Sec. 813. Policy statement on Federal accounting methodologies
509 words·~2 min read·
/bill/114/hconres/27/eh/section-813·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
The House finds the following: Given the thousands of Federal programs and trillions of dollars the Federal Government spends each year, assessing and accounting for Federal fiscal activities and liabilities is a complex undertaking. Current methods of accounting leave much to be desired in capturing the full scope of government and in presenting information in a clear and compelling way that illuminates the best options going forward. Most fiscal analysis produced by the Congressional Budget Office
(CBO)is conducted over a relatively short time horizon: 10 or 25 years. While this time frame is useful for most purposes, it fails to consider the fiscal consequences over the longer term. Additionally, current accounting methodology does not provide an analysis of how the Federal Government's fiscal situation over the long run affects Americans of various age cohorts. Another consideration is how Federal programs should be accounted for. The accrual method of accounting records revenue when it is earned and expenses when they are incurred, while the cash method records revenue and expenses when cash is actually paid or received. The Federal budget accounts for most programs using cash accounting. Some programs, however, particularly loan and loan guarantee programs, are accounted for using accrual methods. GAO has indicated that accrual accounting may provide a more accurate estimation of the Federal Government's liabilities than cash accounting for some programs specifically those that provide some form of insurance. Where accrual accounting is used, it is almost exclusively calculated by CBO according to the methodology outlined in the Federal Credit Reform Act of 1990 (FCRA). CBO uses fair value methodology instead of FCRA to measure the cost of Fannie Mae and Freddie Mac, for example. FCRA methodology, however, understates the risk and thus the true cost of Federal programs. An alternative is fair value methodology, which uses discount rates that incorporate the risk inherent to the type of liability being estimated in addition to Treasury discount rates of the proper maturity length. The Congressional Budget Office has concluded that adopting a fair-value approach would provide a more comprehensive way to measure the costs of Federal credit programs and would permit more level comparisons between those costs and the costs of other forms of federal assistance than the current approach under FCRA. It is the policy of this resolution that Congress should, in consultation with the Congressional Budget Office and the public affected by Federal budgetary choices, adopt Government-wide reforms of budget and accounting practices so the American people and their representatives can more readily understand the fiscal situation of the Government of the United States and the options best suited to improving it. Such reforms may include but should not be limited to the following: Providing additional metrics to enhance our current analysis by considering our fiscal situation comprehensively, over an extended time horizon, and as it affects Americans of various age cohorts. Expanding the use of accrual accounting where appropriate. Accounting for certain Federal credit programs using fair value accounting as opposed to the current approach under the Federal Credit Reform Act of 1990.