Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!
David Leary: [00:00:04] So Citigroup added $81 trillion to someone's account.
Blake Oliver: [00:00:08] Wait. How much?
David Leary: [00:00:09] 81 trillion. When it was supposed to just be $280. Coming to you weekly from the OnPay Recording Studio.
Blake Oliver: [00:00:19] Hello and welcome back to the Accounting Podcast. The number one podcast for accountants in the world. Your weekly news roundup of news in the profession I'm Blake Oliver.
David Leary: [00:00:28] I'm David Leary and Blake. I'm going to take a time machine back to January 27th, 2022. Episode 263. We titled the episode crypto is a scam and you've pretty much been on that horse since. But as of this morning, crypto may have gotten legitimate. And this is how Trump announced that he's going to move forward with the crypto asset crypto strategic reserve. So this was a I don't know what these are called. It's a truth, right? This is a truth post.
Blake Oliver: [00:01:00] A truth post on Truth Social.
David Leary: [00:01:01] Truth post a US crypto reserve will elevate the critical industry after years of corrupt attacks by the Biden administration, which is why my executive order on Digital assets directed directed the Presidential Working Group to move forward on a crypto strategic reserve that includes XRP, Sol and Ada. I will make sure the US is the crypto capital of the world. We are making America great again. And he followed up that I my body wants to say tweet. It's so hard to say this. Uh his truth with an obviously bitcoin and ether is are valuable currencies. Um they will be at the heart of the reserve. I also love bitcoin and your eurytheme with e right. Ethereum Ethereum.
Blake Oliver: [00:01:43] Ethereum.
David Leary: [00:01:44] So so he's moving forward with this and all these are up right. Bitcoin is up. Ada is up. Ada is up 30%. Uh XRP is up. Sol is up. Solana is up. Everything's up all the crypto and has this. Now it has this stamp of legitimacy, right?
Blake Oliver: [00:02:00] Well, maybe we'll see if this actually happens. I think Congress has to pass a law to establish this reserve. If you are tuning in live, stay tuned to the podcast feed, the accounting podcast feed for an interview with Jack Castonguay about the wisdom of the strategic Bitcoin reserve or crypto reserve, whether or not the government should be buying this stuff, he is very much against it and I would tend to agree. If you're listening on the podcast, that episode should be out. It's a bonus episode, so do listen to that. Um, yeah. The price of Bitcoin spiked 1,010%. It had been down to 86,000 from its high of over $100,000 a coin. And it's obvious that the price of Bitcoin, the price of crypto, is being driven up by this idea, this speculation that the government might actually be buying it, which just seems nuts to me. I can't believe that this is where we're headed. Um, you know, as Jack said in our interview, to paraphrase him, he said, like, the reason that the crypto lobby is pushing for this is because they can't find any more buyers. They've run out of retail buyers. There are not enough people, individuals interested in buying crypto anymore. So if you want the price to keep going up, what are you going to have to do? You've got to get institutional money to buy it. And the best is just get the government to buy it.
David Leary: [00:03:23] And they got institutional about 6 to 8 months ago, right.
Blake Oliver: [00:03:26] Yeah. Yeah, exactly. Now there's like ETFs and stuff that you can buy. The state of Wisconsin has been buying uh Blackrock ETF with Bitcoin. I mean how do you know you're at the top of a bubble. It's when the dumb money starts getting in and that's where we're at. It's crazy. This is nuts. Welcome. R5 HD welcome Gator NYC. Yes great to see you both. Welcome, drew. Hey everyone who's joined us live. Feel free to comment. Let us know what you think about these stories.
David Leary: [00:03:58] Somebody pumped her. I can't tell if this person is pumped or questioning a Sunday episode. I can't really tell if they're excited that we have a Sunday episode or not. The reason why is I woke up Friday morning and I had no voice. Like none. No voice whatsoever. So I recovered. So we can record today.
Blake Oliver: [00:04:14] That's good. And yesterday, a little personal news. Yesterday I did a hike with our friend Terrell Turner, CPA, who has his own series of podcasts. Go check him out. And we did what we had planned to do a 28 mile hike in the Sonoran Preserve, which is in my backyard here in Scottsdale, Arizona. We successfully did about 20 of those miles. We did not complete the loop. One of the big challenges of hiking here when it's warm is water. And we each had seven liters of water, which we thought would be plenty for the hike, but it was a little bit unseasonably warm. And so when the sun came out, we started really drinking a lot of that water, and we didn't have enough to make it all the way around. We were kind of grateful because we would have been really tired too. So we also had a dust storm.
David Leary: [00:05:02] So 2026 mile loop. 28 miles.
Blake Oliver: [00:05:05] 20. About 2728 mile loop.
David Leary: [00:05:08] So you got 20 miles in. Which means you were seven miles from the end. Yeah. Did the rescue crew have to go get you? How did you get out of the hike?
Blake Oliver: [00:05:15] Oh, we took we went to one of the other trailheads. There's, like, trailheads around. Oh, you found a shortcut? Yeah, yeah. So we got picked up, but, yeah, it was a lot of fun. So thanks, Carol, for coming out with me and doing that hike. And, you know, for all of you who are in the office working in the busy season, make that time to get out there and stay physically fit. You will not regret it. Anything more about the crypto reserve?
David Leary: [00:05:38] David, I just have a story that maybe reinforces why it's silly. It's not a good idea. This week, it was announced hackers have stolen $1.5 billion from exchange. Bit by bit by bit and bit.
Blake Oliver: [00:05:52] By bit.
David Leary: [00:05:53] By bit I get it, I get it by bit. And the biggest ever crypto heist by bit is a majority crypto. A major cryptocurrency exchange has been hacked to the tune of $1.5 billion in digital assets and what is estimated to be the largest heist in history. The attack compromised Byte Bits Cold Wallet, an offline storage system designed for security. The stolen funds were primarily in ether. They were quickly transferred across multiple wallets and liquidated across various platforms. Analysts are linking this to North Korea's Lazarus Group. So this as soon as we have a strategic Bitcoin reserve, isn't it going to be constantly targeted even more because like North Korea can't just show up? I guess they could try to take gold from Fort Knox. But like this is why this is a silly idea. It's it's making us very vulnerable to attacks.
Blake Oliver: [00:06:43] Securing the reserve would be a challenge. And then also, um, who are we buying it from? The government. If the government were to go out and buy these coins Bitcoin, Ethereum, whatever. How do there's it's totally anonymous. So how do you know you are not buying it from North Korea, from Russia, from Hamas? You don't. So maybe that's the way to stop it is to, in the legislation, say that the US government has to know who is who is selling them the crypto. There has to be like a chain of custody or something. You know, I would also want to know what did what did these holders, these sellers of crypto pay for it. Right. Maybe maybe a little transparency is how you get this fixed.
David Leary: [00:07:30] And who's going to sell to them. If you're holding it's going to the moon. You don't ever sell, right. You hold it forever. Is it Hoddle's H LDR. What is it called? Hoddle. Hoddle. You hold it. Hold it forever.
Blake Oliver: [00:07:41] Yeah. Uh, well, David, let's thank our sponsors for this episode. Who are our sponsors?
David Leary: [00:07:49] So our sponsors this week we have Bluevine and CPA. Com to get your own dot.com or CPA domain.
