Preventing Fraud and Mismanagement in Government Preventing Fraud and Mismanagement in Government Systems and Structures JOSEPH R PETRUCELLI, CPA/CFF/CGMA/ABV, FCPA, CVA, MAFF, PSA, CFE JONATHAN R PETERS, PH.D Copyright © 2017 by John Wiley & Sons, Inc All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com Requests to the Publisher for permission should be addressed to the 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for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002 Wiley publishes in a variety of print and electronic formats and by print-on-demand Some material included with standard print versions of this book may not be included in e-books or in print-on-demand If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com For more information about Wiley products, visit www.wiley.com Library of Congress Cataloging-in-Publication Data is available ISBN 9781119074076 (Hardcover) ISBN 9781119220039 (ePDF) ISBN 9781119220022 (ePub) Cover Design: Wiley Cover Image: © Pung/Shutterstock Printed in the United States of America 10 Contents Foreword vii Acknowledgments ix About the Authors xiii Preface xv Introduction xix Chapter 1: Government and How It Works Chapter 2: Public Finance and How Government Creates Cash Flow 61 Chapter 3: Accounting for Government 117 Chapter 4: Who Works in Government and What Is Their Motivation? 191 Chapter 5: Fraud in Public Agencies: Horse Trading or Stealing? 247 Chapter 6: Corrupt Policies and Actions 325 Chapter 7: Policing of Public Corruption and Fraud 371 Chapter 8: Final Thoughts 401 Appendix: Tables Index 457 497 v Foreword I T SEEMS LIKE GOVERNMENT CORRUPTION is in the news every day and the public’s opinion of those representing us is very low People are frustrated with politicians and their policies, but most of us just complain and go on about our business My good friend Joe the “800-pound friendly gorilla” Petrucelli decided to something about it A dedicated accounting professional, Petrucelli put together this book based on his years of investigating various frauds and applied that to the problems we see in our government Waste, fraud, and abuse of power are all things that thrive in the darkness but quickly wither in the light of day Government should be held accountable to the people, and the best way to that is for the people to understand how government works In many ways, the government is transparent in its reporting, but not transparent enough according to Petrucelli and his coauthor, Dr Jonathan Peters More transparency is only going to come about through understanding what all the information coming from our government representatives means When there is understanding, there are questions, and where there are questions, transparency had better follow Fraud can be prevented, but it may have less to with reminding people of their ethical responsibilities and more to with procedures that let people know that they will be caught if they cheat The concept of the 800-pound friendly gorilla—someone providing powerful oversight—should be applied to government as much as it is in well-run companies Now Petrucelli and Peters are doing just that —Walter A Pavlo, Jr President of Prisonology, LLC Forbes.com Contributor Coauthor of Stolen Without a Gun vii Acknowledgments T O WRITE A BOOK MEANS someone believes in your ideas and vision Sheck Cho, Pete Gaughan, Connor O’Brien, and Wiley: Thank you for making this project a reality To Brien Jones at NACVA, thank you for your continued support To my partner, Timothy Piotrowski, 35 years of friendship, respect, and strong core values—without your continual support this book would not have become a reality To the Moth, as I know him, Walt Pavlo, living proof that one bad choice does not define a person’s character Thank you for all your support, the wonderful foreword, and the inputs you made to this book CSI students, faculty, and staff: Thanks for re-creating me and allowing me to share in your current and future successes Your energy, your support, and the team spirit are second to none To my coauthor, Jonathan Peters, your insight, your support, and all your efforts made this book a reality Professor Pat Galletta: Thank you for taking time to proofread and for all you for the students at CSI and allowing me to be part of that To Jonathan Capp, not only my drummer for life but my friend as well Thank you for your support, the wonderful suggestions, and edits to help get the book to completion To Bob Morrison, the smartest government accountant I know Thank you for all your checking and cross-checking and for the long-standing friendship we continue to enjoy To Assemblyman and friend, Robert Karabinchak, thank you for your efforts to create accountable government, for continuing to fight for transparency, and for emphasizing the importance of creating “numbers that don’t lie.” To my staff at PP&D, Lynn, Brian, Joe Z., Joe M., Priscilla, Mom, Jennifer, and anyone else I’ve missed, thanks for your loyalty and support My second family To my Mom and Dad, thanks for all your support and making believe that “I think I can” means you can as long as you’re willing to put the time and ix x ◾ Acknowledgments effort in To my in-laws, thanks for all the years of support To my two boys, Joey and Matt, I love you and enjoy watching you grow each and every day Thanks for your support To my wife, Angela, who gives me the freedom to be me and reminds me of the importance of family Thank you for your patience To all of those virtuous public servants who show up every day and work to make our government institutions Your service inspires our work and your selfless dedication is one of the few things that keep us hopeful for the future of government enterprises We hope you all achieve 800-pound friendly gorilla status and that you use that power to make our government institutions accountable and efficient Joseph R Petrucelli To Joseph Petrucelli, my coauthor, whose guidance and inspiration was critical to the completion of this work His boundless energy and endless ideas drew out many concepts and thoughts from me that have enriched this work My hope is that our writing will inspire further discussion as to the potential solutions for corruption and mismanagement in our government institutions To the public servants and elected officials that served with me or worked for the various public agencies I have served or work with Your endless good and bad examples pepper this work and enriched our discussion, making it all the more accurate I cannot say it has all been good, but it all has been informative and educational for me To my colleagues in the field of public finance and economics The growing need for our services in government service is becoming more critical as society and elected officials defer key public finance decisions to a later date We need to step forward into the policy debate and provide clear and objective analysis of