Into federal agencies, money flows, but where it stops, nobody knows. That's the tune of the first-ever consolidated financial statements for the federal government, which auditors say paint a troubling picture of federal agencies' financial management practices.
Treasury Secretary Robert Rubin hailed the release Tuesday of the consolidated financial statements as a "truly historic undertaking," since the government has never before attempted to assemble financial statements for all its activities. But the General Accounting Office's review of the statements found that agencies' poor accounting systems leave the government's finances unauditable.
"Significant financial systems weaknesses, problems with fundamental recordkeeping, incomplete documentation, and weak internal controls, including computer controls, prevent the government from accurately reporting a large portion of its assets, liabilities and costs," GAO concluded.
On the bright side, eight agencies--the Energy and Labor departments, the Social Security Administration, NASA, the Nuclear Regulatory Commission, the General Services Administration, the Small Business Administration and the Environmental Protection Agency--received unqualified opinions on their financial statements. That doesn't mean those agencies have no financial management problems, but it does mean their financial statements make sense.
But none of the other 16 agencies required to submit financial statements under the 1994 Government Management Reform Act managed to get a clean opinion from GAO. Nine of those agencies have yet to complete their financial statements.
GAO found that the Treasury Department could not account for $100 billion in transactions. Furthermore, the government cannot account for billions of dollars in estimated improper payments, including an estimated $23 billion in Medicare mistakes.
"Without accurate cost information, the federal government is limited in its ability to control and reduce costs, assess performance, evaluate programs and set fees to recover costs where required," GAO said.
Sen. Fred Thompson, chairman of the Senate Governmental Affairs Committee, blasted the government's financial managers at a press conference Tuesday.
"The federal government can't pass an audit," Thompson said. "We're spending almost $2 trillion a year based on erroneous or non-existent information."
Thompson also decried the government's assets management, noting that the Defense Department was unable to account for two utility boats valued at $174,000 each, two $875,000 tugboats and a missile launcher worth $1 million.
"We don't know what we've got, folks," Thompson said. He added that Congress should either cut agencies' budgets or push for poor managers to be fired if the financial statements don't improve.
Gene Dodaro, GAO's assistant comptroller general for accounting and information management, said the government currently lacks accounting discipline, but predicted the annual financial statement audits would improve the situation. The government is shooting for a clean audit of its financial statements by fiscal 1999.
"That's going to take some effort, but it's doable," Dodaro said.
Rep. Steve Horn, R-Calif., chairman of the House Government Reform and Oversight Committee Subcommittee on Government Information, Management and Technology, was scheduled to release grades for each agency's financial statement on Wednesday.
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