Would you buy stocks without reviewing the audited financial statements of the businesses you are investing in? Of course not! But that is exactly what you do when you file your annual Federal income tax return and pay annual taxes to the US Treasury. You paid taxes to the IRS, but you never receive audited financial statements reporting how your income tax was allocated to the over 24 major Federal agencies that are headquartered in Washington, DC. Indeed, the latest Government Accountability Office’s (GAO) audit report on the U.S. Government’s consolidated financial statements states that the GAO was prevented from expressing an opinion on these consolidated financial statements. What is even more disturbing is that as a result of Section 405 of the Government Management Reform Act of 1994, Federal agencies were required to produce audited conolidated financial statements no later than March 1, 1997 and “each year thereafter”. Why has this never happened? Stay with us here on TaxView with Chris Moss CPA to find out why Americans pay tax every year to a government that cannot provide its citizens with audited financial statements.
Would you believe no audited financial consolidated statements exist for US Federal Agencies? If we rewind back to April 1998, Stephen Horn, then Chairman of the the House Subcommittee on Government Reform and Oversight, said the following regarding the lack of audited financial statements in Congressional Hearings: “If the US had to compete as private sector businesses do we would be out of business very quickly…” After the conclusion of the hearings in 1998 there were still no audited consolidated financial statements. Why not?
If we go back to 1999 Congressman Dan Burton of Indiana was asking the same question. As Chairman of the Committee on Government Reform. Burton acknowledges that similar to the previous year in 1997, the GAO was unable to render an opinion on the 1998 consolidated financial statements of the Federal Government. The GAO report confirmed “at least tens of billions of taxpayer dollars are being lost each year to fraud, waste, abuse and mismanagement in hundreds of Federal programs.” Committee Report 106-170. Unfortunately, year after year going forward we have heard much of the same.
As we head back to November 18, 2010 we spot Gene Dodaro, Acting Controller, during Congressional Confirmation Hearings. He pledges if confirmed to Controller to help agencies identify and reduce billions of dollars in improper payments. Later in that same year Dodaro, says he cannot render an opinion on the 2010 consolidated financial statements of the Federal Government because of widespread material internal control weakness. Dodaro went on to say that 19 of 24 major agencies did not get clean opinions on their financial statements and billions of dollars were missing or unaccounted for. Now fast forward to January 17, 2013. Dodaro now officially the Comptroller General of the United States releases the audited results for 2012 and 2011. Once again due to material weakness in internal control over financial reporting no opinion could be issued on the consolidated Federal financial statements.
Today is no better. The Government’s 2013 financial statements note that three impediments prevented the GAO from issuing audited consolidated financial statements 1, Serious financial management problems at DOD 2, Inability to adequately account for balances between entities and 3, ineffective process for preparing consolidated financial statements. Further reports released just months ago on July 9, 2014 indicate that there was an estimated $105.8 billion in improper payments in fiscal 2013 compared to $107.1 billion the prior year. Based on a year to year review since 1999, the US Government has had Trillions of dollars of improper, unaccounted for and missing payments that perhaps may never be found and accounted for.
In conclusion, it seems at least from the information that the Government Accountability Office is making available to the public, that the Federal Government has serious financial reporting issues. It sure would be nice if we could download a brief one page financial statement each April just before we electronically file our income tax return each year-- just to give us that secure feeling that our money is being invested wisely. Even if we received clean audited financial statements for just the most costly Federal agencies like Social Security, Health Human Services, Defense, and Homeland Security, that would be far a better improvement over what we receive now. Finally, if you feel that the Federal Government needs to be more accountable to you all, let your elected representatives know you want the Comptroller General of the United States to comply with the Government Management Reform Act of 1994 and produce audited consolidated Federal Agency financial statements required by law since 1997. Annual audited Government consolidated financial statements might just make April 15 a little less painful for us all. See you all then and thanks for joining us on TaxView with Chris Moss CPA.
Chris Moss CPA