Financial Audit

An important element of federal financial management reform is the requirement that the government prepare an annual financial statement, which GAO is required to audit. This report contains the government's fiscal year 1999 financial report, which was issued by the Treasury Department, as well as GAO's conclusions about the report. In summary, GAO found that significant financial systems weaknesses; problems with basic recordkeeping and financial reporting; incomplete documentation; and weak internal controls, including computer controls, continue to prevent the government from accurately reporting a large part of its assets, liabilities, and costs. Some of these shortcomings are found primarily at specific agencies, while others are governmentwide.

GAO noted that: (1) certain significant financial systems weaknesses, problems with fundamental recordkeeping and financial reporting, incomplete documentation, and weak internal control, including computer controls, continue to prevent the government from accurately reporting a significant portion of its assets, liabilities, and costs; (2) some of these deficiencies primarily relate to specific major agencies--others, such as intragovernmental transactions, affect the entire government; (3) these deficiencies affect the reliability of the accompanying financial statements and much of the related information in the financial report, as well as the underlying financial information; (4) the deficiencies also affect the government's ability to accurately measure the full cost and financial performance of certain programs and effectively manage related operations; and (5) major problems included the federal government's inability to: (a) properly account for and report material amounts of property, equipment, materials, and supplies, and certain stewardship assets, primarily at the Department of Defense (DOD); (b) properly estimate the cost of certain major federal credit programs and the related loans receivable and loan guarantee liabilities, primarily at the Department of Agriculture; (c) estimate and reliably report material amounts of environmental and disposal liabilities and related costs, primarily at DOD; (d) determine the proper amount of various reported liabilities, including postretirement health benefits for military employees and accounts payable and other liabilities for certain agencies; (e) accurately report major portions of the net cost of government operations; (f) ensure that all disbursements are properly recorded; and (g) properly prepare the federal government's financial statements, including balancing the statements, accounting for substantial amounts of transactions between governmental entities, properly and consistently compiling the information in the financial statements, and reconciling the results of operations to budget results.