A Navy veteran of the tumultuous Vietnam and Nixon years, he served his country from inside that chaotic White House. I cannot sing his praises enough! As a writer and a brother, a mentor and a friend, this man has had a life-long effect on me and so many others. Enjoy the spell he weaves with his mastery of prose and attention to detail that only his style surpasses.
does more damage – an outright lie or a half-truth? Numbers used to mean
things, especially if they had dollar signs in front of them. Take a deep
breath now and come with me on a short journey into the shadowy realm of governmental
accounting. There is an old saying that figures never lie but liars always
figure. Keep that in mind. It just might help you understand the reason you are
having trouble understanding.
me say this at the outset - I am not an accountant nor do I profess to be well
educated in finance. I do have a degree in business management from Arizona
State University and was required to take a basic accounting course in order to
complete my degree program. As a result, I can identify a liability from an asset
correctly at least three times out of five. I am probably as vulnerable as the
next person to having the fiscal wool pulled over my eyes. However; having said
that, I was born at night but not last night.
I want to try and accomplish here is to give you a thumbnail sketch of the
government’s budget process and the development of a document called a
Comprehensive Annual Financial Report or CAFR and contrast how each is
developed for public consumption and why.
I start pontificating let me reassure you that I have some personal experience
in the basics of developing inputs and data for a governmental budget. I spent
eight years in the Navy - three and a little over a half attached to the White
House Communications Agency during the Nixon administration and no I did not
have anything to do with Rosemary’s tape recorder.
received the worst ass-chewing I ever got the entire time I was in the military
for turning in a budget estimate for the section I was in charge of that was
less than the previous year’s estimate. It was a mistake of innocence within
three months of taking over the section and that is the only thing that saved
me. I was given the chance to right my wrong after being told that my estimate
total was to exceed the previous year total by at least 10%. What really
disillusioned me about the whole thing was that this could occur during a
Republican administration. Talk about getting your bubble burst!
a result of this experience and at the risk of sounding a tiny bit skeptical,
as far as I am concerned the governmental budget process the way they do it
these days don’t mean diddly. It is a PR tool used to try and justify
increasing taxes pure and simple. Deficits and surpluses are creations of
political whimsy more than reflections of the managerial skill of those
currently in office. Oh sure circumstances and events can cause impact but they
reflect policy and political leaning far more accurately. Their most useful
value is historical in my humble opinion. In short the process is of more value
than the product.
simplest terms a budget is a plan of how a person or organization intends to
use and/or allocate financial resources. It involves estimating income and
expenditures over a specified length of time and developing alternatives or
contingencies based on any foreseeable circumstances. The key word here is
estimating. Those with their own agendas and motives within an organization can
too easily skew the resultant figures making the entire exercise meaningless in
so far as the planning objectives of the organization are concerned. One thing
is always constant though – the trend is always up.
process of making a budget is fairly basic and easy enough to understand and
appreciate by most prudent individuals but it has become something else as
practiced by those to whom we have entrusted with the reins of government.
bureaucracies rise and fall by the budget. The budget authorizes actual
spending. Budgets are therefore vitally important to bureaucrats. God help the
bureaucrat who fails to totally spend or commit his budgeted funds. Sometimes
it can be a real chore especially if the political spotlight is focused in his
or her direction. This is called being in a position of high visibility. That
usually means that your cross is taller than anyone else’s.
CAFR; on the other hand, can be thought of as an annual statement similar to
those developed for private companies outlining in exact detail all income and
expenditures of the government entity for the fiscal year. Since it is mandated
by law as the name implies it is comprehensive and is supposed to be legally
pristine, accurate, and binding. It includes inputs from all agencies, bureaus,
and service centers, from courts to dog pounds. It is a public document
supposedly available to all interested persons or organizations.
you have a little time on your hands try and access a hard copy directly from
any government entity you wish. There can even be a little entertainment value
associated with the process – dumb looks and obvious bureaucratic distress not
withstanding. Better yet go to the following web sites: http://www.hometown.aol.com/cafr and http://www.cafrman.com/; but before you do, prepare yourself for some
real revelations in so far as government’s use of your tax money. I recommend a
cold shower before, during, and after.
budget is supposed to focus on the fiscal future and the CAFR is supposed to
document the fiscal past. To put it in understandable terms, think of the
budget as school work and the CAFR as the report card. That is the way it
should work in theory anyway.
here is where the blue smoke and mirrors come into play. The tax base does not
provide all government revenues. On average, taxes yield about 25% of the total
income as documented in the most current CAFRs.
case in point - the federal government owns more land than any one individual
or organization in the nation. These lands generate tax free income in all
sorts of ways - mining, timber, and oil leases just to name a few. Grazing
rights, usage fees for parks, rental payments, and other income streams above
and below the board not to mention the natural appreciation in value of the
land itself over time - all in aggregate add up to astronomical sums. We are
talking trillions here folks.
and local governments have their teats on this cash cow too. According to the
latest research done by Mr. Gerald R. Klatt, better known as CAFR Man, state
and local governments nationwide have over 611 trillion dollars under their
control. Hard to believe isn’t it? Makes one wonder what the Federal
Government’s sum is.
before we raise a hew and cry against all politicians and bureaucrats and run
the dirty little so-and-sos in, lets stop a minute and analyze the situation.
This did not develop overnight. Current day public officials did not set it up.
If anything they are only guilty of perpetuating the problem passed on to them
by their predecessors who have long since passed on to their just reward. The
whole thing may well have begun even before the institution of the income tax.
