommittee already has done with Treasury is proof of the smooth transition. He said the committee is talking to Treasury about strengthening its ability to go after non-tax debt, such as outstanding fines.

Another issue Platts plans to address is improper payments, which he said have ballooned four-fold in four years. He said the estimate for improper payments when he was last chairman was $35 billion - the latest estimate is $125 billion. Platts said this is both good and bad news.

-Meg Beasley, FederalNewsRadio.com
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Sen. Tom Coburn presses Pentagon leaders to improve financial management

Republican says he’ll push for budget freeze on some accounts until books can be audited

WASHINGTON — Sen. Tom Coburn on Tuesday asked the nation’s top military leaders to get the Pentagon’s financial books in order, saying he would press for a budget freeze on some accounts until they can be audited.

Coburn, R-Muskogee, sent a letter to the chiefs of staff of the U.S. Army, Air Force, Navy and Marine Corps asking them “to aggressively pursue financial improvement and audit readiness in order to preserve the military’s ability to take care of our troops today and to invest in the needed modernization of our weapon systems for the future.”

Coburn wrote that better financial management could save money and prevent cuts, but that strong leadership was needed to overcome “institutional resistance” to changes at the Pentagon.

The senator said the Pentagon could not produce financial statements that could be audited and that managers couldn’t make important financial decisions without accurate data.

The Government Accountability Office, the auditing arm of Congress, has repeatedly placed some of the Pentagon’s business operations in its “high-risk” category “because of their vulnerability to waste, fraud, abuse and mismanagement.”

In a report last week, the GAO said the Pentagon has made some progress toward reforming its business practices, including naming a chief management officer and a deputy chief management officer.

-Chris Casteel, NewsOK.com
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The Nation by the Numbers - The 2010 Financial Report of the U.S. Government

The slides from the AGA DC January Luncheon presented by Mark Reger, Deputy Assistant Secretary for Accounting Policy Department of the Treasury entitled The Nation by the Numbers - The 2010 Financial Report of the U.S. Government, can be viewed on the AGA DC website here:

http://www.agadc.org/Presentations/AGADC_Lunch_Slides_Jan_11.pdf

New governmentwide financial systems on tap

By the summer, agency chief financial officers will begin figuring out how to move to new governmentwide systems to process intergovernmental transactions and vendor invoices.


Danny Werfel, the Office of Management and Budget's controller, said the Treasury Department is in the middle of testing and analyzing existing systems to see which could be expanded.

Werfel said by May or June Treasury and OMB should come to a final decision about which systems to use and begin to figure out how agencies should migrate to these common systems.


OMB and Treasury has been working on these common systems since last winter.

It's also how the Obama administration has modified the Financial Management Line of Business initiative started under the Bush administration. The FM LOB tried to standardize business processes and terminology, and get agencies to shut down their systems and move to shared service providers. OMB announced in March it was closing the Financial Systems Integration Office (FSIO), which led much of the business process standardization work. Instead of FSIO, OMB set up the Office of Financial Innovation and Transformation (OFIT) within Treasury to lead these intergovernmental transactions and vendor invoicing pilots.

Werfel said the governmentwide systems are among the CFO community's top priorities in 2011.

One of the top goals is to further reduce improper payments. Werfel said agencies made significant progress in 2010, reducing the governmentwide improper payment rate to 5.49 percent, from 5.65 percent in 2009.

Werfel said this means that agencies prevented an additional $3.8 billion in improper payments from being made in 2010.

Along with improper payments, Werfel and other agency CFOs detailed priorities and plans at a recent CFO Council meeting. The 47-page PowerPoint presentation goes through everything from improper payments to technology innovation to open government and transparency to decision support and workforce challenges.


Werfel said federal financial management is getting better each year despite the Defense Department's inability to get audited.

The Government Accountability Office issued its annual report last month finding for a 14th straight year that auditors could not issue an opinion.

Still, Werfel said the total number of clean opinions is up to 20, including NASA, which moved from a disclaimed opinion to a qualified opinion.

OMB also is working closely with DoD on its financial books.


Werfel said the Pentagon is focused on different key areas to help it become auditable. He said DoD is starting with activities that are most closely related to their operational and mission success, which includes things like how money flows through the agency, managing execution and cash flows.

-Jason Miller, FederalNewsRadio.com
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GAO: Weaknesses in federal financial management

Bob Dacey, Chief Accountant, Government Accountability Office

For the 14th straight year, the Government Accountability Office announced that it could not issue an opinion on the federal government's consolidated financial statements.


In its report, the GAO highlights three main obstacles:

1.Serious financial management problems at the Defense Department.
2.An inability to effectively report inter-agency expenses.
3.An overall ineffective process for preparing financial statements.

Bob Dacey, chief accountant at GAO, told the Federal Drive that 20 of the 24 agencies of the CFO Act had "clean opinions" on their financial statements. However, in addition to DoD, Labor, Department of Homeland Security and NASA did not have clean opinions, Dacey said.

Dacey said weaknesses in DoD's financial management have been "pervasive and longstanding." Improvements are focused on two areas: budget information and mission-critical assets, he said.

The defense authorization bill includes implementation of the Defense Financial Improvement and Audit Readiness or FIRE Plan, which mandates DoD financial statements be audi-ready by the end of fiscal year 2017.

One problem persistent since consolidated audits started in 1997 is the lack of a standardized process across agencies for identifying interagency transactions, Dacey said.
-Jolie Lee, FederalNewsRadio.com
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Coburn: Control Government Spending or Face 'Apocalyptic Pain'

"Apocalyptic pain" from an out-of-control debt could cause 18 percent unemployment and a massive contraction in the economy that would destroy the middle class, a leading Republican deficit hawk said in an interview that aired Sunday.

Sen. Tom Coburn, R-Okla., who recently issued a report on government waste, warned that the U.S. only has about three or four years to get its fiscal house in order or it could find itself facing austerity measures seen in Greece, Ireland, Spain, Portugal and earlier in Japan.

"The problem that faces our country today, the last 30 years we have lived off the future, and the bill is coming due," he added.

The senator, who was recently elected to a second -- and he pledges -- final term in Congress, said he's not trying to scare anyone, but eliminating waste in the federal government's ledgers is imperative not just to prevent default but a massive implosion that he defined in catastrophic terms.

Coburn said he can come up with $350 billion off the top of his head in inefficiency and waste that could be eliminated without impacting anyone in a practical sense. He noted $50 billion in programs that are duplicative and $100 billion in Medicare and Medicaid fraud that was not addressed in the health care law.

"We have 267 job training programs across 39 different agencies. Why do we have 267 of them? We have 105 programs to encourage people to go into science and technology, engineering and math. That's 105 sets of bureaucrats. None of them have metrics on it," he said.

"The Pentagon can't even audit its own books. It doesn't even know where its money is going. And we refuse to have the tough forces go on the Pentagon so that at least they are efficient with the money they're spending," Coburn added.

In one of his last acts in the lame-duck session that ended last week, Coburn, an obstetrician who earned the nickname "Dr. No" for his refusal to spend taxpayer dollars, was a critical factor in getting a health care program for Sept. 11 responders reduced in scope and cost. The $7.2 billion program was cut to $4.3 billion and was paid for through additional fees and reductions in other spending.

-FoxNews.com
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