from the secretary of the treasury · 2002. 10. 1. · Reforms unfolding in coming years will...

from the secretary of the treasury...

STATEMENT OF THESECRETARY OF THE TREASURY

The Department of the Treasury is pleased to present these prototypeConsolidated Financial Statements (CFS), an annual effort begun more thantwo decades ago to apply the principles of business accounting to the businessof government. The statements for fiscal year 1996 were prepared followingthe guidance set forth in OMB Bulletin 97-01 entitled “Form and Content ofAgency Financial Statements.” This will be the last set of unauditedprototype statements. Next year, the CFS for fiscal year 1997 will be the firstset of audited financial statements for the United States Government incompliance with the Government Management Reform Act of 1994. This willmove us further in the direction of improving the quality of financialinformation in the federal government.

The Government Management Reform Act of 1994 mandated that the 24major executive agencies produce audited financial statements for fiscal year1996, and that the Treasury produce the first audited Consolidated FinancialStatements covering fiscal year 1997.

I expect to see continued progress in the area of quality improvement infinancial statements. Decision makers need more useful and reliableinformation to evaluate financial and program performance. We intend tomake these consolidated statements more useful to you in the years ahead asimprovements are made in the quality, form and content of agency financialstatements.

Robert E. Rubin

cfs statement 1

from the comptroller general...

Comptroller Generalof the United States

Washington, D.C. 20548

May 21, 1997

Fiscal year 1996 marked a major milestone for federal management. For the firsttime in our nation’s history, the 24 largest departments and agencies preparedfinancial statements covering their entire operations, and those statements weresubjected to independent audits. This mandate finally puts the federal governmenton a par with the private sector and state and local governments, which for yearshave been required to have audited financial statements.

These annual audited financial statements—required by the GovernmentManagement Reform Act (GMRA) of 1994, which expanded the Chief FinancialOfficers Act of 1990—are an essential step forward in identifying and addressingneeded improvements in controls and generating critical data to assess thegovernment’s performance. While certain federal agencies received an unqualifiedaudit opinion on their fiscal year 1996 statements, this positive certification is stillnot the norm. Continued progress will be required for agencies to routinely producereliable data and the type of cost and performance information needed to supportbroader reforms, such as the Government Performance and Results Act.

Reforms unfolding in coming years will continue to stimulate essentialimprovements. GMRA established the requirement that major federal agenciesannually prepare agencywide financial statements and have them audited. It alsorequired, beginning with fiscal year 1997, that the Department of the Treasuryprepare annual consolidated financial statements for the government and that theGeneral Accounting Office (GAO) audit this overall scorecard on our nationalgovernment’s financial status and stewardship. These audited financial statementsimpose management discipline and help produce reliable information fordecisionmakers. Fiscal year 1996 will be the last year for these prototypestatements, which have limited usefulness and reliability. Moreover, fullimplementation of reporting concepts and accounting standards developed by theFederal Accounting Standards Advisory Board—created by the Office ofManagement and Budget, Treasury, and GAO—will occur in fiscal years 1997 and1998. Additionally, fiscal year 1997 will usher in the new requirements of theFederal Financial Management Improvement Act of 1996, which will help ensuregreater attention to making much needed improvements in underlying financialmanagement systems.

We are continuing to work with the executive branch and the Congress to make allthese reforms a reality. Only then will there be full accountability to the Americanpublic.

James HinchmanActing Comptroller General

2 statement cfs

Economic and Budget Results for Fiscal 1996ECONOMIC GROWTH PICKED UP SLIGHTLY

in fiscal 1996. The rate of growth was inline with steady long-term trends that areconsistent with low inflation. Job growthcontinued through the fiscal year, with 2.4million new jobs added. The unemploy-ment rate remained within a very low5.2 percent to 5.7 percent band. Inflationwas well contained, with the underlyingrate of inflation dropping over the fiscalyear to its lowest reading since 1965. TheFederal budget deficit continued to fall, de-clining by $57 billion in fiscal 1996 for atotal drop of $183 billion over the past 4fiscal years.The Economy in Fiscal 1996

Real gross domestic product (GDP)grew by 2.2 percent across the four quar-ters of fiscal 1996 (which encompasses thefourth quarter of calendar 1995 throughthe third quarter of calendar 1996). Thiswas a slight increase from the 2.0 percentrecorded in the previous fiscal year, but be-low the rapid rate of growth over the fourquarters of fiscal 1994, when GDP ex-panded by 3.9 percent. That rate of expan-sion had led to increased concerns about apossible speed-up in the rate of inflation,prompting the Federal Reserve Board totighten monetary policy during the courseof fiscal 1994 and on into fiscal 1995. Asgrowth slowed and inflation fears ebbed,the Federal Reserve Board eased monetarypolicy at the end of fiscal 1995 and againin fiscal 1996. Growth had moderated to

just a 0.3 percent annual rate in the firstquarter of fiscal 1996, but by the thirdquarter of the fiscal year was back up to a4.7 percent pace. Growth over the fourquarters, as noted, was 2.2 percent.

Among the various sectors of the econ-omy, consumer spending (which accountsfor about two-thirds of real GDP) in-creased at a moderate 2.1 percent rate infiscal 1996, a bit slower than the 2.4 per-cent rise in the prior fiscal year. Businessinvestment spending rose by 8.7 percentover the fiscal year, led by continuedstrong gains in capital spending on equip-ment. Residential construction recoveredfrom a 3.0 decline in the previous fiscalyear, rising by 5.9 percent (in real terms)over the four quarters of fiscal 1996 as thehousing market improved. Holding growthdown in fiscal 1996 was deterioration inthe real net export balance as acceleratingeconomic growth drew in imports at afaster pace than the rate of growth in ex-ports. The real net export deficit widenedby $36 billion over the year, but was a rela-tively moderate 2.0 percent of GDP.

Employment growth proceeded at arapid pace in fiscal 1996, with 2.4 millionnew jobs added, a little less than the 2.6million added in fiscal 1995. Most of thenew jobs were in the private service-pro-ducing sector, with especially stronggrowth in retail trade and in business,health, and management services. Employ-ment in manufacturing, in contrast, de-

cfs discussion and analysis 3

clined over the fiscal year. The unemploy-ment rate stayed within a very narrowrange of 5.2 percent to 5.7 percent over thecourse of fiscal 1996, the lowest rates ofunemployment in 6 years.

