Page 1 GAO-10-501R Fiscal Year 2009 CFS Audit Results 

United States Government Accountability Office

Washington, DC 20548 

March 23, 2010 

The Honorable Thomas R. Carper 

Chairman 

The Honorable John McCain 

Ranking Member 

Subcommittee on Federal Financial Management, 

Government Information, Federal Services, and 

International Security 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

Subject: Briefing on the Results of GAO’s Audit of the Fiscal Years 2009 and 2008 

U.S. Government’s Consolidated Financial Statements 

This letter formally transmits the enclosed briefing slides we provided in a briefing to 

the subcommittee staff on March 4, 2010. Our briefing highlighted the results of the 

Government Accountability Office (GAO) audit of the Consolidated Financial 

Statements of the U.S. Government (CFS) for fiscal years 2009 and 2008. GAO is 

required by the Government Management Reform Act of 1994 to perform an annual 

audit of the CFS. 

This report, along with the Financial Report of the United States Government, which 

includes our complete audit report, will be available at no charge on GAO’s Web site 

at http://www.gao.gov. We look forward to continuing to work with you and your 

staff to help further financial management reform in the federal government. If you or 

your staff have any questions concerning our audit or results, please contact me on 

(202) 512-3406 or engelg@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

Gary T. Engel 

Director 

Financial Management and Assurance 

Enclosure 
Enclosure: Briefing slides 

Page 2 GAO-10-501R Fiscal Year 2009 CFS Audit Results 

1

Audit Report on the U.S. Government’s 

Consolidated Financial Statements

for Fiscal Years 2009 and 2008

Briefing to the Subcommittee on Federal Financial

Management, Government Information, Federal Services, and

International Security,

Committee on Homeland Security and Governmental Affairs, 

U. S. Senate 

March 4, 2010
Enclosure: Briefing slides

2

Results of GAO’s FY 2009 Audit Work

• We are unable to, and we do not, express an opinion on the U.S. 

government’s accrual-based consolidated financial statements for fiscal 

years 2009 and 2008 because of the federal government’s inability to 

demonstrate the reliability of significant portions of its accrual-based 

consolidated financial statements, principally resulting from limitations 

related to certain material weaknesses in internal control over financial 

reporting and other limitations on the scope of our work.

• We rendered unqualified opinions on the Statements of Social Insurance 

for 2009, 2008, and 2007, marking 3 consecutive years for this 

achievement.

• Material weaknesses resulted in ineffective internal control over the 

federal government’s financial reporting.

• Our work to test compliance with selected provisions of laws and

regulations in fiscal year 2009 was limited by the material weaknesses 

and other scope limitations discussed in our audit report.

Page 3 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

3

Significant Matters of Emphasis

• Key items were emphasized in order to put the information contained in 

the consolidated financial statements and the Management’s Discussion 

and Analysis section of the 2009 Financial Report of the United States 

Government into context:

• The Federal Government’s Actions to Stabilize Financial Markets 

and to Promote Economic Recovery

• Uncertainties Regarding Certain Asset and Liability Valuations

• Long-Term Fiscal Challenges

• Equity Interests in Certain Financial Organizations and Commercial 

Entities

Page 4 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

4

Major Impediments to an Opinion on the 

Accrual-Based Consolidated Financial Statements

• The following major impediments continue to prevent us from rendering 

an opinion on the accrual-based consolidated financial statements:

• Serious financial management problems at the Department of 

Defense (DOD) that have prevented DOD’s financial statements 

from being auditable

• The federal government’s inability to adequately account for and

reconcile intragovernmental activity and balances between federal 

entities

• The federal government’s ineffective process for preparing the 

consolidated financial statements

Page 5 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

5

Material Weaknesses Contributing to Our 

Disclaimer of Opinion on the Accrual-Based 

Consolidated Financial Statements

• Material weaknesses that contributed to our disclaimer of opinion on the 

accrual-based consolidated financial statements relate to the following 

areas:

• Property, Plant, and Equipment and Inventories and Related 

Property

• Liabilities and Commitments and Contingencies

• Cost of Government Operations and Disbursement Activity

• Accounting for and Reconciliation of Intragovernmental Activity and 

Balances

• Preparation of Consolidated Financial Statements

• Components of the Budget Deficit

Page 6 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

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Other Limitations on the 

Scope of Our Work

• There were limitations on the scope of our work in addition to the 

material weaknesses that contributed to our disclaimer of opinion on the 

accrual-based consolidated financial statements.

• The Department of Treasury (Treasury) and the Office of 

Management and Budget (OMB) were unable to provide us with 

adequate representations regarding the U.S. government’s accrualbased consolidated financial statements for fiscal years 2009 and 

2008.

• The federal government was also unable to provide us with 

adequate legal representations regarding the U.S. government’s 

accrual-based consolidated financial statements for fiscal year 2009.

