Our Federal Government is not accountable to voters, but we citizens can change that. Eighty-one years ago corporations were not accountable to their shareholders, but when citizens demanded it, Congress fixed that almost overnight. Today, if voter demand it, we can compel Congress to make Government accountable under the same disclosure rules that Congress imposed on corporations in 1934.
Unaccountable government spawns bad government. Today’s US Government is grossly inefficient, with massive waste, fraud, and abuse. Government incurs huge debt and even larger undisclosed liabilities. The high cost of unaccountable government is strangling us, and inefficient government spending threatens our economic futures. This problem exists because citizens do not demand that our government follow the simple accountability rules that businesses must follow.
Congress defined business accountability rules in 1934. After the stock market crash of 1929 the public demanded that corporations be made accountable to their shareholders. To do this, Congress to enacted the Securities Exchange Act of 1934, which required that public corporations report to their shareholders under “Generally Accepted Accounting Principles” (abbreviated as “GAAP”).
The new GAAP rules imposed four high-level principles to assure corporate accountability:
Independent Reporting Standards. These must be set by an independent standards board, instead of by the company itself;
Understandability. GAAP accounting disclosure must be presented in a way that ordinary shareholders can meaningfully understand to evaluate corporate performance;
Transparent Disclosure of Long-Term Liabilities. Corporate accounting reports must show the corpsoration’s true expenses and liabilities using long-term accrual accounting instead of deceptive year-end cash accounting (as US Government still does today); and
- Independent External Audits. Corporate accounting reports must be externally audited by a reputable independent accounting firm, which must certify that the reports comply with GAAP accounting rules.
This revolutionary GAAP accountability compelled businesses to transform. For example, it forced businesses to:
- Disclose and solve their financial problems;
- Retool their internal organizations and adopt best business practices;
- Hire the most competent managers and slash bureaucracy;
- Cut bad products and services, and innovate to create better ones; and
- Eliminate waste, fraud, and abuse.
Unfortunately however, citizens have never pressured Congress to impose these same GAAP accountability rules on US Government itself. Instead, our government has maintained its own accounting system and rules that violate each of the above four principles. As a result, today’s US government gives citizens useless financial reports that unleash government inefficiency, waste, and abuse.
TransGov promotes legislation similar to the Securities Exchange Act of 1934 to make US government accountable to citizens under the same GAAP rules that govern corporate accountability to shareholders.