Despite healthy economic growth andvery low rates of unemployment, broadmeasures of inflation remained very sub-dued in fiscal 1996. There was some pickup in energy prices over the course of theyear, contributing to an acceleration in con-sumer prices to 3.1 percent from 2.5 per-cent in fiscal 1995, but excluding thevolatile energy and food components, con-sumer prices were very well behaved. The“core” rate of inflation dropped to 2.6 per-cent in fiscal 1996, down from 3.0 percentover the twelve months of fiscal 1995 andthe slowest rate of underlying consumerprice inflation since 1965.

Budget Results

The Federal budget deficit narrowed sig-nificantly in fiscal 1996. The deficit de-clined by $56.6 billion to $107.3 billion,the lowest in 15 years. After reaching anall-time high of $290.4 billion in fiscal1992, the deficit has been cut by almosttwo-thirds over the past 4 years, or by a to-tal of $183.1 billion. As a share of GDP,the deficit fell from 4.7 percent in fiscal1992 to 1.4 percent in fiscal 1996, the low-est share since fiscal 1974.

The large improvement over the last 3 years resulted partly from passage of thePresident’s Economic Plan in 1993 (theOmnibus Budget Reconciliation Act of1993) and partly from the speed-up in eco-nomic growth since 1992. That figure wasabout evenly split between revenue in-creases and curbs on growth of spending.Largely because the economy has per-formed even better than expected, how-ever, it is now projected that the plan willcut the1994 through 1998 deficits by al-most twice as much.

In fiscal 1996, growth of outlays washeld to $44.6 billion, or 2.9 percent. Thatfigure was held down a bit by a timingquirk in the calendar which resulted in oneless payment date in fiscal 1996 for se-lected categories of pay. Excluding the tim-ing difference, growth of outlays in fiscal1996 was closer to 3-1/2 percent, still avery modest increase by recent standards.

Outlays for defense continued to de-cline in fiscal 1996, down by $6.3 billionor 2.3 percent. Along with lower defensespending, budget balance was also assistedby slower growth in most other majorspending categories. Net interest paymentsonly rose by $8.9 billion (3.8 percent) infiscal 1996 compared with a jump of over$29 billion in the previous fiscal year.Lower interest rates were primarily respon-sible for the improvement. Growth in So-cial Security, Medicare, Medicaid grants,and most other major governmental func-tions also slowed in fiscal 1996.

Receipts increased by 7.5 percent in fis-cal 1996, which was more than 3 percent-age points faster than the rise in economicactivity over the fiscal year (as measuredby the nominal value of GDP). Growth ofreceipts in 1996 was led by very stronggains in nonwithheld individual income taxpayments, partly due to special factors andpartly to strong capital gains from the ris-ing stock market. Corporate income tax re-ceipts also grew rapidly as profitscontinued to rise.

The deficit had been projected to rise infiscal 1997 when the Fiscal Year 1998Budget was prepared in February, but re-ceipts in fiscal 1997 have exceeded projec-tions as jobs and incomes continued theirrapid growth. As a result, the fiscal 1997deficit will fall below the level of 1996.The deficit is expected to diminish furtherand the budget balance is projected to bereached in fiscal 2002.

Office of Economic PolicyMay 15, 1997

4 discussion and analysis cfs

Exchange andNon-ExchangeRevenues and Cost

The graphs on this page and on page 6show categories of revenues by source and theGovernment’s cost by function for fiscal 1996and 1995. Sources of non-exchange revenueslevied under the Government’s sovereignpower are reported on the cash basis. Sourcesof exchange revenues and gross cost by func-tion are reported on the accrual basis.

Sources ofNon-ExchangeRevenues

Sources ofExchangeRevenues

(All graphs are in billions of dollars.)


Gross Cost by Function

1 See ‘‘Gross Costs’’ column in the United States Government Consolidated Statement of Net Coston page 15.2 Does not include interest on investments held by Government agencies.


Major Categories ofAssets as ofSeptember 30, 1996

Assets are resources owned by or owed tothe Federal Government that are available topay liabilities or to provide future public serv-ices. The chart below is derived from theStatement of Financial Position (page 12). Itdepicts the major categories of assets as ofSeptember 30, 1996, as a percentage of totalassets. The components for each of thesecategories are contained in Notes to FinancialStatements.

Total Assets:$1,724 billion


Gross Accounts andLoans Receivable as ofSeptember 30, 1996

The amounts in these graphs were de-rived from the agencies’ adjusted trial bal-ances (ATB) as reported on the FederalAgencies’ Centralized Trial-Balance Sys-tem (FACTS). These gross amounts, less al-

lowances of $14.4 billion and $62.3 billionfor accounts and loans receivable, respec-tively, are included in the Statement of Fi-nancial Position on page 12.

Gross AccountsReceivable Total:$59 billion

Gross LoansReceivable Total:

$189 billion


Commitmentsand Contingencies

For a breakdown of the figures illustrated in thesecharts, see Commitments and Contingencies of theUnited States Government for the Years Ended Septem-ber 30, 1996 and 1995, on pages 32 and 33.

CommitmentsTotal: $405 billion

Contingencies (at face value)Total: $5,447 billion


Federal DebtThe following graphs represent different

facets of the net Federal debt, excluding in-tragovernmental investments. For a break-

down of the Federal debt, see the tables onpages 22 through 24.

Types ofSecurities as ofSeptember 30,

1995-1996(In billions of dollars)

Federal DebtHeld by the

Public, Fiscal1992-1996

(In billions of dollars)

Interest Expensefor Federal DebtHeld by thePublic, Fiscal1992-1996



consolidated financial statements

The Consolidated Financial Statements (CFS) report on the finan-cial status and activity of the executive, legislative, and judicialbranches of the Federal Government, and include those Governmentcorporations that are part of the Federal Government. The Govern-ment-sponsored enterprises and the Federal Reserve System are ex-cluded. The fiscal year of the U.S. Government ends on September 30.

The consolidated statements presented include:The Statement of Financial Position, which shows what theGovernment owes and owns. See page 12.

The Statement of Net Cost, which portrays the cost of theGovernment operation for the year. See page 15.

The Statement of Changes in Net Position, which showsnon-exchange revenues for the year. See page 17.