our financial challenges I hope, as a profession, we can develop tools and techniques to help our society pick through the political mire and help us all find reasonable solutions for our government financial challenges that are fair, practical, and equitable To my Mom and Dad: You are both at the core of my being Dad, you still inspire me from Heaven with your life examples of honesty and integrity You were an 800-pound friendly gorilla if there ever was one Mom, you were my first and best copy editor I hope this work reflects well on the time you spent working with me All errors that remain are due to my flaws, not your training To Caroline and Adam, my children, you both continue to inspire me and make me try to be a better person and a better father Sorry for all the lost time when I was typing and could have done more with you Sorry for the Acknowledgments ◾ xi missed meals when I was off working on government matters and attending town meetings I hope that you both have long lives full of adventure and success; I have all the best dreams for you both Maybe this book will convince you that public service is an honorable and important use of one’s time To my wife, Nancy, the patient observer of this herculean effort and my endless sounding board for book topics and issues You have been there through all of my years of government service and academic work You put up with all that comes from being married to a crazy professor who actually serves as an elected official Your integrity, wit, taste, and clarity of thought have made this work more precise, more fair, and more grounded in perspective Jonathan R Peters About the Authors Joseph R Petrucelli, CPA/CFF/CGMA/ABV, FCPA, CVA, MAFF, PSA, CFE (CPA in New Jersey, New York, Pennsylvania), is a well-known expert in the area of forensic accounting He is a founding partner of PP&D Accounting Services Inc and Fraud Forces Inc., where he provides forensic accounting, tax, and consulting services He is called upon frequently as an expert witness on valuation, labor negotiations, and fraud His client list includes large public agencies, major corporations, and multiple municipal unions and governments He authored Detecting Fraud in Organizations (Wiley) He is a popular adjunct professor at the College of Staten Island of the City University of New York, where he teaches accounting-related courses on a regular basis and assisted in the development of a graduate-level forensic accounting course He frequently lectures on fraud risk and ethics He is a former New Jersey real estate commissioner and is actively involved in various nonprofit work Jonathan R Peters, Ph.D (Fair Haven, NJ), is a professor of finance in the Business School at the College of Staten Island of the City University of New York and a member of the doctoral faculty in the Ph.D programs in economics and earth and environmental science at the CUNY Graduate School He is also a research fellow at the University Transportation Research Center at the City College of New York Dr Peters has served as an expert on panels at the National Academies of Science and is a subject-matter expert in the areas of transportation finance, road pricing, and the privatization of public assets He has recently published in Research in Transportation Economics, the Journal of Public Transportation, and the Transportation Research Record of the National Academies of Science He also has served as a member of the Borough Council of the Borough of Fair Haven, New Jersey, for the past 10 years He currently serves as president of the Borough Council xiii Preface “The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.” —Thomas Jefferson T HE 800-POUND FRIENDLY GORILLA SPIRIT is back, and joining him in writing this book is Professor Jonathan Peters In Detecting Fraud in Organizations, the idea was to use the gorilla to deter, detect, and prevent fraud in all organizations but with a focus on the private sector In this book, the same level of thinking will be applied to government and public entities With the addition of Professor Peters, a whole other dimension will be brought to learning about the existence of mismanagement and fraud in the world of government The 800-pound friendly gorilla metaphor refers to creating a self-governing spirit The gorilla lives in groups The gorilla eats foliage, leaves, bamboo, and fruits, and it does not have to kill to eat The gorilla will recklessly pound on its chest, hoping to scare off its enemy to avoid the fight The gorilla cares for its young Despite all this, the perception is often that the gorilla is strong and forceful in order to achieve its objectives The author’s reference to the 800-pound friendly gorilla is not a one-person focus but, rather, involves the spirit of all interested concerns The 800-pound friendly gorilla that will be continually emphasized throughout this book is to remind the reader that it’s not about catching fraud and mismanagement after the fact It’s all about setting the proper ethical self-governing tone in the people involved in the process, by ensuring that they understand the consequences of a bad choice before they make it Good people bad things, but maybe if they better xv Index Employee benefit plans, 160–161, 233 Employee Fraud, 279, 434, 446 Employee Relations, 226–227 Employee Retirement Income Security Act (ERISA), 161, 220 Employee satisfaction, 236 Enabler, 3, 12, 21–22, 24, 131, 146, 163, 315, 325, 332, 338, 359, 364–365, 378, 418 Ending cash balance, 164 Energy Deregulation, 365 Energy tax, 129, 475 Enforcement and Compliance: Tax Evasion, 77 Enforcement Gaps, 371, 387–395 Enron, xxiii, xxix, 6, 134, 203, 253, 274, 294, 299, 361, 365, 369, 375, 378, 404 Enterprise fund, 158–159, 166, 303 Entitlement, xxx, 14, 18, 127, 341, 344–346, 348, 435 Entitlement versus Earned, 345 Environmental Protection Agency, 47, 197, 258 Environmental Protection Agency (EPA), 47, 197 EPA, 47, 197–198, 489 Erie Canal, 110 ESPN, 333, 367 Ethical behavior, xxiii–xxiv, 3, 114, 127, 150, 152, 170, 253, 371, 384 Ethical credibility, 200 Eurozone, 352, 356 Evaluation, 58, 103–104, 167, 174, 224, 236, 264, 276, 278, 311, 344, 427, 497, 513 Ex-Im, 58 Examiner, 13, 109, 164, 200, 210, 304, 312, 331, 367, 394–395, 403, 443, 446, 452, 454 Excise tax, 28–29, 71, 78–79, 91–92, 460–461, 466, 471–472, 487–488, 490, 496, 501–502, 506 Expectation gaps, 120, 127, 371 Expected Revenues and appropriation, 102 Expenditures, xxv, 10–12, 30, 32, 38–39, 40, 45, 59, 66, 82–83, 96, 98, 101, 104, 121–123, 126, 128, 130–131, 137, 139–141, 153, 155–156, 162, 164–166, 168, 171–174, 176–177, 183–184, 208, 212, 215, 231–232, ◾ 503 264, 276, 279, 285, 297, 301, 309–311, 350, 353, 377, 381–383, 388–389, 392–394, 413–418, 421, 438, 512–513, 515–517 Expense reimbursement schemes, 313, 314–315, 446 Export-Import Bank, 58 External accountants, 175 External auditors, 125, 389 External pressures, xxxix, 24, 109, 113, 