“An emperor of a prosperous city who cares more about clothes than military pursuits or entertainment hires two swindlers who promise him the finest suit of clothes from the most beautiful cloth. This cloth, they tell him, is invisible to anyone who was either stupid or unfit for his position. The Emperor cannot see the (non-existent) cloth, but pretends that he can for fear of appearing stupid; his ministers do the same. When the swindlers report that the suit is finished, they dress him in mime. (acting out a story through body motions, without use of speech—Ed.) The emperor then goes on a procession through the capital showing off his new ‘clothes.’  During the course of the procession, a small child cries out, ‘But he has nothing on!’ The crowd realizes the child is telling the truth. The Emperor, however, holds his head high and continues the procession.”

The above is a plot summary from Wikipedia of the children’s tale, “The Emperor's New Clothes.” 

Let me tell you another tale about a modern day emperor with the initials H.P. I alluded to him last in my September 30th WebCPA column, "Too Many Emperors and Empires for Transparency.”  

He came to my attention again when I saw the following press release:
“Treasury Hires Accounting Firms Under the Emergency Economic Stabilization Act

“The U.S. Treasury Department today announced that PricewaterhouseCoopers LLP and Ernst & Young will assist the Department in the implementation of the Troubled Asset Relief Program authorized under the Emergency Economic Stabilization Act. Treasury hired PricewaterhouseCoopers on Thursday and hired Ernst & Young on Saturday.

“The firms will help the Department with accounting and internal controls services needed to administer the complex portfolio of troubled assets the Department will purchase, including whole loans and mortgage backed securities. PricewaterhouseCoopers will help the Department establish a sound internal control posture and Ernst & Young will provide general accounting support and expert accounting advice.

“The two agreements last until September 30, 2011. Treasury issued two requests for quotes from 12 firms on the General Services Administration's Federal Supply Schedules on October 8. The Department received six responses for each request and awarded contracts to PricewaterhouseCoopers and Ernst & Young. The initial orders are worth $191,469.27 and $492,006.95, respectively. More information on these contracts will be posted at https://www.fpds.gov (Federal Procurement Data System).

• Pricewaterhouse Coopers Contract
• Ernst & Young Contract”

The fees were disclosed by the Treasury, but a portion of the text of the contracts were blacked out. As soon as I saw the blackouts,  I became nervous about this emperor’s understanding of what constitutes actual transparency.

When I discussed this with a consultant I respect (I also worked with him previously), he pointed me to http://www.propublica.org/article/why-are-docs-from-the-bailout-being-redacted-1022, a hyperlink that discusses another Treasury contact and reads in part:

“The U.S. Treasury Department has decided against publicly releasing key details of the contract it awarded Bank of New York Mellon to keep the books for the government’s purchase of toxic securities. In a publicly released copy of the contract, the Treasury blacked out how much it will pay the bank for its role in the government's $700 billion taxpayer-funded bailout.

“The Washington Post first briefly noticed the redactions. Meanwhile, Bailoutsleuth, a site created by Mavericks owner Mark Cuban, has been tracking the redactions and flagging more examples.
“The government’s justification for blacking out the monthly fees set in the publicly bid contract aren’t clear.

“The government released the redacted contract one day after a Treasury Department official touted the bailout plan’s transparency.”

In this updated “children’s tale," I would like to point out some differences from the original version. It’s not just one child in a crowd noticing the emperor’s “new clothes,” it is many individuals noticing, and the Internet is now available to quickly spread the news.

To Emperor H.P.: Your thoughts?

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