	Disclaimer of Opinion

Overall, because we were unable to determine the reliability of significant portions of the government’s fiscal year 1997 consolidated financial statements, we were unable to express an opinion on them. Because of the government’s serious systems, recordkeeping, documentation, and control deficiencies, amounts reported in the consolidated financial statements and related notes do not provide a reliable source of information for decision-making by the government or the public. These problems impair the government’s ability to (1) know the location and condition of all its assets, including those used for military deployment, (2) safeguard them from physical deterioration, theft, or loss, (3) prevent unnecessary storage and maintenance costs or purchase of assets already on hand, and (4) determine the full costs of government programs that use the assets. These problems significantly affect the determination of the full cost of the government’s current operations, as well as the extent of actual liabilities. Preparation of Consolidated Financial Statements

The federal government cannot ensure that the information in the consolidated financial statements is consistent with agency financial statements. As a result, the government is unable to ensure that all disbursements are properly recorded. These weaknesses, such as the lack of effective reconciliations and poorly designed systems, result in ineffective controls over (1) safeguarding the federal government’s assets from unauthorized acquisition, use, or disposition, (2) ensuring that transactions are executed in accordance with laws governing the use of budget authority and with other relevant laws and regulations, and (3) ensuring the reliability of financial statements. We also found that widespread and serious computer control weaknesses affect virtually all federal agencies and significantly contribute to many material deficiencies discussed above. This situation requires extensive reliance on ad hoc programming and analysis and material audit adjustments to prepare basic financial information. Serious weaknesses also affect the federal government’s ability to effectively manage its taxes receivable and other unpaid assessments. Financial Systems Requirements Generally Not Met

The Federal Financial Management Improvement Act of 1996 requires auditors performing financial audits under the expanded CFO Act to report whether agencies’ financial management systems comply substantially with federal accounting standards, financial systems requirements, and the government’s standard general ledger at the transaction level. Financial Management Improvements Underway

Several individual agencies that have been audited for a number of years faced serious deficiencies in their initial audits and made good progress in resolving them. We will continue to focus on financial systems and internal control deficiencies at particular agencies.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO discussed the results of its audit of the United States government's consolidated financial statements.

What GAO Found

GAO noted that: (1) significant financial systems weaknesses, problems with fundamental recordkeeping, incomplete documentation, and weak internal controls, including computer controls, prevented the government from accurately reporting a large portion of assets, liabilities, and costs; (2) these deficiencies affect the reliability of the consolidated financial statements and much of the underlying financial information; (3) they also affect the government's ability to accurately measure the full cost and financial performance of programs and effectively and efficiently manage its operations; (4) such deficiencies prevented GAO from being able to form an opinion on the reliability of the consolidated financial statements; (5) they are the result of widespread material internal control and financial systems weaknesses that significantly impair the federal government's ability to adequately safeguard assets, ensure proper recording of transactions, and ensure compliance with laws and regulations; (6) GAO's audit of the federal government's consolidated financial statements and the Inspectors General audits of agencies' financial statements have resulted in an identification and analysis of deficiencies in the government's recordkeeping and control systems and recommendations to correct them; (7) fixing these problems represents a significant challenge because of the size and complexity of the federal government and the discipline needed to comply with new accounting and reporting requirements; (8) several individual agencies that have been audited for a number of years faced serious deficiencies in their initial audits and made good progress in resolving them; (9) with a concerted effort, the federal government, as a whole, can continue to make progress toward ensuring full accountability and generating reliable information on a regular basis; (10) annual financial statement audits are essential to ensuring the effectiveness of the improvements now under way, and ultimately, to producing the reliable and complete information needed by decisionmakers and the public to evaluate the government's financial performance; and (11) they are also central to helping the government implement broader management reforms called for by the Government Performance and Results Act.