July 26 2002


Government Accounting Fraud Far Outweighs Corporate Mismanagement

By Chad Bayse

When fraudulent accounting takes place in the business world, it is big news. Politicians and government bureaucrats so frequently mismanage our money, however, that their misdeeds go virtually unnoticed by the media. To draw an analogy, deliberate business accounting failures are about as rare as an airplane crashing, whereas government mismanagement of our money is as frequent as the thousands of automobile crashes each day. Even a brief look at the government’s accounting practices reveals neither politicians nor bureaucrats are in a position to criticize-or effectively regulate- business accounting.

Each year, Congress is supposed to pass a budget resolution by April 15th. Congress routinely breaks their own budget by passing “supplemental” or “emergency” spending bills, thereby ignoring their own budget. According to Tom Shatz of Citizens Against Government Waste (CAGW), Washington lawmakers have spent a total of $142 billion above the levels set forth in their annual budgets over the past five years, more than 12 times the misstated figures from Enron, Xerox, and Worldcom combined.

Another example of Congressional accounting fraud is former Representative Dan Rostenkowski (D- Illinois), Chairman of the powerful Ways and Means Committee (you might say a sort of CEO in government), who was indicted on 17 counts of accounting fraud and embezzlement in the 1990s. Rostenkowski did not even pay for his own legal bills. Instead, he tapped into his campaign treasury, diverting more than $1.3 million for his legal defense. In return, Rostenkowski received a light 15 month sentence in a minimum security Wisconsin prison and an eventual pardon from President Clinton.

Congress has done no better when accounting for our retirement money. The Social Security “Trust Fund”- the money that is supposed to pay for the living expenses of future retirees- is nothing more than a box full of government IOU’s. For years, the government has deceived the public by taking Social Security surplus dollars that should help pay for baby boomers’ retirement and either spent the money or used it to pay back government debts that have been racked up after years of fiscal mismanagement.

Unfortunately, Congress is not alone when it comes to government accounting fraud. The accounting in our nation’s bureaucracies is so terrible that Congress hires its own separate agency known as the General Accounting Office (GAO) to oversee the bookkeeping procedures of government agencies. The President also has his own accountants in the Department of Treasury and the Office of Management and Budget (OMB). Multiple accounting agencies still does not prevent gross accounting fraud in government. The GAO reports the following:

-The Department of Agriculture was “unable to reconcile” approximately $38 Billion in fund balance accounts with the US Treasury’s accounts of the same fund. Rather than reconcile the difference, the Department’s “merely adjusted its records to agree with the Treasury’s [figures]”.

-The Department of Education was unable “to prepare routine financial reports” and failed to “return $2.7 billion dollars to the Treasury in accordance with the 1990 Federal Credit Reform Act.”

-The Department of Interior’s Management of Indian Trust Funds has “long been characterized by inadequate financial management.as a result, account holders have no assurance their account balances are accurate.”

Rather than punish the irresponsible bookkeeping of these government agencies, Congress rewards them with more and more money. Unlike the government, businesses that engage in accounting fraud are closed and replaced by more trustworthy providers of goods and services. Wouldn’t it be nice if government abided by the same rules it places on business?

Chad Bayse is Communications Assistant for the the Small Business Survival Committee, a national non-profit advocacy group for small businesses with over 70,000 members across the nation. For more information, visit the SBSC’s website at www.sbsc.org

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