The charitable trust model: an alternative approach for Department of Defense accounting

Abstract

The purpose of this project is to identify logical weaknesses in the financial statements of the Department of Defense (DOD) and to propose an alternative approach to accounting to supplant the current corporate-style financial management and reporting practices mandated by federal law. First, the researcher identifies the influences, statutes, and organization bodies that form the framework for contemporary federal financial reporting. Second, the researcher identifies the fundamental differences between the private and public sectors and divergent purposes of financial reporting in both domains. Next, the researcher presents evidence from stakeholders, indicating the current corporate-style financial statements are less useful than intended in government administration. The researcher then analyzes how the misapplied logic of private sector accounting creates weakness and inconsistencies in federal reporting. The researcher discusses alternative approaches from accounting literature that recognize the differences between sectors and introduces the trust arrangement. Finally, the trust model is overlaid onto the administration of the DOD and recommended as a more useful accounting system for the agency.