Cocktail Napkin Finances

When President George W. Bush signed the Sarbanes-Oxley Act of 2002 into law on July 30, 2002, he called the legislation’s provisions “the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt.” The act was hailed as wide-sweeping legislation that would increase transparency and restore public confidence in the financial practices of U.S. public companies and accounting firms. After all, Congress asserted, this was the public’s money that was at risk.

Sarbanes-Oxley, officially known as the Public Company Accounting Reform and Investor Protection Act of 2002, was the legislation that followed in the wake of several corporate and accounting scandals including Enron, WorldCom, Global Crossing and Arthur Andersen. The measure passed both chambers of Congress by overwhelming margins of 423-3 in the House and 99-0 in the Senate. In lauding Sarbanes-Oxley Senator Patrick Leahy (D-VT) commented, “The legal rights and procedures that protect consumers, investors and employees matter now more than ever.” Sadly, Leahy did not include taxpayers among his protected class.

Unfortunately, Congress has yet to practice what it preaches. As the 110th Congress heads home for its month-long August recess not a single one of the twelve appropriations measures for next fiscal year, which begins on October 1st, will have been signed into law. In fact, not a single spending measure has even completed the conference committee process that would produce a single, consensus spending bill reconciling the House and Senate versions to be voted on by both chambers.

There was a time when the failure to pass all 12 appropriations bills before the August recess was an anomaly. Today, it is commonplace for most of the spending bills to miss not only the conventional deadline of the start of the summer recess, but to also miss the beginning of the new fiscal year, resulting in a continuing resolution to continue government spending at the previous fiscal year’s levels. Only the Defense and Homeland Security spending bills for this year’s operations were passed as stand-alone measures. The rest of the government was funded through a series of supplemental appropriations and continuing resolutions.

The problem is not just one of missing arbitrary deadlines. The larger issue is that several spending measures are frequently rolled up into one massive, omnibus spending bill laden with pork-barrel and other wasteful spending. According the watchdog group, Citizens Against Government Waste, FY2006 spending included nearly 10,000 pork projects costing taxpayers $29 billion.

The danger in omnibus spending packages, according to CAGW President Tom Schatz “is the opportunity for great mischief. Everything occurs in conference [committee] such as earmarks that are not seen or amended. And in these omnibus spending packages, Congress will reauthorize entire programs and agencies. They have abdicated their responsibility to review and reauthorize government programs. It all leads to waste.”

The details in such massive appropriations measures are often negotiated in the waning hours before a final vote on passage and Congressional adjournment. In four of the last five fiscal years (FY2003-2005, 2007), only 12 of the 48 annual spending bills were passed as stand-alone measures. The other 36 appropriations bills were included in various omnibus spending packages.

Nine of the year’s annual appropriations measures were shoe-horned into the consolidated spending bill for FY2005 that weighed in at an impressive 1,645 pages. A Harry Potter book of that size would be read cover-to-cover. It is doubtful anyone ever read the entire FY2005 spending bill before it became law.

One CAGW-identified pork barrel project in FY2005 was $100,000 for the Punxsutawney Weather Discovery Center Museum, which neither the museum nor presumably Punxsutawney Phil requested. Another earmark was $100,000 for the Tiger Woods Foundation. Forbes magazine estimates Woods will become the first billionaire pro-athlete by the end of 2009. It is admirable Congress saw fit to help out Tiger’s foundation when he was only approaching the $500 million mark in earnings.

The current trend of cocktail napkin budgeting and appropriating allows very little public scrutiny before spending measures become law. By then, members of Congress are safely in their home states and districts campaigning for reelection or are off on taxpayer-funded junkets to far-flung corners of the globe.

A harbinger of Congressional unwillingness to get its financial house in order is often signaled when Congress fails to adopt a Budget Resolution. Required by the 1974 Budget Act, the Budget Resolution is the Congressional blueprint of how the legislative body is to spend the people’s money. Well, sort of. Appropriators are not bound to follow spending guidance in the resolution, which may explain why Congress has thrown up its hands in four of the last nine years and has not even bothered to pass one.

Earlier this year, the Democrat-led Congress passed a budget resolution for FY2008 along party lines. Yet, progress on the annual spending bills has been slow. Movement on Defense spending has been virtually non-existent as Congressional Democrats wage war on how the military wages war.

Last year, Bush signed into law the Federal Funding Accountability and Transparency Act of 2006. Introduced by Senator Tom Coburn (R-OK), the act requires the Office of Management and Budget to create a publicly-available, searchable website that includes every federal award of financial assistance and expenditures of $25,000 and greater. The database is to go online by January 2008 and is to include FY2007 data.

This database will aid in pursuing after-the-fact spending accountability; yet, the more serious problem still exists. The public has few tools at its disposal in scrutinizing government spending proposals before they become law because current Congressional practices obfuscate how, when and where taxpayer dollars are being spent. In addition, the failure to exercise proper oversight and reauthorization only continues spending on meaningless programs.

In a side note, Sarbanes-Oxley included a provision that made chief executive and chief financial officers criminally liable for the accuracy of their companies’ financial statements. It is only too bad that Senators and Representatives are not similarly held responsible.