Professor Elam

DISD Audit

The DeLoitte Report on DISD is at this hyperlink.  We will be devoting considerable time to studying these recommendations as an example of the lack of proper internal controls in the audit class this fall. 
Apparently the adjusting entries brought the books into enough compliance to do so but this is an unusual case in my opinion.

Parkinson's Law

I read a piece today in which Mike Gorbachev referred to Parkinson's Law.

This is simply the idea that work expands to fill the time allotted for its completion. The reality of this is the extraordinary time needed when a bureaucracy is involved. Court cases, patent applications, hearings before the FCC, can all take years for what is essentially a statement of facts already known. An anecdotal example is that the US Navy operates numerous ships powered by nuclear reactors, France and Japan use nukes for their energy programs, yet the US nuke program has now been ground to a halt and is paying $140 a barrel for fossil fuel to its enemies. 

 Lo and behold as I read I came across Student Syndrome. The fact that this occurs so often in the same time and place makes light of the reality.  It is so named because students typically ask a professor for more time to complete a project. My experience is that they typically will ask for the very last day possible to present an assignment.  The problem of course is that this eliminates the time buffer they have requested. Indeed, in class this past week students asked to present Tuesday and Wednesday rather than Monday. I inquired if in fact they intended to wait until Monday night to do the assignment.  The alternative would be to huddle on Friday by internet or e mail, assign tasks, and have them done by Sunday.  Student syndrome points up that the buffer of time evaporates as at the last minute there is no buffer left.  Indeed this happens again and again. A book report can be assigned for the entire semester yet at the last week books are still unread, this is occurring right now in some classes.

Other examples include the frenzy of last minute tax return filing. And indeed that works both ways. While tax return preparers complete the circle by also asking for more time before an IRS audit, an IRS auditor remarked to me that most of the returns they look at have actually been filed with an extension of time to eventually get the return done. So like the client, the preparer continues the student syndrome.   In my lifetime I have seen 'tax season'  and the frenzy of last minute work go from April 15 to August 15 and now to Oct 15, the literal last date allowed by law if an extension is filed on April 15.

The point is that when one dispenses with the time buffer, there is no time for reconsideration or checking the results 24-48 hours after completion. This would of course fall under the costs of appraisal in a Quality Circle. A failure to do so will lead to an external failure during the presentation. And indeed this is an external failure cost.  If the presentation is poorly done, and on the last day of class, there is literally no opportunity for a second chance for the student to show that they have learned from a mistake and improved. And so when asked for a referral on their ability after the fact we professors can only say,
beats me. .........

Shift in Consumer Behavior

In his Quality Points Dr. Deming tells us that consumers do not complain, they switch. Hmm, maybe not all the time Dr.  Check out this story on how passengers refused to disembark from an airplane when the flight was cancelled.

In fact they stayed on the plane throughout the night, a sit in reminiscent of the 1960s on American college campuses if you will.

Okay, guess where this happened? And on what airline-surely in the US where protests are common or perhaps say France which always goes its own Gallic way, right?  Nope, how about on a Chinese airline among Chinese citizens!  Gee I thought this was a Communist country where one dared not defy authority?  Perhaps the increased press coverage prior to this summer olympics has something to do with emboldening passengers. But perhaps we are just seeing a global shift to a consumer driven economy.  People are tired in every country of indiscriminate cancellation of flights. So here it is - another  reason China is scrambling to build so much infrastructure in their country!  Communist leaders are well aware that the citizens know how the rest of the world lives. The failure to provide services and infrastructure could start with  a quiet protest like this.  But if it spreads to the billion residing in China, even the Chinese Army will not be able to stop it.  So, we have Communists, as Jim Rogers says in Adventure Capitalist, acting like capitalists.  They certainly saw what happened to Gorbachev in Russia and Calcesceau in Romania-he and his wife were shot dead by firing squad, without a trial.

My piont-ponder what this means for totalitarian governments all over the globe. Not to mention companies that fail to respond to consumer shifts in behavior.

Dennis Writes Ben Bernake

Dear Ben Bernake

Mr. Ben Bernake,
Chairman Federal Reserve Washington, DC

Dear Ben

It didn’t work.

I know that’s a ‘cut to the chase, right to the gut’ summary but, the time for hope is past. Yesterday the Dow Industrials blew right through the January ‘panic low’ and the March ‘rescue Bear Stearns and everything will be okay low.’ In short, that guarantee to Morgan to buy Bear Stearns that required one fourth of the assets of the FED balance sheet was for naught. It is time to re think the strategy. I realize that you are surrounded by people that believe you can actually ‘fix this’ and will do anything to humor you to cast favor in their direction. But frankly you did not make this mess but could get blamed for not ‘fixing it.’ By the way, how bad are things now, let’s review.

If the Dow Industrials matches the decline of the financial Exchange Traded Fund XLF, it will shortly be at 8,000 as the XLF has declined 43% just since last April. But hey, the DOW is only down 18%, so far at 11,400. GM stock has collapsed 71% since last October. Ford stock sells for less than any Ford oil filter. Bond insurer AMBAC ABK is down from $90 last summer to less than $2. The biggest casino in Vega, MGM Grand has lost 65% of its value, now there is a consumer confidence indicator for you! Oil has hit a new all time high, gold recently did the same. It could get worse, the oil price could start down indicating we cannot afford to pay the cost of it, note that Exxon XOM has not gone to a new high suggesting that might happen. The dollar has lost 40% of its value since pre 9/11. Most everyone agrees that commodity prices are up with the dollar down. Bond holders are nervous about getting paid back in tiny US bucks. Oil has risen in price from $80 to $140 but demand is certainly not up 75% since last year. So the price ought to be about $80.

