GAO: U.S. government’s checkbook still too screwed up to audit

Consider the continual political warfare among tea partiers, Democrats, Republicans, President Obama, members of Congress, and anyone else with a media megaphone over size of the deficit run up by the American government. You’d assume they were confident the government knew how much money it took in and how much it spent. You’d assume the government knew how to keep its checkbook in order.

And you’d be wrong. According to the fiscal 2011 financial report by the nation’s bookkeeper, the Government Accounting Office, some government agencies cannot soundly manage their fiscal affairs.

The GAO said in a press release today it cannot

render an opinion on the 2011 consolidated financial statements of the federal government, because of widespread material internal control weaknesses, significant uncertainties, and other limitations.

As was the case in 2010, the main obstacles to a GAO opinion on the accrual- based consolidated financial statements were: (1) serious financial management problems at the Department of Defense (DOD) that made its financial statements unauditable, (2) the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government’s ineffective process for preparing the consolidated financial statements.

Surely the feds have tackled this problem, right? They’re getting a handle on it, right?

Well, no. In his fiscal 2010 press release, the GAO director said the office could not 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.

The press releases of Gene Dodaro, comptroller general of the United States and GAO director, are pretty easy to write. All they require is cutting and pasting from the previous year. That’s because fiscal 2011 is the 15th consecutive year the GAO “has been unable to render an opinion” on the finances of the federal government. As I wrote last year about the fiscal 2010 financial report,

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.

The financial report includes records from 24 major federal agencies and departments. Dodaro said last year that 19 of the 24 agencies received clean bills of financial health. This year, too, he said, while the majority of agencies received unqualified opinions, the Department of Defense and the Department of Homeland Security “have consistently been unable to receive such audit opinions.”

Auditors hand out unqualified opinions when they find evidence that financial information and accounting procedures are sound. A qualified opinion is not optimal. Inability to render any opinion may be evidence of mismanagement if not malfeasance.

Dodaro reported Social Security and Medicare accounts, too, could not receive unqualified opinions. Even if 19 of the 24 agencies are fiscally accountable, the sheer size of the share of the federal budget held by the DoD and Social Security alone — about $1.5 trillion in fiscal 2011 — continue to give pause about money management abilities in the federal government.

Regarding Medicare in 2011: The GAO’s difficulty in rendering an opinion was

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 alternative projection to illustrate the uncertainties.

Dodaro also cited material weaknesses involving an estimated $115.3 billion in improper payments, information security across government, and tax collection activities.

Consider what Dodaro said in the fiscal 2010 report. Sound familiar?

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 cited material weaknesses involving an estimated $125.4 billion in improper payments, information security across government, and tax collection activities.

Dodaro gives the Department of Homeland Security some props for attaining a qualified opinion for the first time since fiscal 2003. Gosh — only eight years to partially get its financial house in order.

When next you hear a a gaggle of politicians say they are trying to “do the work of the American people” in their wrangling over how to reduce the deficit, tell them get their own fiscal house in order first. Hire more and better accountants and auditors to work in the DoD, the DHS, and Social Security and Medicare. Demand a full, accurate accounting of how your tax dollars are spent.

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