A federal panel is recommending changes to governmental accounting that would require the cost of future Social Security and Medicare payments to be accounted for year-by-year as workers accumulate entitlements.

The proposal, from the Federal Accounting Standards Advisory Board, would have no impact on the benefits themselves, but would more closely reflect how much the social programs actually cost.

Adopting the proposal would bring the government more in line with the private sector, but would break with international public accounting practice. The proposal has caused a split within the FASAB board, with six independent members supporting the proposal and a trio of members -- representing the Treasury, the federal Office of Management and Budget, and the Government Account¬ability Office -- opposing the measure.

The federal officials believe the change would incorrectly imply that the government is obligated to make future payments based on current benefit rules. Under current rules, the Social Security program is treated as a cash transaction, while Medicare’s bookkeeping is more complicated.

Comments on the 150-page preliminary views document, “Accounting for Social Insurance,” will be accepted until April 18, 2007. The board also plans to hold a public hearing on the document at its May 23, 2007 meeting.

The draft is available for download online at www.fasab.gov/exposure.html.

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