Bill Requires Reporting Unfunded Federal Liabilities

With state and local governments scrambling to meet the Government Accounting Standards Board’s (GASB) amended rules for reporting on postretirement benefits, and private and public companies getting ready for compliance with the Financial Accounting Standards Board’s (FASB) proposed statement on recording pension liabilities, a congressman from Indiana has introduced legislation that would require the federal government to meet a similar standard. The Truth in Accounting Act, sponsored by Rep. Chris Chocola (R-Ind) and co-sponsored by Reps. Jim Cooper (D-Tenn) and Mark Kirk (R – Ill), would require the federal government to accurately report the nation’s unfunded long-term liabilities, including Social Security and Medicare, a debt that amounts to $43 trillion dollars, during the next 75 years, Chocola says, according to wndu.com.


Advertisement



The U.S. Treasury Department is not currently required to file an annual report of these debts to Congress, wndu.com says.

“When I was in business, the federal government required our company to account for long-term liabilities using generally accepted accounting principles,” Chocola told the South Bend Tribune. “This bill would require the federal government to follow the same laws they require every public business in America to follow. If any company accounted for its business the way the government accounts, the business would be bankrupt and the executives would be thrown into jail.”

The legislation doesn’t propose solutions for the burgeoning liabilities, but it takes a crucial first step, according to Chocola, “by requiring the Treasury Department to begin reporting and tracking those liabilities according to net present value calculations and accrual accounting principles,” the Tribune reports.

“In order to solve our problems and prevent an impending fiscal crisis,” Chocola said, “we have to first identify where and how large the problem is.”

Chocola clearly sees a looming fiscal crisis. “Congress is the Levee Commission and the flood is coming,” he told the Tribune. “This [bill] is intended to sound the warning bell.”

To support his position, according to the Tribune, Chocola referred to an article written by David Walker, a Clinton appointee who serves as Comptroller General of the United States and head of the U.S. Government Accountability Office (GAO). Walker wrote that the government was on an “unsustainable path”.

Speaking to a British audience last month, Walker said that the U.S. is headed for a financial crisis unless it changes its course of racking up huge deficits, Reuters reported. Walker said some combination of reforming Social Security and Medicare spending, discretionary spending and possibly changes in tax policy would be required to get the deficits under control.

“I think it’s going to take 20-plus years before we are ultimately on a prudent and sustainable path,” Walker said, according to Reuters, partly because so many American consumers follow the government’s example. “Too many Americans are spending more than they take in and are running up debt at record rates.”

You may like these other stories...

By Jason Bramwell The board of trustees of the Financial Accounting Foundation (FAF) finalized a new policy on November 19 that provides the Governmental Accounting Standards Board (GASB) with direction on what...
By Jason Bramwell The Governmental Accounting Standards Board (GASB) is now offering a free online toolkit designed to assist preparers and auditors of state and local government pension plans with implementing new...
By Steven Brenner With the news that the Financial Accounting Standards Board (FASB) – in conjunction with the International Accounting Standards Board (IASB) – intends to formally move...

Upcoming CPE Webinars

Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.