GAO Report On Consolidated Financial Statements

The U.S. General Accountability Office (GAO) released a report disclosing significant internal control weaknesses in the federal government’s preparation of its consolidated financial statements. Specifically, GAO found the federal government did not correct prior weaknesses (70 out of 143 recommendations GAO previously made remained unaddressed) and had new weaknesses, prompting GAO to issue 11 new recommendations. In the past, such weaknesses have lead GAO to disclaim an opinion on the financial statements.


Most of the internal control weaknesses GAO identified relate to a failure to reconcile financial information within the federal government. For example, GAO found discrepancies in how the government reports budget deficits, how it reconciles the information on its consolidated financial statement to the financial statements of individual federal agencies, and how it reports unexpended funds.
While this report does not have a direct impact on U.S. Department of Education programs, some of GAO’s recommendations deal with the way federal agencies estimate and report unexpended balances to the U.S. Department of Treasury. Because unexpended funds at the state and local level impact the U.S. Department of Education’s overall unexpended balance, there may be increased pressure on the U.S. Department of Education to track and report grant balances. This, in turn, could lead to pressure on state and local governments to obligate and draw down grant funds. It may also prompt the U.S. Department of Education to further crack down on late liquidation requests since late draw downs presumably require the Department to revise its estimate of unexpended balances report to the U.S. Department of Treasury, which could cause discrepancies on the consolidated financial statement.
The full report is available at: http://www.gao.gov/new.items/d07805.pdf.
Author: SLK