Sarbanes-Oxley for federal agencies and NGO's?

802 Views | 11 Replies | Last: 1 day ago by aggiesherpa
BusterAg
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AG
Cross posted on F16, but not enough people curious to look things up for it to get any traction.

Once upon a time, we had organizations in the US that would lie about fraud and illegal activities overseas. Then, when the organizations got caught, the leaders of the organizations would just claim that they had no idea that the fraud was committed. It happened over and over again, and some people got really hurt.

Then Enron collapsed, Tyco collapsed, Worldcom collapsed, and the leaders of these companies said the same things, "we didn't know" and that is how we got Sarbanes-Oxley (SARBOX).

The most stringent part of Sarbanes-Oxley is that it forced publicly traded companies to put internal controls into place that would catch fraud. It forced the CEO and CFO of a publicly traded company to attest that there were adequate controls in place every time they reported earnings. An internal auditor and external auditor had to sign off on the internal controls. If it turned out they lied about the quality of the internal or external controls when they signed the earnings report, then the CEO, CFO, and auditors could face federal jailtime. A lot of it.

Note that SARBOX doesn't mean that the CEO/CFO gets jailtime if fraud occurs in the company. If the company has adequate internal controls, according to industry standards as attested to by the auditors, and some smart guy figured out how to get around those controls, the company would probably face a fine, have to review and fix their internal controls, and no one goes to jail.

Pigs get fat, and hogs get slaughtered. Well, Biden and Obama screwed up enough that the meat packers are hiring as many illegals as they can find. The fraud we are seeing in the government is worse than Enron, Tyco, and Worldcom combined.

There is no way in the world that we would see the kind of fraud we are seeing in the SS office and USAID if these kinds of internal controls were mandated by law and agency heads had to attest to the quality of internal controls before they requested or were awarded any budget allocation. It would make the fraud of having 380 million active SSN numbers when there are only 330 million US citizens a crime, the head of the SS administration would face jailtime, and the auditors of the internal controls also face jailtime. The amount of jailtime would scale based on the amount of fraud. The heads of USAID would be facing prison sentences of counted in centuries or millennia.

We need internal control reform in the Federal government. It will be a great jobs program for the Federal government until it gets completed. It will take a lot of power out of the federal bureaucracy, eliminate tons of government waste, and give fraud reformers like Musk and Trump a huge freaking hammer to bring down on government incompetence and fraud.

Suggesting this solution is such a short putt, and paints all of Congress and the swamp in such a negative light. Why isn't this a great idea?
Stive
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AG
Um….ok….

I'll tell my congressman to get right on it.
Ag13
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Stive said:

Um….ok….

I'll tell my congressman to get right on it.


They'll vote it in right after they give themselves a pay decrease, enact term limits on themselves, and ban congressional stock trading.

Btw to the OP - it's a great idea. But the deep state is deep.
aggiesherpa
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AG
As some background, I am an accountant who has worked at fortune 50 companies doing internal controls/SOX programs in some capacities.

Although I have was never involved in government audits while in public accounting, the idea that there after not internal controls in government organizations is not true. A quick Google search will turn up audit reports for the DoD that have been made public from 2002 to 2024. These audit were conducted by a combination of external audiotrs and the OIG. The DoD might be the largest entity to ever be audited.

Is there waste and inefficiencies in all govt agencies, absolutely. Will internal controls eliminate that, no they will not. Government waste is a tale as old as time. The question I would be asking is why have the oversight functions of the government (OIG, congress [both parties]) not made some of these things a priority?
Ag92NGranbury
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Sometimes the only way to kill waste and corruption is to upset the money flow... significantly.
aggiesherpa
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I think that is true to an extent. But as long as politicians need money to run campaigns and are elected to represent specific areas with certain business interests the problem will continue.

