Saturday, March 02, 2013


Unmasking The CAFR Scam In Every City, USA

8 Votes

As more and more cities, counties, districts, and states across America falsely declare their near- insolubility, bankruptcy warnings, fiscal deficits, and budgetary quandaries, I am left with the sinking feeling that “the people” just can’t wrap their heads around how to point out these misleading and downright fallacious claims made by their councils, mayors, and professional con-men in places of public trust.
And personally, I’m tired of watching…
So today I want to share with you a simple way to factually stand before your local or state political “leaders” and give indisputable proof that, when stating the “facts” about their own budget shortfalls, limited choices, and necessary raising of your hard-earned monies as taxation (revenue) to “balance the budget”, your own little criminal syndicate of elected mayors and council men and women are lying bold-faced to the entire citizenry through the act of subterfuge and omission.
This little factoid is uniform throughout the entirety of the financial structure of government, as reported in the audited Comprehensive Annual Financial Report and required by Federal and State laws. It is always reported in the same fashion and under the same heading as all other governments (municipal corporations). The figures are not disputable. The truth is unshakable. And yet the doublespeak will never end… For even as you present this one simple line item to the scoundrels themselves behind their raised and protective pedestals, they will still attempt to deny what is undeniable, be it in ignorance or in deceit; usually a mix of both.
So, here it is… a tool for all people to easily use:
Step 1:
First of all, you must find your city/county/district/or state CAFR, which can sometimes be challenging in and of itself.
A search on your favorite search engine of “Your City” “Comprehensive Annual Financial Report” “Year” will generally do the trick. You may need to add the state after the city, or you may need to go to your government’s website to find these CAFR’s. If they are not to be found online, then your government is required to hand over a hard-copy or digital copy to you upon request. It’s the law, folks!
Now that you have the CAFR in front of you, you are probably overwhelmed with all of the nonsensical figures, financial wizardry, and creative accounting that is presented in over 100 pages of a pure accounting nightmare.
But don’t worry, you can ignore all that. For our purposes, we are only concerned with one single page of this entire report. And this page is specifically listed in the index as  the “STATEMENT OF NET ASSETS“. This page is generally in the first 10-30 pages of the CAFR report, and will always be listed in the index.
For the purposes of this lesson, here is an example CAFR from the City of Pacifica, Ca.I found this with a search parameter of “Pacifica Comprehensive Annual Financial Report 2011″, and clicked on the 5th link down which took me to the finance department of the “City Of Pacifica” website.
Click on the “2011″  link to open the CAFR .pdf, and go to the index.
Here you will see, as with all other CAFR reports, an entry for the “STATEMENT OF NET ASSETS“, listed under the FINANCIAL SECTION, and under “GOVERNMENT-WIDE FINANCIAL STATEMENTS”. This tells us to go to page 17 of this particular Comprehensive Annual Financial Report to find our “statement of net assets”.
That’s it! This is the hardest part of the whole process.
Now breathe… it’s all simple from here on in – and quite an eye-opener!!!
Step 2:
Now that we are on page 17 (or your own CAFR page listing the “STATEMENT OF NET ASSETS” graph), we see a page full of large figures.
Don’t worry… you don’t need to know these. They are irrelevant to our goal. Fortunately, we are only concerned with the three or four line items that prove the budget lie and omission of the CAFR facts.
What we see here is a statement of three financial columns.
1. “Assets”
2. “Liabilities”
3. (Total) Net Assets.
In basic accounting, we add up the “ASSETS” and then subtract the “LIABILITIES”, which gives us our balance called “NET ASSETS”.
But we must remember, there is nothing at all “basic” about government accounting. In fact, it is the most complicated structure of obfuscation I’ve ever encountered. Berny Madoff would even be proud…
Step 3:
Now that we are familiar with the layout of this graph, and since we already know that comprehending government accounting is like untangling a mile-long set of Christmas lights that have been kicked around by a kindergarten class that just drank 20 gallons of Coca-Cola, we can fortunately find the few line items we actually need quite easily here.
Now, under the ASSETS column, we see that TOTAL ASSETS  are listed as:
Governmental Activities: $103,806,744
Business-Type Activities: $57,517,150
Totals: $161,323,894
