While Herbert Chubin's idea concerning the elimination of fund accounting for government entities is both new and radical ("Time to abandon fund accounting in government"), it clearly has nothing to do with government waste. Government waste is not eliminated by changing accounting systems but by changing the way that supervisors and employees prepare and manage their budgets and expenditures.

Fund accounting serves a useful purpose for governments and their agencies; it allows the expenditures and the revenues that support them to be segregated and matched. Sources of revenue and their related expenditures that are restricted (i.e., government grants, etc.) are thus able to be separated from unrestricted general fund revenue and expenditures. The chart of accounts that is used to enable this type of reporting can be detailed and extensive but has absolutely nothing to do with how budgeted numbers get reported; that is part of the mechanics of fund accounting itself. Through the use of fund accounting, budgeted information, as well as actual results, are easily obtained, reported and used to make informed decisions.

Governments and their agencies do not exist to turn a profit and should not produce financial statements as if they do (the exception being proprietary-type operations). Their function is to provide needed services within the confines of a limited revenue source.

I do agree with Mr. Chubin that employees should be motivated to eliminate waste; what I do not agree with is his criteria to measure its success. Any supervisor is capable of spending "less money to operate their department than they spent in the previous year;" that is not a challenge. The challenge is to be able to provide the services that were promised at the least cost possible to the taxpayer. That is done by establishing realistic budgets and related expected service goals and comparing them to actual results, and the way to do that is through a method called fund accounting.

Alan C. Reiffe, CPA, PSA

Fair Lawn, N.J.

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