167, 172, 299, 381 Extrinsic fraud, 250 Exxon Mobil, 310 Failure to Meet Specifications, 318 Fair market value, 157, 173 Fair values, 173 Family member, 169, 270, 308, 332, 490 Fare, 8–10, 66, 89, 295, 366 Fare Structure, Farebox recovery, 89 Favoritism, 226, 319, 364, 445 Federal budget, 28–30, 33, 178, 256 Federal Bureau of Investigation, 409 Federal Employees Compensation Act Fraud, 435 Federal Fire Prevention and Control Act of 1974 (15 U.S.C 2201 et seq.), 141 Federal fuel taxes, 64, 275 Federal Government, xvii, 2, 20, 23, 25, 27–29, 31–35, 37–39, 41, 46–48, 63, 84–85, 91, 132, 144, 147, 167, 169, 178, 212, 252, 256, 258, 269, 273, 275, 279–280, 282–283, 285–286, 302, 307, 324, 409, 411–439, 459, 469, 473, 476, 499, 503 Federal Home Loan Bank Board, 363 Federal Programs, 28, 185, 279, 311 Federal Receipts, 28–29 Federal Reserve, 26–27, 32, 38, 48, 60, 147, 149, 262, 290–292, 344 Federal Reserve Bank, 27, 48 Federal Reserve Board, 26–27, 48, 291 Federal Reserve System, 26–27, 48, 147 Federal Reserve Transparency Act of 2015, 27 Federal Tax, 64, 66, 76, 90, 95–96, 178 Federal Trade Commission, 47 Federal-Aid Highway Act, 64 504 ◾ Index Fee-based Systems, 67, 100 Fees, xvi, xxxix, 5–6, 28, 30, 33, 42, 47, 49– 50, 56–57, 61, 63–67, 69, 71, 73, 77, 79–80, 85–86, 89–90, 93, 98–102, 110–111, 115, 130, 147, 155, 159, 171, 174, 177, 206, 210, 256, 271, 274, 333, 365, 376, 412, 414–416, 422, 432, 442–443, 459–462, 464, 466–468, 470–472, 474–476, 478–480, 482, 484, 486, 488, 490–492, 494–496, 498, 500, 502–508, 510 FHLBB, 363 FICA, 349, 470, 487 Fictitious expense reimbursements, 314 Fictitious Revenues, 416 Fiduciary fund, 121, 126, 153, 160, 183 Finance debt, 159 Financial accountability, 127 Financial accounting standards board (FASB), 123 Financial assets, 148, 291 Financial assurance, 110 Financial Cap, 70 Financial communication, xxvii, 131, 163, 173, 182, 186, 277, 426 Financial condition, xxvi, 38, 87, 103, 108, 110, 149, 154, 173, 180, 267, 276, 422 Financial Integrity Act of 1982, 376 Financial Management: Theory & Practice, 82 Financial manipulation, 134, 140 Financial overseer, 148 Financial position, 37, 62, 82, 104, 123–124, 128, 138, 182, 316, 422 Financial rating agencies, 103 Financial ratios, 179–180, 511 Financial Reporting Behavior, 374 Financial reporting practices, 117, 185 Financial Reporting Risk, 381 Financial reports, 69, 118, 129, 424 Financial review, 103 Financial statement communications, 184 Financing activity, 69, 165 Find me a solution, don’t restate the problem principle, 299 Fine revenues, 99 Fiscal accounting aspect, 124 Fiscal controls, 129 Fiscal Discipline, 24, 37 Fiscal Federalism, 28, 84–85, 87 Fiscally independent, 125 Fishbowl accounting, 84 Fitch, Standard and Poor’s and/or Moody’s, 103 Five Categories of Fraud, 413–415, 417, 419, 421 Five-step process, 176 Fixed assets, 156, 166–167, 172, 421 Fixed Assets and Long term debts: selfbalancing accounts, 166–167 Fixed Cost, 7–8 Fixed Rate, 63 Fixed-rate tax, 79, 460 Florio acquisition, 69 Florio administration, 68 Follow the money, 70, 166, 296, 346, 414 Follow-the-money, 70, 136 Following the money and the policies, 117 Forbes.com, vii, 245, 407, 456 Foreign Corruption Practice Act, 99, 146 Forensic examiner, 164 Forensically Accepted Generally Accepted Accounting Principles Assumptions (FAGAAPA), 69 Form 2439, 394 Form 4136, 394 Fort Lee, 204 Fraud and mismanagement, i, iii, xv, xix–xx, xxiii–xxviii, xxx–xxxi, xxxiv, xxxvii, 2–3, 5, 11–13, 16, 18, 22–23, 32–34, 38, 41, 58–59, 62, 70, 82, 99, 102, 113–114, 118–119, 123, 125, 127–128, 131, 139–140, 143–146, 149–151, 154–155, 159–160, 164, 171, 175–176, 179, 186, 196, 199–202, 208, 210, 211, 214, 217, 248–249, 251, 260–264, 270, 273, 276–279, 282, 290, 298, 300, 302–303, 306, 311, 319, 321, 326–328, 336, 338–340, 347–350, 357, 360, 364, 367, 372–373, 378–379, 383, 389, 391, 395, 397, 401, 424–425, 428–429, 431, 433–435, 437, 439, 441, 443, 445, 447, 449–451, 453, 455–456, 459 Fraud detection, 202, 380, 403, 426–427, 454 Fraud deterrence, 380 Fraud Examiners Manual, 304 Fraud in Employment, 247 Fraud in factum, 250 Fraud in Purchasing, 247 Index Fraud on the market, 250 Fraud prevention, 114, 226, 234, 380, 426, 454–455 Fraud prevention measure, 114, 455 Fraud professionals, 160 Fraud Schemes, 220, 235, 253, 313–314, 427 Fraudster, xxxv, xxxviii, 5–7, 11–12, 20–22, 33–34, 69, 94, 120, 129, 143, 170, 196, 199, 215, 217–219, 222, 226, 233–234, 240–241, 243, 249, 260–261, 263, 268, 297, 299–300, 303, 306, 315, 331, 336–337, 340, 346, 372, 378, 380, 389, 391, 396, 402–403, 414, 416, 418–419, 422–425, 428, 432, 438, 454 Frederick Douglass, 203 Fredrich Nietzsche, 175 Freedom of Information and Open Public Records Act, 248 Freedom of Information Law, 398 Freeholders, 44 FTC, 47 Full accrual basis accounting, 122 Full disclosure, 27, 168, 174, 394, 453 Full disclosure principle, 174 Fund accounting reporting, 123 Fund assets, 160 Fund balance, 70, 82, 104, 126, 128–129, 131, 136–137, 152–153, 156, 159, 164–166, 183, 192–193, 350, 381–382, 417–418, 421 Fund financial statements, 124, 126, 183, 185 Fund fixed assets, 166 Fund long-term assets, 166 Funds operations, 124, 131 Future expected obligations, 136 Future obligations, 30, 124 GAAP, xxvii, 121, 157, 165, 175, 271, 372 GAAP-based accrual method, 121 GAO, xvii, 25, 27, 118, 161, 189, 248, 269, 279, 307, 311, 323–324, 350, 375, 398 Gaps in Federal, State, and Local Rules, 371 Garden State Parkway, 75, 77, 115 GASB, 121, 123, 125–127, 129–130, 135, 152–153, 155, 159, 163–164, 187–189, 271, 350 ◾ 505 GASB statement No 1, 123 GASB statement No 4, 123 GASB statement No 6, 121 GASB statement No 27, 135 GASB Statement No 31, 163 GASB statement No 34, 126, 152–153, 159, 164 GASB statement No 54, 152–153, 155, 350 GASB statement No 55, 123 GASB statement No 61, 127 GASB statement No 62, 123, 126 GASB statement No 65, 129 GASB statement No 68, 135, 271 Gasoline Tax, 63–64, 79–80, 381, 476 GE Capital, 99 General (Current) Fund, 154 General fixed assets, 166 General Fund, 42, 64, 67–68, 99, 123, 152–156, 159, 274, 350, 476, 496, 498 General ledgers, 121, 431 General long-term debts, 166 General obligation bonds, 103, 109, 111, 180 General Re, 149 General Services Administration, 47 General-purpose local government, 125 Generally Accepted Accounting Principles, 69, 157, 271, 372, 383 George W Bush, 283–284, 405, 510 George Washington Bridge, 68, 204 Ghost employee fraud, 446 Glass-Steagall Act, 299, 362, 364–365, 378 Going concern, 52, 166, 168, 170, 172, 176, 273 Going concern accounting principle, 166 Golden handcuffs, 202 Goldman Sachs, 26, 148, 299, 311 good roads movement, 63, 275 Goods and services, xxxv, 44, 50, 59, 100, 112, 158, 160, 316, 320, 329, 336, 350–351, 359, 415, 432, 434, 438, 440, 449, 481, 496 Gordon Conwell, 408–409 Gordon Gecko Accounting, 134–135, 137 Gorilla, vii, x, xv, xvii, xx, xxxv–xxxvi, xxxviii, xl–xli, 15, 21, 25, 125, 150–151, 