Page 7 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

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Other Material Weaknesses

• In addition to the material weaknesses that contributed to our disclaimer 

of opinion on the accrual-based consolidated financial statements, we 

found three other material weaknesses in internal control relating to the 

following areas:

• Improper Payments

• Information Security

• Tax Collection Activities

Page 8 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

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Significant Deficiencies

• We also identified three significant deficiencies in internal control 

relating to the following areas:

• Loans Receivable, Mortgage-Backed Securities, and Loan 

Guarantee Liabilities

• Verification Procedures for Data Input for the Troubled Asset Relief 

Program (TARP) Equity Investment and Direct Loan Valuations

• Preparation of the Statement of Social Insurance

• Individual federal entity financial statement audit reports identify 

additional control deficiencies that were reported by the entity’s auditors 

as either material weaknesses or significant deficiencies at the individual 

entity level. We do not consider these additional deficiencies to 

represent material weaknesses or significant deficiencies at the

governmentwide level.

Page 9 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

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Compliance with Laws and Regulations

• Although certain individual entity audit reports contain instances of 

noncompliance with laws and regulations, none of these instances were 

deemed to be reportable noncompliance with regard to the U.S. 

government’s consolidated financial statements.

• Our objective was not to, and we do not, express an opinion on 

compliance with laws and regulations. 

• Our work to test compliance with selected provisions of laws and

regulations that have a direct and material effect on the financial 

statements was limited by the material weaknesses and other scope 

limitations discussed in our audit report.

Page 10 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

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CFO Act Agency Financial 

Management Systems

• Long-standing financial management systems weaknesses at several 

large CFO Act agencies along with the size and complexity of the

federal government continue to present a formidable management 

challenge in providing accountability to the nation’s taxpayers and have 

contributed significantly to our inability to determine the reliability of the 

accrual-based consolidated financial statements.

• For fiscal years 2009 and 2008, auditors for 10 and 14 of the 24

CFO Act agencies, respectively, reported that the agencies’ financial 

management systems did not substantially comply with one or more

of the three Federal Financial Management Improvement Act of 

1996 (FFMIA) requirements.

• A fewer number of agency heads (7 in 2009 and 9 in 2008) reported 

that their agencies’ systems were not in substantial compliance with 

one or more of the three FFMIA requirements.

Page 11 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

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Objectives, Scope, and Methodology

• As required by the Government Management Reform Act of 1994, we 

performed our annual audit of the U.S. government’s consolidated

financial statements for fiscal year 2009.

• Our work was performed in coordination and cooperation with the 

inspectors general and independent public accountants for the 35

entities identified by OMB and Treasury as significant to the U.S. 

government’s consolidated financial statements.

• Our audit approach regarding the accrual-based consolidated financial 

statements focused primarily on determining the current status of the 

material weaknesses we had previously identified in our report on the 

consolidated financial statements for fiscal year 2008.

Page 12 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

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Objectives, Scope, and Methodology

(continued)

• Our work included separately auditing the financial statements of the 

following significant federal entities and federal agency components:

• Treasury’s Internal Revenue Service

• Schedule of Federal Debt Managed by Treasury’s Bureau of the 

Public Debt

• Securities and Exchange Commission

• Federal Housing Finance Agency (1st year audit)

• Treasury’s Office of Financial Stability for TARP (1st year audit)

• Federal Deposit Insurance Corporation (December 31, 2008)

Page 13 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

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Objectives, Scope, and Methodology

(continued)

• In planning and performing our audit, we considered internal control over 

financial reporting; however, we do not express an opinion on internal 

control over financial reporting because the purpose of our work was to 

determine our procedures for auditing the financial statements, not to 

express an opinion on internal control.

• Based on the scope of our work and the effects of the other limitations 

on the scope of our audit, our internal control work would not necessarily 

identify all deficiencies in internal control including those that might be 

material weaknesses or significant deficiencies.

Page 14 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

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Objectives, Scope, and Methodology

(continued)

• Our audit approach regarding the Statement of Social Insurance focused 

primarily on the Social Security Administration and the Department of 

Health and Human Services because of the significance of the amounts 

included from these agencies in the consolidated Statement of Social 

Insurance. 

• We believe our audit, including internal control and substantive audit 

procedures, reperformance procedures, and review of the other auditors’ 

Statement of Social Insurance-related audit work, provides a reasonable 

basis for our opinions on the 2009, 2008, and 2007 Statements of Social 

Insurance.

Page 15 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

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Objectives, Scope, and Methodology

(continued)

• We considered the CFO Act agencies’ and certain other federal entities’ 

fiscal year 2009 and 2008 financial statements and the related auditors’ 

reports prepared by the inspectors general or contracted independent 

public accountants.

• We did not audit, and we do not express an opinion on, any of these 

individual federal entity financial statements.

• We considered DOD’s assertion that DOD management had prepared 

and submitted pursuant to the provisions of the National Defense

Authorization Act for Fiscal Year 2002. In accordance with section 1008 

of this act, DOD reported that certain major deficiencies related to 

noncompliant systems and noncompliant processes continued to impact 

the department’s ability to prepare reliable financial statements.

Page 16 GAO-10-501R Fiscal Year 2009 CFS Audit Results 
Enclosure: Briefing slides

Page 17 GAO-10-501R Fiscal Year 2009 CFS Audit Results 

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Objectives, Scope, and Methodology

(continued)

• We performed our audit of the U.S. government’s consolidated financial 

statements for fiscal years 2009 and 2008 (as well as 2007 and 2006 

with respect to the Statements of Social Insurance) in accordance with 

U.S. generally accepted government auditing standards.

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