Sometimes we are asked why we at Truth in Accounting care so much about total government debt. People suggest government debt is like our mortgages. We only need to worry about making the next month’s payment. If we can pay our bills today, why worry about tomorrow?
Well that is certainly a nice thought. The only problem is, typically, our mortgage is backed by an asset - our house. If we lose our jobs and know we will not have income for the next year, we will have the option to sell our homes to eliminate the debt. The debt is only a debt so long as we are financially responsible for the underlying asset from where the debt originates. Once we sell the house, the debt disappears, and we move forward in whatever manner makes sense.
The total government debt we report is not like our mortgages. Our reports subtract debt that could be paid off with government capital assets before we come to the total debt owed. What debt remains in our reports is more like our credit card debt. It is debt or obligations to pay on expenditures with no financial value that the government or we can sell. Read More.
Sept. 6, 2022
If you are a government employee, have you ever questioned whether your pension is funded? You would assume that as a state employee, you can trust your pension has the funds to pay its retirees. As of 2022, that is often not the case.
At Truth in Accounting, we assess the annual financial statements of all 50 states. This financial report is called an Annual Comprehensive Financial Report (ACFR). We have a staff of seven people who manually review every detail presented by the states. Since these ACFRs are not machine readable (check out our four-part XBRL blog), our staff checks and rechecks the numbers reported on these statements. One type of data we verify concerns the states’ retirement funding levels. We look at the number of retirement plans states oversee, as well as whether the contributions in the plans have a positive or negative balance. If the balance is negative, that means the pension has not received the required contributions from the state government to fund the eventual distributions. Read More
August 30, 2022
Do pension values really change when the stock market rises or falls?
At Truth in Accounting, we analyze government financial statements and aggregate that data into annual reports. One of our most significant concerns when examining these financial documents is the state of pensions. They are often the most considerable debt a government carries. We fear that the valuation of pensions can be distorted for a few reasons. The first is that pension valuations may be up to thirty months old. This is explained in the linked article. A second reason is that the values reported are subject to an accounting concept called “recognized and realized. Read More
August 22, 2022
Part Four or Four
If you read the last three Truth in Accounting blog posts on the functions and importance of XBRL for investors and the SEC, you should not doubt that improving disclosure in governmental financial statements would make it easier for users. Users include citizens, policymakers, and elected officials. The current stagnant pdf documents are cumbersome and take an excessive amount of time to retrieve information. The bottom line is we need information disclosure modernization. We have modernized the computer systems we work on, the GASB regulations we implement, and even the ability to work remotely through cloud infrastructure. What we haven’t modernized in governmental reporting is the types of documents we use to report information. We need to modernize information and transform data into machine-readable documents. Read More
August 15, 2022
Part Three of Four
The previous two blog posts explained that searching governmental financial reporting statements is difficult. We also discussed that after the stock market crash of 1929, the government made financial reporting for publicly traded companies more transparent. It has been an almost 100-year improvement process in public company reporting starting with the rules promulgated through the SEC in 1933 until today. Now the entire information a company reports is searchable through a programming language called Inline XBRL. We know XBRL is a language to report financial data, but how does it work, and how would it help governmental reporting? Read More
August 8, 2022
Part Two of Four
In 1933 and 1934, Congress created two legislative acts to increase reporting and disclosure of publicly traded companies' financial information in order to protect investors. The Securities and Exchange (SEC) Act of 1933 was designed to create transparency in the initial issuance of stock. The SEC Act of 1934 followed with rules governing the secondary or trading market. Information was to be available to investors so they could monitor the financial health of companies openly and transparently. Read More
July 29, 2022
Part One of Four
We at Truth in Accounting (TIA) strive to bring you the most current and accurate data from financial reports that we can. We distribute that information through our State of the States and State of the Cities reports and our Data Z website. What you don’t see from Truth in Accounting is the behind-the-scenes team of people pulling this data from the government financial statements. Read More
August 10, 2022
Employers review our job history, education, references, and credit check to ensure we are someone they can trust. So why should we rely only on credit ratings to assess the financial health of our government? After all, credit ratings are only one tool for taxpayers to evaluate the government's trustworthiness. Read More
August 4, 2022 | Accounting Today
This article first appeared in Accounting Today
You want to refinance your home. The bank requires an appraisal to determine the current value. The appraiser uses data from 2019. Would you feel good about that? Read More
July 29, 2022
Thomas Jefferson and others believe an informed citizenry is necessary for a sound government. But what type of government do you get if the citizens are misinformed? We would argue the state of Illinois. Read More