161–162, 181, 186–187, 196, 200–203, 205, 209–211, 215, 245, 253, 257, 288, 330–331, 333, 335, 506 ◾ Index Gorilla (Continued) 338, 340, 343, 358, 364, 366–367, 376, 390, 412, 414, 426–427, 455 Government, i, iii, v, vii, ix–xi, xiii, xv–xvii, xix–xxvi, xxviii, xxx–8, 10–73, 76, 78, 80–96, 98–104, 108–114, 116–136, 138–160, 162–188, 191–194, 196, 198, 200–202, 204, 206–208, 210–212, 214, 216, 218, 220, 222, 224, 226, 228, 230, 232, 234, 236, 238, 240, 242, 244–245, 248–249, 251–254, 256–263, 265–267, 269–283, 285–289, 292–293, 295, 297, 299–300, 302–304, 306–307, 311–315, 317, 319–324, 326–330, 333, 335–338, 340–352, 355–359, 361–366, 368–369, 372–373, 375–377, 381–385, 387–388, 394, 398, 401–407, 409–413, 415, 435, 438–439, 459–462, 464, 466, 468–470, 472–474, 476, 478, 480, 482, 484–486, 488, 490, 492–494, 496, 498–504, 506, 508–511 Government accountability office, xvii, 118, 248, 269, 279, 323–324, 350 Government accounting, 118, 121, 124, 152, 177, 271 Government Accounting Standards Board, 271 Government auditing standards, 118 Government benefits, xxxv, 281, 292, 345 Government Employees’ and officials’ responsibility to find inconsistencies and irregularities, 127 Governmental entities, xvii, xix, xxiv, xxviii, 3, 11, 20, 27, 35, 43–44, 49, 51–52, 56–58, 63, 89, 94, 104, 108–109, 111, 113, 118, 122, 129, 140, 192–194, 259, 403 Government final reporting, 123 Government Finance, xvi, 27, 62, 65, 113, 134 Government fund types, 152 Government funds, 69, 121, 151, 153–154, 158, 166, 184, 349 Government funds and financials, 69 Government insolvency, xvi, 166 Government intervention (override), 147 Government revenue sources, 29, 89, 91, 93, 95, 99, 101, 103, 113, 459–460, 462, 464, 466, 468, 470, 472, 474, 476, 478, 480, 482, 484, 486, 488, 490, 492, 494, 496, 498, 500, 502, 504, 506, 508, 510 Government shutdowns, 166 Government units, xxxix, 5, 41, 63, 69–70, 136, 151, 167, 170–171, 338, 488 Government workers, 122, 193, 206 Government-wide financial statements, 124, 182, 184 Government-wide financial statements summary, 182–184 Governmental accounting standards board, 123, 138 Governmental fund accounting, 121 Governmental funds, 126, 129, 137, 151, 153, 155, 157, 159, 161, 163, 165, 183–184 Governor Walker, 206 Gramm-Leach-Bliley Act, 364–365 Grand Corruption, 336 Gravina Island Bridge, 256–257 Great Atlantic and Pacific Company (A&P), 81 Green Acres Program, 28 Greenfield projects, 53 Gross domestic product, 172, 178, 296, 301, 351 GSA, 47–48 Guarding the hen house, 117 Gulf Coast, 282 Haliburton, 358 Hamilton, Massachusetts, 408 Handbook, 128, 217, 315 Hedge Fund, 5, 148, 306, 362 Hezbollah terrorists, 144 Hierarchy, 3, 5, 123 High spending/high service model, 112 Highway Funding, 28 Hillary Clinton, 260 Hiring Process, 210, 213, 215–220, 225 Historical cost principle, 173, 453 Historical perspective, xxvi, 118, 424 Homeland Security, 312 Horse trade risk, 84 Horse-trade, 274 House of Representatives, 15, 28, 43, 167, 188, 375 Howard Smith, 149 Hudson-Bergen Light Rail, 54, 56 Hudson-Bergen Light Rail system, 54 Index Human resource, 127, 214–240, 244–245, 278, 288, 455 Hurricane Katrina, 282 Hypothetical assumptions, 177 Identify, record and communicate (IRC), 143, 186, 273 IFRS, xxvii, 175, 271 Illicit practice, 170 Improper payments, 307 Income approach, 70 Income statement, 69, 172 Inconsistencies and irregularities, 127 Incurred and paid, 124 Independent auditors, 175 Independent authority, 298, 364–366 Independent party, 162, 424–425, 431, 435–436, 441 Individual control, 169 Individualized Risk, 329 Inflated revenue or inflows, 128 Inflation, xvi, 30, 36–37, 57, 60, 66, 68, 172, 206, 210, 274, 295, 301, 347–349, 368, 446 Inflow and outflow of cash, 136 Inflow of funds, 69 Inflow of resources, 123 Inflows and outflows, 41, 112, 124, 136, 143, 152–154, 165, 176, 187 Information leaking, 436 Inherent risk, 330, 374 Inspector General, 51, 265, 312 Instability risk, 330 Institutional investors, 148 Insufficient Delivery, 318 Insurance company, 147–148, 250, 270, 301–304, 355, 362, 482 Insurance fraud, 250 Insurance policies, 148, 291, 388 Integration risk, 385 Interest cost, 38, 68, 70, 103, 513 Interest income, 158, 350 Interfund loans, 159, 163, 350, 392 Interfund transfers, 135–136, 372 Interim financing, 110 Interim gigs, 345 Internal control, xxii, xxxiv, xxxix–xl, 3, 24, 30, 36, 121, 125, 127, 151, 161–162, 185–186, 198, 230–231, 233–236, 263, 276, 279, 286–287, ◾ 507 289, 323, 330, 357, 373–379, 382, 389, 404, 444 Internal management, 175 Internal Revenue Service, xxxii, 71, 99, 156, 161, 364, 405, 411 Internal Revenue Service Publication 946, 156 Internal service fund, 158–160 International accounting standards board, 175 International Business Times, 358 International financial reporting standards, xxvii, 169, 271 Interpretation and application, 118 Interstate, 68, 204 Intrinsic fraud, 250 Inventory acquisitions, 146 Inventory inflation, 446 Inventory shrinkage, 446 Inverted Arch, 405–406 Investing activities, 165, 514 Investment earnings and transfers, 155 Investment Management within the Public Entity, 233 Investment pools, 163 Investment trust funds, 163 Iran contra Scandal, 279 Iran-Contra scandal, 143–146 IRS Publication 510, 92 ISIS, 346 Islamic State of Iraq and Syria, 346 James G Watt, 259 James Madison, 401 Jeffery Load, 363 Jerry McGuire, 136 Jersey City Redevelopment Agency and Municipal Utilities Authority, 341 Jimmy Carter, 259, 284 Joan Claybrook, 259 John F Kennedy, xxiii, 197, 335 John Glenn, 363 John McCain, 284, 363 John Merla, 339–340 John Poindexter, 144 Joint venture, 52, 169 Journal and Adjusting entries, 102 Journal entries, 135, 154–159, 163–164, 173, 254, 382, 393, 419, 422, 425, 446 508 ◾ Index Keown, Martin & Petty, 82 Ketchikan, Alaska, 256 Kevin Roberts, 333 Key management, 169 Key Regulations, 371–372 Kick the can down the road approach, 69 Kickbacks, 50, 244, 305, 316, 434, 441–443, 448 Kinds of Fraud, 247 Kinsey Goman, 217 KISS, 254 Kleptocracy, 327 Know management, 185 Lieutenant Colonel Oliver North, 144 Limited-liability companies, 147 Limits on Corruption, 325 Lincoln, 84, 117, 363 Lincoln Savings and Loan Association, 363 Load Factor, 9–10 Local Government, xxxiv, xl, 1, 3–5, 23, 28, 37, 43–46, 65, 83–85, 92–93, 98–99, 112, 123, 125–126, 135, 138, 140, 158, 166, 211, 273, 280, 283, 285, 287, 333, 336, 338, 341, 485, 488, 493, 498 London Congestion Zone, 77, 100 Long Island Railroad, 268 Long range planning, 176 Long-term costs, 58, 122 Long-term debt, 82, 156, 166–167, 182 Long-term planning, 69 Lord Acton, xli, 25, 456 Lou Holtz, 191 Low spending/low service model, 112 Low-Show Jobs, 269 Lyndon B Johnson, 283 Labor, xiii, 7, 17–18, 27, 60, 66, 160–161, 178, 205, 207, 210–211, 220, 228, 232, 254, 258, 278, 345, 353, 360, 416, 438–439, 444, 493, 499 Labor substitution, 438 Laffer Curve, 5–6 Laissez fair model, 260 Lead by Example, 225 Leaky bucket, 78 Learning ratios, 