Blake Oliver: [00:07:57] Great. And so stay tuned for messages about that. Let's talk about PwC getting fined. David. The PCAOB Public Company Accounting Oversight Board has been busy and has fined PwC Israel $2.8 million for cheating on exams. Pwc Israel, also known as Kesselman and Kesselman CPAs, was widely cheating. There was widespread cheating on exams, internal training exams. Between 2017 and 2022, hundreds of employees participated in cheating on mandatory online tests. These exams covered US auditing curriculum, professional independence and professional ethics. The cheating methods included sharing exam questions and answers and unauthorized access to test materials. Now exam cheating never a great thing, but it seems strange to me that the biggest fines that the PwC issues are related to exam cheating and not audit failures. The firm's going to pay a 2.75 million civil penalty without admitting or denying the findings. And they're going to. I guess they were censured and they're going to have to improve audit quality control, improve quality control procedures around these tests, and then report improvements to the PCAOB within 150 days. Since 2021, the PCAOB has fined or sanctioned ten firms for similar misconduct. Kpmg Netherlands got a $25 million fine back in 2023, and Deloitte firms in Indonesia and the Philippines were fined $2 million each.
David Leary: [00:09:37] This is you talk about the AICPA and their to protect the brand. If the public ever really found out that CPAs at accounting firms were cheating on ethics exams that would burn the brand to the ground like this. This is a risk.
Blake Oliver: [00:09:53] This is news. The public knows this. This is not like it's hidden or anything. It's out there.
Speaker3: [00:09:57] Maybe not today, but.
David Leary: [00:09:59] But it doesn't get it doesn't get picked up. Picked up. Oh, you think nobody cares? I just don't think it's getting picked up on that next level of media. But if it ever did and never had the right voice behind it, the right senator made some sound bites about it. This could be bad news.
Blake Oliver: [00:10:11] At the same time. Like who cares? Honestly, it's what matters is the audit quality in the end. Like so you can focus on these exams, right? But why? Why are they cheating on the exams? I don't I don't really think that auditors like, want to cheat on exams. I think it's that they are burned out, overworked, and the only way that they can get this stuff done is to cheat. And that's why there's widespread cheating.
Blake Oliver: [00:10:32] It's it's a symptom to.
David Leary: [00:10:34] Get the checkbox done I need.
Blake Oliver: [00:10:35] Yeah. It's a it's a symptom of a broken business model that overworks people and treats them like machines and not like people. If people had enough time, if the auditors had enough time, they would Do a good job and there wouldn't be this widespread cheating. Yeah, maybe some would. But ethical auditors would not. So that's what the PCAOB should be focusing on if they actually want to make a difference in audit quality. It's the working conditions inside of firms. Oppressed auditors cannot do good quality audits. Overworked auditors can't do good quality audits. So look at the hours. And that's what they were trying to do with those firm engagement metrics. But now they've backed off of that. And I understand like why they wanted to do that. But but also we've talked about this before. Just focusing on the outputs is really what's going to make a difference, right? Naming and shaming the audits that were poorly done. If companies were publicly named that had bad audits, they would find new auditors that would solve the problem, right? The market would would solve the problem. All right. What is next in our headlines today? Top ten college accounting programs. Where should you go to college if you want to become a CPA? Um, and I lost my story. Oh, it's because it's it's collegiate. Not college in the headline. So this appeared in accounting today. The headline is CPA success Index ranks top collegiate accounting programs. The CPA Success Index was established in 2020, and it provides a comprehensive metric for evaluating how effectively collegiate accounting programs prepare students to pass all four sections of the CPA exam within the 18 month window. So success is defined as what percentage of your college accounting program students pass the CPA exam within the 18 month window, which is everyone's goal, right? You do not want to have to start over.
David Leary: [00:12:36] That seems like that's the only thing you could measure this against for the quality of the education, even though the real measurement would be the audit quality eventually. But those aren't grouped and bucketed by what schools people went to.
Blake Oliver: [00:12:46] Yeah, the CPA exam provides an objective metric, the success of that. Right. And if you're going into school for accounting, you want to become a CPA. Passing all four parts of the CPA exam is kind of your goal, right? Like once you do that, you're done. So the way they calculate this is they compute it. They compute the success by taking the number of sections passed on the first attempt in the preceding 12 months. That information we get from Nasba. And then they adjust that value to 18 months using the school's average first time pass rate. And then they divide by the total number of sections. So basically they adjust this nasba single section pass rate to figure out what schools are the most successful or what students are most successful. So here's the list going should I go from 10 to 1 or should I go from 1 to 10?
Speaker3: [00:13:36] Let's go from the Letterman style ten to 10 to 1.
Blake Oliver: [00:13:38] All right. So number ten, Georgetown University nine. University of Kansas eight. Baylor University seven. University of Wisconsin-Madison six. Washington and Lee University five. Good old BYU, Brigham Young University. Number four. University of Virginia three. University of Texas at Austin two. Texas A&M University and number one. University of Northern Iowa. Congratulations. There's your top ten accounting programs by CPA exam pass rate and the four that have been consistently in this top ten. Texas A&M University of Texas at Austin, University of Northern Iowa, and University of Kansas.
David Leary: [00:14:30] And was this the Mac programs they were comparing or just their accounting departments on the whole?
Blake Oliver: [00:14:36] So this is the, um, accounting program that they're run through. So one of the reasons Texas A&M is successful is because they have an integrated five year program. So this is the bachelor's plus master's integrated program. But I think it's based on like I don't know if it it if you have a separate bachelors and a separate master's I don't believe that this accounts for that. It would only account for it if it's integrated.
Speaker3: [00:15:04] An.
David Leary: [00:15:04] Integrated program. Got it. Makes sense.
Blake Oliver: [00:15:08] Um. All right. What's next? David? Maybe we should thank our first sponsor.
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Blake Oliver: [00:16:53] Let's talk about FinCEN and beneficial ownership information reporting. It's off again. It's on again. It's off again. It's on again. It's off again. That's where we're at right now, at least according to the news that I have read, FinCEN both extended the boy reporting deadline and paused enforcement so that March 21st boy reporting deadline is no longer in effect. Fincen will not issue any fines, penalties or take enforcement actions until a new interim final rule becomes effective and they're going to issue it by March 21st, 2025. So sounds like there's nothing that we need to do at this point as of March 2nd, 2025. As far as we know.
Speaker3: [00:17:41] So don't blame us. But don't.
Blake Oliver: [00:17:43] Blame.
Speaker3: [00:17:43] Us if we got it wrong.
Blake Oliver: [00:17:44] Yes, don't blame us if we get it wrong, because this is changing constantly.
Speaker3: [00:17:47] We have to do your own research.
David Leary: [00:17:48] I did last week. They said they reserved the right to modify and change. They went out of their way to say that. And so we have to protect ourselves.
Speaker3: [00:17:56] Uh, I.
Blake Oliver: [00:17:57] Got some more follow up. David. Fyre Festival two has announced dates. Do you remember this? Years ago, we covered this on the show.
David Leary: [00:18:06] It was a Netflix documentary, right?
Speaker3: [00:18:07] That we were talking about it in relation to. We watched it.
Blake Oliver: [00:18:10] I don't know why we talked about it, because I guess because we like to talk about fraud every now and then on the show. Well, you know, something about fraudsters that I have noticed over the years of studying fraud, reading about it in the news, they just can't stop. They will keep going until they are finally, permanently stopped. Billy McFarland, the creator of the Fyre Festival who went to jail for it, is out of jail and he is doing another one. And the dates are going to be May 30th to June 2nd in, uh, in Mexico. And I can't believe that anyone would buy tickets to this.
Speaker3: [00:18:49] And tickets are.
David Leary: [00:18:50] Ridiculous, right?
Speaker3: [00:18:52] Yes.
David Leary: [00:18:52] Prices.
