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Mr. Chairman, Ranking Member Towns and Other Members of the Subcommittee:

I appreciate the opportunity to be here today to discuss our report on the U.S. government’s consolidated financial statements for fiscal years 2010 and 2009. Given the federal government’s fiscal challenges, there is a significant need for transparency and for the Congress, the administration, and federal managers to have reliable, useful, and timely financial and performance information. Even though significant progress has been made since the enactment of key financial management reforms in the 1990s, our report on the U.S. government’s consolidated financial statements illustrates that much work remains to improve federal financial management. Consequently, financial management needs to be a top priority of this administration and the new Congress. I would like to commend you, Mr. Chairman, and this Subcommittee, for continuing the annual tradition of oversight hearings on this important subject. Your involvement is critical to assuring continued progress.

Our testimony today discusses the following major issues relating to the consolidated financial statements for fiscal years 2010 and 2009: (1) the results of our audit, including continued major impediments to an opinion on the accrual-based consolidated financial statements1 and certain significant uncertainties that resulted in us being unable to render an opinion on the 2010 Statement of Social Insurance;2 (2) the effects of the recent economic recession and the federal government’s actions to stabilize financial markets and promote economic recovery on the federal government’s financial condition; and (3) challenges posed by the federal government’s long-term fiscal outlook. We performed sufficient audit work to provide our report on the consolidated financial statements, internal control, and compliance with selected provisions of laws and regulations. We considered the limitations on the scope of our work in forming our conclusions. Our audit was conducted in accordance with U.S. generally accepted government auditing standards.

1The consolidated financial statements other than the Statement of Social Insurance are referred to as the accrual-based consolidated financial statements. Most revenues reported in these financial statements are recorded on a modified cash basis.

2We rendered unqualified opinions on the 2009, 2008, and 2007 Statements of Social Insurance.

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