177 Lease obligations, 103 Legal budgets, 176 Legally separate organization, 127 Lehman Brothers, 69, 172 Leonardo DiCaprio, 304 Leveraged, Levers on Value, 61 Liability, iv, xxv–xxvi, xxxi, 11, 33, 35, 41, 69–70, 81, 101, 114–115, 122–124, 126, 128–131, 133–134, 136–138, 147, 149, 153–154, 164–166, 172–174, 182–184, 207, 211, 216, 240, 250, 274, 290, 303, 310, 348, 355, 359, 376–378, 381–383, 388, 405, 413, 415–417, 419–420, 422, 456, 514 Liberal, 262, 295, 298 Libertarian, 259 Machiavellian, 145 Machiavellian thinking, 145 Macquarie Bank of Australia, 56 Mail fraud, 250, 303 Major rating agencies, 103 Malcom Baldrige Jr., 86 Management, xvii, xxiv–xxvi, xxxi, xxxv, xxxviii, xl, 5, 7, 10, 15, 24, 37, 42, 45, 49, 52, 55–57, 77, 82, 99, 103, 109, 115, 119–121, 124–127, 129, 133, 140, 146, 151, 167–170, 172, 175, 178, 185–186, 192–194, 196, 201–203, 210, 214, 216–218, 220, 226–227, 231, 233–237, 239–240, 242–243, 253, 263–264, 267, 269, 271, 276–278, 285–288, 323, 331, 339, 346, 348, 357, 360, 366–368, 373–375, 379–381, 383–385, 404, 418, 424–426, 428, 434, 450–453, 491, 507, 509, 511 Management approach, 119 Management discussion and analysis, 126, 167 Management discussions and analysis, 125 Management effectiveness, 129 Management practices of the governing body and administration, 103 Journal entry fraud, 446 Journal of Accountancy, 389 Journalizing, 129, 393 Journals, 121, 393 Judgment based, 175 Judgment-based decisions, 119 Judgment-based principles, 168 Junk bond, 273 Index Management-driven motivations, 121 Managerial accounting, 139 Managerial accounting and finance, 139 Manipulate the date and extent, 304 Manipulation of the bid, 436 Maoism, 17 Marginal tax rate, 79, 96–97 Marijuana, xxvii, 91, 113, 286 Market approach, 70 Market values, 94, 173, 419–421 Marx, 17, 259 Marxism, 16–17 Marxism-Leninism, 17 Mass transit, 7–8, 10, 12, 28, 44, 66–67, 80, 88–89, 274, 278 Matching, 36, 41, 81–83, 101, 114, 165, 168, 174, 232, 235, 280, 300, 347, 398, 415, 452–453 Matching principle, 81, 83, 174 Matching the expertise with the need, 300 Material effect, 127 Material misrepresentation, xxviii, 249, 344, 395 Materiality, xxviii, 11, 167, 175 Materiality principle, 175 Maturity Date, 40, 157 Maturity matching, 41, 82–83, 114, 165 Maurice Greenberg, 149 Mayor, xl, 4, 44, 176, 204, 207, 335, 339–340, 368, 386 Meals and entertainment, 307–309 Mean, iv, vii, ix, xvi–xvii, xxvi–xxvii, xxxiv, xxxviii, xli, 7, 11, 19, 23, 30, 34–35, 66–67, 79, 85, 94, 100, 102, 105, 108, 115–116, 118, 127–128, 131, 135, 140–141, 143, 145, 150, 154, 165, 168, 171, 177, 180–181, 200, 230–231, 249–251, 266, 271, 273–274, 281–282, 287, 290, 297, 299, 309, 318, 327, 335, 339, 344, 348, 350, 355–357, 364, 366, 380, 382, 385, 387, 396, 398, 401, 412, 416, 426, 428, 434, 453, 463, 473, 477, 484, 511 Measuring approach, 118 MEDI, 349 Median, 180, 293, 302, 353 Medicare, 307, 346, 349, 470, 480, 487, 492, 497 Metropolitan Transportation Authority, 10, 55 Milton Friedman, xxxvi MIRD, xxviii, xxx, xxxv, 249–251, 265, 344, 374, 395 ◾ 509 Mischaracterized expense reimbursement, 314 Mismanagement, i, iii, x, xv, xvii, xix–xx, xxii–xxxi, xxxiii–xxxix, xli–xlii, 2–3, 5, 11–13, 16, 18, 22–23, 30, 32–34, 38, 41, 58–59, 62, 70, 82, 85, 99, 101–102, 113–114, 118–120, 123, 125, 127–128, 131, 134, 139–140, 142–146, 149–152, 154–155, 159–160, 164, 168, 171, 175–176, 179, 186, 193–194, 196, 199–203, 208–209, 211, 214, 217, 244, 248–249, 251, 259–268, 270, 272–273, 276–279, 282, 289–290, 294, 296, 298, 300–303, 306, 311, 319, 321, 325–328, 335–340, 344, 347–350, 357, 360, 364, 367, 372–373, 375, 377–379, 383–384, 389, 391, 395, 397, 401, 404–408, 424–425, 428–429, 431, 433–435, 437, 439, 441, 443, 445, 447, 449–451, 453–456, 459 Mismatch bidding, 438 Misrepresented progress payment fraud, 439 Misstatement of the true financial picture, 129 Misuse or misapplication, 124 Modified accrual, 121–122, 126, 129, 154, 183–184 Modified accrual accounting, 122, 129, 183 Modified accrual basis, 121, 154, 184 Modified accrual recognition, 122 Modified cash basis of accounting, 154 Monetary unit, xxvi, 168, 172, 453 Monetary unit principle, 172 Money Laundering, 20, 412 Money trail, 136, 166 Monitoring oversight, 127 Monopolistic, 59, 145, 147, 149, 188, 302 Monopolistic control, 145, 147, 149 More Likely Than Not, 105–106, 272, 339 More than likely than not thinking, 67 Mormon Church, 20 Mortgage-backed securities, 148, 362 Mt Everest, 411 MTA, 10 Multiple reimbursements, 315, 436 Municipal and corporate bonds, 103 Municipal Financial Disclosure, 342 Municipal government, 4, 44, 139–140, 147, 157, 206–207, 342, 415, 460 Municipalities, xxix, 3–4, 44–45, 92, 205–206, 285, 339, 341, 441, 494, 506 Mutual funds, 148, 510 510 ◾ Index NASCAR, 312 National Center on Addiction and Substance Abuse, 305 National Conference on Public employee retirement systems, 161 National Council on governmental accounting (NCGA ), 152, 350 National Council on Governments, 350 National Defense, 28 National Economy, 28 National Government, 1, 37, 254 National Highway Safety Administration, 259 National Interstate and Defense Highway Act (Public Law 84–627), 64 National Rifle Association, 258 National Treasury Employees Union, 364 Navy, 312, 324, 333, 358, 367 NCGA, 152–153, 158, 350 NCGA 1, 153 Negative budget variances, 153, 156 Negative invoicing fraud, 432 Nepotism, xxxv, xxxix, xlii, 14, 16, 18, 247, 333, 335, 360–361, 368, 445, 455 Net assets, 138, 419 Net investment in capital, 129, 133 Net pension liabilities, 184 Net position, 123–124, 126–129, 131–135, 136–139, 182–183 Net revenue, 73, 78, 159 Net Worth, 290, 292–293, 296, 392, 474 Never underestimate the enemy principle, 299 New Jersey, iv, xiii, xxvii, 3–5, 13, 23–24, 28, 44, 46, 49, 54, 65, 68–70, 75, 81, 92–93, 102, 129, 131–134, 136–140, 173, 197, 204, 250, 275, 278, 285, 298, 329, 333–335, 339–340, 353–354, 377, 385–386, 420, 441, 458, 504 New Jersey Department of Transportation, 68 New Jersey League of Municipalities, 4, 441 New Jersey Turnpike, 68–69, 75 New Jersey Turnpike Authority, 68–69 New York, xiii, xxxi, 3–4, 10–11, 44, 48–50, 55, 65, 68, 87, 110, 147–148, 161, 189, 197, 204–205, 207, 270, 278, 282, 322, 329, 334, 336, 377, 408, 458, 468, 504, 507 New York City, xxxi, 10–11, 50, 55, 87, 197, 205, 207 New York City Central Labor Council, 205 New York City’s High Line Park, 87 New York State, 48–49, 110, 147, 161, 189, 270, 336, 468, 504, 507 New York Times, 68, 148, 322, 365, 408 NewDay Financial, 99 Nicole Brown, 388 Nigeria, 327 NJ.com, 188, 341, 368, 386, 399 No downsizing, 280 No-Show, 247, 269–270, 322 No-Show Jobs, 247 Nominal GDP, 172 Non-investment-grade risk, 104 Noncash expenses, 138 Noncurrent liabilities, 133, 137 Nongovernmental organizations, 22 Nonmarketable securities, 35–36 North Africa, 352 Not collecting deductibles or copayments, 305 NTEU,364 Nurturing Homegrown Gorillas, 200 O.J Simpson, 388 OASDI, 350, 499 Obama