Transcript Accounting for the Government`s Social Insurance Obligations

Country Report
U.S.A.
Public Sector Accruals Symposium
Organization of Economic Cooperation & Development
March 3-4, 2009
Nancy Fleetwood
United States of America, Department of the Treasury
Deputy Assistant Secretary – Accounting Policy
1
The U.S. - The Basics

Population – 306 million

2009 Outlays: $3.1t; Receipts: $2.7t
• Unified Budget Deficit: $455b
• Net Cost: $1t

National Debt (as of 9/30/08): $10t
• Public Debt:$5.8t
• Intragovernmental: $4.2t

Hundreds of agencies.
• 35 Reporting entity agencies


Fiscal Year: October 1 – September 30
Audit opinion disclaimer for more than a decade.
2
FY 2008 Accomplishments

For the 4th year in a row, all CFO Act agencies completed their
audits within 45 days of fiscal year-end (November 15th).
• 21/24 major Federal agencies received clean audit opinions, (FY07 - 19)
• For the 5th consecutive year, the total number of material weaknesses
government-wide declined (from 39 to 32 during FY 2008).
• 14 agencies earned a clean audit opinion with no material weaknesses
(including the Departments of Commerce, Education, Energy, HUD,
Justice, Labor, State, and Transportation).

The Government issued its consolidated financial report on
time by December 15th.

For the 2nd consecutive year, the Government:
• earned an unqualified audit opinion on its Statement of Social
Insurance.
• issued a ‘Citizen’s Guide’ to the Financial Report of the U.S.
Government’.
3



Key Issues
Current Financial
Position and
Condition
Market
Stabilization &
Recovery
Social Insurance
& Sustainability
4
A Year of
Unprecedented Change
5
Budget Deficit vs. Net Cost
$339b
2008 Unified
Budget Deficit
$454.8 billion
+
$549.8b
Change in VA
estimates
Change in unfunded
postemployment
benefit estimates
$110b
Change in DoD
estimates
+
$100b
$4.5b
Change in
OPM estimates
Net Increase in:
Environmental Liabilities;
Net Capitalized Fixed Assets;
Other
$(46.6b)
Decrease in
Capitalized Fixed
Assets, net of
Depreciation
=
$51.1b
Other
2008 Net Cost
$1,009.1 billion
6
What Came In &
What Went Out
In
Out
7
What We Own &
What We Owe
Assets
$6,000.0
$5,000.0
Environmental &
disposal
liabilities
$4,000.0
$3,000.0
Fed employee &
veteran benefits
payable
$2,000.0
$1,000.0
20
08
20
07
$20
06
• Stewardship Land
(national parks,
forests)
• Heritage Assets
(national memorials,
historic structures)
Other Liabilities
20
05

Liabilities by Type
20
04

$1.97 trillion
Mostly Property Plant
&Equipment
Other (off-balance
sheet)
Dollars in Billions

Liabilities
Federal debt
securities held
by the public
8
Market Stabilization & Recovery
Housing &
Economic
Recovery Act
(HERA)
Emergency
Economic
Stabilization
Act (EESA)
Troubled
Assets
Relief
Program
(TARP)
American Recovery and Reinvestment Act
(ARRA)
Only a small fraction of activity
impacted the FY 2008 statements.
Transactions impacting the
FY 2008 financial statements
Investment: preferred stock warrants from
Government Sponsored Enterprises (GSEs)
Supplementary Financing Program:
Treasury borrows $300b and
deposits with Federal Reserve.
Keepwell' liability to Freddie Mac
Loan Receivable - MBS purchase
Dollars in Billions
Assets
Liabilities
$
7.0
$ 300.0
$ 300.0
$
$
13.8
3.3
9
Market Stabilization & Recovery
Reporting Challenges

Transparency
• Cost / Benefit

Accounting for transactions and events
• Credit Reform.
• Consolidation

Impact of American Recovery and
Reinvestment Act (ARRA)
10
Social Insurance:
An Issue Now & in the Future
Historical & Projected U.S.
Revenue and Cost as % of GDP
Historical & Projected U.S. Debt
Held by the Public as % of GDP
Current Trends Are Not Sustainable
Debt held by the Public
(as a percent of GDP)
(as a percent of GDP)
700
70.0
Net Interest
600
Other
Government
Percent of GDP
50.0
Medicaid
40.0
Medicare
30.0
500
400
300
20.0
Social Security
200
10.0
Total Revenues
100
19
70
19
80
19
90
20
00
20
10
20
20
20
30
20
40
20
50
20
60
20
70
20
80
---

Percent of GDP
60.0
WWII
109% of GDP
0
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
Under current conditions, actuaries estimate that
there will be a social insurance shortfall of $43t.
• 75-year estimate of future benefit expenditures net of
contributions.
11
The Clock is Ticking
12
We Still Have Work To Do
For the 12th Consecutive Year, GAO issued a disclaimer of
opinion on the Financial Report of the U.S. Government.
Material Weaknesses:
'Harmonizing Entries': 2003-2008
$30.0
2. Accounting for/Reconciliation of
Intragovernmental Activity and
Balances
$20.0
• FMS must ‘PLUG’ a “harmonizing” entry
(i.e., ‘PLUG’) into the equity reported on the
Statement of Changes in Net Position to
balance.
3. Preparation of Consolidated
Financial Statements
billions of dollars
1. DoD Accounting Issues
$24.5
$10.0
$11.0
$6.7
$4.1
$-
$(3.4)
2003
2004
2005
2006
2007
2008
$(10.0)
$(29.8)
$(20.0)
$(30.0)
Fiscal Year
'PLUG'
13
Major Initiatives
Governmentwide
Accounting and
Reporting
Modernization Project
(GWA)
Collections and
Cash Management
Modernization
(CCMM)
Financial Information
Reporting
Standardization
(FIRST)
Payment Application
Modernization
(PAM)
Common Governmentwide
Accounting Classification
(CGAC)
14
On the Horizon

We must have a clean audit opinion on the
Governmentwide financial statements.
• Continue to build on agency audit successes.
• Continue to pursue systems and structure initiatives to
resolve governmentwide material weaknesses.

Financial reporting needs to be relevant to decisionmakers.
• Build on success of ‘Citizen’s Guide’

Ready to address the reporting challenges of the
economic recovery effort.
• Credit Reform
• Transparency
15
Find Out More
U.S. Department of the Treasury
http://www.fms.treas.gov/fr/index.html
Office of Management and Budget
http://www.whitehouse.gov/omb/financial/reports/fy08_5yr_plan.pdf
Government Accountability Office
http://www.gao.gov/financial/fy2008financialreport.html
Federal Accounting Standards Advisory Board
www.fasab.gov
16
QUESTIONS
17