May 20 2014
Rep. Jim Renacci (OH-16) today introduced the Federal Financial Statement Transparency Act, a bipartisan bill that will encourage the federal government to clean up its balance sheet, lead to a more honest depiction of our nation’s finances, and ultimately allow Congress to balance the budget and more effectively address our growing debt.
“While many in Congress agree that we must reduce our debt and eliminate our deficits, there is less agreement on how we best accomplish it,” said Rep. Jim Renacci. “I believe this is due in large part to the fact that the actual size of our assets, liabilities, and true net accumulated deficit remain a mystery. If a business ran its books the way the federal government does, then it would most certainly be forced to close its doors.”
Each year, the federal government produces financial statements and the Government Accountability Office (GAO) audits them. However, it is important to note that the GAO has never been able to issue an "unqualified" or "clean" audit of the federal government's consolidated financial statements. In addition, the U.S. Department of Treasury continues to leave some of the largest liabilities, such as the social insurance funds which include Social Security and Medicare, off of the balance sheet. In fiscal year 2012, the balance sheet compiled by the Treasury showed a net accumulated deficit of $16.1 trillion and in fiscal year 2013 a net accumulated deficit of $16.9 trillion. If the social insurance obligations were reflected on the balance sheet, the net accumulated deficit could easily top $60 trillion. The federal government requires public companies to have "clean" audited statements to operate and sell securities, yet it cannot meet that same standard.
“As a CPA and former business owner for nearly 30 years, I know how critical it is to have the financial information necessary before making a decision about how to best move an organization forward. In Washington, we know that our current path is unsustainable, but do we really know where we stand fiscally? The answer is that we don’t, and neither do the American people thanks to the federal government’s incomplete financial statements” said Rep. Renacci.
In the private sector, accounting standards used by public companies are set by an independent accounting standards board, the Financial Accounting Standards Board (FASB). The Governmental Accounting Standards Board (GASB) was created to set accounting standards for state and local governments. The federal government does not use either of these organizations’ accounting principles when drafting its financial statements. The accounting standards used by the Treasury when compiling the consolidated financial statements are set by the Federal Accounting Standards Advisory Board (FASAB).
“Establishing FASAB was a step in the right direction, but it lacks independence – opening the door to political influence,” said Rep. Renacci. “At a time when we are facing a $17.5 trillion debt, hardworking American taxpayers deserve an accurate picture of our government’s finances. That is why I have introduced the Federal Financial Statement Transparency Act, bipartisan legislation that would lead to more transparency and accountability within U.S. financial statements. We know that we must tackle our spending-driven debt crisis, and identifying exactly where we stand financially is a critical first step to addressing it.”
Currently, FASAB is comprised of nine members, three federal members from each of FASAB’s sponsoring agencies (GAO, OMB, and Treasury) and six public or non-federal members. The Federal Financial Statement Transparency Act would enhance FASAB by making it more independent, accountable, and transparent. This is accomplished by removing the Treasury’s voting rights on the board and independently funding its operations. Treasury should not be allowed to vote on the standards they will then use in compiling the financial statements. Additionally, if the Treasury fails to implement a standard set by FASAB, they will be required to submit a public report explaining their deviation.
Rep. John Carney (D-DE), the lead co-sponsor of the bill, added, “There’s not a lot this Congress can agree on, but one thing we should all be able to support is getting our balance sheet in order. I’m proud to work with my friend Mr. Renacci on cleaning up our country’s finances and making sure that Congress -- and the American people -- have an accurate picture of how their money is being spent. This bill is a straightforward solution to a problem Congress has ignored for far too long.”
“The AICPA strongly supports the Federal Financial Statement Transparency Act of 2014, and specifically its goal of reinforcing the Federal Accounting Standards Advisory Board’s (FASAB) status as an independent entity. The measure is a meaningful step toward ensuring FASAB has adequate resources to carry out its mission and address important accounting principles for the federal government,” said American Institute of CPAs President and CEO Barry C. Melancon, CPA, CGMA. “As a CPA, Representative Jim Renacci (R-Ohio) recognizes the importance of enhancing FASAB’s funding and governance. He, Representative John Carney (D-Del.) and the bill’s other co-sponsors are to be commended for their leadership on this issue.”
Maya MacGuineas, President of the Committee for a Responsible Federal Budget, added “As we work to put our debt on a downward path, we need the most comprehensive information about the long term liabilities and overall financial condition of the United States Government, and giving FASAB greater independence and accountability will help achieve that goal. Rep. Renacci should be commended for his efforts to ensure the accurate accounting of federal fiscal information."