for America, 297 Off-balance-sheet financing, 274 Office of Thrift Supervision, 312 Oligarchy, 14, 17 Oligopoly, 14, 145, 358, 365 OMB Circular A-123, 185, 189 OMCL Council-Manager Plan, OMCL Small Municipality Plan, One time budget fixes, 69 One-shot, 34, 64, 68–70, 82, 101, 139, 141–143, 164, 171, 176, 276, 377, 382, 392–393, 417 One-shot revenue solutions, 68 One-shot Thinking, 69 Onetime anomaly, 102 Open Secrets, 298 Operating costs, 110, 155–156 Operating cycle, 171 Operating excess, 164 Operating revenue, 166 Operational and capital assets, 129 Operational and fiscal accountability, 124 Operational and fiscal accounting disciplines, 124 Index Operational budget, 141 Operational expenditures, 83 Operational inefficiency, 77 Operational risk, 382–384 Organizational Symphony, 403, 405 Oscar Wilde, 168 Other accounting mechanisms, 129 Outflow of resources, 123, 398 Outputs and outcomes, 119 Overbilling fraud, 432 Overlapping principle, 280 Oversight, vii, xix–xx, xxix–xxx, xxxiv–xxxvi, xxxviii, 17, 19, 22, 24–26, 28, 30, 33, 36–38, 45, 48–50, 59, 62, 99, 108, 113, 118, 123, 125, 127, 140, 144, 146, 149, 150, 153, 161–163, 175, 179, 185–187, 193, 198–200, 208, 215, 217, 223, 248, 255, 257, 271, 279, 287–288, 307, 326, 330, 333–335, 337, 340, 343, 363, 365–367, 369, 373–376, 379, 383–384, 386, 397, 401, 406, 411–414, 418, 425, 428, 437, 442, 446, 450–451, 454–455 Overstated expense reimbursements, 315 Owner equity, 62 PAC, 297–298 Padding expenses, 141 Padding Fraud, 432 Painkillers, 306 Paperhanging fraud, 432 Parallel, 7, 128, 404 Parallel interest conflicts, 128 Parliamentary Democracy, 19 Parliamentary Monarchy, 15 Parliamentary systems, 195 Partially Tax Deductible, 308 Parties of interest, 170 Partnership, xx, 1, 23, 51–53, 55, 57, 59, 143, 147, 180, 188, 210, 274, 340, 496 Pass-the-buck principle, 280 Patronage, 258, 333, 335–336, 342, 361 Pattern bargaining, 207 Patterns in Expense Frauds, 319 Paulo Coelho, 247 Pay as you go thinking, 136 ◾ 511 Payment for referrals, 305 Payroll fraud, 446 PBS, 47 Peer review, 153, 375, 443 Pension Benefit Guaranty Corporation (PBGC), 161 Pension funds, 148 Pension plans, 81, 134, 160–161 Performance Management, 236–237 Performance measurement, 119, 450 Performance obligation, 176 Permanent Fund, 157–158 Personal Income, 5, 28, 79, 90, 94–96, 295, 355, 466 Personal income taxes, 90, 94 Personality Behaviors, 2, 120, 168, 173, 185, 282, 289, 367 Personality testing, Personnel Data, 220, 240 Perspectives, occupations, and positions (POP), xli, 279 Peters & Kramer, 73, 75, 77 Petty Corruption, 337 Phantom vendor, 446 Phishing/spoofing, 447 Pigou, 88, 259 Pigouvian Tax, 87–88 Pigouvian Taxes and Subsidies, 87 Planarian worms, 384 Planning and Supervision Engagement Risk Behavior, 374 Planning, directing, and controlling, 119, 357, 418 Polarize Principle, 300 Police chief, 330 Policies and Job Descriptions, 222 Policy issue, 167, 262, 310, 405 Political Action Committee, 298 Political appointees, 169, 191, 194, 197, 204, 212–214 Political Corruption, 269, 326, 333, 336, 338–340, 361 Political Culture, 338, 342–343 Political operatives, 191, 204, 212–214 Political Risks, 328–329, 356–360 Political turmoil, 66 Politicians, vii, xxxiv, xxxix, 9, 25, 37, 57, 146, 191, 195, 204, 207, 212, 269, 274–275, 283, 336, 338, 341, 358, 376 Ponzi Scheme, 21, 60, 254, 349 512 ◾ Index Population, 3–4, 16, 22, 41, 86, 90, 99–100, 102, 115, 167, 198, 206, 255–256, 259, 282, 290, 328, 331, 338–339, 341, 347, 362, 407, 458, 516–517 Pork barrel, 194, 257 Port Authority, 49, 161, 204, 277, 329, 333–335 Postemployment benefit plans, 160 Postemployment plan, 169 Potential manipulation, 129, 141 Potential manipulation of funds, 129 Poverty, 260–262, 341 Power, vii, x, xxix–xxx, xxxiii, xl, 3–4, 13–23, 25–26, 28, 42, 44–49, 58, 60–62, 64, 67, 102, 128, 131, 145–146, 175, 192–194, 196–197, 202, 209, 212–214, 222, 228, 254, 257–258, 262–264, 269, 274, 281–282, 285–287, 289–291, 293, 295–299, 302, 325–328, 330, 332, 334–336, 339, 344, 353, 355–356, 360–361, 364, 383–384, 397, 401–402, 447, 454–456 PPP, 52–53, 55–58 Premature revenue recognition, 254 Present-value, 68 Present-value inflation, 68 President Obama’s 2015 proposed spending, 177–179 Presidential Form of of Government, 15 Prevent fraud, xv, xx, xxiii, xxvii–xxviii, xxxiv, 2, 11, 34, 62, 70, 85, 102, 114, 118, 125, 139, 150–151, 155, 175, 179, 186, 196, 238, 276–277, 282, 299, 311, 321, 367, 372, 379, 383, 407, 424, 426, 453, 455 Price is not right bidding, 438 Primary government unit, 125 Principle-based, 69, 113, 144, 152, 170, 282, 287, 289, 321 Principle-based thinking, 69, 287, 289 Principles, xx, xxvi–xxviii, 17, 19, 69, 123, 144, 147, 153, 157, 167–168, 175, 214, 253, 260, 271, 273, 280, 286, 289, 299, 302, 307, 342, 372–373, 376, 383, 387, 402, 453 Principles-based ethics, 144 Private Agency, 46 Private contractor, 54–55, 112 Private Corporation accounting, 118 Private entities, 50–51, 56, 147, 180 Private sector, xv, xxi, xxxv, 7, 47, 51–53, 59, 62, 87, 139, 143, 145, 147, 149, 154, 180, 185, 198–199, 201, 259, 280–281, 361, 389 Private-purpose trust funds, 163 Proactive thinking, 69, 182, 300, 321, 372, 405–406, 447 Probable cause, xxxi, 330, 387, 390 Professional skepticism, xxiii, xxx, xxxviii, xl, 58, 111, 113, 118, 123, 135, 138, 151, 155–156, 162, 168, 181, 187, 276, 299, 300, 304, 321, 344, 379, 401, 423 Profitability, 77, 174, 515 Program income, 452 Progressive rate structure, 79 Progressive tax system, 79 Prohibition, xxxvii–xxxviii, 310, 328–329, 343, 378 Property Taxes, 5, 79, 92–94, 102, 460, 465, 494 Proportional tax structure, 79 Proposed spending, 172, 177 Proprietary and fiduciary funds, 121 Proprietary funds, 122, 126, 129, 153, 158, 183 Public agency, v, x, xiii, xvi–xvii, xxv, 3–4, 25, 46–47, 103, 118, 139, 158, 187, 204, 212, 247–250, 252–256, 258–268, 270–272, 274, 276–278, 280, 282, 285–288, 290, 292, 294–296, 298–300, 302, 304, 306, 308, 310, 312, 314, 316, 318, 320, 322, 324, 331, 344, 348, 373, 375, 456 Public and private sector, 143 Public Authorities, 1, 25, 48–50, 60 Public Building Service, 47 Public Citizen, 297, 365, 373 Public entities, xv–xvi, xxix, 6, 11, 23, 25, 34, 44, 66, 82–83, 98, 114, 125, 135, 150, 154, 171, 181, 192, 196, 199, 201–203, 210, 211, 214–215, 219–220, 222–224, 227, 229–230, 233–234, 236, 240, 276, 280, 307, 315, 321, 338–339, 342–343, 349, 352, 356–357, 360, 372–373, 377, 379, 382–384, 392–393, 395, 397, 402, 421–423, 425, 438, 442, 448, 453 Public Entity Cash Flow Analyzer Tool, 417 Index Public Finance, v, x, xvi, 57, 61–64, 66, 68, 70, 72, 76, 78, 80, 82–84, 86, 88, 90, 92, 94, 96, 98, 100, 102, 104, 108, 110, 112, 114, 116, 207 Public funds, xxxi–xxxii, 52, 57, 73, 114, 147, 193, 208, 214, 233, 248, 257, 335 Public gorillas, 196 Public Operations, 7, 9, 11, 516–517 Public sector, xxv, 51, 56, 59, 147, 150, 180, 199, 206, 245, 253, 270, 280, 336 Public services, 45, 51, 58, 63, 67, 112 Public