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I found your article on the federal banking regulations ("Playing Favorites," April) excellent and right on point. In my interactions with these regulators [as former chief accountant of the Securities and Exchange Commission], I found that they constantly failed to consider the transparency needs of investors and the capital markets, placing the interests of their banking constituents first and foremost.
In one meeting with the heads of the agencies, the chairman of one of the agencies asked me, "What's wrong if the banks fudge their numbers a little?" The federal agencies then proceeded to lobby Congress to pass legislation that handcuffed the SEC when it came to enforcing securities laws with respect to certain accounting practices of banks.
While the banking agencies agreed in a public statement to work with the SEC, the Financial Accounting Standards Board, and the American Institute of Certified Public Accountants to develop more-transparent accounting standards, behind closed doors they proceeded to do everything they could to tank the project. The project was recently dropped by the AICPA due to tremendous opposition by the banking regulators.
In reality, the federal banking regulators do not look out for investors and do not place a priority on their needs, but rather turn a blind eye to the type of practices that occurred at Enron.
Lynn Turner
Professor of Accounting
Colorado State University
Formerly SEC Chief Accountant
Via E-mail
Right on the Money
Your article "The Great Inflatable Service Bill" (April) was right on the money. Many other areas have the same or similar types of billing overcharges.
As a former cost-recovery specialist, I have experienced many of the situations Mr. Durfee mentioned. The fact is, generally, other than good will, there is no monetary incentive to issue accurate bills or invoices. Incorrect/incomplete invoices occur even though the billing function is repeated so many times that the billing department would know how to issue correct invoices.
If an inaccurate invoice happens to be discovered, it is corrected and the overcharge refunded. This approach does not take into account the (potentially) numerous other incorrect bills/ invoices. After the incorrect invoice is corrected, the vendor/supplier falls back into the routine of creating more incorrect invoices.
One solution is to incorporate a billing-accuracy policy into the contract/purchase order. This policy should include the method for determining accuracy and the consequences. The policy could be something like this: At the buyers' discretion, 10 invoices will be selected judgmentally from past invoices to be reviewed. The overcharge error rate (if any) on this sample would be applied to the total of all invoices for the period to yield an overcharge amount. Vendors with an error rate of .02 percent or less would be notified. Those with an error rate of .021 percent to .05 percent would have the overcharges charged back. Those with an error rate of .051 percent to .10 percent would have the overcharge plus the cost of the review charged back. Those vendors with an error rate greater than .10 percent would have the same chargebacks, plus they would be suspended for one year on first offense, two years on second offense, and so on.
Bill Kelly
Via E-mail
Correcting Baseball Stats
In "Squeeze Play" (April), there was one factual misstatement regarding Major League Baseball's new debt-service rule. As reported, 15 clubs were asked to present their financial plans in detail to the commissioner's office. However, after review and revisions (including pledges of additional equity, if necessary), fewer than 5 clubs would fall into the category of potentially not complying with the new rule by 2005.
As for inferences from critics that the revenue-sharing system isn't effective, those statements are either inaccurate, inconsistent, or just plain wrong. For example, I stated that the Marlins could not have won the 2003 World Series without revenue-sharing support. The team owners made both early- and late-season roster moves involving payroll commitments that exceeded their normal revenue resources. They have no other related-party interests (not the stadium, broadcasting affiliates, nor other commercial interests). To suggest that receiving tens of millions of dollars in revenue-sharing payments didn't matter ignores the plain facts—which certain "experts" enjoy doing in order to sell books based on long-held myths that titillate the sports media and the public.
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