Congressional Watchdog Questions Reliability of U.S. Financial Statements, Cites ‘Serious Financial Management Problems at the Department of Defense’

The Pentagon
by Bret Rowland

 

A Congressional watchdog said Friday that it was again unable to determine if the federal government’s consolidated financial statements were reliable.

The U.S. Government Accountability Office, which is Congress’s research arm, said it was hampered by “serious financial management problems at the Department of Defense,” problems in accounting for transactions between federal agencies, weaknesses in the process for preparing the statements and inadequate support for the cost of loan programs from the Small Business Administration and Department of Education.

“Congress and the Administration need reliable and complete financial information, within each agency and across the government as a whole, to govern effectively and efficiently,” U.S. Comptroller General Gene Dodaro said in a statement. “Also, the federal government continues to operate on an unsustainable fiscal path, jeopardizing the country’s long-term position to face domestic and international challenges.”

The Government Accountability Office was also unable to provide an opinion on the federal government’s fiscal year 2023 and 2022 financial statements. In fact, it’s been a long-running problem with the Pentagon being a primary culprit.

The GAO report said that the Pentagon has made progress but noted that “DOD has acknowledged that achieving a clean audit opinion will take time.”

The Department of Defense didn’t immediately respond to questions about its work.

David Walker, the former Comptroller General of the U.S., told The Center Square that it could still take “several years” for the Department of Defense to get a clean audit. But even a clean audit doesn’t mean everything is well within the federal government, said Walker, an advisory board member for Main Street Economics.

Walker said the federal government’s total financial hole – total liabilities plus unfunded social insurance promises – increased by about $6.5 trillion to a total of about $130 trillion. He said that total debt often goes unnoticed.

The U.S. debt of $34.2 trillion, which is subject to the debt ceiling, isn’t a full accounting, Walker said.

“That’s the amount of ice that you see above the water,” he said. “What you don’t see is what’s below the water.”

Main Street Economics has advocated for a fiscal commission that could help Congress put the nation on a more sustainable financial path.

The GAO report noted the debt-to-GDP ratio was about 97% at the end of fiscal year 2023.

“Under current policy and based on this report’s assumptions, it is projected to reach 531 percent by 2098,” according to the report. “The projected continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.”

The report said that the Statement of Long-Term Fiscal Projections showed that the present value of “total noninterest spending, over the next 75 years, under current policy, is projected to exceed the [present value] of total receipts by $73.2 trillion.”

– – –

Brett Rowland is an investigative reporter at The Center Square.

 

Related posts

One Thought to “Congressional Watchdog Questions Reliability of U.S. Financial Statements, Cites ‘Serious Financial Management Problems at the Department of Defense’”

  1. As noted in the article, David Walker, former Comptroller General, points out that getting a clean audit opinion on its financial statements has nothing to do with whether or not the government is operating efficiently and effectively. As a trained accountant and CPA, who once worked at Arthur Andersen and Price Waterhouse Coopers, Mr. Walker understands that in the private sector, a “clean auditor opinion” on its financial statements means only that a company has “fairly presented” its results of operations and financial position ( assets, liabilities, and owners equity) in accordance with Generally Accepted Accounting Principles) – which has nothing to do with how “efficiently” or “effectively” it may be operating. Many companies are not operating as efficiently or effectively as they could, but that does not prevent them getting clean opinions on their financial statements. That’s what the stock market is for, to help investors sort out who the winners and losers are. Executive Branch agencies (including the DOD), all of whom run on budgets and have always had to do budgetary accounting and reporting, began having to prepare private-sector-style financial statements (balance sheets and income statements) more than 30 years ago, after the Congress passed the CFO Act of 1990 – despite the fact that government agencies are very different from private-sector businesses. (No government agency is seeking to make profits or build equity for shareholders.) Solving the nation’s debt problem will require Congress and the Executive Branch to work together to find ways to support and increase economic growth, control spending, and rationalize taxes. To obtain the information they need to do the “control spending” piece, the Congress and Executive Branch would do well to focus on improving budgetary accounting and reporting, rather than private-sector-style financial reporting. Mr. Dodaro, the current head of the GAO, certainly understands that, but for some reason continues to insist that the government should be doing private-sector-style accounting and reporting as well, which only makes things harder for everybody.

Comments