Questionable books.

WATCH out for the next big U.S. accounting scandals in non-profit, government and quasi-government businesses and organizations.

The shocks have already begun. Freddie Mac, the big government-sponsored buyer of mortgage loans, in July fired its chief operating officer and accepted the resignations of its chief executive and chief financial officer.

Freddie Mac said it would have to testate earnings for the past two years and perhaps even a third year. Critics say they were inaccurate due partly to Freddie Mac's handling of derivatives, exotic investment packages often used as hedges against risk. (Freddie Mac was formerly known as the Federal Home Loan Mortgage Corp.)

A New York State Supreme Court judge recently ordered the quasi-government Metropolitan Trans-Authority, whose leaders are appointed by the governor, to rescind a New York City fare increase for subways and buses. Critics said at fare hearings that the MTA showed the public a set of books declaring a deficit while another set of books showed a surplus.

William W. Holder, an accounting professor at the University of Southern California and a specialist on non-profit accounting, says that in looking at the books of such entities "citizens should be forewarned and forearmed" with skepticism and increased scrutiny.

He advises investors and others to examine the financial statements of non-public business or government entities more closely and even ask outside experts if the statements are believable.

Holder notes that years ago the city of Syracuse, N.Y., was called to task by the SEC for issuing financial statements that didn't meet proper reporting standards.

"The problem there was that while cities such as Syracuse are subject to the anti-fraud provision of the law because they sell bonds, they aren't subject to the same registration requirements as public companies and brokerage firms," he said.

In a new book he is writing on what's wrong with non-profit accounting, Anthony said he insists that gifts, endowments and certain fees shouldn't be treated the same way as revenue for public companies. And he dismisses the balance sheets of non-public entities entirely.

"It's foolish to look at their balance sheets," he said. "Instead, you should focus on their expenses and revenues."

Even the SEC ws urged by a consulting firm it hired to tighten its internal controls.