The following changes have been incorporated in the principal state-ments and in the supplemental tables for fiscal 1996:

The Statement of Financial Position remains the same, except forEnvironmental Liabilities and Taxes Receivable. These line itemswere previously included in Other Liabilities and AccountsReceivable, respectively. See page 12.

Depreciation previously calculated by Treasury has been replacedwith agencies’ actual figures. See page 20.

The Statement of Operations has been replaced by the Statement ofNet Cost (page 15) and the Statement of Changes in Net Position(page 17).

Expenditures previously reported on a departmental basis are nowreported by functional classification. See page 15.

A new concept for categorizing revenue has been introduced:Exchange and non-exchange revenues. See pages 13 and 16.

The Reconciliation of the Change in Net Position to the Deficit hasbeen introduced in the supplemental tables. See page 34.

cfs consolidated financial statements 11

United States Government ConsolidatedStatement of Financial Position as ofSeptember 30 (Unaudited)


Assets 1996 1995

Cash and other monetary assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193.4 193.5

Accounts and loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171.7 161.8

Taxes receivable 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.8 46.2

Inventories and related properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232.1 219.9

Property, plant, and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 969.1 934.4

Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.8 133.6

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,723.9 1,689.4

Liabilities and Net Position

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161.8 153.6

Federal debt securities held by the public . . . . . . . . . . . . . . . . . . . . . . . 3,730.0 3,603.3

Pensions and other actuarial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 1,651.5 1,628.2

Environmental liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246.5 227.2

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283.6 228.7

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,073.4 5,841.0

Net position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4,349.5 -4,151.6

Statement of FinancialPosition

This statement shows the operating assetsof the Government that were acquired underthe reporting year and prior year budgets andwhich remain available as resources to sup-ply Government goods or satisfy serviceneeds in the future. It also shows the Govern-ment’s operating liabilities, some of whichhave not yet been funded by congressionalappropriations. The net position shown in thestatement reflects debt held by the publicplus liabilities resulting from the application

of accrual accounting standards rather thanbudgetary accounting concepts.

The Statement of Financial Position doesnot include certain values such as steward-ship assets, investments, and responsibilities(refer to the Statement of Federal FinancialAccounting Standard No. 8). Additional in-formation on some of the aforementionedcan be found in Note 14 on Social Securityand Medicare, and in the supplemental sched-ules regarded as additions to non-Federaleconomic resources.

1 Taxes receivable for individual and corporate income taxes, net of allowances for loss, are reported by the Internal Revenue Service.

12 consolidated financial statements cfs

Statement of Net CostThis statement shows the annual net cost of

Government operations which is funded bytaxes, borrowing, or other means. The state-ment reflects the cost incurred to carry out thepriorities determined by appropriation acts andauthorizing legislation. The statement containstwo components: (1) the gross cost of Govern-ment operations less (2) revenues earned fromthe public for goods and services. (See page15 for the consolidated statement.)

Gross costsGross cost includes the full cost of the func-

tions and consist of the direct costs and allother costs that can be directly traced, as-signed on a cause and effect basis, or reason-ably allocated to the function.

Exchange revenuesThese are revenues that arise when the U.S.

Government provides goods and services tothe public or to another Government entity fora price. The full amount of exchange revenuesis to be reported on the Statement of Net Cost.

Net costsNet cost is the difference between a func-

tion’s gross cost and its related exchange reve-nues. This amount represents the net cost ofoperations of a function that is funded bysources other than exchange revenues. The fi-nancing sources for net cost of operations arereported on the Statement of Changes in NetPosition.

Notes to the Statement of NetCostFunctions of Government and their cost

The Government has begun to implement alaw to measure performance and results. In ar-ranging data on a functional basis, costs areclassified according to the primary purpose ofthe activity. To the extent feasible, this classifi-cation is made without regard to agency or or-ganizational distinctions. Classifying eachactivity solely in the function defining its mostimportant purpose----even though many activi-ties serve more than one purpose----permitsadding the cost of each function to obtain thetotal cost.

The objectives of each of the Govern-ment’s functions are described below. For ad-ditional information about agencies anddepartments responsible for these functions,see their individual financial statements andthe Budget of the United States Government.

National defenseThis function includes those programs di-

rectly related to the common defense and secu-

rity of the United States. Coverage includescompensation and benefits for civilian andmilitary personnel, development and utiliza-tion of weapons systems, and related pro-grams. The areas falling within nationaldefense’s responsibilities are: military activi-ties, atomic energy defense activities, and de-fense-related activities.

Education, training, employment, andsocial services

This function includes expenditures to pro-mote extension of knowledge and skills, en-hance employment opportunities and toprovide public services. The programs in-cluded are: elementary, secondary and voca-tional education, higher education, researchand general education aids, training and em-ployment, other labor services, and social serv-ices.

HealthThis function includes those programs that

have as their basic purpose the promotion ofthe physical and mental health of the Nation’spopulation and the payments for or to personsfor which no current service is rendered (retire-ment pay). The programs included are: healthcare services, health research, education andtraining of the health care workforce, con-sumer and occupational health and safety.

MedicareThis function includes the programs cov-

ered by Medicare: hospital insurance and sup-plementary medical insurance.

Income securityThis function includes general retirement

and disability insurance, Federal employee re-tirement and disability, unemployment com-pensation, housing assistance, food andnutrition assistance, and other income security.

Social SecurityThis function includes the programs cov-

ered by Social Security: Old-age and survivorsinsurance and disability insurance, Federal em-ployees retirement and disability, unemploy-ment compensation, public assistance, andincome supplements.

Veterans benefits and servicesThis function includes programs providing

benefits and services to eligible individualswith prior military service. The programs in-cluded are: income security for veterans, veter-ans education, training and rehabilitation,hospital and medical care for veterans, veter-ans housing, and other veterans benefits andservices.


EnergyThis function includes those programs de-

signed to promote an adequate supply andappropriate use of energy to serve the needsof the economy. Areas within energy in-clude: energy supply, conservation, sci-ences, emergency energy preparedness,energy information, and policy and regula-tion.

Natural resources and environmentThis function includes those programs

whose primary purpose is to develop, man-age, and maintain the Nation’s natural re-sources and environment. Activities withinthis area include: water resources, conserva-tion and land management, recreational re-sources, pollution control and abatement,and other natural resources.