Blake Oliver: [00:18:53] They range from 1400 to $1.1 million. The top tier package includes admission for eight people, round trip airfare from Miami to Cancun, helicopter transfer to the island, and a choice of a yacht or a four bedroom villa. Uh, but as with the first one, there are some red flags to watch out for. No musical artists have been announced. There is very little information on specific event plans. So just like the first one, the problem was they sold all these tickets, they announced all this great stuff and then they had to go do it. And they had no experience doing it. And they failed to do it completely to the point where people were staying in like FEMA tents basically on this island. Um, so, you know, we'll see what happens. Billy McFarland, by the way, had been sentenced to six years in prison for wire fraud. He had defrauded investors and customers of $26 million, and he was released from prison in 2022. He still owes $26 million in restitution. And he says that portions of the revenue will go toward repaying his victims from the first time.
David Leary: [00:19:59] It's like a charity event for his own himself.
Speaker3: [00:20:02] Isn't that great?
Blake Oliver: [00:20:03] Drew says. Thanks for letting me know. Buying my tickets now. All right, drew, we expect a report from you on the Fyre Festival from the. We'll call you while you're on the scene there. All right. Make sure that you bring plenty of, you know, like protein bars, just in case they don't have any food, because I think that was a problem last time.
David Leary: [00:20:22] Yeah, the food was very lame. People complained a lot about the food.
Blake Oliver: [00:20:25] All-pro says why stop when the most infamous and infamous one, Rita Crundwell, got a pardon? So much for the college case studies.
Speaker3: [00:20:33] Well played, well played.
Blake Oliver: [00:20:35] That's right. Rita Crundwell did get a pardon. Um, one of the biggest fraudsters of all time. Crazy. All right.
David Leary: [00:20:45] David, do you want to talk about something about Big Four or something about 150 hour rule?
Speaker3: [00:20:52] Let's do.
Blake Oliver: [00:20:52] 150.
Speaker3: [00:20:52] Why not? 150.
David Leary: [00:20:53] So, the state of Connecticut on Wednesday. State of Connecticut lawmakers introduced House Bill seven 7020, an act concerning certified public accountants, and that proposes three different pathways to certification. So one more state is on board introducing legislation. This is amazing. Every episode it's another state we're going to they're going to change here soon. Um, they offer three, three pathways. So earning a bachelor's degree, uh, passing the exam and two years of general experience, 150 hours passing the exam and one year of experience, or earning a master's degree, passing the CPA exam in one year of general experience. I feel like the earning the master's degree really is just 150, but maybe there's a way you could get a master's and not hit 150. So I think that's why they have a third path.
Blake Oliver: [00:21:40] But so what state is this? I was.
Speaker3: [00:21:42] I was Connecticut.
David Leary: [00:21:43] Connecticut.
Speaker3: [00:21:44] Connecticut.
Blake Oliver: [00:21:44] Okay. And do you know if they require a certain number of hours or if it's just a bachelor's degree?
David Leary: [00:21:50] It just said bachelor's degree did not say hours.
Speaker3: [00:21:52] That's great.
Blake Oliver: [00:21:53] Did they detail what the accounting education requirements are? Because that's something I've been paying attention.
Speaker3: [00:21:58] To in an.
David Leary: [00:21:58] Article I saw. And I also was trying to look at the, um, the mobility statement, and I didn't I couldn't find what their mobility statement is, but they did put in this billet that they reserved the right to deny any certification for any accountant in another state if the board determines it doesn't meet the equivalencies.
Blake Oliver: [00:22:18] But do they have mobility automatic mobility provisions in.
Speaker3: [00:22:22] That I.
David Leary: [00:22:23] That I didn't see in the article. And I probably need to try to find that still.
Blake Oliver: [00:22:27] So that's really important. There's some details here. Right. It's what are the specific education requirements. Some states are saying it's just a bachelor's degree with an accounting concentration, but some are detailing specific classes, semester hours. They're sticking with that hourly mindset of time in a classroom, which I really encourage them to get away from. It's much better just to let the Board of Accountancy define what an accounting concentration is, so that that can be changed. You don't want to stick these specific courses in the law, because otherwise you can't adapt the education to meet the changing needs of the market and also don't require a specific number of education hours. Some schools are moving towards three year bachelor's degrees, so if there's a three year bachelor degree for accounting, do you really want to prevent those students from being able to become CPAs just because you're now in your law, still requiring four years of education? So this is something that's concerning me. It concerns me when it comes to California, which just introduced a bill, its Assembly Bill 1175, that would make changes to California's CPA licensure and practice requirements. The California bill, like these other ones, creates that alternative pathway with a bachelor's degree and one year of experience. But they're keeping all of these requirements for accounting courses and specific accounting credits. A lot of accounting credits. And my view is that if you want to attract career changers into the profession, if you want to attract people that didn't major in accounting in the first place, which is really what we need to be doing if we want to broaden that pathway, it's not going to work if you still require that effectively. An accounting major and I posted about this on LinkedIn, I said, why do we require an accounting major in California? Did you know that you don't have to be you don't have to go to law school to become a lawyer.
Speaker3: [00:24:30] But you have a.
David Leary: [00:24:31] Bachelor's in anything, and then.
Speaker3: [00:24:33] You don't even have to go to.
Blake Oliver: [00:24:34] Law school. You could pass the bar and you can become a lawyer, apparently. Well, so, you know, if the bar is such a good exam that we aren't requiring lawyers to go to law school, and we're letting them become lawyers in California, then why are why is why is the CPA requiring all these specific classes? I mean, the CPA exam is really rigorous and the pass rate is less than 50%. If somebody is so smart and so good at obtaining this knowledge that they can do it without taking the classes, don't you think we want them in the accounting profession?
David Leary: [00:25:07] Yeah, because the exam will flush out who actually took accounting 101 and 102.
Speaker3: [00:25:11] And it should bachelor's degree.
David Leary: [00:25:13] It'll that'll that'll surface really quick I imagine. If not.
Speaker3: [00:25:16] The.
David Leary: [00:25:16] Test has a big defect. If it can't figure that out.
Blake Oliver: [00:25:19] We should totally make CPA licensure much more like CMA where it's bachelor's degree exam and experience. Very simple. Don't require that those specific accounting classes. All right, David. Next story. I've got one. So KPMG, we mentioned on the show that KPMG, uh, started a law firm or they're going to start offering.
Speaker3: [00:25:44] Legal services.
David Leary: [00:25:44] In Arizona. Right.
Speaker3: [00:25:45] A couple yeah.
Blake Oliver: [00:25:46] Specifically because Arizona changed the rules so that you could have non-lawyer ownership of law firms in Arizona. Well, Aprio top accounting firm, Aprio, based in Atlanta, is joining forces with Radixx Law in Arizona to form Aprio Legal LLC, which will allow Aprio to integrate legal expertise into accounting services. This is going to happen here in our home state, David. Um, the Arizona Supreme Court in May gave Aprio approval to operate as an ABS law firm. So expect more of this. Um, we are going to have these accounting legal hybrid firms. This is probably where everything's going to go. Why not right. So much of accounting is legal. Tax is basically the intersection of accounting and law.
David Leary: [00:26:39] It's all the law stuff.
Speaker3: [00:26:41] That.
David Leary: [00:26:42] Lawyers don't want to deal with. They just cut it all out and said, you guys take this part of the law.
Speaker3: [00:26:46] Yeah.
Blake Oliver: [00:26:47] So it really makes a lot of sense. And I think that probably the most successful firms will integrate these services, because who wants to go two places for this? If you're a business, wouldn't it be great to have one firm that handles all your accounting and tax and legal needs? That's what I'd be building.
Speaker3: [00:27:04] Especially for small.
