On Tuesday, Feb. 7th, Truth in Accounting presented to a class of accounting students at the University of Denver and a Zoom audience about our newly released Financial State of the Cities report. Here is a recording of the event.
Before the presentation, at a team meeting, we discussed ways to explain the differences between government and corporate accounting standards in a "cool" way! (I'm not even sure if "cool" is "cool" anymore!)
Anyway, our goal was to make it relatable to the students.
Through our chatter, we joked that government finances were like being set up on a blind date, and the only thing said about the person is, "they are very nice." Or the famous line in the Wizard of Oz, "Don't look behind the curtain." And then, finally, this led to a joke about being catfished by the government, and viola, our new catchphrase, was born!
We all know what catfishing is. Think about it; the phrase works.
The government is financially catfishing us through non-transparent accounting standards, like pretending to have balanced budgets while running massive deficits.
The question is, why is government accounting so different from all other accounting practices? Why are there two different standards?
Isn't money money?
Here are three examples of how government accounting differs from rules for corporations.
They can keep two or three financial books. (ACFR, General Funds, Budget)
Governments can list borrowed money as revenue in their budgets, as seen in this image of Illinois's 2020 - 2023 operating budget:
If you think corporations have too many "loopholes," the government has even more.
But the good news is we are helping to educate you and the next generation on the accounting flaws leading to the wrong policy prescriptions for fiscal management.
Truth in Accounting makes no policy suggestions beyond transparency and a full and complete accounting of the tax resources. Until then, we will be financially catfished and can't ensure that citizens are knowledgeable participants in their government.
It's that simple!