The I-64 Bridge in Illinois has a pothole so large that the road beneath it is visible. It was almost hit by a semi-trailer. This is extremely dangerous, putting lives at risk.
And it highlights the results of poor infrastructure asset management in the audited financial reports, which directly ties to what our friend David Draine at the Pew Charitable Trusts is working on. Here is the latest research from Pew on the disaster that is highway infrastructure. This directly connects to our broader calls for the GASB to be scrutinized.
Over the past two years, GASB has been addressing this issue and seeking public comment. Here is where they stand and what they recommend regarding infrastructure asset reporting in audited financial reports.
Truth in Accounting does not agree with these standards put forth by the GASB. Pew’s research and the I-64 story are enough evidence to back up our position.
Truth in Accounting would recommend that state and local governments adopt the financial reporting and accounting standards used by corporations if they wish for budgets to truly balance and for long-term liabilities to be properly accounted for in the budget.
Here's the key difference between how governments and corporations report these assets:
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Corporations must follow strict matching principles. If a private company builds or buys a long-lived asset (a factory, equipment, or even a bridge-like structure), it capitalizes the cost and depreciates it over the asset's useful life. Every year, the company records a depreciation expense that reflects the asset wearing out. This shows up on the income statement (reducing reported "profit") and on the balance sheet (as accumulated depreciation, lowering net asset value). Investors and the public see the real economic cost of using that asset.
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Governments get a pass under GASB Statement 34. States like Illinois (and many others) can elect the "modified approach" for networks of infrastructure assets such as highways, roads, and bridges. Instead of depreciating the asset, the government:
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Claims the asset has an "indefinite" useful life if it maintains it at a self-set "condition level."
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Records only the current-year maintenance and preservation costs as expenses ("pay-as-you-go").
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Avoids any annual depreciation expense entirely.
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This is allowed as long as the government has an asset management system and says it is preserving the assets at or above its chosen condition threshold. No depreciation means the government's "operating results" and net position look stronger on paper, hiding the ongoing consumption of the asset.
The result? Governments have a built-in incentive to defer or minimize maintenance spending. A pothole on the I-64 bridge isn't just bad roads—it's visible evidence that the "pay-as-you-go" approach often means not paying enough to truly preserve the asset. Yet the financial statements don't force the government to recognize that deterioration through depreciation or a clear liability for deferred maintenance. Taxpayers don't see the full picture of what it actually costs to provide road and bridge services today.
This is exactly the kind of opaque, misleading reporting Truth in Accounting has been calling out for years. GASB allows governments to create their own accounting rules (modified accrual in the funds statements, exceptions like the modified approach in the government-wide statements), which prioritize short-term optics over long-term truth. It confuses citizens and elected officials alike and makes it harder to hold government accountable for kicking infrastructure costs down the road.
We believe the fix is straightforward: governments should be required to use full-accrual accounting consistently—like corporations—so that every taxpayer can see the real cost of government services, including the wear and tear on our roads and bridges. Recent GASB proposals for additional infrastructure disclosures (asset age, etc.) are a small step, but they don't go far enough.