As things return to normal after the pandemic, it is time for a second round of summer horseshoes. Perhaps by the Fourth of July we might have some real picnics again and play a real round of horseshoes. As a refresher for those of you who don’t play horseshoes or haven’t played in a long time, here are the scoring rules. A “ringer” is worth two points. A “double ringer” is worth four. A “leaner” or “closest to the stake” is worth one point. Since Independence Day is fast coming upon us, this is a special edition of Government Horseshoes. Here we go!
Completely missing the horseshoe pit—The SEC fires the PCAOB Chair. For those of you who don’t work in the accounting field, the Public Company Accounting Oversight Board (PCAOB) was created by the Sarbanes-Oxley Act in 2002 as a watchdog over the financial reporting of publicly traded companies. The board members have staggered five year terms and could only be removed for cause under the original law. The latter provision was struck down as unconstitutional by the U. S. Supreme Court in 2009. Since then, the PCAOB has become a partisan battlefield. In early June of this year the SEC fired the Chairman of the PCAOB and began soliciting resumes for the other four board positions. This also opened a political rift at the SEC, where the two Republican members voted against the termination of the board chair and labeled it as “hasty”. To be fair, this is not the first time such events have happened so both political parties are guilty of turning a watchdog agency into one that has an agenda. The accounting principle of neutrality requires information contained in financial statements be free from bias. Perhaps a modern rendition of the neutrality principle should require accounting regulators and standard setters to also be free from political bias. I know. This is a lofty goal…
Closest to the stake– Governors opening up their states in response to the COVID vaccinations. As vaccination levels are increasing on a daily level, Governors continue to open up their states for normal business operations. My home State of New Jersey has achieved over a 50% vaccination rate at the date this article is being prepared and there are minimal mask requirements such as in health care facilities, public transportation etc. currently in place. Perhaps by Labor Day these too will be gone. Why not a higher score? There was a lot of controversy over how the COVID crisis was managed by the various states. I point you to New York State as one example of this.
A double ringer–The New Jersey Society of CPAs pushes for plain language CAFR summaries. Governmental entities keep two sets of accounting records (No, not the cooked books and the real books, you cynics!). The first set is the fund accounting statements, designed to provide accountability for the expenditures and revenues of government entities (okay, NOW you can be cynical.) The second set uses more traditional accounting principles to produce the Comprehensive Annual Financial Report (CAFR). This set of financial statements is much more useful for other stakeholders such as bondholders of the entity. The NJSCPA is working to provide a “plain language” CAFR for the State of New Jersey. To be sure various entities such as the SEC and the GASB (Government Accounting Standards Board) already require financial information to be written in plain language but much work needs to be done there. The last NJ CAFR is over 400 pages long and obscures (not intentionally) some key information such as the State’s pension debt. The NJSCPA also recommends comparative statistics be included in the CAFR. This is certainly a breath of fresh air in the financial reporting for government entities.
The horseshoe is still in the air–Defense Department report on UAP. Come on now, did you really think they would disclose everything they know about them?
Have a great Fourth of July weekend!