Government rules at
cooking books, budget often fudged
By Martin Crutsinger
July 15, 2002
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
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.
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
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 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."