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Saturday, February 21, 2009

In Praise of "Soup Kitchen Accounting"

Two co-contributors to the New York Times Op-Ed section this week think that the solution for ensuring that recipients of federal funds are held accountable for their use of those funds is requiring that the beneficiaries of taxpayer financing should have to keep track of their money in the same way nonprofits must.

"Nonprofits use what is known as “fund accounting.” Fund accounting requires that a separate set of books be maintained for all grants that are designated for a specific activity. The aim is to ensure that the resources are spent for their intended purpose."

Furthermore, "[b]efore a charity can receive a federal grant, it must prepare a proposal outlining precisely what it will do with the funds. Bailout recipients should do the same, or at least sign contracts agreeing to spend the money in accordance with terms set forth by the Treasury. . . . Similarly, charities are asked to provide detailed financial reports at least once a year to the federal agencies overseeing their grants."

"[G]overnmental entities and not-for-profit organizations receiving federal assistance must submit to independent audits. TARP recipients should do the same. The auditors would not only attest to the integrity of the recipients’ financial data but also report on the extent to which they complied with the terms of the grant. If violations were found, the auditors would be charged with reporting them to the appropriate oversight agency.

Charity is accountable. TARP recipients should be, too."

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