Federal agencies flunk financial audits again

When it comes to transparency and accuracy, our government fails. There are many examples that come to mind, but one recent example is the subpoena submitted by House Financial Services Committee Chairman Representative Jeb Hensarling (R-Texas). Hensarling subpoenaed the Treasury Department and the New York Federal Reserve Bank for a failure to submit documentation about the Obama administration’s contingency planning for the debt ceiling. These documents are needed for ongoing investigations and should have been reported.  

This begs the question: Why does the government feel the need to not report accurate information but expects its citizens to? 

{mosads}Individuals and corporations receive heavy penalties for not reporting their finances and financial plans accurately, yet the federal government does not. For the individual taxpayer, some penalties include a $5,000 fine for miscalculations, a negligence charge for not adhering to the IRS’s rules, a fraud charge for incomplete information, imprisonment, and hefty fines for tax evasion. If corporations flunk their audit or file inaccurate financial information, they are also penalized. But, what usually happens to federal departments and agencies like the Treasury for doing the same? Nothing. That’s why I applaud Hensarling for enforcing transparency.  

At Truth in Accounting (TIA), our mission is to educate and empower citizens with understandable, reliable, and transparent government financial information. As part of our Federal Project, we recently analyzed the government’s audit.  

Each year, the Department of the Treasury sends the federal financial report to its auditor, the Government Accountability Office (GAO), and each year, the GAO has given the report a disclaimer opinion. A disclaimer opinion states that the federal government has flunked its financial audit. In fact, for the past 9years, major government agencies and departments have failed to adequately report their financial information.  

In total, we saw that $980 billion of the federal government’s reported assets and $995 billion of the reported net cost could not be audited properly. The government should hold itself to the same rules and accounting standards it asks of its citizens and corporations.  

Although 21 of the 24 agencies and departments that Congress requires be audited received a clean opinion, we are hopeful all agencies and departments will have clean audits in the future. Taxpayers should not wait for federal audits to come and go. Instead, lawmakers must improve internal control over financial data and documentation now.  

In the government’s audited 2014 Financial Report of the U.S. Government, the GAO found that “material weaknesses resulted in ineffective internal control over financial reporting for fiscal year 2014… and material weaknesses and other scope limitations discussed in this audit report limited our tests of compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements for fiscal year 2014.”   

According to the GAO, material weaknesses “impair the federal government’s ability to adequately safeguard significant assets and properly record various transactions and hinder the federal government from having reliable financial information to operate in an efficient and effective manner.” This lack of adequate internal controls makes it impossible to determine if the numbers reported are correct. 

The Treasury’s mission is to “maintain a strong economy and create economic and job opportunities by promoting the conditions that enable economic growth and stability at home and abroad, strengthen national security by combating threats and protecting the integrity of the financial system, and manage the U.S. Government’s finances and resources effectively.” That’s why Treasury Secretary Jack Lew must address these concerns and demand clean audits from his department. Not to mention, truthful, timely, and transparent financial information is the cornerstone of economic growth and a strong financial system. 

For a system built on checks and balances, it’s a shame that lawmakers have not found a way to internally check and balance the federal government’s finances. It’s frustrating that there are no consequences as a result of this, and the government can keep increasing our debt and report inaccurate data.  

Issuing a subpoena may be a right step, but as the IRS can probably attest, accurate data and clear accounting is the only way to truly understand assets and deficits. It’s time to implement a better system of fiscal checks and balances. We need a system that holds the federal government to higher standards, and we need a government that transparently discloses its finances. As citizens, we deserve to know where, how, and why our tax dollars are spent. Our economy depends upon it. 

Weinberg is the founder and CEO of Truth in Accounting.