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Addressing Other Impediments

Significant Uncertainties Result in Disclaimer of Opinion on 2010 Statement of Social Insurance

some of these internal control deficiencies will be a difficult challenge and will require a strong commitment from Treasury and OMB as they continue to execute and implement their corrective action plans.

While not as significant as the major impediments noted above, financial management problems at the Department of Homeland Security (DHS) and the Department of Labor (Labor) also contributed to the disclaimer of opinion on the federal government’s accrual-based consolidated financial statements for fiscal year 2010. About $28 billion, or about 1 percent, of the federal government’s reported total assets as of September 30, 2010, and approximately $235 billion, or about 5 percent, of the federal government’s reported net cost for fiscal year 2010 relate to these two agencies. The auditors for DHS and Labor reported that they were unable to provide opinions on the financial statements because they were not able to obtain sufficient evidential support for certain amounts presented in financial statements. For example,

only selected DHS financial statements were subjected to audit, and the auditors stated that DHS was unable to provide sufficient evidence to support certain financial statements balances at the Coast Guard and Transportation Security Administration; and auditors for Labor reported that the department was unable to provide sufficient support for certain accounts in Labor’s fiscal year 2010 financial statements.

The auditors for DHS and Labor made recommendations to address control deficiencies at the agencies, and management for these agencies generally expressed commitment to resolve the deficiencies. It will be important that management at each of these agencies remain committed to addressing noted control deficiencies and improving financial reporting.

Because of significant uncertainties (as discussed in Note 26 to the consolidated financial statements), primarily related to the achievement of projected reductions in Medicare cost growth reflected in the 2010 Statement of Social Insurance, we were unable to, and we did not, express an opinion on the 2010 Statement of Social Insurance.16 The Statement of Social Insurance presents the actuarial present value of the federal

16About $22.8 trillion, or 74 percent, of the federal government’s reported total present value of future expenditures in excess of future revenue for 2010 relate to the Department of Health and Human Services’ 2010 Statement of Social Insurance, which received a disclaimer of opinion.

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