A serious debate about public sector accounting issues is absent from the USA primary’s candidates for the American presidential race, according to Joe DioGuardi, an American CPA and former Congressman.
DioGuardi, now a campaigner for the adoption of IPSAS and accrual accounting at USA federal government level, told The Accountant that such important issue for fiscal responsibility and transparency of public finances hasn’t been discussed at all during the USA primaries.
Ahead of yesterday’s victories of Bernie Sanders and Donal Trump in the Indiana primaries, and asked if any candidate is supporting the adoption of IPSAS, DioGuardi said:
"It doesn’t even come up in the debate. That’s the incredible thing. Nobody is even asking those questions. The world is upside down."
DioGuardi, a Republican himself, hasn’t formally endorsed any candidate. However, when asked what candidate is closer to his IPSAS advocacy work, the name of John Kasich comes to mind. (See update below)
"I served with him in Congress. He was also chairman of the House Budget Committee. He is the governor of one of the most important states now (Ohio) that he’s made fiscally responsible, from running a deficit to running a surplus of some billions."
Currently the federal accounting books reflect a hybrid of cash/accrual basis method which allows not including unfunded liabilities, such as Medicare, social security, and military and civil services pensions.
As DioGuardi recalled in many of the articles he’s written, the first and second Hoover Commissions on the organisation of the executive branch of the government had already mandated in the 1950s the accrual accounting systems for federal agencies, resulting in laws that, nevertheless, were never implemented.
"I’ve criticised the FASAB [Federal Accounting Standards Advisory Board] because they are not doing what I thought was supposed to be done to implement accrual accounting. I’ve said in my articles that this has been in the law since 1955 with the Hoover commissions and endorsed by several presidents, but somehow it’s not being enforced."
As such, he continued, USA’s federal government debt is measured at $19tr, instead of $72tr according to his estimates following an accrual accounting method.
However, DioGuardi said things are going to change at federal level, as the standard-setting body at the state level (the Government Accounting Standards Board or GASB) has introduced accrual-based standards which require bringing those unfunded liabilities into the States’ books and financial statements.
That amendment came into force on 30 June 2015 (the fiscal year for the States as opposed to 30 September for the federal government), therefore it is going to be enforced once 30 June 2016 comes.
"I think everything has to be consistent. If the States now are going to report on accrual basis, we need a full accrual basis for the federal government too."
DioGuardi added that the change at state level is already an important factor to weigh in due to the role that ratings service companies (such as Moody’s, Standard & Poor’s or Fitch) can play.
"Now, is this going to happen to the federal government? I believe so. I think the credit ratings service companies will say: ‘You know what? We’ve always said that treasury bills are AAA, maybe we need to look at this again.’"
Back to the absence of IPSAS in the USA primaries, DioGuardi said politics is reigning supreme when it comes to the numbers.
"That’s why you have Bernie Sanders doing so well here. Because he is saying that you can’t be a president if you are depending on Wall Street’s money and getting paid $220,000 to give speeches on Wall Street — Hillary Clinton has not yet disclosed what those speeches were."
"He is running an amazing campaign. He is raising $40m a month. I think he’s raised more than anybody that has Super PACs [Political Action Committees]. I’m a Republican and I like what he is doing. He is attracting a whole new group of young people, because it’s about their future, he tells them."
Update: On 4 May John Kasich suspended his campaign for Republican nomination
A seventy-two-trillion-dollar question?