Joe Carvin is the founder of One World. His time spent as Town Supervisor for the Town of Rye and three-decade long career in emerging market finance, his ability to speak 5 languages fluently, and being a father have influenced his passion for global citizenship education. Joe also holds graduate degrees from the Harvard Kennedy School of Government (MPA) and New York University (MBA).
Each Citizen-Heroes participating in this effort has been fighting the good fight for financial transparency for over two decades and some for over three decades. While we understand the term hero is primarily reserved for soldiers in battle, our goal is to highlight exemplars of good citizenship here at home.
Indeed, we hope this movement will catalyze a new Lyceum Movement here in the United States: Citizen Heroes Call for Civic Engagement and our Lyceum Moment.
The goal of our citizen heroes has not changed over all of this time. Their goal is simple: put in place best practice financial management systems starting with accrual accounting so that the financial accounts of the U.S. Federal government accurately reflect the obligations they have undertaken so that the citizens in our democracy can make informed decisions.
We hope that by bringing together one credible speaker after the other and with all of the attention surrounding DOGE, their voices for reform can finally break through.
We, therefore, have three goals for the Citizen Heroes Fiscal Pathway:
- Expose the discrepancy between reported and actual U.S. financial obligations
- Advocate for the implementation of accrual accounting in federal financial reporting authorized by FASAB.
- Urge the Department of Government Efficiency (DOGE) to require FASAB to implement best-practice accrual accounting.
As you will see below, getting here has been a long and winding road filled with far too much neglect if not outright wanton behavior. However, as David Walker makes clear, if we do not change now, there is a high probability of a significant national and global debt crisis.
Our capacity to act to avoid this crisis is fast evaporating. We are at a tipping point, a point where the future of our children and grandchildren has been put at grave risk.
We need to act now!!
Our Citizen Heroes have been sounding the alarm bell for decades to no avail. The longer we wait to address this problem, the harder it will be to solve it.
Perhaps even more disappointing than the lack of action are the wanton efforts that politicians of both parties have deployed to keep the American public from knowing the actual level of financial obligations they have thrust on us. The document below seeks to explain how we got here.
Best Practice Accrual Accounting A Brief Legislative History
Budget and Accounting Procedures Act of 1950 & Public Law 84-863 of 1956
We expect that many will be surprised that our story starts in the 1950s with the Hoover Commissions of 1950 and 1956 and two subsequent laws, The Budget and Accounting Procedures Act of 1950 and a second law in 1956, Public Law 84-863. This second law formally directed federal agencies to maintain their accounts on an accrual basis, as you see via the following link: Public Law 84-863 - August 1, 1956.
We have included the relevant section here:
"(c) As soon as practicable after the date of enactment of this subsection, the head of each executive agency shall, in accordance with principles and standards prescribed by the Comptroller General, cause the accounts of such agency to be maintained on an accrual basis…"
For more background on the 1950 and 1956 laws click here.
The CFO Act of 1990
A second attempt to implement best practice accrual accounting started with Joe Dioguardi, one of the few accountants ever elected to Congress. As a former partner of Arthur Anderson and newly elected Congressional representative, on March 25, 1986, Congressman Dioguardi introduced H.R. 4495, a bill entitled “The Federal Financial Management Improvement Act.” This bill eventually led to the enactment of the CFO Act of 1990.
Congressman Dioguardi had hoped that an important component of the CFO Act would be to implement robust financial management practices that would include best-practice accrual accounting consistent with what was called for by Public Law 84-863 of 1956. As things turned out, his hopes were dashed, as he makes clear in his 25-year review of the CFO Act.
FASAB Created to Undermine the Purpose of the CFO Act
Dioguardi later concluded that “I still believe, as I testified on February 25, 2009, that the FASAB was formed by the Treasury Department to ef ectively block the use of full liability accrual accounting in the annual financial statements of the federal government with voting seats on the FASAB.”
From: The Fight of a Lifetime: Telling It Like It Is on Our National Debt by Hon. Joseph J. DioGuardi, CPA
Unfortunately, cynical or uninformed politicians undermined Congressman Dioguardi’s efforts to introduce best-practice financial accounting. In its place, in October 1990, the Federal Accounting Standards Advisory Board (FASAB) was established by the Secretary of the Treasury, the Director of the Office of Management and Budget (OMB), and the Comptroller General of the United States.
