Government issues first consolidated financial report with poor results.

BY JOURNAL



The FY 1997 Balance Sheet

The consolidated balance sheet of 24 federal departments and agencies

(In billions of dollars)    
Total assets   $1,601.5
Total liabilities   6,604.5
Net position   -5,003.0
Total liabilities
and net position
$1,601.5

Disclaimer of opinion: Because of the governments serious systems, recordkeeping, documentation and control deficiencies, amounts reported in the consolidated financial statements and related notes do not provide a reliable source of information for decision making by the government or the public.

Source: General Accounting Office Report

Government Issues First Consolidated Financial ReportResults Are Poor

The federal government for the first time was subjected to the same fiscal discipline it imposes on private-sector businesses and state and local governmentsand the results were not good.

The Treasury Department and Office of Management and Budget consolidated the financial statements of the federal government for fiscal year 1997. The General Accounting Office audited the consolidated statements and on April 1 submitted its audit report to Congress and the president.

According to the report, significant financial systems weaknesses, problems with fundamental recordkeeping, incomplete documentation and weak internal controls prevented the GAO from forming an opinion on the reliability of the financial statements. The GAO said such deficiencies impair the governments ability to safeguard assets, maintain proper records and ensure compliance with laws and regulations.

Government requires effective and responsible management, vigorous leadership and accurate, timely information on its financial condition, said Congressman Stephen Horn (R-Calif.), chairman of the House Subcommittee on Government Management, Information and Technology. This first governmentwide audit demonstrates that we remain far short of these commonsense goals.


Bad grades
Twenty-four of the governments largest departments and agencies were required under the Chief Financial Officers Act of 1990 and the Government Management Reform Act of 1994 to each produce financial statements for the consolidated statements (see Federal Audit Report Card, p. 18). Only two of the agenciesthe Department of Energy and the National Aeronautics and Space Administrationhad no material weaknesses, complied with all the laws and regulations material to the financial information in their statements and received clean audit opinions. Nine of the agencies did not submit their reports on time. To be credible and useful, the information not only needs to be materially correct but also timely, said Horn.

According to the GAO report, the federal government could not properly account for billions of dollars worth of property, equipment, materials and supplies. The government also failed to

  • Estimate the cost of most federal credit programs and related loans receivable and loan guarantee liabilities.
  • Report material amounts of environmental and disposal liabilities and related costs.
  • Accurately report major portions of the net costs of operations.
  • Properly account for billions of dollars of basic transactions, especially between government entities.
  • Ensure that all disbursements were properly recorded.

This is the story of deficient financial systems, systems rife with problems and a general failure to comply with laws and regulations, said Horn. The statements are riddled with gaps and filled with unreliable numbers.


In perspectivea good start
Nonetheless, Horn acknowledged that although it was common to compare the government with business, such a comparison was clearly inexact. G. Edward Deseve, OMB acting deputy director for management, told Horns subcommittee the Clinton administration does not expect the governmentwide statements to receive a clean opinion until year 2000. We knew it would take many years for several agencies to obtain an unqualified opinion, but we expect to see improvements each year in the accuracy, reliability and timeliness of agency financial statements.



SPONSORED REPORT

Year-end tax planning and what’s new for 2016

Practitioners need to consider several tax planning opportunities to review with their clients before the end of the year. This report offers strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.

QUIZ

News quiz: IRS warning on cyberattacks and a change in pension rules

Once again, the IRS sounds the alarm about a threat from cyberthieves. See how much you know about this and other recent news with this short quiz.

CHECKLIST

Bolster your data defenses

As you weather the dog days of summer, it’s a good time to make sure your cybersecurity structure can stand up to the heat of external and internal threats. Here are six steps to help shore up your systems.