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The government’s checkbook too screwed up to audit, says GAO

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You know the company’s in trouble when the auditor tells the company that its bookkeeper can’t manage the company’s finances, reconcile balance sheets among different departments, or prepare credible financial statements.

And you know it’s real trouble when the auditor can’t even do an audit and provide the company with a statement of its financial health — or ill health.

That’s what Gene Dodaro, acting comptroller general of the United States and head of the Government Accounting Office, has told the federal government about its fiscal 2010 books: You’re in deep fiscal do-do. Said Dodaro:

Even though significant progress has been made since the enactment of key financial management reforms in the 1990s, our report on the U.S. government’s consolidated financial statement illustrates that much work remains to be done to improve federal financial management.

Apparently, the feds don’t know what to count, how to count it, and how to report the count.

Dodaro says the GAO cannot render an opinion on the 2010 consolidated financial statements of the federal government because of three factors:

• 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.

This ought to be astonishing. But it isn’t. From Dodaro’s preface to the fiscal 2009 audit:

Certain material weaknesses in internal control over financial reporting and other limitations on the scope of our work resulted in conditions that prevented us from expressing an opinion on the fiscal year 2009. [emphasis added]

And from Dodaro’s preface to the fiscal 2008 audit:

Certain material weaknesses in financial reporting and other limitations on the scope of our work resulted in conditions that prevented us from expressing an opinion on the financial statements other than the 2008 and 2007 Statements of Social Insurance. … The federal government did not maintain effective internal control over financial reporting (including safeguarding assets) and compliance with significant laws and regulations … [emphasis added]

And you’ll just love the preface from the fiscal 2007 audit:

Certain material weaknesses in financial reporting and other limitations on the scope of our work resulted in conditions that, for the 11th consecutive year, prevented us from expressing an opinion on the financial statements other than the Statement of Social Insurance … The federal government did not maintain effective internal control over financial reporting … [emphasis added]

Had enough? We could dig into fiscal 2006, 2005, 2004 … but we’d find the same language expressing chagrin at the ineptness of the federal government in handling its finances.

But in 2010, that ineptness worsened. Even “statements of social insurance” could not obtain an opinion. Said Dodaro:

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 agencies-DOD, the Department of Homeland Security, and the Department of Labor-did not get clean opinions. Nineteen of 24 major agencies did get clean opinions on all their statements. [emphasis added]

I’m just aghast at this, so I don’t have a punch line here. Make up your own.

If you’d like to read the GAO’s rendering of the feds’ checkbook, it’s available here.

xpost: Scholars and Rogues

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Written by Dr. Denny Wilkins

December 21, 2010 at 5:15 pm

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