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One law for them…

Not only is the state not your friend; it does not live in the same country you do. Failing to keep proper books and records in a business is likely to end in your going to jail, if you do not go broke first. So almost all businesses do manage it.

What would happen to the board of directors of a corporation with a turnover of £10 Billion and 61,000 employees, if it were discovered it did not even reconcile its bank statements during their tenure? Something like this, perhaps? In most corporate scandals the accusation is not defective or absent bookkeeping, but that it was too clever.

Here is the National Audit Office on 31st January 2005:

Sir John Bourn, head of the National Audit Office, reported to Parliament today that the Home Office had not maintained proper financial books and records for the financial year ending 31 March 2005. Sir John therefore concluded that, because the Home Office failed to deliver its accounts for audit by the statutory timetable and because of the fundamental nature of the problems encountered, he could not reach an opinion on the truth and fairness of the Home Office’s accounts.


Because of the difficulties in implementing the new accounting system, the Home Office was unable to reconcile its cash position during 2004-05, i.e. match its own records of cash payments and receipts with those shown on its bank statements. This is a key control for the prevention and detection of fraud. Following significant work by the Home Office to investigate a £3.035 million discrepancy, it had to make adjustments of £946 million to reconcile its cash position. However the Home Office found no evidence of fraud following this work.

The report points out that the poor quality of the financial statements and the delay to their production reflected a lack of skills within the accounts branch compounded by late recognition by management of the serious problems being encountered. Management procedures to ensure the quality of the financial information produced were also inadequate.

I particularly like, “the Home Office found no evidence of fraud”. Did nobody think to call in the Serious Fraud Office just so that they could say there’d been an independent check?

This is government, you see, and the rules for government are different. I confidently predict that there will be no consequences whatsoever for anyone but the taxpayer, who will stump up for yet another incompetent systems review. No minister will be censured, no official will lose his job, and no-one will go to gaol.

Which is just as well, considering how badly the prisons are run — by the Home Office.

The Home Office is an organisation that is currently preening itself before setting out up to become the Master Department, ruling them all through the largest and most complicated IT system ever, anywhere. It is currently asking suppliers what it should do and how much they think that should cost, while telling parliament it will not reveal any cost estimates (See: Lords Hansard 16 Jan 2006 : Column 428) in case it damages the bargain to be got from those same suppliers.

Though I have other reasons for thinking that the Home Office should not be permitted to seize from the Treasury the role of colossus over the rest of Whitehall, this NAO report at least ought to give any sane administration pause. I cannot see any whelk stalls or breweries taking the risk of offering their facilities for the necessary in-house training.

22 comments to One law for them…

  • The Home Office might me learning more from the EU than we thought…

  • Johnathan Pearce

    Guy, a similar example surrounded accounting issues at the U.S. quasi-state mortgage agencies, Fannie Mae and Freddie Mac last year. The scale of money involved was on an Enron scale, and yet the media have raised not nearly as big a stink about it, I suspect out of unconscious bias against business. And yet if one looks at this case, or the corruption allegations at the European Commission, the sums frequently dwarf anything you will see in business.

  • The Chief Accounting Officer of a Central Government Department is the Permanent Secretary i.e. the “Sir Humphrey Appleby” figure.

    The Permanent Secretary at the time of this scandal was Sir John Gieve.

    He has recently taken up his new job as the Deputy Governor of the Bank of England, with a vote on whether or not to change the official UK interest rates and by how much.

  • And three cheers for Mr H.’s use of the spelling ‘gaol’. Splendid. I shall watch your future career with interest.

  • Julian Taylor

    Of course the Home Office can no longer use the excuse that, “the Home Secretary’s guidedog chewed the accounts before he could sign them” …

  • On the bright side, a government that cannot even keep its own checkbook straight is hardly likely to function as an efficient totalitarian apparatus. A spastic elephant has difficulty finding and killing a quick, athletic mouse.

  • GCooper

    Similar levels of ‘inefficiency’ (though one suspects worse in some cases) are to be found right throughout the NHS.

    Never is anyone held properly accountable. The very concept seems anathema.

    The sheer scale of mismanagement and corruption under this government is mind-boggling, yet the public dozes away, kept supine by pretend prosperity.

  • Jake


    The Fannie Mae and Freddic Mac problem did not involve accounting systems just the reporting of the results. They hid the fact that they made more money than expected. They did not want the stock price to go too high. It did not have anything to do with the financial health of the agencies.

    The reason the media did not cover it was this. The head of these agencies was a high level official in the Clinton administration. He was also to be Kerry’s Secretary of Treasury if Kerry won.

    The media in the US will always cover up scandals involving Democrats.

