Monthly Archive: August 2012

Accounting Shutdown

Would you invest 30% of your income each year in the stock market without you or your broker reviewing financial statements of the businesses you are investing in?  But that is exactly what you do when you file your annual Federal income tax return and pay tribute to the US Treasury. You send money to the IRS  but never receive audited financial statements back from the government explaining how your tax  contribution was spent.

I believe it is reasonable and prudent for taxpayers to require the Government to produce audited financial statements for each of the major federal agencies that are funded with taxpayers money.   But no such statements exist. I actual found the screenplay for this mystery thriller entitled “Accounting Shutdown” with a Top Secret classification.  So if you all can keep a secret it goes something like this:

The plot begins with the passage of Government Management Reform act of 1994.  This act required Federal agencies to produce audited financial statements by 1997.  No such statements could ever be found.  The scene shifts to the House Congressional hearing in March of 1999.  The Committee of Government Reform chaired by Dan Burton of Indiana reports that of the 24 largest Federal agencies only two received an A grade in their accounting systems.  With billions of dollars missing and unaccounted for many of the Federal agencies received Ds and Fs in their accounting systems.

Now fast forward to December 21, 2010.  Gene Dodaro, Acting Comptroller of the US Government Accountability Office says he cannot render an opinion on the 2010 consolidated financial statements of the federal government, because of widespread material internal control weaknesses, significant uncertainties, and other limitations.  Mr. Dodaro went on to say that 19 of 24 major agencies did not get clean opinions on all their statements and billions of dollars were missing or unaccounted for.

One only can wonder why is it that over ten years after the passage of legislation requiring audited financial statements for Federal Government agencies we still cannot produce them.   Many will say that the Government is too big or too complex to account for all the money it spends.

But in my view, there is a more sinister twist to this story:  Many if not all of these Federal agencies have taken a life of their own, independent of the nation’s citizen stockholders, and have in effect become unaccountable to the American people.  Playback to a few years earlier:  David Walker, CEO of the Peter Peterson Foundation and former Controller General of the United States makes a surprise cameo appearance on the set.  His one line:  “Unfortunately, once federal programs or agencies are created, the tendency is to fund them in perpetuity.”

And then the surprise ending: A lone American taxpayer says, as she fades in the sunset: “Unless we can review and analyze the financial condition of the various Federal agencies, we will never be able to assess whether an agency is cost-effective and warrants continued funding.  Let’s avert the “Accounting Shutdown” and have full accountability in each Federal agency that is being funded with our tax dollars.”