Commerce and housing creditThis function includes the promotion and

regulation of commerce and the housingcredit and thrift insurance industries. Theprograms included are: mortgage credit andthrift insurance, postal service, Federal Fi-nancing Bank, and other advancement andregulation of commerce.

Transportation This function includes all the programs

with the primary aim of providing for thetransportation of the general public and/ortheir property. The programs included are:ground transportation, air transportation,water transportation and other transportation.

Community and regional developmentThis function includes all broad-based

community, regional, urban and rural re-newal and development programs. The pro-grams included are: communitydevelopment, area and regional develop-ment and disaster relief and insurance.

Under the Federal Emergency Manage-ment Agency (FEMA), the Federal Insur-ance Administration program Federallysponsored flood insurance coverage to indi-viduals and businesses.

International affairs This function includes programs for the

maintenance of peaceful relations, com-

merce, and travel between the United Statesand the remainder of the world. The areasfalling within international affairs are: for-eign economic and financial assistance, mili-tary assistance, conduct of foreign affairs,foreign information and exchange activities,and international financial programs.

General science, space, andtechnology

This function includes programs whoseresources are allocated to general scienceand basic research, space flight, space sci-ence, applications and technology, and sup-porting space activity.

AgricultureThis function includes those programs

that promote the economic stability of agri-culture and the Nation’s capability to main-tain and increase agricultural production.The programs included are: farm income sta-bilization, and agricultural research andservices.

Administration of justiceThis function includes those programs

designated to provide judicial services, po-lice protection, law enforcement and the pro-motion of the general maintenance ofdomestic order. The programs included are:Federal law enforcement activities, Federallitigative and judicial activities, Federal cor-rection activities, and criminal justice assis-tance.

InterestInterest costs are the amounts accrued on

Federal securities held by the public. Inter-est payments are made by the Treasury’s Bu-reau of Public Debt.

General GovernmentThis function includes the general over-

head costs of the Federal Government, in-cluding legislative and executive activities,personnel, and property activities. The pro-grams included are: legislative functions, ex-ecutive direction and management, centralfiscal operations, general property and re-cords management, central personnel man-agement, and other general Government.


The accompanying notes are an integral part of this statement.

United States Government Consolidated Statement ofNet Cost for the Year Ended September 30(Unaudited) (In billions of dollars)

Gross CostsExchangeRevenues Net Costs

Costs of GovernmentFunctions 1996 1995 1996 1995 1996 1995

National Defense . . . . . . . . . . . . . 230.2 194.6 9.4 11.1 220.8 183.5

Human resources:

Education, training, employment,and social services . . . . . . . . . . 54.5 82.5 1.6 3.2 52.9 79.3

Health . . . . . . . . . . . . . . . . . . . . . 132.9 132.2 5.4 4.8 127.5 127.4

Medicare . . . . . . . . . . . . . . . . . . . 224.7 211.1 20.3 21.2 204.4 189.9

Income security . . . . . . . . . . . . . . 227.8 186.0 11.8 10.6 216.0 175.4

Social Security. . . . . . . . . . . . . . . 380.8 364.1 1.1 - 379.7 364.1

Veterans’ benefits and services . 13.3 81.0 3.6 3.7 9.7 77.3

Subtotal . . . . . . . . . . . . . . . . . . . 1,034.0 1,056.9 43.8 43.5 990.2 1,013.4

Physical resources:

Energy . . . . . . . . . . . . . . . . . . . . . 31.2 15.1 14.0 10.2 17.2 4.9

Natural resources andenvironment . . . . . . . . . . . . . . . 29.8 23.8 3.0 2.9 26.8 20.9

Commerce and housing credit . . 73.2 70.0 66.2 68.9 7.0 1.1

Transportation . . . . . . . . . . . . . . . 53.7 37.4 2.1 2.5 51.6 34.9

Community and regionaldevelopment . . . . . . . . . . . . . . . 8.1 13.7 .9 1.5 7.2 12.2

Subtotal . . . . . . . . . . . . . . . . . . . 196.0 160.0 86.2 86.0 109.8 74.0

Net interest:

Interest on the public debt . . . . . . 241.7 234.3 - - 241.7 234.3

Other . . . . . . . . . . . . . . . . . . . . . . .1 .1 - - .1 .1

Subtotal . . . . . . . . . . . . . . . . . . . 241.8 234.4 - - 241.8 234.4

Other functions:

International affairs . . . . . . . . . . . 20.8 19.3 6.0 2.7 14.8 16.6

General science, space, andtechnology. . . . . . . . . . . . . . . . . 16.5 17.9 - .1 16.5 17.8

Agriculture . . . . . . . . . . . . . . . . . . 16.7 7.0 2.8 2.9 13.9 4.1

Administration of justice . . . . . . . 21.5 16.9 1.0 1.1 20.5 15.8

General Government. . . . . . . . . . 26.7 50.3 8.5 8.8 18.2 41.5

Subtotal . . . . . . . . . . . . . . . . . . . 102.2 111.4 18.3 15.6 83.9 95.8

Total . . . . . . . . . . . . . . . . . . . . 1,804.2 1,757.3 157.7 156.2 1,646.5 1,601.1


Statement of Changes in NetPosition

The Statement of Changes in Net Posi-tion reports the beginning net position, theitems which caused net position to changeduring the reporting period, and the endingnet position. It shows the revenues gener-ated principally by the Government’s sover-eign power to tax, levy duties, and assessfines and penalties, as well as any prior pe-riod adjustments that affect the net position.

Net cost of Government operationsNet cost of Government operations is

the cost of operations reported on the State-ment of Net Cost. Financing sources fromnon-exchange revenues are taxes and othernon-exchange revenues, including dona-tions, which the Federal Government isable to demand or receive due to its sover-eign powers.

Prior period adjustmentsPrior period adjustments are limited to

corrections of errors and accountingchanges with retroactive effects that caneither increase or decrease net position de-pending upon their nature, including adjust-ments occasioned by the adoption of newFederal financial accounting standards. Ad-justments are included in the calculation ofthe net change in cumulative results of op-erations, rather than as an element of net re-sults for the period. Prior period statementsshould not be restated for prior period ad-justments.

Net position-beginning of periodThe amount is the net position reported

on the prior year’s balance sheet.

Net position-end of periodThis amount shall agree with the

amount reported as net position on the cur-rent year’s balance sheet.