  • “…One law to rule them all, and in the darkness bind them…”

  • simon

    How does the government manage to provide such good pensions to its employees? I’d like to see how the figures balance on that issue.

  • simon

    How does the government manage to provide such good pensions to its employees? I’d like to see how the figures balance on that issue.

  • toolkien

    A significant number of material weaknesses6 related to financial systems, fundamental
    recordkeeping and financial reporting, and incomplete documentation continued to
    (1) hamper the federal government’s ability to reliably report a significant portion of its
    assets, liabilities, costs, and other related information; (2) affect the federal government’s
    ability to reliably measure the full cost as well as the financial and nonfinancial
    performance of certain programs and activities; (3) impair the federal government’s
    ability to adequately safeguard significant assets and properly record various transactions;
    and (4) hinder the federal government from having reliable financial information to
    operate in an economical, efficient, and effective manner. We found the following:
    Material deficiencies in financial reporting (which also represent material weaknesses)
    and other limitations on the scope of our work resulted in conditions that continued to
    prevent us from expressing an opinion on the accompanying consolidated financial
    statements for the fiscal years ended September 30, 2005 and 2004.7
    • The federal government did not maintain effective internal control over financial
    reporting (including safeguarding assets) and compliance with significant laws and
    regulations as of September 30, 2005.
    • Our work to determine compliance with selected provisions of significant laws and
    regulations in fiscal year 2005 was limited by the material weaknesses and scope
    limitations discussed in this report.
    Because of the federal government’s inability to demonstrate the reliability of significant
    portions of the U.S. government’s accompanying consolidated financial statements for
    fiscal years 2005 and 2004, principally resulting from the material deficiencies, and other
    limitations on the scope of our work, described in this report, we are unable to, and we do
    not, express an opinion on such financial statements.
    As a result of the material deficiencies in the federal government’s systems,
    recordkeeping, documentation, and financial reporting and scope limitations, readers are
    cautioned that amounts reported in the consolidated financial statements and related notes
    may not be reliable. These material deficiencies and scope limitations also affect the
    reliability of certain information contained in the accompanying Management’s
    Discussion and Analysis and other financial management information—including
    information used to manage the government day to day and budget information reported
    by federal agencies—that is taken from the same data sources as the consolidated
    financial statements.
    6A material weakness is a condition that precludes the entity’s internal control from providing reasonable assurance that
    misstatements, losses, or noncompliance material in relation to the financial statements or to stewardship information would be
    prevented or detected on a timely basis.
    7We previously reported that material deficiencies prevented us from expressing an opinion on the consolidated financial statements of
    the U.S. government for fiscal years 1997 through 2004.
    We have not audited and do not express an opinion on the Management’s Discussion and
    Analysis, Stewardship Information, Supplemental Information, or other information
    included in the accompanying fiscal year 2005 Financial Report of the United States
    Significant Matters of Emphasis
    Before discussing the material deficiencies and the additional limitations on the scope of
    our work we identified, two significant matters require emphasis—the nation’s fiscal
    imbalance and restatements of certain agencies’ prior-year financial statements.
    The Nation’s Fiscal Imbalance
    While we are unable to express an opinion on the U.S. government’s consolidated
    financial statements, several key items deserve emphasis in order to put the information
    contained in the financial statements and the Management’s Discussion and Analysis
    section of the Financial Report of the United States Government into context. First, while
    the reported $319 billion fiscal year 2005 unified budget deficit was significantly lower
    than the $412 billion unified budget deficit in fiscal year 2004, it was still very high given
    current economic growth rates and the overall composition of federal spending.8
    Furthermore, the federal government’s reported net operating cost, which included
    expenses incurred during the year, increased to $760 billion in fiscal year 2005 from
    $616 billion in fiscal year 2004. Second, the U.S. government’s total reported liabilities,
    net social insurance commitments 9 and other fiscal exposures continue to grow and now
    total more than $46 trillion, representing close to four times current GDP and up from
    about $20 trillion or two times GDP in 2000. Finally, while the nation’s long-term fiscal
    imbalance continues to grow, the retirement of the “baby boom” generation is closer to
    becoming a reality with the first wave of boomers eligible for early retirement under
    Social Security in 2008. Given these and other factors, it seems clear that the nation’s
    current fiscal path is unsustainable and that tough choices by the President and the
    Congress are necessary in order to address the nation’s large and growing long-term
    fiscal imbalance.

    Happy little extract from the Financial Statements of the United States Government –
    GAO Addendum written by David M Walker, Comptroller General.

    It is a bit too much to take with the Feds blowing hot over Sarbannes Oxley when their own house is not in order by a magnitude of a thousand. Also note the fiscal crisis of $46 trillion in present value dollars that the US faces (Europe’s, by and large, is even worse).

