To be the center of regulation for most activities developed in the country, the government is expected to have a good control over its own conduct an plans.
However, this is not what is happening in the Accounting side of the story. Due to some budgetary malfeasance, the interest rates in the student loans doubled in the United States. In addition, the federal government is supposed to earn tens of billions of dollars in profit from the student loan program. What’s the story behind it? The government budgets for this moneylending by taking the initial cost of the loan and subtracting all the projected repayments to create a single cost figure. In this sense, the expected revenue is almost never achieved and therefore taxpayers are the ones covering the difference.
The majority of students in the US need a student loan in order to pursue further education.
If I were a US citizen and had acknowledge this situation I would be very disappointed by this thoughtlessness that government appears to have towards the economy of people. Thus, in the government accounting, in contrast with the private sector, the risk of component of the marker price is disregarded. If “Fair Value” accounting were brought into play the price of risk would be incorporated into cost estimates and therefore there would not be any budgetary malfeasance upon expected assets.
I believe that a government biggest aspiration should be to give a comfortable and honest environment for citizens by letting clear how their money is spent. Therefore, the incorporation of Fair Value Accounting should be considered.
Based on: http://www.forbes.com/sites/realspin/2013/06/20/how-government-uses-accounting-tricks-to-hide-the-student-loan-swindle/