United States Government Consolidated Statementof Changes in Net Position for the Year EndedSeptember 30 (Unaudited)(In billions of dollars)

1996 1995

Net cost of Government operations. . . . . . . . . . . . . . . . . . . . . . . . . -1,646.5 -1,601.1

Less financing sources from non-exchange revenues:

From income taxes:

Individual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656.4 590.2

Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171.8 157.0

From employment taxes and contributions:

Social Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371.4 355.0

Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.0 96.0

Unemployment insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.6 28.9

From other taxes and Governmental receipts:

Excise taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54.0 57.5

Estate and gift taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.2 14.8

Customs duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.7 19.3

Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.5 27.3

Total non-exchange revenues . . . . . . . . . . . . . . . . . . . . . . . . . 1,448.6 1,346.0

Net results of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -197.9 -255.1

Prior period adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.5 1 109.7

Change in net position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -197.9 -145.4

Net position, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . -4,151.6 -4,006.2

Net position, end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4,349.5 -4,151.6

1 Prior period adjustments consist of: environmental clean-up cost of -$227.2 billion; Bureau of Indian Affairs, -$1.6 billion; defense invento-ries and fixed assets, -$82.4 billion; and depreciation, $420.9 billion. (See note 6 for explanation of adjustment for depreciation.)


notes to financial statements

1. Summary of significantaccounting policies

Principles of consolidation

The ‘‘Consolidated Financial Statementsof the United States Government, Prototype1996’’ (CFS) were prepared using Federalagencies’ financial data. Agencies submittheir pre-closing adjusted trial balances underthe Federal Agencies’ Centralized Trial-Bal-ance System (FACTS) to the Financial Man-agement Service electronically, via theGovernment On-Line Accounting Link Sys-tem (GOALS).

The Consolidated Financial Statements re-port on the financial activity of the legisla-tive, judicial, and executive branches of theFederal Government, and those Governmentcorporations that are part of the Federal Gov-ernment; the Federal Reserve System and theGovernment-sponsored enterprises are ex-cluded. The legislative branch provides lim-ited reports voluntarily. The judicial branchdoes not provide financial reports to Treas-ury.

All significant intragovernmental transac-tions were eliminated in consolidation.

Basis of accounting

The Secretary of the Treasury, the Direc-tor of the Office of Management and Budget(OMB), and the Comptroller General of theUnited States, principals of the Joint Finan-cial Management Improvement Program(JFMIP), established the Federal AccountingStandards Advisory Board (FASAB) in Octo-ber 1990. FASAB recommends accountingstandards to the JFMIP principals for ap-proval. Upon approval, they become effectiveon the date specified in the standards publish-ed by OMB and GAO.

In March 1991, the JFMIP principals ap-proved the FASAB’s recommendations gov-erning interim accounting standards used inpreparing financial statements for audit. Untila sufficient set of comprehensive ‘‘generallyaccepted accounting principles’’ have beenpublished by JFMIP principals, the revisedguidance recommends a hierarchy of ‘‘othercomprehensive basis of accounting’’ to beused for preparing Federal agency financialstatements. The hierarchy is as follows:

1. Individual standards agreed to and pub-lished by the JFMIP principals.

2. Form and content requirements in-cluded in OMB bulletin 94-01, dated Novem-ber 16, 1993.

3. Accounting standards contained in anagency accounting policy, procedures manu-als and/or related guidance as of March 29,1991, so long as they are prevalent practices.

4. Accounting principles published byauthoritative standard-setting bodies andother sources (1) in the absence of other guid-ance in the first three parts of this hierarchy,and (2) if the use of such accounting stand-ards improves the meaningfulness of the fi-nancial statements.

To date, FASAB has recommended eightstatements of accounting standards and twostatements of accounting concepts. However,the majority were not effective for fiscal1996.

Principal financial statementsThe principal statements are unaudited

and consist of the Statements of Financial Po-sition, Net Cost, and Changes in Net Posi-tion, and use the accrual basis of accountingin their presentation. Revenues levied underthe Government’s sovereign power are re-ported on the cash basis.

Fiscal yearThe fiscal year of the U.S. Government

ends September 30.

2. Cash and othermonetary assetsCash

The cash reported in the financial state-ments represents balances from tax collec-tions, customs duties, other revenues, publicdebt receipts, foreign currencies, and variousother receipts maintained in accounts at theFederal Reserve banks and the U.S. Treasurytax and loan accounts.

GoldGold is valued at market for fiscal 1996

and 1995. The market value represents theprice reported for gold on the London fixing,and is based on 261,702,958.879 and261,734,796.787 fine troy ounces as of Sep-tember 30, 1996 and 1995, respectively (as re-ported in Treasury’s general ledger). Thestatutory price of gold is $42.2222 per troyounce.

18 notes to financial statements cfs

Special drawing rightsThe value of special drawing rights is

based on a weighted average of exchangerates for the currencies of selected membercountries. The value of a special drawingright was $1.4394 and $1.5063 as of Septem-ber 30, 1996 and 1995, respectively.

3. Accounts and loansreceivableSummary of accounts and loansreceivable due from the public

The Federal Government is the Nation’slargest source of credit and underwriter ofrisk. The Debt Collection Act of 1982 (31U.S.C. 3719) requires agencies to prepare

Cash and other monetary assets as ofSeptember 30

(In billions of dollars) 1996 1995

Operating cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68.2 66.8

Gold (at market value of $379.00 per troy ounce for 1996 and$385.00 for 1995). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.2 100.5

U.S. reserve position in the International Monetary Fund . . . . . . . 15.4 14.7

Special drawing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2 11.0

Nonpurchased foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . .3 .3

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 .2

Total cash and other monetary assets . . . . . . . . . . . . . . . . . . . . 193.4 193.5

and transmit a report summarizing any out-standing receivables on their books.

Agencies are required to submit those re-ports to the OMB and the Department ofthe Treasury. The Federal Government usesthe data in these reports to improve the qual-ity of its debt collection methods.

In 1990, the Credit Reform Act was en-acted to improve the Government’s budget-ing and management of credit programs.The primary focus of the Act is to providean accurate measure of the long-term costsof both direct loans and loan guarantees,and to include these costs at the time ofloan origination. Most direct loans obli-gated and loan guarantees committed afterSeptember 30, 1991, are reported on thepresent value basis.