    What was someone saying about if the government is poorly run, so much the better? Not from where I am looking. When the smoke and mirrors clears and there is no other choice other than not making good on promises or confiscating equity, or a vile hybrid of both, I doubt the government’s fiscal ineptitude is going to prevent them from hauling off individuals’ equity with very little in return. I’m sure the collection process will be quite robust and efficient.

  • Robert Alderson

    Meanwhile the US DoJ is busy filing briefs in the case about Blackberry patent infringement to get government employees exempted from any court ordered shut down of the Blackberry service. Again, one law for the gov another for the taxpayers.

  • Edward Lud,

    I can beat ‘gaol’. I’ve got ‘gaoled’ on a similarly inspired piece, here:

    A Tale of Two Legal Systems

    However, my current favorite word is poltroon. How many points does that score?! 🙂

  • John K

    How does the government manage to provide such good pensions to its employees? I’d like to see how the figures balance on that issue.

    That’s an easy one. They don’t.

  • Hi simon,

    To expand on John K’s point, the government don’t provide their employees with a pension. Every year they simply hand them an IOU promise which states, in effect:

    “We have put nothing towards your pension. However, when you do retire, if the British government is still around we will hopefully use armed gunmen to go out every year and fleece the rest of the population, if they’re still putting up with us. From the loot we can sweat out of the miserable scum, if there’s any available, we will give you your cut of the swag.”

    It is we the genuine taxpayers who provide current government pensioners with their ongoing payments. Future government pensioners currently have absolutely ZILCH in their pension pots.

    They just have these promises that future taxpayers will be fleeced appropriately, when the time comes.

    I often wonder why so many government parasites swan around with such beatific smiles on their faces. When the time comes there may be no loot left for the British government to steal on their behalf. There may be even no British government in the form we recognise it today (I hope), or indeed a British state as we recognise it today.

    The one group of government employees who do get paid-for pensions are those who work for local authorities. And if you’ve wondered recently why Council Taxes keep shooting up each year, wonder no longer. Virtually all of the increases are spent on topping up local government worker pension schemes. It won’t be many years now before more than half of your council tax will be sucked up into local government pension plans.

    Saying that though, it might not be too long before half of ALL taxes is being used to prop up government pensions. It’s going to take a Stalin-like figure to keep that one going.

    Short of a British Stalin figure emerging, or a fully centralised EU state, it’s all going to go pop. They keep burying their heads in the sand, trying not to think about it, but sooner or later the government pensions provision issue is going to break the back of British government. It couldn’t happen to a nicer bunch of crooks.

  • veryretired

    A few years ago, the General Accounting Office did an audit of the Internal Revenue Service. The GAO report was very blunt in stating, in so many words, that the IRS books were completely insufficient, lacking significant documentation as required by law.

    If any private organization had been audited by the IRS and produced such incomplete records, the persons responsible would have been liable for severe penalties. Care to guess what happened to the little darlings at the IRS?

    This is the same IRS that has been trying to put together a new computer system for several years, spent about 10 billion dollars, and still doesn’t have anything that works.

    Thank God they’re as inept as they are. Just think of all the additional mayhem they could cause if they were as well organized as Wal-Mart.

  • toolkien

    ***Thank God they’re as inept as they are. Just think of all the additional mayhem they could cause if they were as well organized as Wal-Mart.***

    But soon much greater revenues are going to be needed to meet the Defined Welfare Benefits under Social Security and Medicare, and it’s going to be this doltish entity that is going to be charged with getting it. We’ve had a “kinder and gentler” IRS of late, but a few seminars I’ve gone to recently (I’m a CPA) portend a new IRS that is going to be more aggressive. And that will only be the start. Fines and Penalties have sky-rocketed, even for those that are “errors in fact”.

    When the “tax addicted government” needs a bigger fix, I shudder what this oaf will turn into.

    And good luck reasoning with it.

  • veryretired

    I agree completely, T.

    When the Ponzi schemes that make up the Gov’s entitlement committment demand ever more and more money, I’m sure the “system” will get as ruthless as it needs to be, especially with all the regular working stiffs who can’t afford the accountants and lawyers needed to construct the tax avoidance havens built into the codes.

    It’s going to get really ugly really fast.

  • Jack Maturin – “However, my current favorite word is poltroon. How many points does that score?! :-)”

    Poltroon’s a corker, I’ll grant. But I’d swap you a palimpsest or a gallimaufry, or even a node, any day of the week.

  • palimpsest or a gallimaufry

    Now you’re talking. I did manage ‘buffoon’ recently, but that’s very small beer compared to the two above. Once I’ve found out what they mean, I’ll get them worked in ‘toot sweet’, as we say in Luxembourg.