GAO says no to fed financial fraud
The U.S. Government Accountability Office (GAO) recently revealed that, as the official auditing agency of record for the U.S. Federal Government, it could not sign off on the government’s consolidated financial statements for 2015. Even worse, because of the lack of properly prepared and thorough government data, the GAO says it may not be able to do so any earlier than 18 months from now, if at all.
Lack of information, insufficient transparency, ongoing problems with the Department of Defense data, and inefficient data gathering were cited as major problems.
The declaration by the GAO is a stunning non-partisan indictment of the federal government and should cause concern to all Americans, but certainly comes as no surprise to those already familiar with the issue.
It is unlikely that anyone will get fired or go to jail as a result of the gross incompetence and corruption within federal agencies.
“The federal government needs to be able to track all revenues and expenses, as well as its assets and liabilities, and that’s particularly important in a tight budget environment,” said Gene L. Dodaro, Comptroller General of the United States and head of the GAO. “Our report on the government’s consolidated financial statements underscores the fact that much more work needs to be done to ensure our policymakers receive the accurate financial information needed to make difficult short-term and long-term spending decisions.”
For 2014, most, but not all, the 24 Chief Financial Officers Act agencies received unmodified or “clean” opinions on their respective entities’ fiscal year 2014 financial statements. But for 2015, the Department of Defense (DOD), as well as the Department of Housing and Urban Development and the Department of Agriculture, failed to get clean opinions.
The Department of Defense (DOD) is the only government agency that has failed to comply with a 1992 law that all federal agencies be audited. The Marines did manage to pass an audit in 2014, but no DOD agency has passed an audit since and the Marines’ 2014 audit came under heavy criticism.
The DOD says that its goal is to have audit-ready financial statements department-wide by September 30, 2017, something it has failed to provide since 1997 and can’t realistically provide.
Since 1997, there is nearly $10 trillion the DOD can’t properly account for. Without a massive restructuring it is unlikely that a proper audit could ever be conducted. There are far too many people who benefit from an opaque war industry that now costs American taxpayers nearly $1 trillion each year and from which vast sums are siphoned off.
Dodaro optimistically urged strong and sustained commitment by DOD and other federal entities, along with continued leadership by the U.S. Department of the Treasury and the Office of Management and Budget, to ensure more accurate financial reporting.
GAO could not render an opinion on the sustainability financial statements due to significant uncertainties about achieving projected reductions in Medicare cost growth and a material weakness in internal control over financial reporting. These sustainability financial statements consist of the 2015 Statement of Long-term Fiscal Projections, an effort to provide information on the federal government’s long-term fiscal condition.
Dodaro also expressed concern about the continued increase in improper payments under the Obama administration. He noted material weaknesses involving upwards of $136 billion in improper payments reported for fiscal 2015.
This compares to more than $124 billion in improper payments reported for fiscal year 2014, and more than $105 billion for fiscal year 2013. Altogether, the GAO has identified more than $1 trillion wasted through improper payments.
Improper payments have consistently been a government-wide issue despite efforts to reduce them and identify root causes, including fraud. An improper payment can include:
• Incorrect amounts paid to eligible recipients
• Payments made to ineligible recipients
• Payments for goods or services not received
• Duplicate payments
• Payments for which insufficient or no documenta-
tion was found.
GAO remains concerned that the federal government’s long-term fiscal path remains unsustainable without further policy changes. GAO has prepared long-term fiscal simulations that project federal deficits and debt under different sets of policy assumptions.
“Growing debt held by the public, which is now about 74% of GDP, could limit the federal government’s flexibility to address new or unforeseen challenges, such as another economic downturn or a large-scale disaster,” Dodaro said.
In addition, Dodaro pointed out that delays in raising the debt limit can create uncertainty in the Treasury market and limit America’s ability to keep borrowing more money to keep the ship afloat. To avoid disruptions to the Treasury market, minimize unnecessary costs, and help inform fiscal policy debate in a timely way, GAO has suggested that Congress consider better linking decisions about the debt limit with decisions about spending and revenue at the time those decisions are made.
GAO’S audit report on the U.S. government’s consolidated financial statements is included in the 2015 Financial Report of the United States Government, which is prepared by the Department of the Treasury. GAO has not been able to render an opinion on the accrualbased consolidated financial statements since they were first prepared in 1997.
GAO’S audit report is available on GAO’S website at www.gao.gov/products/gao-16-357r.