The following is taken from Mike Medlock's (of the dailyreckoning.com) summary of the United States Consolidated Financial Statement for the year 2005. It is something to consider as we continue raising our children together.
Those still suffering through that massive report will notice the following disclaimers from the Government Accountability Office, starting on Page 139 and pretty much continuing for the rest of the document. Following are some of the lowlights:
“A significant number of material weaknesses related to financial systems, fundamental recordkeeping and financial reporting, and incomplete documentation continued to (1) hamper the federal government’s ability to reliably report a significant portion of its assets, liabilities, costs, and other related information; (2) affect the federal government’s ability to reliably measure the full cost as well as the financial and nonfinancial performance of certain programs and activities; (3) impair the federal government’s ability to adequately safeguard significant assets and properly record various transactions; and (4) hinder the federal government from having reliable financial information to operate in an economical, efficient, and effective manner. We found the following:
“Material deficiencies in financial reporting (which also represent material weaknesses) and other limitations on the scope of our work resulted in conditions that continued to prevent us from expressing an opinion on the accompanying consolidated financial statements for the fiscal years ended Sept. 30, 2005 and 2004.
“· The federal government did not maintain effective internal control over financial reporting (including safeguarding assets) and compliance with significant laws and regulations as of Sept. 30, 2005
“· Our work to determine compliance with selected provisions of significant laws and regulations in fiscal year 2005 was limited by the material weaknesses and scope limitations discussed in this report.
Disclaimer of Opinion on the Consolidated Financial Statements
“Because of the federal government’s inability to demonstrate the reliability of significant portions of the U.S. government’s accompanying consolidated financial statements for fiscal years 2005 and 2004, principally resulting from the material deficiencies, and other limitations on the scope of our work, described in this report, we are unable to, and we do not, express an opinion on such financial statements.
“As a result of the material deficiencies in the federal government’s systems, recordkeeping, documentation, and financial reporting and scope limitations, readers are cautioned that amounts reported in the consolidated financial statements and related notes may not be reliable. These material deficiencies and scope limitations also affect the reliability of certain information contained in the accompanying Management’s Discussion and Analysis and other financial management information -- including information used to manage the government day to day and budget information reported by federal agencies -- that is taken from the same data sources as the consolidated financial statements…
The Nation’s Fiscal Imbalance
“While we are unable to express an opinion on the U.S. government’s consolidated financial statements, several key items deserve emphasis in order to put the information contained in the financial statements and the Management’s Discussion and Analysis section of the Financial Report of the United States Government into context. First, while the reported $319 billion fiscal year 2005 unified budget deficit was significantly lower than the $412 billion unified budget deficit in fiscal year 2004, it was still very high given current economic growth rates and the overall composition of federal spending. Furthermore, the federal government’s reported net operating cost, which included expenses incurred during the year, increased to $760 billion in fiscal year 2005, from $616 billion in fiscal year 2004. Second, the U.S. government’s total reported liabilities, net social insurance commitments and other fiscal exposures continue to grow and now total more than $46 trillion, representing close to four times current GDP and up from about $20 trillion, or two times GDP in 2000. Finally, while the nation’s long-term fiscal imbalance continues to grow, the retirement of the “baby boom” generation is closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008. Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the president and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance…
Adverse Opinion on Internal Control
“Because of the effects of the material weaknesses discussed in this report, in our opinion, the federal government did not maintain effective internal control as of Sept. 30, 2005, to meet the following objectives: (1) transactions are properly recorded, processed, and summarized to permit the preparation of the financial statements and stewardship information in conformity with GAAP, and assets are safeguarded against loss from unauthorized acquisition, use, or disposition; and (2) transactions are executed in accordance with laws governing the use of budget authority and with other significant laws and regulations that could have a direct and material effect on the financial statements and stewardship information. Consequently, the federal government’s internal control did not provide reasonable assurance that misstatements, losses, or noncompliance material in relation to the financial statements or to stewardship information would be prevented or detected on a timely basis. Our adverse opinion on internal control over financial reporting and compliance is based upon the criteria established under FMFIA. Individual federal agency financial statement audit reports identify additional reportable conditions in internal control, some of which were reported by agency auditors as being material weaknesses at the individual agency level…
“David M. Walker
Comptroller General of the United States
Dec. 2, 2005”
What the government is willing to admit is rather amazing. Perhaps they are hoping no one reads these things. I suggest we would all be better off if these reports were required reading for every high school in the country.
Mike Shedlock ~ “Mish”
The rest of Mike Medlock's summary, also very revealing, can be read at:
(sorry, I can't figure out how to do the links!