Today, I want to reiterate Truth in Accounting's message.
Government accounting is complex—all the more reason to welcome its scrutiny in our representative form of government.
The following concepts highlight various ways government accounting practices and standards can be manipulated, ultimately affecting transparency, fiscal accountability, and the ability to make informed decisions about government finances.
Full Accrual vs. Cash-Basis Accounting Discrepancy: The government uses cash-basis accounting in its budgetary process, which records transactions when cash is received or disbursed. This leads to discrepancies in reporting actual financial health, as it doesn’t account for future obligations or revenue expected to be received.
Off-Balance Sheet Financing: Governments can use off-balance sheet financing to hide debt and liabilities. This involves using public-private partnerships or other mechanisms to keep certain financial obligations off the official balance sheet, making it appear that the government has a healthier financial position than it does.
Creative Budgeting: Governments may use creative budgeting practices to meet budgetary targets, such as shifting expenses to future periods, delaying payments, skipping or shorting retirement contributions, and listing borrowed money as revenue. This results in financial instability and a lack of transparency in budget reporting. A lack of transparency leads to distrust and misinformation.
Unfunded Pension Liabilities: Many governments have significant unfunded pension liabilities. These liabilities can be underestimated, misrepresented, or ignored, creating future fiscal challenges. We are the only organization that includes these liabilities in our reports.
Inconsistent Reporting Standards: Government entities and agencies may use different accounting standards, making it challenging to compare financial information across varying levels of government.
You can’t deny that the government’s accounting standards affect us all. But the good news is this issue is fixable with enough scrutiny and pressure in the right direction. Truth in Accounting is the only organization applying that pressure.
Join us. We can solve this problem together, making transparency and accountability the norm!
In Truth,
Sheila