Now what are you going to do about it? Stop trying to everything to everybody. These guys on Wall Street got themselves in this mess, it is high time they were held accountable. Besides, Justice has already indicted two of the Bear Stearns traders so why rescue more of them? Show some courage. Bond interest rates are already up, the FED usually follows their lead. Raise rates one half a point. Call the Congressional leaders together and point out that caribou and polar bears do not vote, American voters have a habitat too. Get them to announce drilling in the Gulf and on Federal Lands. Everyone buys gasoline but everyone is not in Greenpeace. Showing the world we are taking responsibility for ourselves will bring oil prices in line and some new respect for the beleaguered buck.

Or you can do nothing. For a picture of what that will be like, gander at a few 1980-81 U S Newspapers. Sky high oil prices, rising unemployment, the DOW at 800, it was not pretty. And remember, Regan beat Carter 489 electoral votes to 49. The markets will take rates up if you don’t. In fact interest rates on most bonds are already going up. Trust me, if things are like this next January, the new President, not the polar bears, will pick your successor.

Dallas ISD Receives Negative Audit Report

The long awaited  audit report from Deloitte on DISD has been presented, and it is not pretty.  Clearly the report was delayed until after the $1 B + bond election, which passed.  Click to read the DMN article.  Numerous control failures were cited by the new audit firm which replaced KPMG, another of the big four firms in the world.  As the timeline shows, DISD blew through numerous CFOs over the last few years.  The failure to balance subledgers to the main ledger, perform bank reconciliations, account for grant money, the appointment of outside consultants.The consultants say it will take three years to get things corrected. My take, gee Jimmy Johnson went from 1-15 to the Super Bowl in three years and we won WWII in four. This is accounting not the Super Bowl.  Simply acknowledging that things are bad and we should do better is hardly an adequate response from the Superintendent or the Board.  The article notes that there are less than five CPAs on the entire staff to handle the $1 billion budget.

We are studying school communication in EDAD 5610 and accounting in ACCT 5020. This is a perfect case for both classes.  Please , if you have not, get to  the store and buy a copy of the Friday Dallas Morning News. This is a keeper. As a communication event this is worth studying.  AS an accounting event this is a disaster of Titanic Proportions.  Interestingly there is a photo of teachers protesting about their lack of a raise, apparently they were not inside listening to the report.

DLE

Just What We Needed ......

I know I know you have been waiting anxiously but did you know it was already here. Yes the team that has won three WORLD championships and is now well on its way to a fourth. They smashed Miami 49-0 just last week. Yep what the world needs now, Women's Football.

No no not women's cheerleaders for men's football, women's football.  Meet the Dallas Diamonds.

Shore Leave Extended for USS Reagan Sailors

About 100 sailors were left behind when the USS Ronald Reagan lifted anchor and sailed out of Hong Kong to avoid an incoming typhoon. Considering that there are 6,000 sailors on the carrier a statistcian would say that is an acceptable error rate (1.6%).  But perhaps not for the 100 that are now homeless in a strange port. We are studying crisis plans in Education and benchmarking best practices in Managerial.  Crisis planning is a serious concern for all given terrorist attacks, weather attacks such as we have had in China and the midwest USA, and any and all times in the military.  US Universities have recently grappled with this problem, How and who does one notify on short notice?  UNT has established a databank of cell phone numbers. Eagle Alert can send a mass phone alert to thousands of students and stakeholders in the event of an emergency. Imagine trying to do that with 6,000 sailors in hong kong, well that got 98.4% anyway.

Perotcharts.com

Yep like Freddie Krueger he is back.  Perotcharts.com  looks at how we spend money and what we get for it. He is concerned about the federal deficit and rightly so. However I doubt there is a way to make this a front burner issue. Fact is that politician use public money to buy votes for interest groups. This is why they do not want to let you invest your social security money, they want to control it. This is why they do not want to change the income tax system, they want to dispense favors with it.

At any rate take a look, one can learn a great deal from a good presentation, clearly this was professionally and painstakingly done.

Seven Emerging Research Universities

The move to spread the wealth (read research funds) heat up. In this link the Dallas Morning News

supports the three in North Texas, interestingly the other four are not mentioned. IN addition to UNT, UT Dallas and UTA, I would guess Univ of Houston, Texas Tech, UTSA, and UTEP. Too bad Texas State.

What Does it Really Cost?

In business classes we attempt to assess real or projected costs to projects. Educators do the same thing.  Here is an article from the Houston Chronicle 
deploring the Higher Ed  tuition increase in Texas. I will show you the UT response in class today. In addition we will look at the actual report of the Higher Coord Board CB though I am at a loss to find the numbers the Chronicle alludes to amid all the stats on the CB page.

But this is not the point. What is the real cost increase of attending UT Austin?  Earlier this week I read a plea from the UT President that the School was horribly underfunded as to research. We are studying communications, what is the truth?  What will be your reaction to the Chronicle story and then the UT response, which the Chronicle refused to run?  All of us grapple with the  famous dictum that  figures don't lie but liars....well you know.  And we all face some degree of disbelief when we parade numbers. What then can we learn about presenting our facts from two of the largest and most influential sources in Texas, the Chronicle and UT itself.

As Fox Says, we report you decide.