Watchdog Faults Accounting in Government’s Consolidated Financial Statement

The Obama administration’s procedures for preparing the government’s annual consolidated financial statement suffer from “control deficiencies” that contribute to material weaknesses in end-of-the-fiscal-year accounting adjustments, a watchdog found.

The Government Accountability Office in a July 30 report said a review of fiscal 2014 consolidated financial statements concluded that the Treasury Department and the Office of Management and Budget’s current year-end accounting standards could mar the statement’s accuracy in three areas:

1. Accounting for and reconciling intragovernmental activity and balances between federal entities;
2. Reasonably assuring that the consolidated financial statements are consistent with the underlying audited entities’ financial statements, properly balanced, and aligned with U.S. generally accepted accounting principles; and
3. Reasonably assuring that reconciliation of net operating cost and unified budget deficit and the  statement of changes in cash balance from unified budget and other activities is complete and consistent with the underlying information in the audited entities’ financial statements and other financial data.

Agencies currently lack an adequate process to work effectively with key federal entities to ensure that appropriate accounting standards are consistently implemented, GAO said.

They also don’t have procedures for determining the significance of transactions that lack appropriate audit assurance or procedures to document significant increases or decreases in all consolidated financial statement line items and disclosures from prior years.

In a letter to Budget Director Shaun Donovan and Treasury Secretary Jack Lew, auditors added three recommendations to past items for improving the annual consolidated financial statement. The agencies agreed with the proposals.

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