Treasury Advised to Improve Consolidated Financial Statement

The government’s annual consolidated financial statement prepared by the Treasury Department lacks adequate internal controls and documentation on the conclusions of managers about the nation’s fiscal health, auditors found.

The Government Accountability Office in a report to Treasury Secretary Jack Lew and acting White House budget director Brian Deese said its review of the 2013 consolidated statement showed that efforts by Treasury and the Office of Management and Budget to correct previously identified procedural weaknesses “are not adequate to reasonably assure that internal control deficiencies involving the processes used to prepare the [consolidated financial statement] are efficiently and effectively addressed.”

The annual statement is used compute the government’s budget deficit and record cash transactions in order to account for and reconcile intragovernmental activity and balances between agencies. It must be executed in line with U.S. generally accepted accounting principles.

“Treasury does not have adequate procedures for verifying staff's preparation of the narrative within the notes to the [consolidated financial statement] to reasonably assure that the narrative is accurate and supported by the underlying financial information of the significant component entities,” wrote GAO, which has audited the statement since 1997.

GAO made seven new recommendations -- five to both Treasury and OMB and two to Treasury -- to address the control deficiencies and to help analysts better “identify systemic root causes of intragovernmental differences and monitor how federal entities are addressing” them.

Both agencies generally agreed with the recommendations.