Government rules at cooking books, budget often fudged
By Martin Crutsinger
July 15, 2002
The Associated Press

 WASHINGTON - Lost in all the outrage over the corporate accounting scandals is one fact politicians don't like to acknowledge: The auditing problems at American companies cannot rival the bookkeeping shambles of the world's largest enterprise: the U.S. government.

  Exaggerated earnings, disguised liabilities, off budget shenanigans - all are there in the government's ledgers on a scale even the biggest companies could not dream of matching.
  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.
  Last year, when Congress was faced with a similar need to bolster the bottom line, law makers 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.
  Although Republicans pushed that particular sleight of hand, both parties over the years have engaged in similar maneuvers to cover shortfalls.
  "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.
  "Members of Congress get reelected 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."
  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.
  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 is now projected to be $165 billion, not the $106 billion deficit the administration projected in February.
  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.
  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.
  Last year's surplus was proudly hailed by the Bush administration in October. By March, however, the administration released a little-noticed document showing that by another accounting method, last year's surplus was actually a deficit of $514.8 billion.
  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. The March deficit figure reflected a $389 billion increase 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.
  The very existence of the alternative accounting document, which the government started 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.
  Unfortunately, the General Accounting Office 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.
  The 2001 report featured $17.3 billion in what was described as "unreconciled transactions" money that simply could not be accounted for. GAO Comptroller General David Walter said this discrepancy does not mean the money was stolen, just that the antiquated accounting systems at many government agencies lost track of it.
  Missing from the report's listing of future liabilities is the giant Social Security 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 budget in coming decades.
  "The government's budget is just horrendously confusing," said Robert Reischauer, a former head of the Congressional Budget Office. "We've made some progress, but there are many government accounts that are just hopelessly messed up."