The decision by President-elect Donald Trump to stock his administration’s top ranks with people who have no significant experience in government has many experts worried about how well the federal bureaucracy will function under the new leadership. But there is at least one thing that a cabinet made up of Wall Street insiders and businesspeople might be able to do that succeeding waves of career public servants have not: get the federal government to balance its books.
The Government Accountability Office on Thursday released its annual evaluation of the consolidated financial statement of the federal government, and for the 20th time in a row, dating back to 1997, was unable to offer an opinion on the reliability of the government’s books because of widespread accounting and financial management failures.
(To be clear, there’s no reason to believe the government’s book had been balanced until things suddenly went south in 1997. That was the first year that a GAO audit was required under the Government Management Reform Act of 1994.)
“Given the federal government’s mounting fiscal challenges, it’s essential that it be able to accurately account for its costs, outlays, and assets,” said Comptroller General of the United States Gene Dodaro. “But GAO’s latest audit report on the consolidated financial statements underscores how much more has to be done to provide policymakers with reliable financial and performance data—information that is crucial for the difficult spending decisions that lie ahead.”
The good news is that, for the most part, auditors know where the biggest problems are: the Pentagon and the Department of Housing and Urban Development and, to a lesser extent, the Department of Agriculture.
Of the 24 different agencies covered under the audit requirements, almost all of them received a “clean” opinion from GAO examiners. However, the Defense Department and HUD “have continuing impediments to receiving a clean opinion on their financial statements” and only one of the several financial statements presented by the Department of Agriculture passed muster.
The biggest offender, as usual, was the Pentagon, with its $600 billion budget. In this year’s audit, GAO found “persistent financial management problems at the Department of Defense.” Other problem agencies, it reported, showed an “inability to account for and reconcile certain transactions, an ineffective process for preparing the consolidated financial statements, and significant uncertainties. These shortcomings hamper the government’s ability to reliably report much of its financial information.”
And even when the government can show, definitively, where money is flowing, that’s not always much comfort. The GAO reports that in 2016 the volume of improper payments -- that is, money that was paid out but should not have been, climbed to $144 billion from $137 billion the previous year. Historically, federal agencies have a terrible track record when it comes to recouping money that is paid out improperly, getting back pennies on the dollar.
Other uncertainties that stood in the way of GAO signing off on the consolidated federal report had nothing to do with bookkeeping at individual agencies but were tied to broader uncertainties about the government’s future obligations. Auditors said that they were not confident in the federal government’s own assessment of its long-term fiscal outlook in general and the costs associated with various entitlement programs in particular.
“GAO could not render an opinion on the federal government’s sustainability financial statements due to significant uncertainties surrounding the achievement of projected reductions in Medicare cost growth and a material weakness in internal control over financial reporting.” the agency reported.
The report offers a final warning about the future trajectory of government spending.
“GAO continues to be troubled by the long-term fiscal projections in the financial report and those prepared annually by the Congressional Budget Office and GAO, all of which show that, absent policy changes, the federal government’s fiscal path is unsustainable.”
Budget challenges, it said, “could limit the federal government’s flexibility to address emerging issues and unforeseen events, such as financial crises, cyber attacks, or pandemics.”
Next week, GAO will issue the first in what the agencies say will be an annual “review of the federal government’s fiscal health.”