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GAO: Many federal financial books are so sloppy they can’t be audited


By Johnny Kampis  /   January 18, 2017  /   News  /   2 Comments

The Government Accountability Office says many federal agencies’ financial books are in such bad shape that they cannot be audited.

In a report released last week, the GAO said material weaknesses in accounting procedures “hamper the federal government’s ability to reliably report a significant portion of its assets, liabilities, costs and other related information.”

The GAO said those weaknesses also:

Affect the federal government’s ability to reliably measure the full costs and financial performance of certain programs and activities.
Impair the federal government’s ability to adequately safeguard significant assets and properly record various transactions.
Hinder the federal government from having reliable financial information to operate in an efficient and effective manner.

The GAO said its report on the U.S. government’s consolidated financial statements for fiscal years 2015 and 2016 “underscores that much work remains to improve federal financial management.” The agency couldn’t even express an opinion on the balance sheets because of the weak financial reporting.

“It’s another way of saying ‘we wash our hands of this,’” Bill Bergman, director of research for Truth in Accounting, said of the internal government watchdog.

Bergman said the sorry situation is nothing new. The GAO has highlighted such sloppy record-keeping for two decades. And he said such dismal reports wouldn’t fly in the private sector.

“A private corporation wouldn’t have a record like this for so many years,” Bergman told

GAO noted that 34 percent of the federal government’s reported assets and 18 percent of its reported net cost relate to federal entities that were unable to issue audited financial statements, were unable to receive audit opinions on the complete set of financial statements or received a disclaimer of opinion on their statements.

The GAO called out the Department of Health and Human Services and Department of Defense, in particular, for weak internal controls.

The agency also took a shot at the Department of the Treasury and the Office of Management and Budget, noting that some of the “numerous recommendations” GAO made to those agencies in previous years to address internal control deficiencies remain unaddressed. The secretary of the Treasury and director of OMB are required to annually submit financial statements for the U.S. government, audited by the GAO, to the president and Congress.

“It’s a sad state of affairs,” Bergman said. “It comes with the territory when you’ve got a government this big and this complex.”

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Too Big To Audit? Large Partnerships Escape IRS Scrutiny, GAO Reports


Too Big To Audit? Large Partnerships Escape IRS Scrutiny, GAO Reports
May 2, 2014 – 1:14 PM
By Barbara Hollingsworth

( – In 2011, while the Internal Revenue Service (IRS) was busy scrutinizing the tax-exempt status of 100 percent of Tea Party groups and other conservative non-profits, the tax agency did not audit a single high-value electing large partnership (ELP) with more than $100 million in assets.

That’s according to a preliminary report released to Congress by the Government Accountability Office (GAO) April 17th. (See GAO.pdf)

An ELP is a business entity with more than 100 partners and more than $100 million in assets that is required to file a 1065-B tax return every year. They include large private equity firms, hedge funds and oil and gas partnerships.

“No partnerships that filed a Form 1065-B from tax years 2002 to 2011 had their tax return audited and closed by IRS from fiscal years 2007 to 2013,” a footnote on page 14 of the GAO report stated.

Jim White, a spokesman for GAO, confirmed that no ELPs were audited by the IRS between 2007 and 2013, the last year statistics are available. However, he pointed out that there were only 15 ELPs out of 105 filing 1065-B returns nationwide in 2011 that met the $100 million asset threshold.

Another 2,211 partnerships filed under IRS Form 1065 in 2011, “but only 20 audits (or less than one percent) were closed that year,” White told, acknowledging that “this is a very low audit rate.”

White noted that GAO is doing a follow-up and “will be asking the IRS a number of questions to try to better understand” the tax agency’s audit decisions.