WASHINGTON -- The Government Accountability Office said Thursday that it could not complete an audit of the federal government, pointing to serious problems with the Department of Defense.

Along with the Pentagon, the GAO cited the Department of Homeland Security as having problems so significant that it was impossible for investigators to audit it. The DHS got a qualified audit for fiscal year 2012, and is seeking an unqualified audit for 2013.

The report released by the GAO on Friday indicates serious accounting problems at two of the largest government agencies: the Pentagon and the Department of Homeland Security. The Department of Defense has a net cost of $799.1 billion to the federal budget, while the Department of Homeland Security has a net cost of $48.7 billion.

"The U.S. Government Accountability Office (GAO) cannot render an opinion on the 2012 consolidated financial statements of the federal government because of widespread material internal control weaknesses, significant uncertainties, and other limitations," the agency said. "As was the case in 2011, the main obstacles to a GAO opinion on the accrual-based consolidated financial statements were: Serious financial management problems at the Department of Defense (DOD) that made its financial statements unauditable. The federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies. The federal government’s ineffective process for preparing the consolidated financial statements."

The Department of Defense's inability to get its books in order also comes as Congress is slated to cut $500 billion from its budget over ten years starting March 1. The cuts may never come into effect if Congress chooses, as it did in the recent "fiscal cliff" deal, to continue delaying them.

A GAO source told The Huffington Post that the Pentagon routinely postponed audit-related meetings at the last minute, explaining that they had been unable to get paperwork ready in time.

In the report, the GAO also said that the federal government could not reconcile transfers between federal agencies and had an ineffective process for preparing financial statements.

“Although we’ve seen significant improvements in federal financial management and accountability over the years, our report on the U.S. government’s consolidated financial statements underscores that further progress is urgently needed,” said Gene L. Dodaro, Comptroller General of the United States and head of the GAO, in a press release.

The report lists the Department of Defense as having the third-largest cost to the federal government, at 21 percent. That value is slightly behind the costs of the Department of Health and Human Services and the Social Security Administration, which both have high costs because they run the large social insurance programs Medicare and Social Security.

The GAO said that the Pentagon was working on a way to get its financial statements to a point where they could be audited, "following years of unsuccessful financial improvements." The goal is to have such statements ready by September 2017. However, just in October 2011, the goal was to have audit-readiness by fiscal year 2014.

The agency faulted the Pentagon for its financial readiness, saying that recent work has "raised concerns" about the office's ability to implement a plan.

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