Many people may agree that the government needs to be more efficient. But efficiency requires a deep understanding of the accounting standards used, the efforts underway, and the experts in the field.

How are Federal Accounting Standards different from Private Accounting Standards?

Federal government accounting is different than private company accounting. The money flowing through the federal government is intended for different purposes, objectives, and stakeholders.

Accounting End Users are Different

For companies and non-profits, the end users of financial outcomes are shareholders and business leaders. For the federal government, the end users are taxpaying citizens and governmental leaders.

Accounting Objectives are different

For companies and non-profits, accounting helps managers, creditors, and investors (shareholders or donors) make informed decisions. Performance and cash flow are important factors in investing and lending, as well as in expansion and growth. The purpose is to show profit and loss, or position.

For the federal government, accounting demonstrates the management of public funds within legal and regulatory boundaries. The purpose is to show stewardship and compliance.

Accounting Standards are Different

In the U.S., financial accounting and reporting standards are called generally accepted accounting principles (GAAP, pronounced like ‘gap’).

The Governmental Accounting Standards Board (GASB) sets GAAP for state and local governments and the Financial Accounting Standards Board (FASB) sets GAAP for public and private companies and non-profit organizations.

The Federal Accounting Standards Advisory Board (FASAB) sets GAAP for the U.S. federal government. FASAB is a private non-profit organization that proposes concepts and standards to the Comptroller General, the Secretary of the Treasury, and the Director of the Office of Management and Budget (OMB) for review. Finalized standards are announced in the Federal Register, which also houses all presidential actions and agency rules and regulations.

Financial Reporting is Different

For companies and non-profits, financial reporting includes income statement, balance sheet, and cash flow statement.

For the federal government, financial reporting includes both accrual-based consolidated financial statements and sustainability financial statements.

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Can the differences in Government Accounting Impact Efficiency Efforts?

Yes. A business leader, familiar with private financial reporting, who picks up government financial reports may believe the reports don’t follow GAAP. They might announce a failure of government, a failure of accounting, and rampant fraud. These beliefs and announcements may be false because the accounting is not understood. Any initiatives based on misunderstanding will make the government less efficient and harm ongoing efficiency efforts.

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Who is Best Situated to Address Inefficiency in the Government?

The answer depends on the type of inefficiency. Likely, inspectors general (IGs) are best situated to address financial inefficiency. Perhaps the newly established Department of Government Efficiency (DOGE) is best situated to address technological inefficiency.

Inspectors General Address Financial Inefficiency

Financial inefficiency in the government is called fraud, waste, and abuse (FWA). The inefficiency happens because of intention actions: a person commits fraud, wastes public funds, or abuses their position for personal financial gain.

Many executive agencies have an Office of Inspector General, which is an independent arm of the agency that investigates and addresses FWA within that agency. An IG is meant to be insulated from political pressure so that they can do the same job no matter who the president is or what political party dominates congress.

President Trump has fired multiple IGs, who recently warned about a lack of oversight in their absence.

DOGE’s Inefficiency Efforts are Unclear

While one might expect DOGE to systematically audit the technological systems of the executive branch, that does not seem to have happened.

But DOGE has entered several agencies and accessed data. DOGE activities have been quick and broad.

Yet it is unclear what expertise DOGE used to identify unnecessary contracts or FWA. Newsweek reported the list of DOGE staff, and it is not immediately obvious whether any of them have education or experience in accounting, or more specifically government accounting. NPR reported that the calculations DOGE has published have been inconsistent and, at times, wrong.

DOGE has also successfully lobbied for buying out or terminating thousands of federal employees. Given the brief, one-month tenure of the department, it is unclear what basis DOGE used to determine that employees or their positions were unnecessary.

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What Can the Public Do?

Ask elected leaders hard questions. Demand and expect transparency and demonstrated evidence. Consider whether fast answers are ultimately the best answers.

As a starting point, ask one or more of these questions:

• Does DOGE have experts in government accounting or other fields related to efficiency in government?
• Has DOGE identified an agency that failed to use generally accepted accounting principles for the federal government?
• Does DOGE look for profit and loss or stewardship and compliance?
• How does DOGE decide what’s inefficient?
• How does DOGE decide whether a contract is necessary?
• How does DOGE decide whether an employee or their position is necessary?
• What were IGs working on when they were fired?
• What have IGs done for government efficiency recently?
• What happens to all the investigations that IGs had ongoing when they were fired?
• Who looks for technological inefficiencies and what do they do when an inefficiency is found?

Find your members of congress. Tell them to ask the questions, too.

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Source citations are available for download.

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This post provides law-related information but does not provide legal advice or counsel. If you need legal advice or counsel, contact a local licensed attorney or your state bar association.