Management's Discussion & Analysis
In FY 2022, the federal government obligated over $1.1 trillion for grants and cooperative agreements, according to USAspending.gov. This figure does not include obligations for other types of financial assistance, such as loans or direct appropriations. A large portion of grant funding went to support the nation’s response to the pandemic through the ARP, the CARES Act, and other COVID-19 funding. Improving access to key financial assistance data continues to be a priority for OMB and was highlighted in OMB Memorandum M-22-02, New Financial Assistance Transparency Reporting Requirements, which requires agencies to report additional information to USAspending.gov. M-22-02 also supports efforts to improve the financial management of grants and other forms of financial assistance.
On November 15, 2021, President Biden signed into law the IIJA and subsequently OMB issued two memoranda to provide guidance to agencies regarding IIJA program implementation. First, OMB issued M-22-08, Identification of Federal Financial Assistance Infrastructure Programs Subject to the Build America, Buy America Provisions of the Infrastructure Investment and Jobs Act, which required agencies to identify all existing infrastructure programs. Second, OMB issued M-22-11, Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure, which required that by May 14, 2022, agencies take actions to ensure that “none of the funds made available for a federal financial assistance program for infrastructure, including each deficient program, may be obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.”
Also in FY 2022, OMB issued M-22-12, Advancing Effective Stewardship of Taxpayer Resources and Outcomes in the Implementation of the Infrastructure Investment and Jobs Act, which provided initial implementation guidance to agencies to ensure proper governance and management of IIJA programs both within and across agencies and to ensure regular engagement by agencies with the oversight community, including the Inspectors Generals and the GAO. The Memorandum also provided guidance on program planning, design, and execution; managing risk; public reporting of financial, award, and post-award data; and hiring and managing workforce needs.
On May 12, 2022, OMB issued the FY 2022 Compliance Supplement, which was the earliest the Supplement has been issued in 15 years. The Supplement provides audit guidance for federal grant programs and for FY 2022 included five new programs that are funded by ARP.
Preventing improper payments in the federal government continues to be a management priority. To be successful in preventing improper payments, there must be a focus on systemic enhancements intended to make payments correctly the first time with an emphasis on minimizing monetary loss. The federal government, through the CFO community, continues to develop strategies to better analyze and prevent monetary loss.
Agencies with programs reporting more than $100.0 million in monetary loss provide a quarterly scorecard at PaymentAccuracy.gov. These scorecards provide information on the actions taken and progress made on preventing improper payments that would result in monetary loss to the government. Details, including FY 2022 improper payment data, for programs with more than $100.0 million in monetary loss can also be found at PaymentAccuracy.gov. PaymentAccuracy.gov also includes payment integrity information that had previously been reported in agency financial reports, allowing information about program compliance, corrective actions, and accountability mechanisms to be provided in a consistent format across all programs.
OMB will continue to work with agencies, the CFO Council, and other stakeholders to improve the identification of the root causes of improper payments that result in monetary loss and to promote data analytic methods that take a comprehensive view of an agency’s payment lifecycle.
Agency Financial Report Audits
Since the passage of the CFO Act, the federal financial community has made significant progress in financial accounting and reporting. As shown in Table 10, for FY 2022, 20 of the 24 CFO Act agencies obtained an unmodified opinion from the independent auditors on their financial statements.34 In addition, 50 auditor-identified material weaknesses were identified for FY 2022, three more than in FY 2021. Twenty-eight of these are associated with DOD. The other 22 material weaknesses are associated with non-DOD agencies. Although virtually all federal agencies have adopted and maintained disciplined financial reporting operations, implemented effective internal controls over financial reporting, and integrated transaction processing with accounting records, weaknesses in financial management practices continue to prevent the government as a whole from achieving an audit opinion.
