State auditors across the country were unable to verify billions of dollars in unemployment spending, Medicaid payments, and pension obligations in federally-funded programs, according to a new report by a government watchdog group. The findings in the 2026 Financial Transparency Score report, released by the government watchdog Truth in Accounting, found that 13 states failed to earn clean audit opinions. The report comes as the Trump administration is cracking down on how states are spending federal dollars. The organization used data from annual comprehensive financial reports, or ACFRs, produced by each state as a requirement for getting federal funding. The biggest culprits of the unlucky 13 states, according to the analysis, were Delaware and Georgia, as auditors were unable to obtain enough evidence to issue an opinion at all. This is a “disclaimer” in audit terms. Seven other states received a “qualified” audit opinion, which indicates auditors identified issues significant enough to limit their assurance over a state’s financial condition. Four other states didn’t adequately track pension spending, according to the Truth in Accounting analysis. In response to reports of widespread fraud in several states, the White House has launched an anti-fraud task force, while the Justice Department has launched an anti-fraud division to track misspent federal tax dollars. “If these guys are looking for fraud, these audits would be a roadmap,” Sheila A. Weinberg, CEO of Truth in Accounting, told The Daily Signal. “If you want to look for waste and fraud, these audits will point you in the right direction.” “These states don’t know whether they should or shouldn’t pay these benefits. How much is fraud?” Weinberg added. “We don’t know. The problem is that these state governments don’t investigate.” The Daily Signal reached out to the governors’ offices and relevant agency offices in each of the states identified in the report. Here are seven trends the watchdog discovered. 1. ‘Disclaimer’ States Delaware didn’t provide auditors with sufficient evidence regarding the state’s unemployment compensation fund, the independent auditing firm CliftonLarsonAllen LLP found. According to the Truth in Accounting report, Georgia’s Department of Labor did not provide sufficient evidence for auditors to determine whether certain paid unemployment claims met eligibility requirements. The Georgia audit says, “We have not been able to obtain sufficient appropriate audit evidence to provide for an audit opinion on the financial statements of the business-type activities and unemployment compensation fund of the state.” 2. Arizona Discrepancy Arizona’s audit identified one of the more striking problems cited by the Truth in Accounting report. “Arizona was unable to substantiate much of its financial statements, including a discrepancy of $231.1 million between the Arizona Department of Economic Security’s cash balance and its bank records,” the report says, citing the state’s 2023 ACFR. Arizona officials have taken steps to improve, said Brett Bezio, spokesman for the Arizona Department of Economic Security. “Demonstrating this commitment to the responsible management of public funds, the department has taken immediate and decisive action to address the fiscal year 2023 audit findings and has made significant strides toward mitigation,” Bezio told the Daily Signal. “All funds are fully accounted for. DES is working with the Office of the Auditor General to reclassify funds based on the recommendations. Additionally, the department has partnered with an external CPA firm to thoroughly reconcile, align, and verify all financial data.” 3. California’s Deficits and Shortfall California’s most recent ACFR, which reviewed the state’s finances for 2024, found the state had to correct $1.4 billion in prior-year accounting errors, a previously unreported $950 million in loans, and a $196.5 billion unrestricted deficit driven by pension and retiree obligations. It further had to note that the state’s Medicaid system helped create an $11.8 billion budget shortfall. The 2025 state budget act partially addressed the Medicaid shortfall; one measure included an enrollment freeze, H.D. Palmer, spokesman for the California Department of Finance, told the Daily Signal.   Palmer added that the administration directed the Labor and Workforce Development Agency to assess potential concepts to pay down the outstanding unemployment insurance loan balance. Regarding the $196.5 billion in unrestricted debt, Palmer said it is mostly for pensions.  4. Alaska Medicaid In Alaska, auditors reported that the state’s Medicaid payment-processing system relies on outside contractors. However, it says the state failed to obtain independent assurance that the contractors’ financial controls were functioning effectively during fiscal year 2024. Alaska’s Medicaid payment system underwent a change in fiscal year 2024 to separate the system vendor from the fiscal agent vendor, Mirna Estrada, spokesperson for the Alaska Department of Health, told the Daily Signal. This delayed an independent audit.   “The vendor had processes in place to manage the business processes, but the independent audit of those processes was not done timely,” Estrada siad.  “The fiscal agent service organization eventually underwent an independent audit dating back to their start of contract with no significant findings.” 5. Illinois Unemployment Illinois also received a qualified opinion after auditors were unable to verify payment activity within the state’s Unemployment Compensation Trust Fund. Because of those limitations, auditors could not determine whether portions of Illinois’ business activities were free from material misstatement. 6. Revenue and Balance Questions Missouri auditors were denied access to source documentation, including state income tax returns, to verify revenue. The affected revenue represented about 24% of overall revenue and about 27% of general fund revenue, according to the Truth In Accounting report. Last year, Missouri’s auditor sued the Missouri Department of Revenue for denying access to tax returns. The case is pending. “The Missouri Department of Revenue (DOR) is fully transparent and has an internal tax audit team that monitors returns,” the department said in a statement to the Daily Signal. “This group stopped over $42 million in fraudulent returns during the 2025 tax season. As required by law, the Department maintains taxpayer confidentiality and does not release personal tax information.” The department said in similar past cases, “the courts have sided with DOR.” Nevada’s General Fund likewise received a qualified opinion because auditors lacked sufficient evidence regarding inventory balances maintained by the Division of Emergency Management. “A qualified opinion does not mean that the state’s financial statements were inaccurate or that the state’s finances could not be relied upon,” Drew Galang, spokesman for Nevada Gov. Joe Lombardo, told the Daily Signal. “Rather, it means the auditors identified a specific area for which they could not obtain enough evidence to fully verify the reported amounts. The qualification was limited to OEM inventory and did not represent a pervasive issue affecting the state’s overall financial reporting.” Meanwhile, Washington state’s audit identified several potential misstatements in its fiscal year 2024 financial statements, contributing to its qualified opinion, the Truth In Accounting report notes. 7. Pension Tracking The report faulted Connecticut, Hawaii, North Carolina, and Vermont for poor transparency, asserting their largest public pension plans don’t issue separately audited financial reports. The watchdog group argues independently audited pension reports provide more visibility into retirement systems that often carry billions of dollars in long-term obligations.