Summary: For the first time ever, the federal government has prepared consolidated financial statements. In accordance with the Chief Financial Officers Act, consolidated financial statements for fiscal year 1997 were prepared by the Treasury Department and audited by GAO. GAO found significant financial systems weaknesses, recordkeeping problems, incomplete documentation, and weak internal controls, all of which prevented the government from accurately reporting a large portion of its assets, liabilities, and costs. These deficiencies affect the reliability of the consolidated financial statements and much of the underlying financial information. They also affect the government's ability to accurately measure the full cost and financial performance of programs, effectively and efficiently manage its operations, and ensure compliance with laws and regulations. Among other things, the government could not properly account for billions of dollars worth of property, equipment, and materials; properly estimate the cost of most federal credit programs; determine the proper amount of reported liabilities, from postretirement health benefits for military and civilian employees to veterans compensation benefits; or determine the full extent of improper payments in major programs that are estimated to involve billions of dollars annually. These shortcomings prevented GAO from rendering an opinion on the reliability of the consolidated financial statements. Considerable effort is underway to address these problems. GAO believes that, with a concerted effort, the federal government, as a whole, can continue to make progress toward generating reliable information on a regular basis. Annual financial statement audits are essential to ensuring the effectiveness of the improvements now ongoing.