David Leary: [00:27:05] Business. Yeah, you knock it off. And some of these startups are trying to do this. These startups like collective, they're offering some bookkeeping, but they're also offering business license registration. And Legalzoom tried to do this, but I think they're backing out of it a little bit. But but it makes sense. As a small business owner, I don't want you talk to your lawyer. Like, that's not my job. That's the accountant. You go to the accountant. Like I can't do that. Go to the lawyer and you just get bounced around as a small business owner. So you're right, firms that can figure out how to offer it as a complete service and provide that good service are going to win because people want a one stop shop. This is why they go to Walmart, because you can do all these other things at Walmart. You get your eyes checked, you can. They got a pharmacy. You do everything in one store. People love that.
Speaker3: [00:27:43] And.
Blake Oliver: [00:27:44] Automate it with AI. So that's where the consultants come in. The consultants at these firms, the IT folks, the tech folks can work with the accountants, the tax people, the lawyers to automate generating the initial drafts of a lot of the work that that is being done. And you and I, we've done it. We drafted an operating agreement using ChatGPT as our paralegal. And it worked. It worked well enough to get your wife to sign off on it. David.
David Leary: [00:28:13] Yeah. Now we just have to have the lawyer quickly.
Speaker3: [00:28:15] We're gonna have a lawyer take a look.
Blake Oliver: [00:28:16] Yeah, and we're going to have a we're going to have a licensed attorney in the state of Arizona look at this thing. And when we get the feedback, we're going to let you know here on the show how well the AI did in combination with us.
David Leary: [00:28:27] We should hire a law firm to do it just to, so we can use an accounting firm that's practicing law to look at our legal agreement.
Blake Oliver: [00:28:35] You know, on this theme of accounting firms becoming more than tax and accounting. I've got another story. Mckinsey consulting firm McKinsey is projecting a huge shortage of financial advisors by 2034. So ten years from now, there will be a shortage of 100,000 financial advisors in this country. And that, by the way, takes into account a huge efficiency gain from AI. They've already factored that in. So we're going to have 100,000 fewer financial advisors than we need in ten years. Well, who is best positioned to offer that kind of advice? If you're an accounting firm and you want to have fewer clients paying you more. Integrating wealth management, financial advice, financial planning along with your accounting services is the perfect solution, in my humble opinion. You're already probably doing the books. You could be doing the books, you could be doing the tax return, you could be doing the tax planning, you could be doing the wealth management all in one place. And I spoke to Kyle Walters on the earmark podcast about this a while back. Go check out the earmark podcast. Podcast. Earmark cpcomm. Look for the episode with Kyle Walters. Because he has done this. He has created a structure where he has a wealth management firm and a CPA firm, and they work together on the same clients. And it's working great for him. So that's another possibility. We might have accounting slash law firms. We might have accounting slash wealth management firms. And you don't have them in the same entity. You have separate entities but they operate under the same brand or they work together. Whatever you have to do to get that that that legal entity compliance dealt with. Same thing the audit firms are doing when they go take private equity, they're separating out that audit firm into its own entity and keeping all the consulting in a separate entity. So that's what I think.
David Leary: [00:30:40] I have two stories that are kind of related to Big Four and, you know, consulting. So one news story I saw this week that came out is the Saudi wealth fund. This is their a $925 billion public investment fund. The Saudis have it's huge. It has 100 subsidiaries. They have been ordered to stop handing out consulting projects to PwC until February 2026. There's no explanation why.
Speaker3: [00:31:08] Um, well.
David Leary: [00:31:09] The PwC and the fund, neither have provided any comments on this. And this comes just two years after PwC received their license to open its regional headquarters in the kingdom. Um, it employs 2000 people there and across the Middle East. Pwc has 20 locations, and this is a big deal because global demand for consulting work has fallen in Australia and China. The previous two booms of the last 30 years and Saudi's the next boom. Like they're building cities and spending $1.5 trillion to build a new city on a coast. Yeah, like this is where the money's at, and they want to chase it. And for them not to get a contract doesn't make sense. But I don't know why. There's not a lot of why, but I did see a video on a related article that I'm going to flip on and just play this.
Speaker4: [00:31:55] Hey everybody. You know, it's been fast paced and I keep coming to you with what we're doing. And today I've got a number. I got some big news for you. And look, this is why we talk about efficiency and getting the job done for veterans here at the VA. Right now. I've just been told we are just the first step of almost 2 billion. That's billion with a B that we found in contracts that are cutting. Those are things that we're saving now that we can put back into healthcare benefits, making sure that we're doing what the VA is supposed to do and that is health and veterans benefits. You know, stands to reason. But hey, you got to see this. I've been giving this report says we were taking millions of contracts and dollars in contracts to create things like PowerPoint, slide and meeting minutes. Folks, if you don't know how to run PowerPoint slides, learn it's a tutorial on your computer. Go learn for free. It's okay. Take your own notes. Wow. I'll send you one of my pencils if you need one. But we're not paying millions of dollars for consultants to do this for us. Also, I found out coaching and training millions and dollars in contracts for coaching and training.
Speaker4: [00:32:52] If you need coaching and training, that's what you have in a supervisor. And if your supervisor can't coach you and train you in their job, then I tell you what, let me know. I'll come help you. We'll be ready to go. And also this last one kills me. It was millions of dollars for executive support. You know I love you and I support you, but we can figure out how to do things on our own. We don't need outside people coming in to help us with executive support. Look, these are going to be more coming. This is going to have some details that are going to be coming out for you. And also there's more contracts coming. So this is just the first of all right. At 2 billion we got almost there. There's going to be more coming. But let me let you know. Don't feed the line of what DC's wanting to tell you. We are putting money back to veterans health, back to veterans benefits. And don't let nameless sources, even senators and House members who want to scare you and media who want to perpetuate the line, we're taking care of the veterans. I promise you that from day one.
David Leary: [00:33:46] So this was Doug Collins. He's the secretary of Veterans Affairs. So he's specifically talking about the way they're managing their budget and looking to efficiencies in their own department, probably because they don't want Doge coming along. Right. Um, and he he's looking at these government contracts. And the way they, they think of these consultants ultimately are power pointers and pencil pushers. That's that's the mindset of a lot of people with these consulting companies. And so going concern had an article about Deloitte's Its money and revenue that comes in from the Department of Defense. So Deloitte is the number 14 federal government contractor in 2024 with $3.5 billion in contracts. This is just consulting Blake. Deloitte does not sell $35 million airplanes to the government. This is just consulting contracts. 11% of Deloitte's US service revenue was $33 billion. Ey is number 58 with 547 million. Kpmg is six, was number 69 with a respectable 461 million. And PwC doesn't even make the top 100 for government contracts that exist. So with all these cuts in government coming, the spotlight is going to focus on these consulting companies. And it makes me wonder. The attractive thing of these of the big four and these big accounting firms, right, was the advisory division or that's why they wanted to divide, ey up and split everything they want. Private equity doesn't want the compliance part in the audit. They want the advisory money.
Speaker3: [00:35:19] They want.
Blake Oliver: [00:35:19] The consulting.
David Leary: [00:35:20] Right. So now if that's going away for unknown reasons in Saudi Arabia, that might be going away with all these Doge initiatives that were happening. Like what does this mean for these these big firms and their consulting divisions. Are we going to see is this going to solve our accountant shortage? Because now people are going to have to go into the other side of the business.
