This year at Truth in Accounting, we have been trying to change governmental accounting standards for the better. Current accounting standards allow state and local governments to claim they have “balanced” their budgets while sliding further into debt.
All too often, governments' official financial statements don’t reflect reality because they follow “cash based” accounting principles. With cash-based accounting, financial reports show expenses only when money is paid, not when debt or future expenses are incurred. By only reporting cash spending, and not accumulated debt, the financial reports paint a much rosier – but far from accurate – picture of government finances.
This delusional and nontransparent approach to government accounting has had dire real-world consequences for cities, states and their citizens. When it comes time to pay the previously-hidden debt, elected officials face a sudden need to hike taxes or slash services, or both. People suffer.
Last month, the Governmental Accounting Standards Board (GASB), which sets the accounting standards for state and local governments, hosted several public hearings on this issue.
Truth in Accounting mobilized thought leaders, elected officials, and everyday citizens to testify against GASB's proposals for continuing the status quo and to advocate for full accrual accounting. Full accrual accounting shows expenses as they are incurred, especially when a government makes promises to pay in the future. Watch those testimonies below.
The video contains 15 different testimonies. You can view the individual contributions here: 0:00 Sheila Weinberg, 34:45 Bill Bergman, 1:17:21 Joe Kent, 1:48:38 Richard Skiba, 2:13:21 Paul B. Kazarian, 2:42:30 Ed Bachrach, 3:09:08 Barrett Peterson, 3:39:02 David Walker, 4:09:09 Jeanne Ives, 4:41:02 Grover Norquist, 5:08:02 Bob Fioretti, 5:35:30 Mary Pat Campbell, 6:05:02 Leslie Munger, 6:33:35 Sharon Lassar, 7:01:09 Andy Shaw.
Although the hearings have ended, the fight is far from over. The GASB will not make a final decision on whether or not to continue cash-basis accounting until Summer 2022.