serving agency, 248 Public Union, 205, 207–210 Public-Private Partnership, 1, 23, 51–53, 55, 57, 210, 274 Publicly traded companies, 149 Puerto Rico, 273 Purchasing and Billing Fraud, 432 Purchasing Power, 64, 274, 383 Quai-insurance product, 148 Quantifiable Evidence, 270 Quasi-liabilities, 124 Rasmussen, 405 Rate of return, 160, 162, 347–348 Rating categories, 104 Ratio and tables from a government perspective, 179–181 Real GDP, 172 Reasonable assurances, 120, 125, 143, 331, 374 Reasonable Person, xxxi, 98, 114, 151, 170, 228, 272–273, 281, 321, 372, 391 Receipt of money, 33, 136, 320, 350 Reconciliation of government-wide and government funds financial statements, 184 Reconciliation process, 124 Record of action, 167 Record-Keeping Requirements, 309 Recurring expenditures, 139 Recurring revenues, 139 Red flag #1, 176 Red Tape, 24, 98, 286–288, 404 Redevelopment agency, 340–341 Redevelopment planning, 87 Regression analysis tool, 180–181 Regressive taxes, 79, 92 Regulation, xli, 27, 44–46, 52, 88, 93, 124, 135, 144, 147, 153, 159, ◾ 513 161–162, 164, 185, 194, 259, 268, 270, 277–278, 282, 293, 303, 325, 328, 336–338, 349, 361–362, 364–365, 371–373, 375, 378–379, 383, 391, 398, 414, 422, 452, 463, 473, 478 Regulation and Supervision, 325 Regulatory agencies, 169, 372, 398 Regulatory standards and structures, 117 Regulatory structures, 148, 326 Related entity, 69, 93, 128, 134, 192, 394, 419 Related party, 68, 169–170, 335–336, 393, 416, 422 Related public entities, 34, 135, 382, 392, 421 Related statements, 136 Related-party transaction, 70, 135, 168, 422 Relative costs, 67, 77 Relative tax, 67 Religion, 20–21, 261–262, 338, 345 Religious imperialism, 346 Renumbering fraud, 447 Repo 105, 69 Request for Proposal, 317, 318, 436, 439 Reserve Sewer Capital Development Account, 410 Reserving, 129, 136, 377 Responsible party, xxix, 175, 186 Restricted assets, 129 Results-based approach, 120 Retained Earnings, 62, 165, 459 Retirement Assets, 234 Reuters, 149, 189, 377 Revel Casino, 386, 420 Revenue, xvi, xxi, xxxii, 2, 5–12, 23, 25, 27, 29–30, 33–35, 37–38, 42–43, 45, 47–49, 52–54, 56–57, 61, 63–64, 66–74, 76–78, 81–83, 85–91, 93–95, 98–104, 109–114, 121–124, 126, 128, 130–131, 133, 137–139, 141, 143, 146, 151, 153–157, 159, 161, 164–168, 171–172, 174–183, 189, 206, 249, 254, 257, 272, 274–276, 279, 282, 285, 297–298, 301, 303, 307, 310, 344, 347, 350, 355, 360–361, 364, 376–378, 381–382, 388, 391–395, 398, 405, 411, 413–418, 420–421, 433, 446, 452–453, 459–460, 462, 464, 466–468, 470, 472, 474, 476–478, 480, 482, 484, 486, 488–492, 494, 514 ◾ Index Revenue (Continued) 496, 498, 500, 502–504, 506–511, 515–517 Revenue bonds, 103, 109–111 Revenue estimates, 30, 141, 176 Revenue flow, 69 Revenue Functions, 23, 25 Revenue Recognition, 69, 151, 168, 174–176, 254, 392, 420, 453 Revenue recognition principle, 174 Revenue stream, 47, 53, 69, 99, 110–111, 141, 166, 176, 360, 414, 416, 515 Revenue tools, 38, 45, 86, 98, 102 RFP, 317–318, 428, 436 Ridership, 8–10 Rigging Specification, 318 Right question, xxxvi, xl, 108, 125, 326, 381 Risk averse, 36, 199, 386 Risk Found Behavior, 374 Risk of fraud, 125, 339, 380, 427, 434, 450 Rita Crundwell, xxxix, 156, 176, 253, 339, 410, 441 Roads, 44–45, 48, 51, 63–64, 66–69, 77, 83, 109–110, 114, 147, 156, 274–275, 322, 346, 381, 476, 493, 505, 511 Robert Durando, 204 Robert S Beecroft, 197 Ronald Reagan, 144, 259 Ronald Regan, 284 RSCDA, 410 Rubik’s Cube, 375, 379 Rule-based, xxvii, 22, 170, 200, 279, 287 Russia, 327 Sales Tax, 41, 79, 89, 99, 460, 466, 476, 478, 480, 486, 495–496, 501, 504, 506–507 Salient point, 127 Sam Antar, 277 Samuel Clemens, 181 San Francisco, 44, 312 Sarbanes-Oxley Act, 228, 365, 375, 404 Saudi Arabia, 327 Saul Alinsky, 260, 301 Saul Goodman, 263 Scheme, 6, 21, 60, 99, 113, 145, 149, 220, 222, 234–235, 241, 250–251, 253–254, 269, 302, 305–306, 313–316, 318–319, 322, 333, 343, 349, 410, 414, 418–422, 427, 431–432, 437, 439, 446 Scorecard of performance metrics, 119 Scott Sullivan, 138 Scott Walker, 206 SEA, 119, 121, 123, 125, 127, 167, 174, 187, 283, 511 SEA performance, 119 SEC, 47, 116, 188, 472, 480, 482, 488 Second amendment, 261 Securities and Exchange Commission, 47, 99 Segregated fund thinking, 163 Segregation of responsibilities, 108 Seigniorage, 60 Self-interest conflict, xxxiv–xxxv, 127 Senator Robert Byrd, 193 Separated Funding, 64 Separation-type principle, 101 Sergio Bichao, 162 Service accomplishments, 119 Service delivery planning, 120 Service efforts, 119, 121, 123, 125, 127, 167, 174, 187, 283 Service Efforts and Accomplishments, 119, 121, 123, 125, 127, 167, 174, 187 Service efforts and accomplishments (SEA) reporting, 119, 121, 123, 125, 127, 167, 174 Services are not covered, 303 Services are not performed but are billed, 302 Servicing capacity, 123 Seven elements of financial position, 123 Short-term actions, 69 Short-term repurchase agreement, 69 Show me the money principle, 101 Sick-time buyouts, 162 Sign-off by third parties, 108 Simple Inflation, 66 Single-selection fraud, 438 Single-source bidding, 438 Skepticism, xxiii, xxx, xxxviii, xl, 5, 20–21, 25, 27, 58, 66, 70, 94, 102, 108, 110–111, 113–114, 118, 123–124, 135, 138, 151, 155–156, 162, 168, 176, 181, 187, 193, 200, 208, 248, 257, 276–277, 282, 285, 299, 300, 304, 321, 335, 339, 344, 350, 356, 362, 379, 401–402, 423, 441–442, 451, 454, 456 Index Skimming, 252, 431, 433 Small Purchase Pattern, 319 Snap shot view, 103 Social benefits, 67, 72, 88 Social costs, 72–73, 76–77, 88 Social Security, xvi, 28, 35, 79, 90, 95, 101, 210, 221, 264–266, 347–351, 354, 394, 470, 480, 487, 492, 497, 499 Social Security System, 264 Socialism, 18 Sociopaths, 407 Soft skill arsenal, 108 Soft skills, 62, 152, 186, 192, 200, 231, 326 Soft-skill approach, 151 Soft-skill commonsense thinking, 151–152 Sole-member proprietorships, 147 Sole-source contract, 156 Sound bite, 141, 172, 300, 340 Sound bite principle, 300 SOX, 375, 377 Spain, 56 Special and extraordinary items, 164–165 Special assessment funds, 158 Special assessments, 158, 499 Special purpose funds, 123 Special Revenue Fund, 155–156 Special-purpose districts, 25 Special-purpose local government, 125 Special-purpose taxes, 93 Specific-purpose-restricted or committed funds, 155 Spending, xvi, xxxviii, 1–2, 6–7, 11, 23–24, 28–30, 33–35, 38–39, 41–42, 44, 52, 61, 64–67, 70–71, 85, 100, 104, 111–112, 115, 121–122, 136–137, 140, 142, 159, 165, 167, 171–175, 177, 179–180, 184, 194, 212, 215, 230–232, 256–257, 264, 272, 274, 277, 280–281, 292, 294, 297, 307, 311, 323, 335, 346, 351–353, 355–356, 372, 376, 381–382, 389, 397–398, 410, 415–416, 500–501, 515–517 Spending of money, 136 Spending plan, 24, 167 Staffing for Adequate fire and emergency response (SAFER grant), 141 Standard & Poor’s, 37, 103, 105–106 State and local income taxes, 98 State Budget Solutions, 377 ◾ 515 State fuel taxes, 64, 74 State government, xvi, 1–2, 4, 23, 41–42, 63, 66, 68, 91, 94, 101, 123, 