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The top stories on government finance, accounting and transparency
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Government Executive The Defense Department fails its audit again, but officials have ‘no doubt’ it will eventually pass By Courtney Buble, includes “On Monday, the Defense Department completed its annual audit required by the 1990 Chief Financial Officers Act for the fourth time. … The financial watchdog group Truth in Accounting has issued reports on the past three audits. Following their most recent analysis, published in March, Bill Bergman, Truth in Accounting’s director of research, told Government Executive, ‘They are making progress in the sense that they’re finding more problems than they resolve.’ …” (Note: We will produce an initial analysis of the audit results soon.)
Texas Scorecard Texas earns average score in financial transparency By Sydnie Henry, includes “On Tuesday, the citizen organization Truth in Accounting (TIA) published the transparency grades states earned during Fiscal Year 2020. While Texas did not earn the worst score, state officials have room for improvement when it comes to being financially transparent with citizens. … ‘This report focuses on important-but-obscure annual financial reports on file in statehouses across the country and measures their contents against widely accepted best practices from the private sector.’ …”
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United States Department of Defense Agency Financial Report Fiscal Year 2021 Includes “The Department completed its fourth annual consolidated financial statement audit in FY 2021. It covered approximately $3.2 trillion of the Department’s total assets, involved more than 1,200 auditors, and included nearly 1,350 site visits (virtual and in-person). …The DoD OIG issued a disclaimer of opinion on the Department’s FY 2021 financial statements, meaning it was unable to obtain sufficient appropriate audit evidence on which to base an opinion. The Department’s leadership fully expected these results, as receiving a disclaimer of opinion is consistent with the experiences of other large and complex federal agencies during their initial years under audit.”
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The Washington Times Pentagon again struggles to produce ‘clean’ audit of sprawling operations By Mike Glenn, includes “… The Pentagon has yet to pass the wide-ranging financial examination. … The Pentagon employs almost 3 million people, both civilian and military, manages one of the federal government’s largest real estate property portfolios located in all 50 states and more than 40 countries, and is responsible for more than $320 billion in inventory, more than six times the size of Walmart.”
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Breaking Defense As most military agencies fail annual audit, comptroller claims steady progress By Aaron Mehta, includes “The Pentagon’s fourth annual audit saw just eight of 24 military agencies likely to receive a clean financial bill of health, the same number as last year, signifying only incremental improvements and a long road ahead to the military-wide passing grade sought by good government groups and members of Congress. Still, Mike McCord, the Pentagon comptroller, told press ahead of the audit’s release Monday night that the department is making ‘steady progress’ towards its goal without taking any steps back year over year.”
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| STATE AND LOCAL
Reason Foundation Governments increased their use of pension obligation bonds in 2021 By Jordan Campbell, includes “A new report from S&P Global Ratings highlights an increase in debt issuances from pension obligation bonds (POB) rated by S&P in 2021. As of mid-Sept. 2021, the number of pension obligation bonds rated by S&P has already more than doubled the previous annual total. … However, as the S&P report also notes, ‘an increased spread does not mean free money; it indicates increased exposure to market volatility risk when proceeds are deposited in the pension trust.’ …”
Bloomberg Connecticut city asks residents to take $145 million pension bet By Martin Braun, includes “Residents of Norwich, Connecticut, will vote Tuesday on whether to gamble with their tax dollars by issuing bonds to cover swelling pension obligations, amid a record year for sales of such debt. Voters are being asked to approve issuing $145 million of securities to cover Norwich’s pension obligation, after retirement costs almost tripled in the past decade. With interest rates in the municipal market near historic lows, officials expect the earnings from investing that sum will exceed the borrowing cost.”
The Bond Buyer Illinois local governments offer steady stream of pension bonds By Yvette Shields, includes “The wave of local Illinois governments turning to pension obligation bonds shows no signs of abating and could accelerate amid concern that the window is closing on record low interest rates. Wheaton sold $46 million last month. Berwyn is eyeing an issue and Moline plans to follow its neighbor East Moline into the market. They continue a trend that made Illinois the third largest source of POB issuance, behind California and Arizona, among local governments rated by S&P Global Ratings from the start of 2020 through September 2021.”
The Wall Street Journal Main street pensions take Wall Street gamble by investing borrowed money By Heather Gillers, from September 2021, includes “Many U.S. towns and cities are years behind on their pension obligations. Now some are effectively planning to borrow money and put it into stocks and other investments in a bid to catch up. … Pension obligation bonds can backfire. If investments don’t perform as expected and returns fall below the bond interest rate, the city can end up paying even more than if it hadn’t borrowed.”
FEDERAL/NATIONAL
MarketWatch Build Back Better plan may clear White House this week, as White House says bill will combat inflation By Robert Schroeder, includes “House Democrats are expected to vote this week on a nearly $2 trillion social-spending bill, as Republicans sharpen their criticism of the measure amid the highest inflation in three decades. … Lawmakers returning to Washington this week also face approaching deadlines on government funding and the U.S. debt limit. Federal government operations are funded through Dec. 3, and a partial shutdown would ensue if Congress doesn’t approve at least a stopgap budget.”
KTVL CBS News (Oregon) Inflation concerns loom over Democrats as they debate spending bill By Stephen Loiaconi, includes “House leaders said Tuesday they aim to pass President Joe Biden’s ‘Build Back Better Act’ this week, but some obstacles remain, including convincing moderates the plan is fully funded and convincing the public it would not exacerbate soaring inflation. … The House could begin debate as early as Wednesday on the $1.75 trillion measure, which would fund new social programs like universal prekindergarten, provide assistance with childcare and medical costs, and bolster efforts to fight climate change. However, a final vote would not come until after the Congressional Budget Office renders its verdict on the budgetary effects of the bill, expected to be released by Friday afternoon.”
R Street Don’t fear the continuing resolution By Nan Swift, includes “In what is becoming an almost annual tradition, it’s unlikely that Congress will have completed its already postponed annual appropriations work by the new December 3rd deadline, making it necessary to enact another continuing resolution (CR) to avoid a government shutdown during the holiday season. CRs are far from ideal policy making, but neither are they the catastrophe that some fear. … Predictably, the biggest opposition comes from those who claim that a CR undermines our national security.”
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