HIDDEN WEALTH TRANSFER [2]: A BRIEF HISTORY OF GOVERNMENT ACCOUNTING (AND REFORM?)

Americans assume the government has always kept good books. We assume that since the very beginning of the Republic, government accountants have kept strict written financial records of all transactions accessible to all.

.

“And when He calls me to account, what will I answer Him?” [Job 31:14]

GOVERNMENT ACCOUNTING

I confess this is an area I have never delved into or have any interest in and therefore have no idea what the facts actually are regarding historical government accounting practices. And, due to the nature of such an all-encompassing subject that would appear to take several lifetimes to get a handle on, I will leave it to others to research the subject as I’m sure many already have.

All of us have a need for accounting. We all must keep financial records. I would think the record keeping of most people is likely not so complicated but can always present a challenge. Small businesses must have extensive accounting departments to keep track of everything. Two hundred years ago it was obviously much simpler. Over the course of the prior century keeping proper financial records grew much more burdensome due to an exponential increase in mandatory compliance toward new government agencies on every level including massive new infrastructures to support, but also as the monetary byproduct of a higher standard of living. In other words, simpler times when much less was required to live were also simpler to account for and document.

I’m sure there’s a graph out there illustrating government growth over the last 245 years, and I would think it shows a low steady climb from the bottom of the left side (1776) to maybe the mid-1800s as we move toward the right when it probably has a small upward jolt (The Civil War) and continues on a slightly higher steady climb until about the magical year of 1913 at roughly the middle of the graph. At this point there would be a higher climb until a huge jump during the 1930s and into WWII. After this one would hope the paper on which the graph was printed was tall enough because government spending likely grew beyond a 45-degree ascent and continued unabated exponentially toward dizzying heights until the present. As of now we are precariously balanced on a sharp nearly vertical pinnacle shooting majestically off the graph on the far right side into government accounting oblivion.

Did federal accounting manage to keep up in its transition from millions to billions to untold trillions? Is there an actual honest record of all expenditures? Is such a record available to every American taxpayer/investor? Could someone choose a particular year of our history and access all accounting records? The answer, of course, is a resounding no. And even if one could, one could never know about any money spent that was officially “off the books.” Known in some circles as dark money, there is certainly a need for utilizing such for various reasons, especially national defense, primarily regarding the comprehensive though indeterminate reason of national security. Therefore, one must assume that there must be at least two sets of books and also the possibility in some cases of no books at all. And in this we must conclude that no, there can likely never be any actual accounting for of all monies appropriated and spent by government agencies.   

Again, being pretty much the opposite of an expert in this field with no desire to research it out, I cannot say when or if attempts first began to possibly rectify poor accounting procedures so I will simply start with fairly recent developments.

THE FEDERAL ACCOUNTING STANDARDS ADVISORY BOARD

Mission Statement:

The FASAB serves the public interest by improving federal financial reporting through issuing federal financial accounting standards and providing guidance after considering the needs of external and internal users of federal financial information.[1]

According to its website, FASAB had its initial origins in 1990 when Congress passed the Chief Financial Officer’s Act (CFO Act), requiring audited financial statements, in accordance with applicable standards, for selected federal reporting entities. It was a step toward the comprehensive requirement for audited financial statements established in 1994 by the Government Management Reform Act. Congress passed the CFO Act in part due to concerns about highly publicized financial management problems at various federal agencies.[2]

One must assume this meant there was a serious systemic accounting problem prior to that time. Low level problems and basic accounting fraud in general would not have registered as a great enough offense to require the new law. The CFO Act must have therefore had not mere elementary reform in mind but something much more substantial. And how does that happen? How do the heads of the aforementioned federal agencies allow for such highly publicized management problems? A great many accountants, auditors, and congressional staff [3] were aware of major problems. It must have been exceptionally bad with so many government workers from various agencies blowing the whistle.

By this time you may be getting the big idea that government accounting in general has historically not been so accountable. An effort was made for reform in 1950 with The Budget and Accounting Procedures Act but this was apparently not deemed mandatory and did not involve anything close to full participation. Indeed, some questioned whether it was constitutional for a legislative agency to define accounting standards for an executive agency.[4]

One can only imagine the depth of government accounting incompetence and a total lack of proper oversight and standards that took place over the next forty years (1950-1990). Again, you are getting this information not from government critics but from the government itself. All the information in italics is from the FASAB website. The very creation of FASAB was due to the government itself answering the call to implement system-wide reforms. How much this was driven by concerned American taxpayers in general is not specified but I would think it was not much of a factor, especially during that time period. It was an era when Americans so fully trusted its government most people were completely unaware of any number of scandals and secrets which have since been revealed. Remember, the majority of the country fully supported the Vietnam War (1965-1973) and that tells us pretty much everything.   

It was not until 1990 that the government finally decided to get a handle on the accounting “problem” by instituting corrective reform of general accounting procedures with the specific provision of utilizing both the executive and legislative branches working together. Imagine that.

On October 10, 1990, then Secretary of the Treasury Nicholas Brady, Director of OMB Richard Darman, and Comptroller General Charles Bowsher jointly agreed to create and sponsor the Federal Accounting Standards Advisory Board (FASAB) by signing a “Memorandum of Understanding (MOU) Among the General Accounting Office, the Department of the Treasury, and the Office of Management and Budget on Federal Government Accounting Standards and a Federal Accounting Standards Advisory Board.” FASAB would consider and recommend the appropriate accounting standards for the federal government. For the first time, the legislative and executive branches agreed to work together in an agreed framework, with an open, public process, to determine the accounting standards that federal agencies should follow.[5]

In our next segment we will discuss a recent relatively unknown but extremely serious development within FASAB that takes government accounting on an unaccountable magical mystery tour.

© 2020 by R.J. Dawson. All Rights Reserved. [Part 2]


[1] https://fasab.gov/about-fasab/mission-objectives/

[2] https://fasab.gov/about-fasab/fasab-history/the-history-of-fasab/

[3] https://fasab.gov/about-fasab/fasab-history/the-history-of-fasab/

[4] https://fasab.gov/about-fasab/fasab-history/the-history-of-fasab/

[5] https://fasab.gov/about-fasab/fasab-history/the-history-of-fasab/

HIDDEN WEALTH TRANSFER [1]: YOUR FUTURE IS BEING STOLEN

HIDDEN WEALTH TRANSFER [3]: “FEDERAL FINANCIAL ACCOUNTING STANDARDS 56, CLASSIFIED ACTIVITIES”

HIDDEN WEALTH TRANSFER [4]: THE MISSING TRILLIONS

Posted on October 17, 2020, in Current Events and tagged , , , , , , , , , . Bookmark the permalink. 2 Comments.

  1. RJ, this is above my head. I’m going to have to take the time, when I’m alone, and without interruption, to digest it all. I appreciate the work you’ve done to research and share.

    Like

    • Thanks Linda. I appreciate it. It can certainly be complicated (understatement alert). I’m just giving a brief glance at a pretty dull but hugely important subject in an attempt to shine some light. There are some brilliant research minds out there who have taken the whole thing apart and put it back together. Unfortunately, what they discover often does not involve a positive outcome.

      Liked by 1 person

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