Accounts and loans receivable as of September 30Accounts

receivable Loans receivable

(In billions of dollars) 1996 1995 3 1996 1995

Gross receivables . . . . . . . . . . . . . . . . . . . . . 59.0 53.7 189.4 189.6

Less: Allowance for losses 1 . . . . . . . . . . . . . 14.4 12.7 54.3 61.6

Less: Allowance for subsidy 2 . . . . . . . . . . . iiiiiii- iiiiiii- 8.0 7.2

Net receivables . . . . . . . . . . . . . . . . . . . . . . 44.6 41.0 127.1 120.8

1 Allowance for losses represents estimated amount of uncollectable receivables.2 Allowance for subsidy represents unamortized credit reform subsidy for direct loans and for defaulted guaranteed loans assumed forcollection by the Federal Government.3 Accounts receivable for 1995 are reduced by taxes receivable, which are shown on the next page. The fiscal 1995 figures have beenrestated to reflect this change.

cfs notes to financial statements 19

4. Taxesreceivable

The mission of the In-ternal Revenue Service isto collect the properamount of tax revenue atthe least cost and encour-age voluntary compliance with theInternal Revenue Laws.

Taxes receivable are composedof receivables, net of allowance forloss, reported by the IRS for Indi-vidual and Corporate income taxesonly. Taxes receivable are pre-sented in the table at right.

5. Inventories andrelated properties

Inventories and related proper-ties consist of several categories. In-ventories held for sale are tangiblepersonal property that is either (a)being held for sale, (b) in the proc-ess of production for sale, or (c) tobe consumed in the production ofgoods for sale or in the provision ofservices for a fee. Operating materi-als and supplies are tangible per-sonal property to be consumed innormal operation. Stockpiled mate-rials are strategic and critical mate-rials held due to statutoryrequirements or for use in nationaldefense, conservation, or nationalemergencies. Other includes for-feited property, foreclosed prop-erty, commodities and other. Foramounts see the table at right.

Agencies use a wide variety ofmethods to value inventories (e.g.first-in-first-out, last-in-first-out,latest acquisition cost, andweighted or moving averages). TheDepartment of Defense uses the latest acquisi-tion method to value its inventories. The De-partment of Energy uses the lower of cost ormarket to value its inventories.

6. Property, plant, andequipment

Property, plant, and equipment includeland, buildings, structures and facilities, shipsand service craft, industrial equipment inplant, and construction-in-progress. It also in-cludes automated data processing software,assets under capital lease, and other fixed as-sets that have been capitalized.

Land purchased by the Federal Govern-ment is valued at historical cost. The land ac-quired through donation, exchange, bequest,forfeiture, or judicial process is estimated atamounts the Government would have paid ifpurchased at the date of acquisition. No valuehas been assigned to the Outer ContinentalShelf and other offshore lands. More than677.8 million acres of public domain landhave been assigned a minimal value of $1 peracre, and are included in the total landamount.

The accumulated depreciation reported byagencies in fiscal 1996 and 1995 was $96.3billion and $76.5 billion, respectively. Mostagencies use the straight-line method.

Taxes receivable as of September 30(In billions of dollars) 1996 1995 Gross taxes receivable . . . . . . . . . . . . 122.4 112.7Less: allowance for losses. . . . . . . . . . 88.6 66.5

Net taxes receivable . . . . . . . . . . . . . 33.8 46.2

Inventories andrelated properties asof September 30


Inventories held for sale . . . . . . 141.6 60.3

Operating supplies . . . . . . . . . . 41.2 57.0

Stockpiled materials . . . . . . . . . 44.1 97.3

Other . . . . . . . . . . . . . . . . . . . . . iiiii5.2 iiiii5.3

Total inventories . . . . . . . . . . . 232.1 219.9

Note: Some of the differences between 1995 and 1996 are due to reclassificationof defense inventories.


Other assets as of September 30(In billions of dollars) 1996 1995

Funds Appropriated to the President . . . . . . . . . . . . . . . . . . . . . 37.8 56.0

U.S. Postal Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.9 28.9

Resolution Trust Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13.6

Federal Deposit Insurance Corporation. . . . . . . . . . . . . . . . . . . 14.5 5.9

Health and Human Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5 3.6

U.S. Air Force. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 8.1

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.0 17.5

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.8 133.6

In the past, Treasury provided estimatesfor those agencies that did not report deprecia-tion. However, beginning with this report, thedepreciation will reflect the calculations thathave been provided by the agencies. Thus, aprior period adjustment of $420.9 billion wasnecessary to reinstate the depreciation forprior years.

The useful lives for each classification ofassets are as follows:

Buildings . . . . . . . . . . . . . . . . 50 yrs.

Structures and facilities . . . . . 21 yrs.

Ships and service craft. . . . . . 13 yrs.

Industrial equipment in plant 13 yrs.

All other assets . . . . . . . . . . . 13 yrs.

The largest ownership of Federal property,plant, and equipment, except for land, re-mains within the domain of the Department

of Defense, whose major equipment itemsand weapons systems are valued at acquisi-tion cost. When the acquisition cost cannotbe determined, the estimated fair marketvalue of such equipment and the costs of ob-taining the equipment in the form and placeto be put into use are recorded. Real and per-sonal property are also recorded at acquisi-tion cost. For more information see the tableabove.

7. Other assetsOther assets are comprised of advances

and prepayments, receivables and other as-sets from banking assistance and failures, de-ferred retirement costs from the PostalService, and investments held by the agen-cies and other miscellaneous assets. Other as-sets are summarized by agency in the tablebelow.

Property, plant, and equipment as ofSeptember 30(In billions of dollars) 1996 1995

Buildings, structures, facilities, and lease-holdimprovements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265.1 242.3

Military equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587.7 542.7Equipment, other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.6 110.1Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.4 11.7Construction in process . . . . . . . . . . . . . . . . . . . . . . . . . . . 56.0 82.1Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.6 22.0

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,065.4 1,010.9Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . 96.3 76.5

Total property, plant, and equipment . . . . . . . . . . . . . . 969.1 934.4


8. Federal debt held bythe public

Total Federal debt held by the publicamounted to $3,730.0 billion and $3,603.3billion at the end of fiscal 1996 and 1995, re-spectively. The three debt tables on pages 22through 24 reflect information on borrowingto finance Government operations. These ta-

bles support the Statement of Financial Posi-tion caption, ‘‘Federal debt securities heldby the public,’’ and are shown net of in-tragovernmental holdings and unamortizedpremium or discount. Intragovernmentalholdings represent that portion of the totalFederal debt held as investments by Federalentities, including major trust funds.