Blake Oliver: [00:35:40] It's a lot of money, $65 billion in consulting contracts. That's how much the top ten consulting firms receive from the government. Booz Allen Hamilton generates 98% of its 11 billion annual revenue from US government contracts, and its stock has dropped 30% since Trump's election. Great place to go. I think, for for Doge. Um, I mean, those of us who have worked in firms that do a lot of consulting, we know how much of it is literally just taking somebody's notes and making a PowerPoint? It's not it's not complicated stuff. A lot of it's BS, and the government is probably overpaying dramatically for these services. Something that I have learned over the last few weeks that I didn't know before because of all this is, is just how much federal money doesn't actually get spent on programs that are run by the federal government, meaning something like 300 billion more than that of this 900 billion approximately of discretionary funding that is not defense related. So there's 900 billion of discretionary non-defense money every year getting to a trillion. I think it's going to be a trillion this year. 30% of that goes out the door to nonprofits and there's like 40, 50,000 nonprofits that have government contracts where there's it's there's 40 or 50,000 grants.
Blake Oliver: [00:37:23] I don't know how many nonprofits there are. And that's a lot of money and a lot of nonprofits. And and then we have the money that goes to the consultants. So like, how much of the money actually goes to people employed by the federal government to do the work? Wouldn't it be more efficient if the government just hired people directly to do this work? Right. There's a markup every time you have a middleman. So that's why consulting is so ridiculous. You know, you pay 200 or $300 an hour for, effectively an intern to do something. You could just hire that intern, right? I think this is a big problem, is there's too many middlemen along the way. And you could look at, you know, the the nonprofit or you could look at the consulting firm as a middleman because they have a very high markup. And, you know, you could say, oh, nonprofits don't have a markup. Well, there is a markup in the sense that there's like a there's a lot of admin that has to exist to provide those services to do those programs. And if the government simply ran the program itself, maybe you wouldn't have that.
David Leary: [00:38:39] Hopefully we'd have efficiencies from an IT perspective. We'd have efficiencies of HR because you would just have people executing on the mission of that dollar that needs to be spent, and nonprofit has to have executive board. They have to raise other funds, they have to have an IT department, possibly. They have all these other things needs they need to fill that maybe could be filled for them.
Speaker3: [00:39:01] Exactly.
David Leary: [00:39:03] It's it seems risky to me that it's just too much eggs in one basket. And we went out last Saturday, went up to Phoenix and we were talking to somebody and a friend of yours. He's a CFO or a virtual CFO.
Speaker3: [00:39:19] Oh, yeah. Ryan. Yeah.
David Leary: [00:39:21] And he made a comment that when he was telling his client a year ago that you have too much in, like, one contract and dose cut something, and they got the trickle effect of it. Oh, they were I think they provided like electrical wires or something like that to the government for network.
Speaker3: [00:39:37] They had a government contract. Yeah.
David Leary: [00:39:38] Government contract and.
Speaker3: [00:39:39] Big.
Blake Oliver: [00:39:39] Government.
Speaker3: [00:39:40] Contract.
David Leary: [00:39:40] Basically they lost half their revenue in one one day.
Speaker3: [00:39:43] Right.
David Leary: [00:39:44] It's risky. And so like Deloitte this is a this is massive amounts of money. And this is just Deloitte's US government contracts right. I'm sure they have contracts with every state. We know. They have contracts with Canada because they think they're helping Canada with their new computer system.
Speaker3: [00:39:58] Mhm.
David Leary: [00:39:58] And then they probably also have other contracts that are like subcontracted out. Right. With a deeper government agency who also hired Deloitte separately. Right. There's probably there's probably way more money than this. That's it's very scary.
Speaker3: [00:40:12] Here's a great.
Blake Oliver: [00:40:13] Example of waste. This is one of my favorites that comes up every now and then, every decade. It seems the penny we still mint pennies, $0.01 coins, and Doge is coming after it. And the penny has a lobbyist that has successfully defended the penny from being minted. Every time this comes up. His name is Mark Weller, and he was profiled in a Wall Street Journal article titled Everyone Hates Pennies except this guy. He spent 30 years defending the penny. He is the executive director of Americans for Common Sense Cents, which is funded by a Tennessee based company that produces blank coins for pennies. So there's apparently one company that makes the blanks that then get printed into pennies by the mint, and it costs 13 point no. It costs 3.6. It costs 3.7 cents to produce every penny. So it costs more to mint a penny than it's worth. I mean, it's just nuts that we produce pennies. Who needs pennies?
David Leary: [00:41:26] Then what's next? It costs more to produce a nickel than a nickel. Like, where does this stop Blake? Like, how far up the ladder does this go?
Blake Oliver: [00:41:34] I mean, all I know is that not printing pennies would save us a lot of money. Like the studies show this, this has been proven, but it has been stopped every time because of a very special interest. And so, you know, that's how that's how you get these issues. That's why like cutting government every now and then is important. You know, since we're talking about Doge, can we talk about the what did you do last week? Email. I saw this and I just I couldn't help but laugh. Like it's just incredible. Um, there have actually been two emails now, and I've got the second one on the screen. So if you haven't heard this a couple of weeks ago, the Office of Management and Budget or maybe it's the OPM, it's not OMB. I get them confused. Opm. Omb they're all like they're part of the same thing. They're related. Anyway, they sent an email to all the federal workers asking them to detail in five bullet points. What did you accomplish last week? And CC your manager? And this just set off a firestorm. Federal employees saying they're terrorized, scared. There was a New York Times article talking about how this is like a huge overreach. And I'm sitting there thinking, I have required this of my employees.
Speaker3: [00:42:52] I've done this in the past.
David Leary: [00:42:54] Managers do this.
Speaker3: [00:42:55] Yeah, like.
Blake Oliver: [00:42:56] Five.
Speaker3: [00:42:56] Bullet points.
David Leary: [00:42:57] This happens a lot.
Speaker3: [00:42:58] Yeah.
Blake Oliver: [00:42:59] So send me an email. Five bullet points every week. Here's what you did last week. I mean, you know, this is normal. And federal workers are out there like crying to their union saying like, they can't make me do this. And I love how it just illustrates the bureaucracy, that the bureaucracy is so insulated from being accountable that the idea of having to detail your accomplishments in five bullet points is like a shock. Now, whether or not it's legal, whether or not it's appropriate is debatable. And actually, I dug into this with perplexity pro in crazy enough, this is probably not legal, and not even if the president himself sent this email. That's the crazy part. Can I read? I'll read the email. Here's the second one. This is the one that went out on Friday, February 28th. It just says subject line. What did you do last week? Part two. Please reply to this email with approx five bullets describing what you accomplished last week and CC your or manager going forward. Please complete the above task each week by Mondays at 11:59 p.m. ET. Please do not send links, attachments, or any classified sensitive information. If all of your activities are classified or sensitive, please write quote. All of my activities are sensitive. Unquote. That's it. So they added that last bit about the not sending information that's classified or sensitive because of pushback on that, which makes a lot of sense. And I guess now they're saying this is voluntary. It's not a requirement. And that's because of the legal question of whether or not OPM can even require this of federal employees. Um, and I dug into that with perplexity. Go ahead.
Speaker3: [00:44:52] So is this.
David Leary: [00:44:53] Does this mean the deadline keeps getting moved, or is this the second week in a row you have to put the email. Like what is the current status? Do I have to send the. It's like, boy, do I have to send an email saying how much work I got done or not. It's very confusing at this point.
Blake Oliver: [00:45:05] So some agencies have told their employees not to comply. Some have not. So some I guess some people are doing this and some are not. Um, and you know, Elon Musk had like threatened on Twitter or had said on Twitter that if employees if federal employees don't respond to this email, that will be taken as a resignation. But that was not in the official email that went out. So it's all very confusing. I was really just interested in this idea of whether or not this is something that can be required. Does the president or an office of the president have the authority to require this of federal employees? Because it feels to me like they should if the president is the executive and all these agencies and all these federal employees work for the president at the end, like if the president calls you up and says, tell me what you did last week, you should, as a federal employee, have to tell him, right? Like it'd be like your boss calling you up seems reasonable.
