Rejoinder to David Mosso’s Comments on “The Fatal Defect in the Federal Accounting System” (PB&F 20:4)

Abstract

David Mosso is an intelligent, knowledgeable, fair-minded person. His comments about expense accounting are accurate. As chairman of the Federal Accounting Standards Advisory Board (FASAB), he naturally is optimistic about the eventual acceptance of its expense accounting system. He agrees that the House Appropriations Committee’s requirement that budget submissions be on an obligation basis is a serious obstacle, but he hopes that legislation requiring expense-based reports for other congressional committees will provide the needed impetus. Unfortunately, experience does not support this optimism. The Budget and Accounting Procedures Act of 1950 required the submission of expense-based reports to Congress as soon as practicable, but as of 2001, this has not happened. Mr. Mosso doesn’t accept my assertion that a balance sheet for the federal government is useless. Although I agree that the balance sheet is an anchor used to keep the accounts accurate and honest, the same anchor has been used in the accounting system for many years by accountants and auditors even though it is not published. The accounts must balance. But this is not a reason for publishing a balance sheet. A federal balance sheet implies that the assets of the federal government named therein are the government’s actual assets. This implication is incorrect. The reported assets are a small fraction of the actual assets. There is no evidence that this information is useful, either at the federal level or at the agency or lower levels. In 50 years of using information from agency accounting systems, I have never used a balance sheet for the federal government or for one of its agencies. Records of financial assets published by the Treasury Department are useful. Records of the cost and location of individual assets are essential for control purposes; such records have been maintained