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It’s Lucky for the Federal Government That It Isn’t a Corporation

If it were, a lot of people who work for it would be in serious trouble with . . . the federal government.

Corporations are required to have their books audited and certified by independent accountants as being complete and honest.  But the Government Accountability Office, whose job it is to do just that with the government’s books, “said it could not render an opinion on the 2010 consolidated financial statements of the federal government, because of widespread material internal control weaknesses, significant uncertainties, and other limitations, ” according to Accounting Today.

The main obstacles to a GAO opinion were: (1) serious  financial management problems at the Department of Defense that made its  financial statements unauditable, (2) the federal government’s inability to  adequately account for and reconcile intragovernmental activity and balances  between federal agencies, and (3) the federal government’s ineffective process  for preparing the consolidated financial statements.

If a corporation failed an audit like this, its credit lines would vanish, the NYSE would suspend trading in its securities, and the SEC would be down on it like a wolf on the fold. The CEO and CFO would be lucky if all they lost were their jobs. But when the government fails, it’s apparently of interest only to the accounting profession.

But the rest of the country had better get interested, and soon, because there’s an avalanche of government fiscal problems on the way. It’s starting at the bottom, but it’s going to very soon involve the top.



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