GAO’s High Risk List: One Step Forward, Three Steps Back
By Sean Kennedy
WasteWatcher, February 2017
The latest iteration of the Government Accountability Office’s (GAO) biennial High-Risk Series, released on February 15, 2017, added three programs and removed one. The new areas included programs serving Indian tribes, environmental liabilities, and the 2020 census, while terrorism-related information sharing disappeared from the list.
The report noted that while the list ballooned to 32 high-risk areas, progress has been made. Two-thirds of all programs have partially met each of the five criteria the GAO established for removal from the list. This was made possible in part due to the dozen laws members of Congress passed in the preceding two years addressing high-risk areas.
However, many longstanding concerns still exist, including eight areas within the Department of Defense (DOD), the same number as the 2015 report. This is disconcerting, since DOD directs more than half of discretionary spending. GAO described the Pentagon’s financial management problems as follows: “Significant financial and related business management systems and control weaknesses have adversely affected DOD’s ability to control costs; ensure basic accountability; anticipate future costs and claims on the budget; measure performance; maintain funds control; prevent and detect fraud, waste, and abuse; address pressing management issues; and prepare auditable financial statements.”
In fact, the DOD remains the sole federal agency that has not undergone a clean audit under the Chief Financial Officers Act of 1990. In 2010, Congress established September 2017 as the deadline for a review by independent financial auditors, which the Pentagon is now likely to miss.
The necessity for an audit is revealed on a regular basis. For example, a July 26, 2016, DOD IG report noted that the Defense Financing and Accounting Service, which provides payment for military and civilian personnel and retirees, could not adequately document $6.5 trillion in year-end adjustments to general fund transactions and data.
Another repeat high-risk offender, the United States Postal Service (USPS), reported a net loss of $5.6 billion in fiscal year (FY) 2016, the tenth consecutive year it has been in the red. The USPS has accrued unfunded liabilities that have grown from 99 percent of revenues to 169 percent of revenues over the past decade. These liabilities mostly consist of retiree health and pension benefit obligations, totaling $121 billion at the conclusion of FY 2016.
The GAO cites longstanding factors for the USPS’s dismal financial outlook, including the decline in mail volume, mounting expenses, and a lack of cost-saving initiatives. The expiration in April 2016 of a 28-month rate surcharge that was responsible for $4.6 billion in increased revenue has also worsened the financial picture.
Medicare and Medicaid again made the list, as they have since its inception 27 years ago in 1990. One of the nagging problems cited by the report in regard to Medicare is improper payments, which totaled $60 billion in FY 2016, the same as in FY 2014.
One of the reasons for the failure to reduce improper payments is Congress’s complicity in allowing the Centers for Medicare and Medicaid Services to suspend and weaken the Recovery Audit Contractor Program, which recovered $9.6 billion for the Medicare Trust Fund and taxpayers before it was gutted.
The GAO High-Risk list can serve as a roadmap to more effective federal expenditures. It is now up to Congress to implement the report’s suggestions in order to ensure that the next version contains fewer problematic programs.