Maybe the presidential candidates should start wearing baseballs caps with the slogan: Make America Auditable Again.
The country that has delivered epic accounting frauds like Enron, Worldcom, Tyco, and Bernie Madoff just flunked its own audit. Yesterday, the Government Accountability Office, the nonpartisan investigative arm of Congress, released a thumbs down report on how the U. S. government keeps its books. The GAO said it could ‘not render an opinion on the federal government’s consolidated financial statements for FY 2015 because of persistent problems with the Department of Defense’s (DOD) finances, the federal government’s inability to account for and reconcile certain transactions, an ineffective process for preparing the consolidated financial statements, and significant uncertainties.’
How big of a deal is this? According to the GAO, what it was unable to effectively audit amounted to about ’34 percent of the federal government’s reported total assets as of September 30, 2015, and approximately 19 percent of the federal government’s reported net cost for fiscal year 2015….’ In simple terms, more than a third of your government is a black hole.
The two words that no one ever wants to see attached to an audit report are these: ‘material weaknesses.’ But those two words crop up in GAO’s findings. It says the following:
‘Material weaknesses, including those underlying these three major impediments, continued to (1) hamper the federal government’s ability to reliably report a significant portion of its assets, liabilities, costs, and other related information; (2) affect the federal government’s ability to reliably measure the full cost, as well as the financial and nonfinancial performance of certain programs and activities; (3) impair the federal government’s ability to adequately safeguard significant assets and properly record various transactions; and (4) hinder the federal government from having reliable financial information to operate in an efficient and effective manner.’
This post was published at Wall Street On Parade on February 26, 2016.