Federal debt held by the public as of September 301996 1995

Averageinterest

rate(percent)

Total debt(in billionsof dollars)

Averageinterest

rate(percent)

Total debt(in billionsof dollars)

Public debt:

Marketable . . . . . . . . . . . . . . . . . . . . . . 6.706 3,418.4 6.869 3,260.5

Nonmarketable . . . . . . . . . . . . . . . . . . 7.392 1,802.4 7.500 1,690.2

Non-interest-bearing debt . . . . . . . . . . 4.0 23.3

Total public debt outstanding . . . . . . 5,224.8 4,974.0

Plus premium on public debtsecurities. . . . . . . . . . . . . . . . . . . . . 1.5 1.2

Less discount on public debtsecurities. . . . . . . . . . . . . . . . . . . . . 79.4 81.2

Total public debt securities . . . . . . . 5,146.9 4,894.0

Agency debt:

Tennessee Valley Authority. . . . . . . . . 23.3 24.8

Farm Credit System FinancialAssistance Corporation . . . . . . . . . . . - 1.3

Housing and Urban Development . . . . 3.9 .1

Federal Deposit Insurance Corporation,FSLIC resolution fund . . . . . . . . . . . . .1 .2

National Archives and RecordsAdministration . . . . . . . . . . . . . . . . . . .3 .3

Architect of the Capitol . . . . . . . . . . . . .1 .2

Postal Service . . . . . . . . . . . . . . . . . . . 4.3 -

Total agency securities . . . . . . . . . . . 32.0 26.9

Total Federal securities . . . . . . . . . 5,178.9 4,920.9

Less Federal securities held asinvestments by Governmentaccounts . . . . . . . . . . . . . . . . . . . . 1,448.9 1,317.6

Total Federal debtheld by the public . . . . . . . . . . . . 3,730.0 3,603.3


Summary of Federal Debt Outstanding Part I

Total Debt Outstanding as of September 301996 1995


Averageinterest

rate(percent) Total debt

Averageinterest

rate(percent) Total debt

Marketable:

Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.442 761.2 5.897 742.5

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.540 2,098.7 6.610 1,980.4

Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.012 543.5 9.134 522.6

Federal Financing Bank . . . . . . . . . . . . . . 8.917 1 15.0 8.917 15.0

Total marketable . . . . . . . . . . . . . . . . . . 6.706 3,418.4 6.869 3,260.5

Nonmarketable:

Foreign Government series . . . . . . . . . . . 7.523 37.5 7.696 40.9

Government account series . . . . . . . . . . . 7.550 1,454.7 7.693 1,324.3

State and local Government series . . . . . 5.000 95.7 5.000 113.4

U.S. savings bonds. . . . . . . . . . . . . . . . . . 6.695 184.1 6.763 181.2

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.585 30.4 6.570 30.4

Total nonmarketable . . . . . . . . . . . . . . . 6.222 1,802.4 6.210 1,690.2

Total interest-bearing debt . . . . . . . . . . . . 6.479 5,220.8 6.517 4,950.7

Non-interest-bearing debt. . . . . . . . . . . . . 2 4.0 23.3

Total public debt outstanding. . . . . . . . . 5,224.8 4,974.0

Plus premium on public debt securities . . 1.5 1.2

Less discount on public debt securities . . 79.4 81.2

Total public debt (Treasury securities). . 5,146.9 4,894.0

Agency securities . . . . . . . . . . . . . . . . . . . 32.0 26.9

Total Federal securities . . . . . . . . . . . . . 5,178.9 4,920.9

Less Federal securities held asinvestments by Government accounts. . 1,448.9 1,317.6

Total Federal debt held by the public . 3,730.0 3,603.3

1 These marketable securities were issued to the Civil ServiceRetirement Fund and are not currently traded in the market. 2 Includes matured debt of $2.5 billion and other various non-inter-est-bearing debt of $1.5 billion.

Types of marketable securities

Bills--Short-term obligations issued with a term of 1 year or less.

Notes--Medium-term obligations issued with a term of at least 1 year,but not more than 10 years.

Bonds--Long-term obligations of more than 10 years.


Summary of Federal DebtOutstanding Part II

Intragovernmental Holdings----Federal SecuritiesHeld as Investments by Government Accounts as of September 30


Intragovernmental holdingsFederalFunds 1

TrustFunds 2 Total

FederalFunds

TrustFunds Total

Legislative branch . . . . . . . . . . . . . . . . . . .6 .1 .7 .4 .1 .5Judicial branch . . . . . . . . . . . . . . . . . . . . - .3 .3 - .3 .3Executive branch:

Funds Appropriated to the President . . 2.3 - 2.3 2.1 - 2.1Departments:

Agriculture . . . . . . . . . . . . . . . . . . . . . - - - - .3 .3Defense . . . . . . . . . . . . . . . . . . . . . . . - 3 119.6 119.6 - 115.2 115.2Energy . . . . . . . . . . . . . . . . . . . . . . . . 5.8 - 5.8 5.0 - 5.0Health and Human Services . . . . . . . - 4 154.1 154.1 - 144.4 144.4Housing and Urban Development . . . 12.7 - 12.7 11.1 - 11.1Interior. . . . . . . . . . . . . . . . . . . . . . . . . 3.6 .3 3.9 3.4 .3 3.7Justice . . . . . . . . . . . . . . . . . . . . . . . . .4 - .4 .5 - .5Labor. . . . . . . . . . . . . . . . . . . . . . . . . . 6.6 5 54.0 60.6 5.8 47.2 53.0State . . . . . . . . . . . . . . . . . . . . . . . . . . - 8.4 8.4 - 7.8 7.8Transportation . . . . . . . . . . . . . . . . . . .1 6 30.9 31.0 .5 31.6 32.1Treasury . . . . . . . . . . . . . . . . . . . . . . . 12.1 .2 12.3 3.1 .2 3.3Veterans Affairs . . . . . . . . . . . . . . . . . .6 13.7 14.3 - 13.6 13.6

