Short and Simple Financial Reports

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Government’s financial reports are impossible for Citizens to understand, which creates a Constitutional problem. Our US Constitution was designed to let we citizens an external “check and balance” over our government. But if we cannot understand how government taxes and spends our money, we cannot effectively control government. Instead, Congressional and Administration leaders can be controlled in non-transparent ways by special interests. Is it possible to make government’s financial reports meaningful to citizens?

The answer is yes. But before we describe how, we first describe the way government currently reports its financial performance to citizens.

US Government’s Financial Report for Fiscal Year 2014 illustrates the problem. It is 268 pages that no one can understand, and fails to describe government’s financial performance in ways citizens can meaningfully use to evaluate government’s financial performance. Even worse, this report grotesquely distorts liabilities such as social Security, Medicare and Medicaid by failing to transparently disclose their true annual costs and long-term liabilities.

However, a solution to this disclosure failure exists. In 1975 the respected auditing firm, Arthur Anderson, demonstrated this solution. They prepared a draft of the US Financial Report for Fiscal 1974 (see here). They prepared this draft using the same disclosure rules that publicly traded corporations must use to report to their shareholders. These rules require financial reports to be understandable to the external users who need them, and also require reporting of long-term liabilities using accrual accounting, instead of the deceptive cash-in/cash-out accounting that government still uses.

Arthur Andersen’s 1975 draft was only 14 pages including footnotes. Nonetheless it was complete, and prepared in a way that government’s citizen shareholders could understand and use to evaluate government’s financial performance.

However, Congress and the Administration failed in 1975, and have failed since, to adopt Arthur Anderson’s recommendations. The result is the complexity and uselessness of government’s current financial reports. These deceptions block citizens’ Constitutional right to oversee government, and instead unleashes the inefficient, wasteful government - controlled by special interests - that we have today.

TransGov’s goal is legislation that makes government accountable to citizens under the same rules that govern corporate accountability to shareholders. But to accomplish this we need help from citizens, volunteers, and donnors to create public awareness and pressure for this critical change. Please sign up with TransGov.org to receive occasional updates, and also please donate, volunteer, and sign our petition.