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|Table 10: Agency Audit Results: FY 2022|
|Audit||Auditor-Reported Material Weaknesses|
|Department of Agriculture (USDA)||Unmodified||2||0||0||0||2|
|Department of Commerce (DOC)||Unmodified||0||0||0||0||0|
|Department of Defense (DOD)||Disclaimer||28||3||0||3||28|
|Department of Education (Education)||Disclaimer||1||1||0||1||1|
|Department of Energy (DOE)||Unmodified||0||0||0||0||0|
|Department of Health and Human Services (HHS)*||Unmodified||0||0||0||0||0|
|Department of Homeland Security (DHS)||Unmodified||2||2||0||0||4|
|Department of Housing & Urban Development (HUD)||Unmodified||1||0||0||0||1|
|Department of the Interior (DOI)||Unmodified||0||1||0||0||1|
|Department of Justice (DOJ)||Unmodified||1||1||0||1||1|
|Department of Labor (DOL)**||Qualified||1||0||0||0||1|
|Department of State (State)||Unmodified||0||0||0||0||0|
|Department of Transportation (DOT)||Unmodified||0||0||0||0||0|
|Department of the Treasury (Treasury)||Unmodified||0||0||0||0||0|
|Department of Veterans Affairs (VA)||Unmodified||3||0||0||0||3|
|Agency for International Development (USAID)||Unmodified||0||0||0||0||0|
|Environmental Protection Agency (EPA)||Unmodified||0||0||0||0||0|
|General Services Administration (GSA)||Unmodified||0||1||0||0||1|
|National Aeronautics & Space Administration (NASA)||Unmodified||0||0||0||0||0|
|National Science Foundation (NSF)||Unmodified||0||0||0||0||0|
|Nuclear Regulatory Commission (NRC)||Unmodified||1||0||1||0||0|
|Office of Personnel Management (OPM)||Unmodified||1||0||0||0||1|
|Small Business Administration (SBA)||Disclaimer||6||0||0||0||6|
|Social Security Administration (SSA)||Unmodified||0||0||0||0||0|
** Unmodified opinion on the SOSI and SCSIA.
Financial Management Systems
Federal agencies improved, but continue to face challenges, in implementing financial management systems that meet federal requirements. The number of CFO Act agencies reporting lack of substantial compliance with one or more of the three Section 803(a) requirements of the FFMIA decreased to seven in FY 2022, and the number of auditors reporting lack of substantial compliance with one or more of the three Section 803(a) FFMIA requirements decreased to eight in FY 2022.
Because of the federal government’s size and diversity, its financial management infrastructure consists of both legacy and modernized systems and standardized and customized systems. Treasury works closely with agencies to manage systems for collecting and disbursing the government’s cash and financing disbursements when necessary, recording and reporting on those collections and disbursements, and reporting on all government revenues, expenses, assets, and liabilities.
Treasury was designated as the Financial Management Systems QSMO in 2020 and continues to pursue financial management improvement strategies that have government-wide implications. These strategies include standing up a financial management systems marketplace and developing system standards, standardized processes, system requirements, and system interfaces. These efforts are providing a path to the decommissioning of legacy systems and migration to updated systems, leveraging modernized technologies. In addition, agencies continue to coordinate with the Treasury QSMO to improve their financial management and financial reporting systems as described in their financial reports, congressional budget justifications, and performance plans. DOD continues to address its material weaknesses in financial reporting, and is bringing its financial systems into compliance with federal financial management systems requirements, including the FFMIA.
HHS was designated as the Grants QSMO in 2021 and continues working to modernize and streamline the government’s vast and aging legacy grants management systems. The goal of this effort is to allow agencies to successfully manage grants through the entire award cycle and allow grants management systems to interface with agency financial management systems.
Federal managers are responsible for developing and maintaining effective internal controls. Internal controls help to ensure effective and efficient operations, reliable financial reporting, and compliance with applicable laws and regulations. Safeguarding assets is a goal of each of these three objectives.
OMB Circular No. A-123 implements the requirements of 31 U.S.C. 3512 (c) and (d) (commonly known as the Federal Managers’ Financial Integrity Act) by providing agencies a framework for assessing and managing risks strategically and tactically. The Circular reflects GAO’s Standards for Internal Control in the Federal Government and contains multiple appendices that address one or more of the objectives of effective internal control.
- Appendix A provides for agencies to use a risk-based approach to assess, document, test, and report on internal controls over reporting and data integrity;
- Appendix B requires agencies to maintain internal controls that reduce the risk of fraud, waste, and error in government charge card programs;
- Appendix C implements the requirements for effective estimation and remediation of improper payments; and
- Appendix D defines requirements for determining compliance with the FFMIA that are intended to reduce the cost, risk, and complexity of financial system modernizations.
As noted above, the total number of reported material weaknesses for CFO Act agencies was 50 for FY 2022, three more than in FY 2021. Effective internal controls are a challenge at the agency level and at the government-wide level, with GAO reporting that at the government-wide level, material weaknesses resulted in ineffective internal control over financial reporting. While progress is being made at many agencies and across the government in identifying and resolving internal control deficiencies, additional work is needed.