***Note: “Business-Type Activities” may also be listed as “Non-Governmental Activities” or similar language. This represents government acting in the capacity of a corporation offering a “service” to the people, but not as “taxpayers”. Instead, this is a business that earns money, and the taxpayers are instead “customers” of government. In this way, government wears two hats. Often, as in Utah with its self-proclaimed “Alcohol Monopoly” – were government controls and profits as the only legal seller of high content alcoholic beverages – or in the case of “State Lotteries” run solely by State Governments as a monopoly, the government is acting as any for-profit corporation might, and taxpayers voluntarily purchase this service and products from government as “customers”. Thus, these types of governmental activities are considered “non-governmental” or in Pacifica’s case “Business-type Activities”.  For our purposes, this is certainly important to understand but not necessary to our stated goal. It is simply a way to transfer money out of the taxpayer base and into the business-base of revenues, leaving the taxpayer budget short.
Under the Liabilities column, we see TOTAL LIABILITIES listed as:
Governmental Activities$45,403,706
Business-Type Activities: $37,792,153
Totals: $83,195,859
We will come back to these figures in a moment, as the big lie is within this LIABILITIES section.
Finally, our TOTAL NET ASSETS are listed as:
Governmental Activities$58,403,038
Business-Type Activities: $19,724,997
Totals: $78,128,035
Assets minus liabilities equals total assets. But we must now expose the fraud written into these so-called liabilities…
Step 4:
Now, since I have written extensively on what all of these facts and figures mean within the full report of the CAFR, we will not be reading between the lines today. Again, we need not understand the whole financial report to understand the crime of omission happening in every government across America (and the world for that matter). All we need to know is this one method of “creative accounting”, and with it we have more ammunition than we could possibly need to call foul on our elected holders of public trust. So for now, don’t worry about all this other red tape. If you want to learn more about all of this, you can scour my articles or watch my movies for explanations of this CAFR information. Again, we need not get sidetracked with anything but these few line items that prove massive fraud on a national level.
Listed here are the ways in which these “totals” are restricted, invested, and unrestricted. But again, this information is irrelevant to our goal, for it is based on the lie we are about to expose. Without the continuity of the big lie, these “restrictions” mean nothing.
In order to understand this lie, we must now go back to the LIABILITIES section.
Remember, we only need to read this one graph called “STATEMENT OF NET ASSETS”. Nothing else matters for our purposes of establishing basic fraud through omission and obfuscation. So for now, ignore the rest of the CAFR.
Under the LIABILITIES section, we see a line item titled “NONCURRENT LIABILITIES”.
In our Pacifica City Corporation CAFR, these are listed as follows:
Due Within One Year:
Governmental Activities$4,283,958
Business-Type Activities: $2,458,072
Totals: $6,742,030
Due In More Than One Year:
Governmental Activities$38,527,849
Business-Type Activities: $34,108,234
Totals: $72,636,083
And there it is… Perhaps you still don’t see it, and that’s OK. For most people have hope and faith that government has integrity and honesty even within its own required Federal and State accounting principals. Perhaps you have even heard your mayor, council members, and even your governor talk about their “intent” to do right by the people? But in reality, nothing could be farther from the truth. For intent means nothing until it is written down on a paper, signed, notarized, and filed as a legally binding contract. Only then can the true intent of politicians be guaranteed. And only then can the law be broken – for a broken promise of ones good intentions is not against the law!
So what just happened here that is so darn eye-opening, as I claim?
Glad you asked…
For it can easily slip past your cognition if you aren’t ultra aware of what you are reading. In this case, the City of Pacifica has just listed its current assets and compared those assets to its future liabilities.
Why is this significant?
Well, imagine if you were reporting your own assets and liabilities to the IRS after it informed you that it required this information for an audit. And let’s say you wanted to play a creative accounting trick on the IRS to hide your real current asset holdings. While this little trick would actually be illegal for you to do, in government it’s perfectly OK and legal, and even promoted in standards of practice. After all, government wont punish itself for its own lies – for the lie is the basic foundation of government accounting as recommended by itself!!!
So when Agent Smith comes a knocking at your door and asks you for your STATEMENT OF NET ASSETS, you give him your list that you made, which includes the same creative accounting methods used by government. On your list you itemize all of your assets, including your home, your car, your equipment, and any other property you might own. You then list your bank checking and savings accounts and any liquid investments you have in your investment portfolio, just like government does. And once you’ve listed everything you can possibly account for as one of your assets that you have right now at this very moment in time, you then begin to list your liabilities.
And here is where the creative part comes in – the act of obfuscation and trickery to fool IRS Agent Smith into believing that you have more liabilities that effect your asset balance than you actually do. Here’s how that works…

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