Chocola Introduces Truth in Accounting Bill

Chocola Introduces Truth in Accounting Bill

Today Congressman Chris Chocola introduced a bold bi-partisan piece of legislation. Congressman Chocola (R-IN), along with Congressman Jim Cooper (D-TN) and Congressman Mark Kirk (R-IL) have introduced the "Truth in Accounting Act" that will forever change the way the government accounts for its long-term liabilities.

Long term budget forecasts by CBO, GAO, and others show that the Federal Government's fiscal policies are on an unsustainable course. The government's net liabilities, unfunded commitments, and other obligations now amount to more than $46 trillion, and is growing daily. This problem is too big to be solved by economic growth alone or by making modest changes to existing spending and tax policies. If the U.S. is to effectively address its long term fiscal challenges, truth and transparency in government reporting are essential. Our fiscal exposures can only be managed if they are properly accounted for and publicly disclosed.

The Truth in Accounting Act takes a crucial first step by requiring the Treasury Department, in coordination with the OMB, to begin reporting in the annual Financial Report of the U.S. Government a measure to track the costs of the Federal Government's long-term liabilities and commitments based on NPV (net present value) calculations and accrual accounting principles.

"In order to solve our problems and prevent the impending fiscal crisis, we have to first identify where and how large the problem is," said Chocola. "The government needs to level with the American people, and give them an honest and accurate depiction of our nation's fiscal challenge."

Chocola has focused a great deal of his efforts in Washington on creating a more fiscally responsible government. Currently, the government uses incomplete fiscal measures such as debt held by the public, deficit projections over limited - usually 5 or 10 years - horizons, or 75-year estimates of Social Security and Medicare shortfalls provided by program trustees. These measures, however, significantly understate the financial shortfall that the Federal Government faces under today's fiscal policies. As a consequence, the degree to which current policy is unsustainable is hidden from policymakers and the American people. Chocola felt it was important that the American people have a more accurate portrayal of our nation's fiscal exposures.

Chocola solicited suggestions and advice from people like David Walker the Comptroller General of the United States, our nation's chief financial officer, budget experts from inside and outside of government, as well as high level officials from the Office of Management and Budget. Their suggestions, along with Chocola's belief that our government should account for its liabilities much like the government requires business to do, led to the drafting of the Truth in Accounting Act of 2006.

"When I was in business, the Federal Government required our company to account for long-term liabilities using Generally Accepted Accounting Principles." "This bill would require the Federal Government to follow the same laws they require every public business in America to follow," said Chocola. "If any company accounted for its business the way the government accounts, the business would be bankrupt and the executives would be thrown in jail."

"I learned in business that you shouldn't sell something you aren't willing to buy yourself." "If we require public businesses to follow these rules, we should follow these rules ourselves."

http://chocola.house.gov/News/DocumentSingle.aspx?DocumentID=42065