Federal agencies are required to comply with a wide range of laws and regulations, including appropriations, employment, and health and safety, among others. Responsibility for compliance rests with agency management and compliance is addressed as part of agency financial statement audits. Agency auditors test for compliance with selected laws and regulations related to financial reporting and certain individual agency audit reports contain instances of noncompliance. None of these instances were material to the government-wide financial statements; however, GAO reported that its work on compliance with laws and regulations was limited by the material weaknesses and scope limitations discussed in its report.
The federal government has seen significant progress in financial management since the passage of the CFO Act more than 30 years ago, but significant challenges remain to realizing the intended financial management reforms of the act. The issues that the federal government faces today require financial managers to improve both the efficiency and effectiveness of financial management activities, which includes moving toward integrated government operations with standardized business processes, systems, and data. Together with Treasury and OMB, agencies are building on tools and capabilities to improve financial accountability and transparency.
34 The 20 entities include HHS, which received an unmodified (“clean”) opinion on all statements except the SOSI and the SCSIA. (Back to Content)
- Current Report: Fiscal Year 2022 - PDF version
- A Message from the Secretary of the Treasury - PDF version
- Table of Contents - PDF version
- The Nation By The Numbers
- Executive Summary - PDF version
- Management's Discussion & Analysis - PDF version
- Statement of the Comptroller General of the United States - PDF version
- Financial Statements - PDF version
- Statements of Net Cost
- Statements of Operations and Changes in Net Position
- Reconciliations of Net Operating Cost and Budget Deficit
- Statements of Changes in Cash Balance from Budget and Other Activities
- Balance Sheets
- Statements of Long-Term Fiscal Projections
- Statements of Social Insurance
- Statement of Changes in Social Insurance Amounts
- Notes to the Financial Statements - PDF version
- Note 1. Summary of Significant Accounting Policies - PDF version
- Note 2. Cash and Other Monetary Assets - PDF version
- Note 3. Accounts Receivable, Net - PDF version
- Note 4. Loans Receivable, Net and Loan Guarantee Liabilities - PDF version
- Note 5. Inventory and Related Property, Net - PDF version
- Note 6. General Property, Plant, and Equipment, Net - PDF version
- Note 7. Investments - PDF version
- Note 8. Investments in Government-Sponsored Enterprises - PDF version
- Note 9. Advances and Prepayments - PDF version
- Note 10. Other Assets - PDF version
- Note 11. Accounts Payable - PDF version
- Note 12. Federal Debt and Interest Payable - PDF version
- Note 13. Federal Employee and Veteran Benefits Payable - PDF version
- Note 14. Environmental and Disposal Liabilities - PDF version
- Note 15. Benefits Due and Payable - PDF version
- Note 16. Insurance and Guarantee Program Liabilities - PDF version
- Note 17. Advances from Others and Deferred Revenue - PDF version
- Note 18. Other Liabilities - PDF version
- Note 19. Collections and Refunds of Federal Revenue - PDF version
- Note 20. Commitments - PDF version
- Note 21. Contingencies - PDF version
- Note 22. Funds from Dedicated Collections - PDF version
- Note 23. Fiduciary Activities - PDF version
- Note 24. Long-Term Fiscal Projections - PDF version
- Note 25. Social Insurance - PDF version
- Note 26. Stewardship Property, Plant, and Equipment - PDF version
- Note 27. Disclosure Entities and Related Parties - PDF version
- Note 28. Public-Private Partnerships - PDF version
- Note 29. COVID-19 Activity - PDF version
- Note 30. Subsequent Events - PDF version
- Required Supplementary Information (Unaudited) - PDF version
- The Sustainability of Fiscal Policy - PDF version
- Social Insurance - PDF version
- Deferred Maintenance and Repairs - PDF version
- Other Claims for Refunds - PDF version
- Tax Assessments - PDF version
- Federal Oil and Gas Resources - PDF version
- Federal Natural Resources Other than Oil and Gas - PDF version
- Land and Permanent Land Rights - PDF version
- Other Information (Unaudited) - PDF version
- Tax Burden - PDF version
- Tax Gap - PDF version
- Tax Expenditures - PDF version
- Unmatched Transactions and Balances - PDF version
- Appendix A: Reporting Entity - PDF version
- Appendix B: Glossary of Acronyms - PDF version
- U.S. Government Accountability Office Independent Auditor's Report - PDF version
- Related Resources
Table of Contents
Certain material weaknesses, limitations, and uncertainties prevented the Government Accountability Office from expressing an opinion on the U.S. Government's consolidated financial statements included in the Financial Report and, therefore, GAO disclaimed an opinion on such statements. Certain information included on or referenced in this website, such as individual agency financial reports that were audited by other auditors, is separate from and not specifically reported in the Financial Report and therefore not covered by GAO's disclaimer.