Via Accounting Today, WebCPA asks: What’s the difference between Enron and the United States government? As I blogged recently, the federal government cannot get an unqualified audit, so therefore, we do not know that the financial statements of the U.S. government are fairly stated in conformity with U.S. generally accepted accounting principles. Now, this is not new stuff, as we know. (But a look at the audit letter I link to is interesting.)
WebCPA then states:
Congress and American citizens may be comforted to know that the federal government has never had its consolidated financial statements audited, yet it has been chugging along for 228 years without a financial disaster.
But could that go on forever?
The reason it can, and the reason Enron couldn’t is simple: the United States has unlimited recources to draw from due to the fact that it subsists on theft. When Enron had no cash flow, it leveraged itself into insolvency. The party had to end, and it did. The Fed’s party is a continuous all-nighter, and can be financed on the backs of millions of people, through the overseas theft of resources, etc. The government is also exempt from its own laws (note Section 302 of the Corporate Disclosure Laws), and therefore need not be tamed by consequences. This is something you won’t see mentioned nor analyzed in mainstream financial/accounting pieces.
Some interesting numbers from the piece:
He calculated the federal government’s gross debt as of September 2004 at about $7.4 trillion, or about $25,000 for every man, woman and child in the country. If the gap between promised and funded Social Security and Medicare benefits and other unfunded commitments is included, the per capita gross debt rises to $145,000, or about $350,000 per full-time worker.
The GAO report said that material weaknesses, fundamental record-keeping and financial reporting, and incomplete documentation had hampered the government’s ability to report on assets, liabilities and costs, to measure the cost of financial and non-financial performance, to safeguard assets and record transactions, and to operate in an economical, efficient and effective manner.
The report also warned that the federal government has not maintained effective internal controls over financial reporting (including safeguarding assets).
“If a corporation had such a long record of material weakness in its reporting, its stock price would tank,” Walker told Accounting Today. “We don’t have stock … but we do have plenty of debt … . Our financial condition is worse than advertised. We face large, growing structural deficits that we’re not going to grow our way out of, and we need to start making some tough decisions soon in order to get back on the right path.”