To bring this back to a business perspective. I find the topic of corporate vs government structure interesting. As I believe the OP said, corporate leaders goals are very much tied to the performance of the company to maximize revenue and reduce expenses.. I would be curious to know how govt department leaders are evaluated.
Sims
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aggiesherpa said:

I think that is true to an extent. But as long as politicians need money to run campaigns and are elected to represent specific areas with certain business interests the problem will continue.

To bring this back to a business perspective. I find the topic of corporate vs government structure interesting. As I believe the OP said, corporate leaders goals are very much tied to the performance of the company to maximize revenue and reduce expenses.. I would be curious to know how govt department leaders are evaluated.
The DOD could be audited 100 more times and I would imagine the audit opinions would be much as they have been forever -

Auditor is unable to issue an opinion as to the accuracy and reliability of the financial statements because DOD cannot provide sufficient information to validate data.

The difference is what happens next. If my company had an audit result in that the auditor was unable to issue an opinion - we'd catch all kinds of hell. We'd hear it from lenders, we'd here it from owners, we'd here it from key customers. The DOD doesn't have a single person in the world that 1) cares and 2) can do something about it.

Today they do and things are going to hell in a hand basket in the grift economy.
chris1515
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What did ChatGPT estimate as the cost to setup those controls and oversight in the first place along with the ongoing costs?

Many billions?
aggiesherpa
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Including the increased auditor fees and adjusted to be in today's dollars, I think easily in the trillions

.I'm having a strange deja vu with this question....
aggiesherpa
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That is a really good point. And speaks to the structural differences. If a company has a material weakness, a going concern, or a qualifed/adverse opinion, that could trigger investor sell off, bank loans called and the list goes on. But not with a US govt entity.

It would be interesting to know what comes out of those audits. I have assisted the state of Texas with an OIG audit....and it was not pleasant, so I would find it hard to believe that nothing comes out of the OIG audits of the DoD or other agencies.
Sims
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aggiesherpa said:

That is a really good point. And speaks to the structural differences. If a company has a material weakness, a going concern, or a qualifed/adverse opinion, that could trigger investor sell off, bank loans called and the list goes on. But not with a US govt entity.

It would be interesting to know what comes out of those audits. I have assisted the state of Texas with an OIG audit....and it was not pleasant, so I would find it hard to believe that nothing comes out of the OIG audits of the DoD or other agencies.
I think it's a bit presumptuous (not a slight toward you, just I think it needs to be emphasized) that an OIG audit within the state of Texas is probably a lot different than what we've seen from the federal government. I think that is particularly true of the sacrosanct departments/agencies.

I brought up an example the other day of when Sen. Tom Coburn had a dozen whistleblowers come to him in the early 2000's with extremely damning evidence about USAID. The IG whitewashed the evidence eliminating over 400 specific references to misappropriation and fraud in USAID.

I think, similar to audits in industry, there is going to have to be some mechanism by which these "audits" are reviewed and acted upon by groups outside of the control of the ones being audited. I don't even mean subcommittees, IGs, ombudsmans etc. I think a good example of who I'm thinking would be more politically neutral versions of Americans for Prosperity or JudicialWatch.

Even typing "politically neutral" makes me chuckle a bit and ultimately reveals the main problem. There are very few citizens as a portion of the electorate that actually care for accountability and visibility in government spending - less so at the Federal level than local. You'll have folks raise hell about a $1B school bond but what is that same group going to do about an $8.5T omnibus.
aggiesherpa
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M company was hired by the state of Texas to assist them with an audit being performed by the federal OIG related to the use of FEMA funds.

I'm not familiar with the Coburn reference, but will look into it. My initial thought would be that if a senator received that many whistleblower complaints and the IG whiteashed and destroyed evidence of wrong doing, and the Senate did nothing about that, then that is a failure of their job to hold the executive branch responsible.

I do want to say, I do not think that there is nothing wrong with govt agencies and that there is zero fraud and abuse occurring. I wanted to point out that in my limited experience there are more controls in place than is being implied in this thread. This thread keeps coming back to be more political than this board tends to be, so I will duck out of this thread.
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