The truth about federal accounting practices

The truth about federal accounting practices
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In an effort to bring attention to the federal government and its miscalculated budget, this week the Chicago think tank Truth in Accounting (TIA) will be releasing its federal project. Over the past four years, the TIA has focused on state budgets and their true deficits. However, the nonprofit organization has decided to raise public awareness by reporting the actual debt figures the federal government should be publishing. 

For the first time, the TIA has carefully analyzed the 2013 federal budget. This report will be the most comprehensive analysis the organization has published since its inception in 2009. From its research, the nonprofit organization had discovered that more than $67 trillion of the benefits the federal government has promised seniors have not been reported on the federal balance sheet and have not been included in any budgets. Over the next 12 months, the TIA will release new data that will demonstrate why the federal government’s accounting practices are grossly inaccurate by clearly explaining how the amount of debt reported has been severely understated. 

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Since 2009, the TIA has quantified the accurate non-reported debt owed by state governments, debt largely attributed to ballooning pension costs. The TIA now reveals the debt discrepancy to be much more severe at the national level. 

The colossal discrepancy between what TIA found the federal government owed in debt compared to what the federal government reports it owes is due to the way the government balances its books. 

Across the country this month, taxpayers cast ballots for their local and state leaders in elections. Most were unaware of the fact that the federal government uses a form of budgeting that allows elected officials to hide losses and liabilities, including those related to pensions and other retirement benefits. This non-transparent form of accounting does not provide citizens or state officials the necessary information to hold elected federal officials accountable. 

And while the federal government oversees state budgets to an extent, there isn’t any regulatory oversight in place to monitor the federal government’s accounting practices. 

For example, the U.S. Securities and Exchange Commission is an agency held accountable for regulating Wall Street trading. However, there is no entity in place that is accountable for regulating government budgets at the federal level. 

Corporations must adhere to Generally Accepted Accounting Principles (GAAP) and to the IRS, a government entity that enforces compliance. The federal government does not have to follow the same restrictions it forces corporations to use. 

The federal government operates under accounting principles established by the Federal Accounting Standards Advisory Board, a government entity led by the secretary of the Treasury, the director of the Office of Management and Budget, and the comptroller general, who heads the Government Accountability Office. Since the federal government operates under accounting principles established by this board, the government gets to decide its own limits. 

For example, the IRS does not allow corporations with revenue of more than $5 million to follow the same accounting standards that the federal government is allowed to follow. State leaders maintain budgets well into the billions and the federal budget is in the trillions; both state and federal budgets should require using the same accounting standards as large corporations. 

Government entities, however, must follow a different set of GAAP standards as determined by the Governmental Accounting Standards Board. 

Hidden liabilities make it impossible for citizens to hold their elected officials accountable. Without accurate financial reports, voters do not have the information they need to cast informed votes for their government officials.

Truth in Accounting intends to report to citizens the correct amount of debt that the government has on its books in the hopes that citizens will demand from their government truly transparent accounting, on both state and federal level. 

Based in Chicago, Weinberg is the founder and CEO of Truth in Accounting.