While the CFO Act did not directly create FASAB, it emerged in the context of this legislation, which emphasized the need for reliable financial reporting and established a framework for federal financial management reforms.
Creation of FASAB
Unfortunately, for Congressman Dioguardi and U.S. citizens, this advisory committee has never delivered on its good government mandate, probably in large part because, as Congressman Dioguardi points out:
“FASAB… is wholly funded by internal government sources (such as the U.S. Treasury Department), creating a conflict for what is in the public interest in fully disclosing the national debt.”
FASAB’s refusal to apply best practice accrual accounting hides as much as $200 trillion in unfunded liabilities, as legendary investor Stand Druckenmiller makes clear in minute 6:30 of this video.
“Did you know that the $32 trillion in debt assumes the US federal government will never make another social security or medicare payment? Only government accounting could think that the government is never going to make another payment. Not one. Not to me. Not to Sheldon. No to you guys when you get older. That is what the accounting reads. If you actually accounted for that, our debt would not be $31 trillion, credible estimates if you present value that - 200 trillion. That is $200 trillion with a “t”.
One of our Citizen Heroes, Shelia Weinberg, who testified in front of FASAB, was told that her testimony on behalf of the use of best practice accrual accounting was wrong-headed because the U.S. Federal government has no obligation whatsoever to make any payments relative to Medicare or Social Security beyond the checks that were cut this past month!!!
Can you imagine if FASAB told the American people that no Social Security or Medicare payment would be made beyond this month's end?
One of the reasons Mr. Dioguardi reached the conclusion that the Secretary of the Treasury refuses to apply best practice accrual accounting results from an experiment he participated in with Arthur Anderson:
It should not go unnoticed that the first prototype U.S. Consolidated Financial Statement for the fiscal year 1975 (prepared by Arthur Andersen & Co.) contained a $5 trillion liability for Social Security that was eliminated when the U.S. Treasury Department assumed responsibility for the preparation of the annual financial statements; thus, creating an inherent conflict in opposition to the public interest (which would have been better served by fully disclosing the national debt on the accrual basis of accounting).
This first prototype produced by Arthur Anderson provides us with an invaluable first step toward producing reliable financial accounts. Unfortunately, like so many other attempts at achieving fiscal transparency, the behemoth that is the U.S. federal bureaucracy has built up its own deleterious logic of self-preservation and continued growth irrespective of results that won't be denied, and this project was abandoned almost as soon as it started.
Here are the 73/74 prototype accounts produced by Arthur Anderson. They make for an interesting read, with accrued obligations exceeding general obligations by a factor of five.
FASAB is Nothing More than an Advisory Committee
A critical consideration for DOGE is that FASAB operates under the authority of the 1972 Federal Advisory Committee Act (FACA). It does not have specific statutory authority but functions as a neutral body to bridge jurisdictional issues among federal financial management agencies.
FASAB was created as part of an effort to improve federal accounting standards, influenced by the broader reforms initiated by the CFO Act, and operates under the governance framework established by the Federal Advisory Committee Act.
Unfortunately, given its governance structure, FASAB has never been able to break free from the cynical politicians fighting reform…until hopefully now with DOGE.
The fact that FASAB is effectively an MOU between the Secretary of the Treasury, the Director of the Office of Management and Budget (OMB), and the Comptroller General of the United States should make it far easier for DOGE to implement change rapidly.
Based on the above analysis, the new administration has great latitude to transform the workings and operations of this advisory committee.
To better understand a FACA-supervised entity click here.
Our Recommendation to DOGE
After 70 years of ignoring our laws and over three decades of ignoring straightforward best practice financial management practices, we believe DOGE has a huge opportunity to effect fundamental reform, starting with the implementation of best practice accrual accounting at FASAB, making clear the real financial obligations of the U.S. federal government.
FASAB needs to be fundamentally transformed and repurposed so that US Federal Government accounting practices conform to a law that is already in place - Public Law 84-863 of 1956 - as compared with the Advisory Committee shenanigans of FASAB.
Tipping Point
There can be no doubt our nation is at a tipping point or a critical threshold at which a small change can lead to significant and often irreversible effects within a system. This concept is widely applicable across various fields, including climate science, social dynamics, and economics.
Which way we go depends on you!!
From Hemingway’s The Sun Also Rises
How did you go bankrupt? "Two ways. Gradually and then suddenly."