68 The Solari Report / 2018 Annual Wrap Up / Part Two U.S. Federal Finances: 22 Challenges Here are the most significant challenges we must address to put our federal fiscal house in order. Each includes a brief description. The links that follow provide more discussion of the particular challenge, including examples and stories from my experience as well as other recommended references. Disclosure We do not have reliable financial information about federal financial operations that provides government officials or citizens with the data they need to easily understand federal operations, make informed choices, or hold their legislative representatives and their fellow taxpayers ac- countable. The current government budgets and financial statements reflect “overt” operations. They exclude a significant amount of classified or illegal government activities—“covert operations”—whether paid for out of classified intelligence agency and military budgets or the “black budget.” The financial statements that reflect “overt operations” have not been able to pass independent audits for almost two decades (as required by law) and report that trillions of dollars have gone missing in transactions that are “undocumentable.” This has included years when such “undocu- mentable” transactions exceeded total annual tax receipts. In addition, it is nearly impossible to track federal expenditures by place using federal reporting structures; and thus, it is very difficult for communities to hold their congressional representatives accountable. Some information about local sources and uses of federal funds can be indirectly gleaned from financials prepared by state and local officials (see “Comprehensive Annual Finan- cial Reports,” https://en.wikipedia.org/wiki/Comprehensive_annual_financial_report). But it is impossible to get a comprehensive picture from these or any government-issued financial reports. Perhaps by design. As a government official, I struggled with the problems of trying to understand the origination of government mortgage credit by place without basic financial information. If reliable government budgets and financial statements were easily accessible to citizens by county or congressional dis- trict, mortgage fraud would never have become as bad as it did during the last few decades. When I joined the Bush Administration in 1989 as Assistant Secretary of Housing, I read the budget for the Federal Housing Administration (FHA). It described a $300 billion portfolio of mortgage insurance in force with about $50-100 billion a year of annual originations. I asked the person responsible for the comptroller function to direct me to the place in the budget where it explained how much we were making and losing. I was told there was no such place. I asked where the financial statements were. I was told that the accountants had them, that they reported to a different Assistant Secretary and that I was not allowed to speak with them. The Government Accounting Office (GAO) had audited our financial statements several years ago. We could not afford an outside auditor, let alone every year. Besides, we operated on a cash basis. The Office of Management and Budget (OMB) would never permit accrual statements.