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A Trillion Here, A Trillion There . . .

I ended my last blog with a quote attributed to the late Senator Everett Dirksen:  “A billion here, a billion there, pretty soon you’re talking real money.”

How about:  “a trillion here, a trillion there . .  .”?

Relatively quietly, the Inspector General of the U.S. Department of Defense released a report on July 26, 2016, entitled “Army General Fund Adjustments not Adequately Documented or Supported. “

Wow!  That’s an understatement!!

The report uses a lot of acronyms, but it boils down to this.  The Army made adjusting journal entries to the Army General Fund of $2.8 trillion in the third quarter of 2015 and of $6.5 trillion at yearend.  That’s trillions of dollars of AJEs with respect to the Army’s most recent annual budget of less than $200 billion.   The Pentagon’s total annual budget is about $600 billion.

The Inspector General says that the AJEs were not adequately supported or documented.  The IG goes on to suggest that there is considerable risk that the 2015 financial statements are materially misstated – accounting speak for “you can’t rely on ‘em.”

Congress passed a law requiring that the Army General Fund must achieve “audit readiness” by September 30, 2017.  The Army has been working on it.  It has had the help of a Big Four accounting firm.  The IG speculates that the Army will not be ready for an audit by that time.

I couldn’t help but imagine the following scenario.  At the end of an audit, my partners nominate me to approach the client with this proposition:  “Well, we are proposing a yearend AJE writing down your accounts receivable by $6,478,376,956,199.87, unless you can convince us that amount is not material to your financial statements.”

VKM

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