125, 160, 183, 285, 377, 383, 469 Statement No 63, 138 Statement of activities, 124, 126, 128, 182 Statement of cash flows, 126, 183 Statement of changes in fiduciary net position, 126 Statement of fiduciary net position, 126 Statement of revenue expenditures, 126 Status of Global Mission 2013, 408 Steph Solis, 162 Steven Spielberg, 84 Stick, xix–xx, 179, 203–204, 384, 406 Stick-resistant, 203 Stolen Without A Gun, 406 Structural debt, 166 Structural deficiencies, 165 Structural deficit, 30, 69, 131, 173, 176 Stuart E Jones, 197 Sub government units, 170 Sub governmental unit, 170 Subprime lending, 11, 30, 147, 276, 294, 404 Subprime Lending crisis, 11, 30, 147, 294, 404 Subprime loan tranches, 148 Subsequent losses, 148 Subsidizing, 67, 89, 158, 452 Substitution approach, 70 Summary reconciliation, 136 Superstorm Sandy, 11, 282–283, 424 Supply and demand, 11, 85 Supply-side economic theory, Support risk, 384 Sydney Opera House, 411 Systematic Risk, 329 Systems and structures, iii, xvii, xx, xxiii–xxiv, xxviii–xxx, xxxiv–xxxv, xxxviii, 2–3, 24–25, 27, 30, 34, 37, 62, 70, 114, 118, 125, 146, 150–152, 155, 162, 168–170, 173, 177, 185, 187, 196, 210–211, 287, 290, 307, 315, 317, 320, 326, 339, 346, 363, 372, 401, 404, 406, 414, 425, 443, 450–451, 454 T account approach, 102 Tax avoidance, 115, 250, 515 Tax bases, 80 516 ◾ Index Tax break, 81 Tax burden, 67, 90, 96, 99, 102, 208, 350, 406 tax costs, 67 Tax evasion, 77–78, 89, 115, 250 Tax Foundation data, 64 Tax Fraud, 20 Tax implications, 80 Tax levies, 157 Tax rates, 6, 64, 93–96, 99, 171, 349, 458, 495, 500 Tax Revenue, 6, 67, 71, 76, 85, 87, 98, 130, 155, 177, 275, 347, 489 Tax Revenue Sources, 67 Tax-free rate, 87 Taxation, xvi, 41, 47, 61, 67, 71–74, 78, 80, 86, 88, 90–96, 99–100, 113, 115, 147, 167, 171, 210, 460, 463, 467, 469, 472, 478, 484, 500, 509 Taxes, xvi, xxxi, xxxix, 4–7, 10, 12, 22, 28–30, 33, 41–42, 47, 63–67, 69, 71–74, 76–81, 85–102, 108, 111–113, 115, 134, 141–142, 149, 155, 157, 159, 171–172, 174–175, 177–178, 189, 206, 208, 210, 232, 238, 240–241, 256, 261, 272, 274–275, 281, 294–296, 303, 311, 346, 353, 355, 357, 376, 381–383, 385–386, 411, 414–415, 420, 422, 459–462, 464–466, 468–478, 480–488, 490–492, 494–504, 506–508, 510, 515 Taxing structures, 79 Teapot Dome Scandal, 358 Technical risk, 385 Ted Stevens, 256 Tennessee Valley Authority, 48 Terrorism, 346–348, 357, 412 Texas, 65, 76, 275, 334, 365, 377 The Basic Rules of Forensic Accounting, 69, 71, 73, 77, 79, 81, 83 The Big Dig, 55 The Carrot and the Stick, 203 The Firm, 7, 54, 72, 82, 169, 252–253, 267, 270, 272, 303, 375 The Great Depression, xvi, 283 The hedging principle, 82 The Hill, 296, 324 The Keating Five, 363–364 The New York State Thruway Authority, 110 The odd and unsettling mix of public and private capital, 147 The Securities and Exchange Commission, 47, 99 The Talmud, 113 Theocracy, 19–20 Third party reasonable person views, 170 Thomas Jefferson, xv, 27, 60–61 Thomas P Di Napoli, 161 Three J’s, 168, 334 Three primary users of the government financial statements, 123 Time assumption, 168 Time value of money, 348, 359 Time-period principle, 172 Todd M Johnson, 408 Tom Cruise, 303 Tone at the top, 3, 44, 113, 144, 149, 173, 254, 285, 289, 364, 379, 389, 406, 451 Too big to fail, 147–148, 175, 412 Too Good to Be True, xxxviii, 38, 300, 362, 404 Totalitarian, 22 Town, xi, xl, 4, 44–46, 87, 92–93, 112, 162, 256, 339, 410, 420, 462 Township, 4, 44, 462 Tradeoff interest rationale, 85 Training and development, 234 Transaction price, 176 Transfer payments, 84, 102 Transferring, 52, 64, 129, 140, 149, 377 Transit, 7–12, 28, 44, 54–55, 63, 66–67, 76, 80, 88–89, 274–275, 278 Transit riders, 9, 67 Translation, 167, 359 Transport for London, 77 Transportation infrastructure, 64, 67 Treasury bills, 35 Treasury Borrowing Advisory Committee, 39–40 Treasury Department, 312 Trial balances, 121 Trickery, 316 Triple tax exempt, 110 Trucking industry, 258 Trust fund, 35, 64, 122, 160, 163, 264, 274–276, 350, 392, 476 Trustee model, 195 Truth-or-dare bidding, 438 Tulip mania, 38 Index Turing Pharmaceuticals, 306 Turnpike authority, 49, 68–69 TVM, 348 Tweed Courthouse, 50 Tyco, xxiii, 375 U.S Census Bureau, 65, 199, 255 U.S Congress Joint Committee on Taxation, 80 U.S Department of Defense, 64 U.S Department of Transportation, 212 U.S Department of Treasury, 40, 80, 234 U.S Government, 15, 20, 26, 39–40, 60, 90, 147, 149, 188, 212, 248, 258, 344, 351, 412 U.S Senate, 28, 41, 84, 102, 188, 375, 436 Uber, 281 Unassigned or unused credits, 313 Uncommitted fund balances, 156 Understanding people, 192–203 Unearned revenue, 124, 133, 417 Unemployment Rate, 295, 345 Unfair advantage bidding, 436 UNICEF, 22 Union Worker, 205, 208, 210 Unions as Gorillas, 210–211 United Kingdom, 15, 39, 466 United Nations, 22 Unrestricted, 129, 133, 153, 156, 431 Unrestricted fund balance, 153 Unsystematic risk, xvi, 329 Up-and-running systems, 64 USA Today, 295 Useful life, 82, 156–157 User fee, 5, 64–66, 71, 80, 86–87, 93, 98–100, 110, 113, 177, 206, 476 User Fee versus Tax, 86 Valenta, 334 Variable Cost, 7–8 Verification, xxviii, xl, 36, 114, 136, 167, 279, 331, 388, 423 Vermont, 377, 458 Veto, 24, 28 Village, 4, 44, 340 Virginia’s General Assembly, 78 Virtuous public servants, x, 191, 211 ◾ 517 W-2, 240, 394 W-7, 394 Wall Street, 134, 208, 275, 301, 324, 358 Wall Street Journal, 275, 323, 358 Walt Pavlo, ix, 406–407 Warning Operations Resolve Management System, 384 Warren Buffet’s Berkshire Hathaway Inc., 149 Warren Harding, 358 Washington Examiner, 312 Washington Post, 257, 327, 333, 367 Washington, D.C., 63, 114, 281 Watchdog.org, 412 Watching, x, xxiv, xxx, xxxv, xl, 2, 62, 117, 187, 211, 223, 225, 230, 288, 333, 390, 426 We Know better, 280 Wealth Distribution, 290 Wealth inequality, 262, 290, 292, 344, 356, 383 Wedding Plan Benefits, 233 Whatever I Need Principle, 69 Wheeling, 298 Where the patient goes for the service, 304 Whistle-blower, xxxii–xxxiii, 176, 201, 276, 286, 332, 411, 434, 441, 443, 455 Who Are the Police?, 371 William Gaddis, 325 Wire fraud, 251, 303 Wisconsin, 206, 496 Wollman Ice Skating Rink, 55 Worker’s compensation, 232 Working capital, 33–34, 101, 153–159, 165, 378, 417, 514 WorldCom, 138, 172, 375 WORMS, 384–385 Xanadu, 386 Xerox, 273 Yellow book, 118 Zero-based budgeting, 66, 311 Zigzag, 404 ... mismanagement and fraud will continue in today’s governments The words greed and need rhyme The two words work hand in hand in developing an understanding of where mismanagement and fraud might exist in government. .. corruption, malfeasance, and misuse and may or may not be fraud Understanding mismanagement and the intent of the parties involved in it leads to skeptical thinking and close scrutiny Both of the authors... key step in correcting areas of mismanagement and fraud in government The “carrot and the stick” comes to mind when thinking of the establishment REVENTING xix xx ◾ Introduction of government