Something like this develops it own momentum especially if the voting public is
not vigilant or is apathetic. The fact that the beast exists compels the less
scrupulous among us to feed it right or wrong.
that, governments have administered for some time, quite legally I might add,
specific fund pools for specific purposes such as pensions for government
workers and citizen groups. Where the problem comes into play is that the
reporting of the results of these funds have been shall we say less than
realistic. The main reason for that is that for the most part government
officials have maintained control over these funds instead of releasing control
to private firms. There are some, perhaps even a majority, of them that are on
the up and up but even those can be subject to let us say non-standard
accounting rules or principles.
main source of growth for these funds has been faulty accounting in general.
Neither the budget nor the CAFR as currently set up record a carryover of the
previous year’s bottom line. Let us say a government entity ends up with a
reportable surplus of a million dollars in one fiscal year. Any income produced
from that million dollars is addressed quite properly in the next year’s budget
and CAFR. However the next year the million dollars and its income stream are
left out of both. The money is still there capable of producing even more
income. It doesn’t just de-materialize because the government official fails to
record it in the next fiscal period - intentionally or not.
can almost feel sorry for the government types. Covering this thing up until
now must have seemed like trying to hide an elephant in the living room. The
problem with an elephant in the living room though is that sooner or later the
damn thing is liable to sit on you - or worse.
what do we do with this elephant now that it has become so visible? We could
just shoot it but what problems would that create? We would still have to get
it out of the house before it started to stink up the whole place. Besides whom
among us do we trust to properly dispose of the carcass considering that its
form is really all that lovely money? Who is wise enough to disperse the money
so that it doesn’t upset everyone’s economic applecart?
let’s at least housebreak it you say. Quit feeding it and it might just go
away. Declare a permanent tax holiday and see what happens. After all, the
Founding Fathers did not envision the government as a profit making institution.
Well the cold hard fact of the matter is that it functions as one now and has
for some time. Create a vacuum too quickly and you may find yourself in a worse
situation than before. No one can predict exactly what would happen or what
impact such an action would have not just here but worldwide as well.
to coax the elephant out of the house and put it to useful work. Walter J.
Burian has formulated a plan entitled the CAFR1 plan that addresses what I
think is a workable and reasonable approach. He presented it at a breakfast
meeting of local leaders in the Phoenix area and - guess what – it was pretty
he proposes that starting at say the county level of government that a team of
independent auditors establish the real current value of all the county
government’s holdings. These assets are then transferred to private control
responsible to the government for creating a level of income that can sustain
the county’s operations. A simple sales tax could replace or adjust any
temporary shortfalls if they occur. Otherwise collection of all taxes at the
county level could be suspended.
the process is demonstrated and any kinks worked out then it can be expanded on
to cover all other government entities. The key element is to get the control
of the money out of the elected official’s hands. No foxes in the henhouse so
to speak. Besides, too much time in this kind of henhouse can turn the most
well intentioned public official into a fox.
may be those who think this whole scheme was set up by an evil syndicate or
some nefarious organization foreign or domestic to bring down our democracy.
Personally, I tend to think not. The main reason is that any such group would
have sought to accelerate the process far beyond its current or past growth
rate so that they might have enjoyed the proceeds during their lifetime. That
of course does not preclude some such organization from forming now and
attempting to rustle this cash cow for their purposes. That possibility must be
considered in any future decisions we make of course but I personally think
this situation evolved due to the underlying philosophy of the governmental
bureaucracy and, as I have already mentioned, an apathetic and poorly informed
They say knowledge is power. That may be true but possession of either or both does not guan tee that the possessor knows how to make proper and wise use of either or both. Elected officials have no business trying to administer such sums. They are not trained for it for the most part and it is too easy for them to be corrupted and so corrupt any viable process that we might come up with for managing the money. Control needs to be held in the private sector where the money can be more efficiently and honestly handled. Accountability of those in charge must be a matter of open public concern and maintained by a sizeable accounting organization that is above reproach. Exactly how we do that I have no idea. As I said, I recognize and admit my own limits.
conclusion, where do we go from here? We who now posses the knowledge of the
situation I have described need to make the rest of the public aware of the
existence of these mega-funds and help responsible men of good will formulate a
plan and process that will relieve the tax paying public of its onerous burden
while setting up a stable financial plan that will assure a sufficient level of
income to meet all the legitimate needs of all levels of our government.
such a thing really be done? I honestly don’t know. I do know that business as
usual is probably the worst thing we can do. It can continue to make criminals
out of good public officials and, at the very least, distract them from their
real duties of public service. If we keep on going the same way we are now we
make ourselves vulnerable to the next truly evil person or organization who can
figure out a way to use these funds in a truly destructive way other than for
the public good.
apathy had a major role in allowing this to happen. It will take considerable
public action to correct it. We must start soon if we wish to save our
children’s future. We each must ask ourselves two questions: If not me, who?
And if not now, when?
A Common Sense Foreign Policy – “Judging from today’s headlines this title probably qualifies as a four-word oxymoron.”
This Dixie Chick Thing – “You girls don’t look stupid and you clean up real nice.”
War Correspondents – “Alright, alright enough already!!”
The True Cost Of Political Proctology – “It
would be nice if fear of public exposure kept the cruel, stupid and inept out
of public life and power but it hasn’t seemed to deter them in the past.”
Cancer Patience – “Experience is of no value unless it is shared.”
My Rant – “Ok boys and girls, fasten your seat belts, put your seats and tray tables in the full upright position, and get ready. I am going to try my hand at this “rant” business.”
Negro Mattie – “Perhaps the greatest testament
to Mattie’s capacity to love was the fact that we were not the only white
family to pass by her casket with tears in our eyes.”
Doc – “To say our family respected and trusted our family doctor is
Little Sisters - “I was her foil and scapegoat . . .”