The Ostrich Head reviewed the Audit Report of the FY 2019 Consolidated Financial Statements of the U.S. Government. This doesn’t sound fun. But oh man, you wouldn’t believe what we found.
On February 27 2020, the Government Accountability Office issued its Audit Report of the US government. To say it was damning would be an understatement. Specifically, a $44 trillion understatement.
An audit report is supposed to show especially the assets and costs, which are most subject to being fudged by white collar criminals (and upstanding government officers). They seemed to have missed a bit here. According to the report:
About 29 percent of the federal government’s reported total assets as of September 30, 2019, and approximately 19 percent of the federal government’s reported net cost for fiscal year 2019 relate to significant federal entities that received a disclaimer of opinion or qualified opinion on their fiscal year 2019 financial statements.
GAO Audit Report Page 1
They also had a question about future social security insurance of $42.2 TRILLION relating to Medicare programs. And that’s just 71% of the total of $60 trillion. Say WHAT? That’s three times the US GDP and the GAO thinks it could be… anything! Forget the debt passing 100% of GDP. We’re already waving good bye to it being 5x. And it gets worse. A lot worse. Specifically, back in February last year, the GAO criticized the government for not accounting for
other risks, such as health pandemics, cyberattacks, military engagements, and economic crises that could affect the federal government’s financial position and condition
GAO Audient Report Page 7
and its financial management in the future.
So, the allowance for future social security insurance for Medicare was already in doubt BEFORE the pandemic. How are we looking now? We’ve just had a $900 billion stimulus plus a $2 trillion stimulus package, and more to come under Biden. This $42 trillion number, which is mind blowing in itself is suddenly gaining a bit of perspective. That was over 75 years into the future. Now it looks like the government can burn through it in less than ten years.
The Audit Report continues on the Pension Benefit Guaranty Corporation (PBGC), which guarantees US pensions. This GAO simply used the PBGC’s own projections:
PBGC’s liabilities exceeded its assets by about $57 billion as of the end of fiscal year 2019. PBGC estimated that its exposure to potential further losses for underfunded plans in both the single and multiemployer programs was nearly $166 billion. PBGC has projected that without legislative reforms, there is a high likelihood the multiemployer program will become insolvent during fiscal year 2025 and hat insolvency is a near certainty by the end of fiscal year 2026.
GAO Audient Report Page 7
Given that pension payments plummeted last year and there’s no recovery so far this year, 2025 looks very optimistic.
Now, $166 billion doesn’t sound like a lot after throwing around numbers in the trillions, but that’s about $4,000 per US pensioner. I don’t know many pensioners who wouldn’t notice a $4,000 drop in income.
Then there’s Freddie Mac, Fannie Mae, and Ginnie Mae, the US mortgage corporations backed by the US government which all went simultaneously bankrupt in the 2009 meltdown. They are still bankrupt.
The government “solved” this problem by getting the Federal Reserve to purchase a bunch of mortgage backed securities through TARP. However, these securities were insured by these government backed corporations.
The Government National Mortgage Association (Ginnie Mae) guarantees the performance of about $2 trillion in securities backed by federally insured mortgages—$1.2 trillion of which were insured by FHA and $0.8 trillion by other federal entities, such as the Department of Veterans Affairs
GAO Audient Report Page 8
These future losses of $2 trillion weren’t consolidated into the US government’s accounts. So that adds an extra $2 trillion of losses (i.e. debt) to the US government. They haven’t recognized these losses yet, because that would mean raising the US debt ceiling by another $2 trillion, and Congress seems to like doing this in small stages for maximum political benefit.
Looking forward, we’re even less optimistic.
Under Obama, US government net operating costs (operating loss) doubled in 2016 to $1.05 trillion. Trump, a fiscal conservative, took that to $1.45 trillion in 3 years.
Mind you, this was when the economy was doing well, if you can even trust the data. The GAO was very clear about this: You can’t.
The federal government is not able to demonstrate the reliability of significant portions of the accompanying accrual-based consolidated financial statements as of and for the fiscal years ended September 30, 2019, and 2018, principally because of limitations related to certain material weaknesses in internal control over financial reporting and other limitations affecting the reliability of these financial statements and the scope of our work, as discussed below. As a result of these limitations, readers are cautioned that amounts reported in the accrual-based consolidated financial statements and related notes may not be reliable.
GAO Audit Report p234
So it’s little surprise that the Auditor declined to issue an opinion on the financial statements. This failure to do so is tantamount to declaring the organization a sham, a scam, or simply a financial disaster and/or black hole.
Because of the significance of the related matters described in the Basis for Disclaimers of Opinion on the Consolidated Financial Statements section above, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the accrual-based consolidated financial statements. Accordingly, we do not express an opinion on the accrual-based consolidated financial statements as of and for the fiscal years ended September 30, 2019, and 2018.
GAO Audit Report p238
No surprise. Just in the Treasury Account (you know, the one that is supposed to be run by people who understand accounting), they manufactured a decrease of $1.6 billion in 2019 and an increase of $2.4 billion in 2018. That’s $4 billion they can’t find and have no idea where it’s gone. As in, “John, did I leave my wallet lying around? I had 4,000 tons of Ben Franklins in it.”
“Yeah, Joe Biden picked it up. He used it for the campaign. He says there about $6 left.”
Apart from this tiny $4 billion — enough to buy the presidency — GAO Audit reports have discovered a total of $2.3 trillion in improper payments since 2003.
“Hmm…” you wonder, “What could I buy with the $2.3 trillion the government has misplaced?”
Well, you could purchase what’s left of the assets of the US government, net of loans and accounts receivable.
Looking forward to next month’s report!
P.
