Recently, Representative James B. Renacci, R-Ohio, introduced the Federal Financial Statement Transparency Act of 2014. This bill can help increase accountability and transparency in federal government financial reporting. The bill can also help bolster the independence of the Federal Accounting Standards Advisory Board, which determines accounting standards for the federal government.
I applaud bill sponsor Renacci, and lead co-sponsor Rep. John Carney, D-Del., for taking this crucial bipartisan first step towards increased federal fiscal accountability, transparency and independence. But it is just a first step.
More needs to be done to ensure that FASAB is completely independent from the government, and that federal accounting procedures truly serve the American people. FASAB is predicated on a double standard between the government and its constituents, and that needs to change.
Currently, only six of the nine FASAB board members come from the financial community. The others are from three federal agencies: the Government Accountability Office, the Office of Management and Budget and the Department of the Treasury. The bill adds an additional board member from the financial community, and removes the Treasury member’s vote. But each of the heads of GAO, OMB and the Treasury would still have the power to veto any standard FASAB approves. Would a completely independent FASAB Board, one exclusively made up of members from the financial community – auditors, macroeconomics professors, or CPAs – be a bad thing? Isn’t it imperative that knowledgeable and informed citizens set the accounting standards for the federal government?
There is a private sector FASAB analogue. The Financial Accounting Standards Board is an independent board that sets corporate accounting standards. And the state and local governments have their own board, the Government Accounting Standards Board.
While those two boards cover state and local governments as well as the private sector independently, the federal government refuses to hold itself to the same standards. Having GAO and OMB representatives on the board is like General Motors finance director and auditor be a part of determining the liabilities GM reports on its balance sheet. This would not be right for General Motors or any other corporation.
Shouldn’t the federal government have to play by the same rules to which it holds its citizens?
Last October, the federal government shut down for over two weeks while Republicans and Democrats in Congress debated details of a spending bill with politically charged talking points.
Our national debt clock is ticking. Before our government shuts down again, raises the debt ceiling another time, or figures out another way to conceal its true debts, the government needs to change its accounting standards so that citizens and lawmakers know the true fiscal consequences of every decision the government makes. Misleading federal financial data derived from inaccurate accounting methods is the single greatest financial problem our federal government faces.
If government accounting standards don’t change, our children and our children’s children will be the ones left to clean up the fiscal mess that we created. It’s time to change the way things are done in Washington, D.C.
While Renacci’s bill is a solid step in the right direction, more needs to be done. The single best way to increase transparency, independence and accountability is accurate and truthful accounting methods that represent our nation’s true financial condition. Giving this bill more teeth before it becomes law will do just that.
Sheila Weinberg is the founder and CEO of Truth in Accounting and a Certified Public Accountant.