Speaker3: [00:46:08] If you don't, that.
Blake Oliver: [00:46:09] Would be a firable offense, but apparently not. So to get an idea of what's going on here, I used Perplexity Pro and I used the deepresearch. So not pro, I used perplexity deepresearch and I asked, does the Office of Management and Budget have the legal authority to require federal workers and other agencies to summarize what they accomplished for the week? So to send out an email like this. And so perplexity went out and did a lot of deep research, which you can see here on the screen if you're watching on YouTube and you can read through this, what title of the US code OMB operates under, what Opm's jurisdiction is. And the conclusion is that. Omb or OPM can't do this because it violates the APA's notice and comment requirements. So if OPM is going to make a change like this with this weekly reporting, they have to submit it to public comment. And the unions get to comment on this. And they have to deal with the unions, because apparently asking emails, asking employees to send their weekly accomplishments every week is a change in working conditions. So. Now that they've made it optional, they can continue to send this email. It seems like and there's not really a legal grounds to say you can't do that because it's optional. Employees don't have to respond. But it's wild to me that the unions in the federal workforce have protected the federal workforce to such an extent that you can't even send an email, a required email, From at the direction of the white House, asking them to list out their accomplishments for the week. So we have that's a that's a real bureaucracy. That's a very insulated bureaucracy.
Speaker3: [00:48:11] Does that make sense?
David Leary: [00:48:12] You could just say five things that you did and just send it up the ladder. It's like people's time sheets, right? This is the big joke that always happens. How many of you ever relied on a time sheet? Everybody raises their hand, right? It's just lie. Just fill it out and send it up the ladder. Nobody's going to see it. Now, there's some benefit to doing this process, and I'm going to go back to a story. Before Google became bloated with a bunch of PhDs and it was a kind of a slow company. Now Google has lost their way a little bit, but they.
Speaker3: [00:48:39] I'm sorry, David.
Blake Oliver: [00:48:40] Did you just did you just advocate for federal employees to just lie to the president?
David Leary: [00:48:46] Yeah, just run it up the ladder. My argument is nobody's reading these emails. Nobody's doing anything with them. This is just an exercise in threats. Just make something up.
Speaker3: [00:48:54] And actually, I think I think you have to do I think they are going to.
Blake Oliver: [00:48:56] Do something with these emails.
Speaker3: [00:48:57] Because.
David Leary: [00:48:58] You only have to do for one of the lines you always put. Number five spent a half hour writing this email, always put that so you only have to create four anyways.
Speaker3: [00:49:05] Well, I.
Blake Oliver: [00:49:06] Was going to say like it's not that hard. Like if you're a productive employee, it's not that hard to come up with five things that you did last week. But if you're not a productive employee, then it's it's pretty easy.
Speaker3: [00:49:16] Or it's not hard.
David Leary: [00:49:16] If you have 39 hours of the week to probably work to make something up or just fill it out.
Speaker3: [00:49:21] Yeah.
David Leary: [00:49:22] Um, but there is some valid reason to use something like this in your firm or at a big company. And Google used to have this as a tool. And what they did is they made everybody send it, and it was all plain text and you could search it. And this is where this could be very valuable for the government, because you might be working on a project. And if you're at a big enough company, let's say to Google and there's, you know, 50, 60, 100,000 employees, you might be working on something and not know. Three other employees in the company are working on something similar, but now you can search everybody's top five things they did. And now you can be like, oh, you're working on something. I'm working on similar. It eliminates those overlaps, and then you can make those connections to work together on a project together. And so if they if I'm all supportive of this happening, if they're going to have all the employees be able to see everybody else's emails and search it like that. So you this could have worked like the nine over 11 terrorist. Remember when the FBI, like three different agencies and the CIA weren't on the same page? They were all watching the same guys. They're like, why are these guys taking airplane flying lessons in Florida? And they never connected the dots. A system like this would have been so simple. Here's the five things I'm working on. You could search that database. You see the other people working on it. You could make a phone call. You have a conversation, move on. There is a valid reason from an organizational standpoint to do this.
Speaker3: [00:50:37] Well, yeah, it'd be extremely.
Blake Oliver: [00:50:38] Valuable information connecting the dots like you.
Speaker3: [00:50:41] Said, if it's shared.
David Leary: [00:50:42] But I don't think it's shared. I think this is just an exercise in instead of it's the work from home requirement. You got to return to office or you lay people off, you got to do this. If you don't do it, I'm going to lay you off. That's all this is. This is a tool for firing people. It's not. It's not an initiative.
Speaker3: [00:50:57] But you.
Blake Oliver: [00:50:57] Don't know that. You don't know that, David. You don't know what's going on inside Trump's head. What's going on inside Elon's head. You're just speculating. You're just making it up.
Speaker3: [00:51:04] Well, then.
David Leary: [00:51:04] Why don't they present it that way? Then present it that way. Hey, I have this great idea. Everybody's going to send one email a week, and we're all going to see each other's emails. And because of that, the government's going to be more efficient. Where's the efficiency part of Doge at?
Speaker3: [00:51:17] Well, right now they're in.
Blake Oliver: [00:51:18] The they're in the cutting phase.
David Leary: [00:51:19] The cutting phase.
Speaker3: [00:51:20] Yeah.
Blake Oliver: [00:51:24] Uh, I think that actually we could accomplish what you're talking about, David, with AI. So those emails get fed into some centralized AI that then correlates what every single person in the government is working on, and offers insights at a centralized level. Often the left hand doesn't know what the right hand is doing, and you might find ways to create efficiencies. I'm sure there are agencies and programs that are working on exactly the same thing and don't know it. So Colonel Pablo here in the chat points out this. The stated reason for these emails that Elon has said is that it's a temp check to see who is real, while alluding that there are tons and tons of fake employees. That's a legitimate reason. I mean, who knows what? And by fake employees, you know, are we talking about people who are just collecting a paycheck that actually exist? Or maybe there are people who are on the payroll, you know, like.
Speaker3: [00:52:28] That guy from. They don't exist.
Blake Oliver: [00:52:29] Remember that guy from Office Space who was, like, collecting a paycheck that did nothing? Milton with the red stapler. How many of those people are at the federal government where they've just been forgotten about and put in the basement, and they're still getting a paycheck? And so, you know, this could be a way to to root out a lot of that, right? If there are people who are just collecting a paycheck that aren't doing anything, this would find them, find them. And like to me, that doesn't sound like that big a deal.
David Leary: [00:52:57] Or if they're not checking their email, they're going to miss this and then be in trouble.
Blake Oliver: [00:53:02] Rogue says he also said that if his AI determines your job is useless, you'll get fired. He's going to have AI fire people. Yeah, and actually, it could probably be really good for that if if somebody is turning in weekly accomplishments, emails that have mediocre or zero weekly accomplishments week after week, an AI could surface that and and help find that person a job where they will be more usefully employed, more gainfully employed.
David Leary: [00:53:32] Or you use AI.
Speaker3: [00:53:33] To I mean, these are.
Blake Oliver: [00:53:33] Our taxpayer dollars like we're paying for these jobs. So I think we want people to be, you know, to have the jobs that are being productive, don't you? Um, I'm just I'm just, you know, you may not like the man, you may not like the methods, but I think in principle, this is a really good idea. So speaking of the administration, Trump has confirmed that tariffs on Canada and Mexico will proceed on March 4th, 2025. I picked this up a little while ago, so I'm not sure if this is still happening or not. But you know, just to balance things out, for all of those of you listening who think I'm a Trumper, I'm not. I think these tariffs are a terrible idea. I think they're bad for the economy. I am not a fan of tariffs. Um, and like this is not the idea that they are going to relocate manufacturing to the US. That could happen in the long term, but it won't happen in the short term. And we simply don't have enough people here anyway to work. So unless we're going to import all the workers, it doesn't make any sense. You know, you'd have to you'd have to basically open the borders to bring all the people from Mexico who are working at the factories in Mexico, here to the US. If the factories are going to be here in the US, and that's.
