- Lost in all the outrage over the corporate accounting
scandals is one fact politicians do not like to acknowledge: The auditing
problems at American companies cannot rival the bookkeeping shambles of
the world's largest enterprise - the U.S. government.
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- Exaggerated earnings, disguised liabilities, off-budget
shenanigans - they are all there in the government's ledgers on a scale
even the biggest companies could not dream of matching.
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- WorldCom Inc. executives brought America's second largest
long distance phone company to the brink of bankruptcy after using improper
accounting to pad earnings by $3.8 billion.
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- Last year, when Congress was faced with a similar need
to bolster the bottom line, lawmakers simply voted to shift the date by
which corporations had to make a quarterly tax payment. The result: $33
billion in revenue badly needed to cover the costs of President Bush's
big tax cut.
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- While Republicans pushed that particular budget sleight
of hand, both parties over the years have engaged in similar maneuvers
to cover shortfalls.
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- "If you look at the books of the corporate world,
even the fraudulent ones, they are less subject to manipulation than the
federal budget is," said former Minnesota Rep. Bill Frenzel, who watched
the process up close as the top Republican on the House Budget Committee.
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- "Members of Congress get re-elected by bringing
home roads and armories and university grants and heaven knows what else,"
Frenzel said. "Every American wants more frugality, but only after
they get their road or bridge."
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- With such a dynamic, it is no wonder that there has been
no outcry over government accounting scandals to match the congressional
outrage being expressed over misleading financial reports by U.S. companies.
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- On Friday, Bush's Office of Management and Budget offered
its own restatement of earnings and expenses. The federal deficit for the
current budget year, which ends in September, is now projected to be $165
billion, not the $106 billion deficit the administration projected in February.
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- The White House also once again cut the projected surplus
for the next decade, to $827 billion. That is a far cry from the $5 trillion
surplus projection Bush made when he took office, before a recession, a
war on terrorism and his $1.35 trillion 10-year tax cut saw $4 trillion
of that amount evaporate.
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- "The persistent inability of the government to make
correct projections is the budget's most visible problem," said Stanley
Collender, a budget expert at the Fleishman-Hillard consulting firm. "It's
pretty easy for the public to become cynical."
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- A deficit for this year would mark a return to red ink
after four straight years of surpluses, including a $127 billion surplus
a year ago.
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- That achievement was proudly hailed by the Bush administration
in October. By March, however, the administration released a little-noticed
document that showed by another accounting method last year's surplus would
actually turn into a deficit of $514.8 billion.
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- The reason for the difference: under the accrual method
of accounting that companies are required to use, expenses are booked when
they are incurred, not when the payments are made.
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- The March deficit figure reflected a $389 billion boost
in military retirees' health benefits that Congress approved last year
and other future-year expenses that were added to the deficit side of the
ledger.
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- The very existence of the alternative accounting document,
which the government started producing in 1998, represents a milestone
in the country's history. It's the first time Washington has tried to reconcile
its books using real world accounting standards.
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- Unfortunately, the General Accounting Office ( news -
web sites) has not been able to sign off on any of the five annual documents
so far, contending that the bookkeeping is still too shoddy to get an auditor's
seal of approval.
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- The 2001 report featured $17.3 billion in what was described
as "unreconciled transactions" ó money that simply could
not be accounted for.
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- GAO Comptroller General David Walter said this discrepancy
does not mean the money was stolen, just that the antiquated accounting
systems in use at many government agencies lost track of it.
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- The GAO has published a long list of documents detailing
the auditing sins of various agencies. They range from estimates of hundreds
of billions of dollars unaccounted for at the Defense Department, one of
the worst offenders, to $12.1 billion in improper Medicare payments last
year.
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- Missing from the report's listing of future liabilities
is the giant Social Security ( news - web sites) program. Technically,
the Social Security trust fund represents obligations the government owes
to itself. The report does warn that unless something is done, ballooning
pension and retiree medical costs will swamp the federal budget in coming
decades.
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- Walter says he intends to keep prodding government agencies
to work toward clean audit reports and praises the support he is receiving
in the effort from the administration.
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- Skeptics question whether, given the size of the problem,
the effort will succeed.
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- "The government's budget is just horrendously confusing,"
said Urban Institute president Robert Reischauer, a former head of the
Congressional Budget Office ( news - web sites). "We've made some
progress but there are many government accounts that are just hopelessly
messed up."
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