As you may or not know, the government paints a picture of the current budget deficit that does much to cover up some of the expenditures that is considered to be irrelevant.

It came to my attention through a program on C-Span in which Dennis Cauchon, a Financial Report of USA TODAY, discussed that the government produced a bottom line figure of a fiscal year 2005 federal deficit of $318 billion. The problem with this type of reporting stems from the fact that if the government were to report their finances like a public company, the audited deficit would amount to $760 billion in federal debt.

Our current system of reported budgeting only accounts for cash that comes in and out. With an audited buget system, cash that comes in and out along with expenditures consisting of future liabilities are taken into consideration. The latter is a more accurate procedure for any institution to follow.

The government currently does not report on expenditures and promised payments such as Social Security and Medicare. The reason for this is that these programs are considered to be pay as you go programs that can be canceled at any time. It appears as though the government has made promises that it can not keep. It is unrealistic that these programs will be paid for and cancelled at any time. These programs are liabilities and need to be accounted for.

Mr. Cauchon also brought up the point that New Zealand in 1992 and Australia in 1999 decided to use an audited type of government accounting and have since cleaned up their act and are now producing healthier budgets.

I decided to do some research to verify Mr. Cauchon’s figures that were given to him through various government agencies as they apply to the audited budget. Click here to read an article which matches the budget figures that I have mentioned in the above paragraphs.