Speaker3: [00:54:48] Not.
Blake Oliver: [00:54:48] Going to happen.
David Leary: [00:54:49] So decades to build the infrastructure to do all manufacturing.
Speaker3: [00:54:52] Exactly.
Blake Oliver: [00:54:52] And in the meantime, what happens? Prices spike, which hurts the economy, increases inflation, which is exactly what we don't want anymore right now. David, do you want to thank our sponsor? I will put the banner up.
David Leary: [00:55:11] So our sponsor is CPAacademy. Have you ever tried to get the perfect web domain for your firm, only to find out it's already taken? Or worse, worried about phishing scams that could put your clients at risk? That's why CPA. Com offers dot CPA domains exclusive to the accounting profession. Not only does a CPA boost domain boost your credibility and branding, but it also helps protect your firm from online fraudsters who try to mimic your website and steal client information. Because unlike a regular.com domain, only verified accountants can register a CPA domain, making it more secure and trusted option. Beyond security, a dot CPA domain also helps you stand out with a professional, shorter and more memorable web address that instantly boosts your firm's credibility. And here's the best part you can get a free professional starter website that you can set up in just minutes. So if you're ready to take your firm's online presence stronger, safer, and more professional, now is the time to act. Claim your CPA domain today and get 20% off with the code Top25. That's Top25. Head over to The Accounting Podcast dot promo slash CPA. That is The Accounting Podcast dot promo forward slash CPA. So the big gist of that is you can't somebody can't spoof your website and reach out to your clients because they can't even buy the domain. But there was a spoof email you forwarded me to me this week, Blake, that I thought it was pretty impressive.
Blake Oliver: [00:56:35] This came from the Arizona State Board of Accountancy. Not the spoof email, but the warning about it. Beware of this phishing scam. If you are in Arizona.
Speaker3: [00:56:47] Or any.
David Leary: [00:56:48] Of the state societies.
Blake Oliver: [00:56:49] Somebody is sending out emails purporting to be from the state Board of Accountancy that says you need to verify your CPA license because of a recent system update. Click here to verify my CPA license, and it takes you to a spoof website where you'll put in your information. And I assume they're going to use this to defraud people. So watch out if you get an email from your Board of Accountancy or your state society asking you to verify your information as a CPA, uh, verify that that email is for real. And you can see here in the from you know, the from email that it's from a solo tennis. It it's not from your state board. So check those links. Check those emails. Be really frosty friends stay frosty.
David Leary: [00:57:45] And we always know that accountants are targets because it's tax season. Accounts have all this private information of their clients, their targets anyways. But if I was a hacker I would go out to state societies first, compromise their their systems, then send these emails using the actual state society's information. And then from there you can move on to the accounting firms.
Speaker3: [00:58:05] David. So hopefully in this episode societies.
David Leary: [00:58:06] Are more.
Speaker3: [00:58:07] Secure.
Blake Oliver: [00:58:07] In this episode, you have advocated for federal workers to lie about what they do to the office of, uh, Office of Personnel and Management. And you have advocated for hackers to hack into state boards of accountancy.
Speaker3: [00:58:22] Well, any of.
David Leary: [00:58:23] The state boards are very secure. Hopefully. Hopefully they don't get fired.
Speaker3: [00:58:27] Yeah, I'm sure I'm sure.
Blake Oliver: [00:58:28] They have the latest it. I'm sure they do. Um.
David Leary: [00:58:33] Maybe I'll do a third thing here. I'll come. I'll be in trouble with a third story eventually. Here today.
Blake Oliver: [00:58:39] Well, where do we go from here? I've got so many stories still. Maybe I should stop giving my opinions. Because I guess we're running out of time on this stuff. Um, I want to talk about Elon Musk's bid to purchase OpenAI. So a few weeks ago, Elon Musk made an unsolicited offer to purchase OpenAI for $97.4 billion, which might surprise you if you've been following the story about OpenAI because Sam Altman and Elon Musk do not get along. Elon Musk was an early donor to the nonprofit OpenAI, but then fell out with Sam Altman after Sam decided to take it on a different track. And now they're embroiled in a lawsuit. Sam Altman wants to make OpenAI a private company. And so the question is, why did Elon do this? Why would he want to enrich Sam Altman by buying OpenAI? And it goes back to what we talked about on the show previously. We did an episode in which I detailed the entity structure that OpenAI chose with a nonprofit that controls two different for profit entities. And we talked about how they would actually get the nonprofit IP into a for profit, which is their big challenge right now. Well, this is why Elon made the unsolicited offer. It really complicates Sam Altman's job here because according to California law, it's a California nonprofit. The nonprofit would have to sell the IP at fair market value to any for profit entity. And the question was, well, what would that value be? Now, fair market value is subjective. When there is not a market price, when it's not a stock. When it's not Bitcoin or something like that. Right. So how do you calculate the fair market value of all the IP that the nonprofit controls? Well, Elon just created a market price. His unsolicited offer is now going to be compared to whatever the nonprofit does sell the IP to at the price.
David Leary: [01:01:10] He's he's framing the price.
Blake Oliver: [01:01:12] He's framing the price. He's anchoring the price.
Speaker3: [01:01:14] Anchoring the price. That's right.
Blake Oliver: [01:01:15] So it's not necessarily that cash will be exchanged like the nonprofit might not get cash, but it will have to get cash or shares in the nonprofit. So Elon has just set a floor for the value of the shares that the nonprofit will receive, which reduces the shares that Sam Altman can get. That's why he did it. And I didn't see any of the media Reporting on it from that perspective. But that's my theory about it.
David Leary: [01:01:47] Your breakdown when you had the entity structure and the reason the tax hit they could take if they went private because of the way they were set up, that whole kind of mess was episode 405 of the Accounting Podcast. I put the link in the comments so it should be appearing right now.
Blake Oliver: [01:02:03] Here's another follow up item that I have been wanting to share on the show. Remember our discussion about Senator Robert Menendez? One of the worst fraud cases.
Speaker3: [01:02:15] Is.
David Leary: [01:02:15] This the gold bars that sewn inside jackets guy.
Speaker3: [01:02:18] Yes.
Blake Oliver: [01:02:19] So he's an he was the US senator from one of the US senators from new Jersey, and he was sentenced to 11 years in prison at the end of January after convictions on federal bribery and corruption charges. And the reason we talked about this on the show is because some of the details are just really juicy. According to the case, he accepted $480,000 in cash, stuffed in jackets, shoes and a safe with some envelopes bearing codefendant Fred Diaby's fingerprints. He had 13 gold bars, worth about $150,000 that were discovered in an FBI raid, and he secured a Mercedes Benz convertible for his wife, Nadine, from a businessman in exchange for political favors. He was found guilty of acting as an unregistered agent for Egypt. He helped a new Jersey businessman monopolize halal meat exports to Egypt in exchange for bribes. So, 11 years in prison. His co-defendants, Fred and Wael, got seven and eight years as well. There you have it.
David Leary: [01:03:29] And then. Is he still blaming his wife? I thought like that was his scapegoat. Like she did it all. I had no knowledge. I think that was his his main defense for the longest time.
Blake Oliver: [01:03:36] I don't know, he's trying to get a pardon. He wants to get a pardon from the Trump administration. He's going to appeal, but he hasn't been successful yet. So I guess we'll see how the appeal goes.
