General Accounting Principles and the U S Government

GASB Persons who use governmental financial reports have different needs than those who use business financial reports. These different needs are shown in the way the framework of the accounting and reporting standards are set up. The GASB framework is geared towards being user-friendly to citizens and their elected representatives in government. These users are not the primary readers and/or targets of business reports.

Thus, while some businesses might use mark-to-market accounting principles, like those employed by Enron prior to its collapse in the early days of the 21st century, GASB puts accountability and transparency at the top of its principles. The purpose of its accounting, in other words, is to show constituents what their government is doing with taxpayer dollars (Reck, 2015).

One significant example of how GASB standards address differences between governmental and business financial reporting is the Congressional Budget Office, which shows the use of fund accounting and budgetary reporting to meet public accountability needs. The CBO gives projections of federal receipts and expenditures in the national income and product accounts. This is a summary of fiscal transactions of the federal government: there is the budget of the U.S.

government, which is prepared by the Office of Management and Budget and then there is the NIPA, or national income and product accounts, which is prepared by the Department of Commerce. The purpose of these two accounts is to show that accountability is being given to the public, but of course the U.S. government is an enormous bureaucracy, which by definition has no real accountability to anyone other than the top portion of the pyramid which oversees the bureaucracy -- and this is certainly not the public.

Therefore, the GASB is actually worse for readers of the financial statements because it puts on the guise of accountability and transparency, when in all actuality there is neither. With businesses, the public can at least go short the stock and allow price discovery to occur -- if the public investors feel that the company is not being honest in its depiction of the books. This is what happened with Enron and what is currently happening with Valeant, whose share price is being obliterated on the U.S. stock exchange.

But what can the public do if it actually does manage to read and make sense of the U.S. government's financial reporting? It has virtually no power to short the government or hold the government accountable.

When it does try to do that (for example by supporting an outsider like Trump or Paul), the Establishment rallies to ensure that the public is not allowed to vote into office someone who might actually challenge the Establishment or hold it accountable for its dishonest record-keeping and lack of real transparency, no matter how much lip service it pays to the idea of having open books.

Thus, while the Congressional Budget Office may be a significant example of how GASB standards address differences between governmental and business financial reporting, the fact of the matter is that in this day and age, one would be ill-advised to trust either -- but if one is going to trust either, he would probably be better off assessing the fundamentals of a Fortune 500 company than he would the U.S. government.

Like the Chinese government, it too has been giving inaccurate accounts -- or just simply losing accounts (as Rumsfeld reported on the day before 9/11 -- 2.3 trillion USD to be exact, lost by the Pentagon, misplaced, unaccounted for). Therefore, why anyone would actually consider anything that the government prints for public consumption, GASB or not, is as big a mystery as the case of Rumsfeld and the missing trillions (BubbaLouis, 2006).

Two suggestions about this answer are that the GASB standards are insufficient to actually meet the needs of the public and the representatives whom they elect. The problem may not be in the standards themselves, however, but in the bureaucracy behind them that finds ways around them, whether by the sheer volume of reports that are generated or by the incontestability of them. As stated above, there is no real way in which the public can redress perceptions of wrongdoing in the reports.

It is to be accepted that the GASB standards are sufficient and efficient in and of themselves because the government has stated that its purpose is authenticity, accountability and transparency. But, as stated above, Enron's Board suggested the same thing about its accounting practices. Thus, GASB may be a good first step towards accountability but there ought to.