NCPA - National Center for Policy Analysis

Federal Accounting Worse Than Enron's

April 10, 2002

This year's Financial Report of the United States Government is especially interesting in light of the Enron/Arthur Andersen scandal. Members of Congress who have spent months denouncing the accounting practices that led to the Enron debacle -- often demanding jail time for the perpetrators -- might be more temperate in their denunciations if they knew that the federal government is guilty of worse accounting deficiencies than those that brought down Enron.

The most interesting part of the financial report is the opinion of David M. Walker, Comptroller General of the United States, and head of the General Accounting Office, on its accuracy and compliance with generally accepted accounting principles.

Walker is blistering in his criticism of the federal government's accounting methods, controls and inability to provide data that meet even minimal standards for accuracy, timeliness or comparability.

Among the problems:

  • Property, plant and equipment cannot properly be accounted for.
  • It is often impossible to determine the exact cost of loans and loan guarantees, especially at the Department of Agriculture.
  • Many large liabilities, such as for environmental cleanup and future health benefits, cannot accurately be determined.
  • And many interagency financial transactions are significantly out of balance.

This is really just the tip of the iceberg.

  • Since the federal government uses cash accounting, the long-term liabilities of programs like Medicare and Social Security are largely hidden.
  • Costs for things like federal deposit insurance are not accounted for at all, although the government laid out $130 billion for such commitments during the savings and loan crisis just a few years ago.

Since Congress is, in effect, the federal government's board of directors, Members of Congress busily denouncing shoddy accounting might want to look at comparable problems in the federal government, for which they themselves are answerable.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, April 10, 2002.


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