Accounting Standards and the United States Government

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            Even with the increased focus on the fiscal policy of the United States Government in recent years, little attention has been given to the board that issues the accounting standards used by the federal government.  The Federal Accounting Standards Advisory Board ("FASAB") is the group that sets these standards. FASAB was founded in 1990 after the passing of the Chief Financial Officers Act. This Act required for the first time annual audited financial statements for the United States Government and its component entities.  

FASAB  is currently composed of nine different members: three members represent federal agencies and six are members of the public not associated with a federal agency.  The public members are eligible for two five-year terms. The current chairman of FASAB is Tom L. Allen, a Certified Public Accountant who also serves as a member of the accounting department faculty at Weber State University. The three members that represent the federal agencies are from the Office of Management and Budget (OMB), the U.S. Department of Treasury, and the Government Accountability Office (GAO).

In 1999 FASAB was designated by the American Institute of Certified Public Accountants (AICPA) as the standard-setting body for federal governmental entities. This designation carried significant weight. The AICPA is the national professional organization of Certified Public Accountants in the United States.  With its designation FASAB's standards were considered as Generally Accepted Accounting Principles (GAAP).

Each fiscal year the United States Treasury Department releases the Financial Report of the United States Government. This report uses the standards set by FASAB to illustrate the financial position of the United States Government. Similarly, the federal government's component entities release yearly financial reports using the FASAB standards.

 FASAB standards are based generally on accrual accounting. The reports contain a statement of net cost, which provides the net cost of government goods and services provided by the taxpayer. To determine the statement of net cost, revenue generated by the entity is subtracted from the cost of operations. An example of generated revenue would be the sale of stamps to the public by the United States Postal Service.

FASAB has come under criticism from some accounting professionals who argue that the three federal board members, from the so-called sponsoring agencies, hold too much power. This argument largely stems from the veto power that the sponsoring agencies have over any FASAB standards within 60 days of its approval by the board. Critics believe this power makes the non-federal members beholden to the federal members, and hurts its role as an independent advisory board.

The power of FASAB to set the standards of financial reporting by the United States Government is a great power. This importance is further amplified by the fiscal problems facing the federal government. Because of this importance and the current economic climate facing this country, the media and the American public should pay greater attention to the role played by FASAB. 

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Michael Hayes has 1 articles online

Michael Hayes is enrolled in the West Chester University MBA program.

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Accounting Standards and the United States Government

This article was published on 2013/04/15