Understanding the Financial Report of the United States Government

WASHINGTON, D.C. (February 15, 2018) — The U.S. Government Accountability Office (GAO) was unable to render an opinion on the federal government’s consolidated financial statements for fiscal year 2017. GAO cited shortcomings that have plagued the financial statements in past years, including persistent problems with the Department of Defense’s (DOD) financial management and auditability, the federal government’s inability to account for and reconcile certain transactions, and an ineffective process for preparing the consolidated financial statements. Such deficiencies undermine the federal government’s ability to accurately report much of its financial information.

“It’s essential that the federal government be able to adequately track all revenues and expenses, along with its assets and liabilities. It is critical to improving the accountability, effectiveness and efficiency of government operations,” said Gene L. Dodaro, Comptroller General of the United States and head of the GAO.  “GAO’s audit report makes clear the continuing challenges to providing policymakers with the accurate and complete financial information needed for ensuring accountability and making difficult policy decisions.”

For 2017, with few exceptions, all of the 24 Chief Financial Officers Act agencies received unmodified or "clean" opinions on their respective individual entities' fiscal year 2017 financial statements. However, about 38 percent of the federal government’s reported total assets as of September 30, 2017, and approximately 20 percent of the federal government’s reported net cost for FY 2017, involved federal entities that were unable to issue audited financial statements, unable to receive audit opinions on the complete set of financial statements, or unable to receive an opinion on their FY 2017 financial statements. Notably, DOD, the Department of Housing and Urban Development, and the Department of Agriculture have continuing impediments to receiving a clean opinion on their financial statements.

GAO also 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 2017 and 2016 Statements of Long-Term Fiscal Projections; the 2017, 2016, 2015, 2014, and 2013 Statements of Social Insurance; and the 2017 and 2016 Statements of Changes in Social Insurance Amounts.

Acknowledging ongoing efforts to resolve the government’s financial management challenges, Dodaro called for 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 achieve more accurate and complete financial reporting. 

Dodaro also raised concerns about the problem of improper payments by federal agencies, which GAO reported as a material weakness. Such payments are estimated at about $141 billion for FY 2017. Other material weaknesses reported by GAO this year included information security across government and tax collection activities.

Dodaro said he was pleased by the recent actions which will allow the federal government to continue to borrow funds to finance the decisions already enacted by Congress and the President. He emphasized the importance of safeguarding the full faith and credit of the United States and noted that GAO has recommended the Congress change how it deals with the debt limit so that decisions about borrowing are tied to the spending and revenue decisions at the time when those decisions are made.

Dodaro added that the Financial Report, and simulations by CBO and GAO, all show that the federal government currently is on an unsustainable long-term fiscal path. He noted GAO has recommended that the Congress develop a plan to address this long-term outlook, even as it must respond to near-term economic and national priorities.

Dodaro thanked the Inspectors General throughout government for their hard work and professionalism in auditing the annual financial statements of their respective departments and agencies.

GAO's audit report on the U.S. government's consolidated financial statements is included in the 2017 Financial Report of the United States Government, which is prepared by the Department of the Treasury in coordination with the Office of Management and Budget. GAO's audit report is available on GAO's website at www.gao.gov/products/GAO-18-316R.

GAO has also updated its guide to the Financial Report of the United States Government. The guide is intended to help those who seek to obtain a better understanding of the Financial Report and is available on GAO’s website at www.gao.gov/products/GAO-18-239SP.

For more information, contact Chuck Young, Managing Director of Public Affairs, at (202) 512-4800.

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The Government Accountability Office, known as the investigative arm of Congress, is an independent, nonpartisan agency that exists to support Congress in meeting its constitutional responsibilities. GAO also works to improve the performance of the federal government and ensure its accountability to the American people. The agency examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO provides Congress with timely information that is objective, fact-based, nonideological, fair, and balanced. GAO's commitment to good government is reflected in its core values of accountability, integrity, and reliability.