David Leary: [01:03:47] I have another story that was kind of crazy. I saw the headlines crazy. So Citigroup added $81 trillion to someone's account.
Speaker3: [01:03:54] Wait.
Blake Oliver: [01:03:54] How much?
David Leary: [01:03:55] 81 trillion. When? It was supposed to just be $280.
Speaker3: [01:04:00] How did.
Blake Oliver: [01:04:00] That happen?
David Leary: [01:04:02] So the way the way it happened was it's a software design issue. Apparently some screen somebody needs to use to type in the numbers fills it in automatically with 15 zeros. So imagine every time you went to an amount field in QuickBooks or zero or your tax software, there's 15 zeros and you had to delete those off before you typed in the number.
Blake Oliver: [01:04:22] Why would it do that? That makes no sense.
David Leary: [01:04:25] Or poor software design. Okay.
Speaker3: [01:04:26] Right.
David Leary: [01:04:27] And so some of the numbers obviously didn't get deleted or there was a typo.
Speaker3: [01:04:32] They put.
Blake Oliver: [01:04:32] Their.
Speaker3: [01:04:32] Cursor in a major typo.
Blake Oliver: [01:04:33] The person put their cursor in like in front of the zeros, and then added the 200 and something dollars.
David Leary: [01:04:40] Or maybe they.
Speaker3: [01:04:41] Somehow some of them 280.
David Leary: [01:04:43] Yeah, they put 81, 81. But essentially it's because you have to edit that field instead of just typing the number is the reason it happened. So this past a first employee that did it, a second official that was assigned to check the transactions before it's approved to be processed. A third employee actually detected it when they were reviewing bank account balances. Right. That that's how it was detected. They caught it 90 minutes after it was posted, and then they reversed it several hours later. And then obviously they have to report it up to the authorities, right, that this occurred. But I didn't know there was this concept in banks called near misses. And that's what this is called as a near miss. Have you heard of this before?
Blake Oliver: [01:05:23] No.
David Leary: [01:05:24] So a near miss is when a bank processes the wrong amount but is able to recover the funds. So maybe I where I meant to where you transfer you money. Blake. I actually typed it. Had a typo. I put it to the wrong bank account or the bank did it themselves. If they can get the money back. That's a near miss. Um, Citigroup had ten near misses of $1 billion or more last year and 13 the year before. This happens all the time.
Blake Oliver: [01:05:52] I'm trying to understand why were humans involved at all in this process? What was the transaction? Do we know what kind of transaction it was? It was only 200 and something dollars. What was happening?
David Leary: [01:06:05] A good point. Yeah. So good point.
Speaker3: [01:06:07] Like, I.
Blake Oliver: [01:06:07] Mean, I know there are humans that are still involved in, like, confirming wire transfers and that sort of thing. But it just kind of seems nuts to me like that. There would not be some automated system doing this that would prevent the human error. Like this was caused by human error. And then the human review did not catch the error and.
Speaker3: [01:06:28] The processes that you're.
David Leary: [01:06:29] Supposed to.
Speaker3: [01:06:29] See this so you.
Blake Oliver: [01:06:30] Can automate the process and prevent the error. Or guess what, you can use AI. Now that would have caught it. I would catch this. Absolutely.
David Leary: [01:06:40] And I could not find it because I. One day. Blake, we have to make all our episodes more searchable in real time so we can search them. But we talked about something similar like this before, where the software design was weird, and then people did a bad transfer of hundreds of millions of dollars. It was very similar story where the field itself was either pre-filled in or when you tapped out of the field, it added zeros. But bad software design will bite you. And this is the bigger issue of expecting software to save the world, or AI to save the world. Like it's never going to be perfect. There's always going to be bugs, right?
Blake Oliver: [01:07:14] But humans are absolutely imperfect. And we are seeing this right now, right?
Speaker3: [01:07:18] So it's true.
Blake Oliver: [01:07:19] This is, uh, this is one of the problems with the way the public perceives automation and AI is that they want it to be 100% perfect. But you have to recognize that humans are not 100% perfect. The AI just needs to be better than the humans. And that's the issue with self-driving cars right now, is the public doesn't trust them. I found a story about that. This is from a AA survey. A majority of us drivers are afraid to ride in self-driving cars. 60% of drivers are afraid to ride in self-driving cars, and 53% said there is no way that they would ride in one at all. Self-driving cars, objectively, are far safer than human drivers. This has been proven.
David Leary: [01:08:09] I'm in the phase of life. Teenage drivers. Right? And the first 1 or 2 times your teenager gets in the car and drives on a major road with you in the car, your body does funny things. It's a little scary. But I got into those Waymo's in Scottsdale twice now and I never got that feeling in my body, right. So I've taken a driverless car and I never got that feeling I got when my 15 year old was going to pull out in front of traffic and that. So there's. It's a trust, right? Like, I get it. But I'll tell you right now, people, you don't get too scared with the AI driver.
Speaker3: [01:08:41] Well, you have to try it.
Blake Oliver: [01:08:42] You have to take the chance.
Speaker3: [01:08:43] You have to get.
Blake Oliver: [01:08:44] In one and see what it's like. Yeah. Human error accounts for over 70% of crashes. So if everyone was driving in an AI autonomous vehicle, it could reduce 70% of crashes right there. And the crashes that the cars do get in are rarely fatal because they're like, at low speed. They're they're not driving too fast. They're not drunk. Right. It's very unlikely that a self-driving car is going to kill you.
David Leary: [01:09:17] You think the insurance companies would be pushing harder for this?
Speaker3: [01:09:21] Yeah.
Blake Oliver: [01:09:22] Well, it's just so new, right? It still hasn't even gotten regulatory approval in a lot of places. Like, it's brand new. I guess only a few a year old in in Phoenix where the test ground for this. So I can't wait until I can take a Waymo everywhere. It's it's almost comes to my neighborhood. Once it does, I'm just going to be taking them all over the place. You know, I mean, I would prefer it to human driver. Honestly, I feel like it would be safer.
Speaker3: [01:09:46] You don't.
David Leary: [01:09:46] Have to have those awkward conversations you do in an Uber or Lyft.
Speaker3: [01:09:49] Sometimes. Exactly.
Blake Oliver: [01:09:50] No awkward conversations. Perfect for me as an accountant. All right.
Speaker3: [01:09:55] David, are you getting.
David Leary: [01:09:56] A taxi cab in, uh, Vegas? And the driver of the taxi cab is, like, to the moon. Crypto. You own any crypto? Every taxi cab driver. You own crypto yet? No. They're all doing better than me today.
Blake Oliver: [01:10:07] David, great chatting with you, as always. To our listeners, don't forget you can earn free continuing professional education credit for having listened to this episode. Go to earmarked app, find the accounting podcast and enroll. Take a quick quiz. Just five questions and you've already listened. You can verify you listened. Get your CPA certificate. You can get one for free every week. And if you want to support our work to make continuing education affordable and accessible to all, you can join for just $150 a month, a month, a year for unlimited $150 a year. What a deal for unlimited CPE. Lots of great shows on there. Not just this one. My earmark podcast. We got all my fraud. We got federal tax updates. We got tax chats. We've got so many. Take a look and let us know what you think. If you want to send us an email we are at the The Accounting Podcast at Earmark me that's The Accounting Podcast at earmarks me. We read every email that we get and I love hearing from our listeners. If we missed a story, let us know. If you have opinions on a story, let us know. And that's all I got this week, David. See you.
Speaker3: [01:11:23] Around.
David Leary: [01:11:23] I have nothing left.
Speaker3: [01:11:24] Bye, everyone.