Independent agencies:Environmental Protection Agency . . . . - 7.5 7.5 - 7.3 7.3Office of Personnel Management . . . . . - 7418.2 418.2 - 389.9 389.9Export-Import Bank. . . . . . . . . . . . . . . . .5 - .5 .1 - .1Farm Credit System Insurance

Corporation. . . . . . . . . . . . . . . . . . . . . 1.9 .1 2.0 1.4 .2 1.6Federal Deposit Insurance

Corporation. . . . . . . . . . . . . . . . . . . . . 27.6 - 27.6 25.2 - 25.2National Credit Union Administration . . 3.5 - 3.5 3.3 - 3.3U.S. Postal Service. . . . . . . . . . . . . . . . .9 - .9 1.3 - 1.3Railroad Retirement Board . . . . . . . . . . - 17.1 17.1 - 14.4 14.4Social Security Administration . . . . . . . - 549.5 549.5 - 483.2 483.2Tennessee Valley Authority . . . . . . . . . 1.0 - 1.0 1.2 - 1.2Various scholarship funds. . . . . . . . . . . - .4 .4 - .4 .4

Subtotal . . . . . . . . . . . . . . . . . . . . . . . 80.2 1,374.4 1,454.6 64.4 1,256.4 1,320.8Less discount on Federal securities

held as investments by Governmentaccounts . . . . . . . . . . . . . . . . . . . . . . . 5.7 - 5.7 3.2 - 3.2

Total . . . . . . . . . . . . . . . . . . . . . . . . . 74.5 1,374.4 1,448.9 61.2 1,256.4 1,317.6

1 Federal funds are monies held by Government accounts that arenot trust funds.2 Trust funds are monies held by the Government in accountsestablished by law or by trust agreement for specific purposes anddesignated by law as being trust funds.3 Includes military retirement fund of $116.9 billion.

4 Includes medicare trust funds of $153.0 billion.5 Unemployment Trust Fund.6 Includes Highway Trust Fund of $21.2 billion and Airport andAirway Trust Fund of $7.7 billion.7 Includes civil service retirement and disability fund of $394.0 billionand employee life insurance fund of $17.0 billion.


9. Pensions and otheractuarial liabilities

The Federal Government administers morethan 40 pension plans. The largest are admin-istered by the Office of Personnel Manage-ment (OPM) for civilian employees and bythe Department of Defense (DOD) for mili-tary personnel. The majority of the pensionplans are defined benefit plans.

The accounting for accrued pension, retire-ment, disability plans, and annuities is subjectto several different assumptions, definitions,and methods of calculation. Each of the majorplans is summarized in the table at the bottomof the page, and the actuarial liability is in-cluded on the Statement of Financial Position.

Civilian employees and militarypersonnel

Pension expense for the various Federalpension plans is calculated for budgetary pur-poses by a variety of methods. For financialreporting purposes, Federal pension plans re-port their accumulated benefit obligation(ABO) pursuant to directions under the provi-sions of Public Law Number 95-595. TheABO is calculated with the ‘‘unit credit’’ actu-arial cost method. The ABO is recognized asa liability in the Consolidated Statement of Fi-nancial Position. An expense is recognizedequal to the annual change in the ABO. MostFederal pension plans are funded with obliga-tions issued by the Treasury pursuant to theactuarial method and funding requirementsspecified by the governing law. These plan as-sets (Treasury bonds or other debt), being ob-

ligations of the United States, were elimi-nated from the consolidated statements.

CivilianThe Federal Government has both de-

fined benefit and defined contribution pen-sion plans.

Defined benefit

The principal plan is administered byOPM and covers approximately 90.0 per-cent of all Federal civilian employees. Itincludes two components of defined bene-fits, the Civil Service Retirement System(CSRS) and the Federal Employee’s Re-tirement System (FERS). The basic bene-fit components of the CSRS and the FERSare financed and operated through theCivil Service Retirement and DisabilityFund (CSRDF), and all disbursements forboth are made from the CSRDF. Most em-ployees covered by CSRS contribute 7.0percent of their basic pay, an amount fixedby statute. The FERS employees contribu-tion is 0.8 percent in fiscal 1996. The valu-ation of the Retirement Program has beenprepared by OPM in accordance with Fi-nancial Accounting Standard (FAS) 35.

Defined contribution

The Federal Retirement Thrift Invest-ment Board is a Federal agency that oper-ates the Thrift Savings Plan. The fund’sassets are owned by Federal employeesand retirees, who have individual ac-counts. For this reason, the fund is ex-cluded from the CFS and the fund’s

Pensions and other actuarial liabilities as of September 301

Actuarial liabilities Plan assetsUnfundedliabilities

(In billions of dollars) 1996 1995 1996 1995 1996 1995

Civilian retirement-OPM 2 . 774.4 722.4 398.8 344.3 375.6 378.1Military retirement-Defense 547.5 547.7 148.0 148.6 399.5 399.1Veterans’ compensation

and benefits . . . . . . . . . . 240.0 266.6 - - 240.0 266.6Compensation programs. . 17.9 20.3 - - 17.9 20.3Other pension programs . . 35.6 30.8 17.3 16.2 18.4 14.6Other benefits . . . . . . . . . . 36.1 40.4 38.7 35.9 -2.7 4.5

Total . . . . . . . . . . . . . . . . 1,651.5 1,628.2 602.8 545.0 1,048.7 1,083.2

1 Does not include actuarial liability for future costs of post-retirement health benefits.2 OPM’s accumulated benefit obligation is presented as of the beginning of the year, under FAS 35. To make the unfunded liabilities moremeaningful, plan assets are also presented at the same valuation date.

Note.--For Social Security and Medicare, see note 14.


holdings of Federal debt are considered part ofthe debt held by the public rather than debt heldby the Government.

The Thrift Savings Plan is a defined contri-bution plan for eligible employees covered un-der the Civil Service Retirement System(CSRS) and the Federal Employees’ Retire-ment System (FERS).

FERS employees may contribute up to 10.0percent of base pay to the plan, which ismatched by the Government up to 5.0 percent.CSRS employees may contribute up to 5.0 per-cent of base pay with no Government match.An individual’s total annual contribution couldnot exceed $9,500 in 1996.

The plan was started in April 1987 and as ofSeptember 30, 1996, the total invested was$42.0 billion. Investments include U.S. Govern-ment nonmarketable certificates of $23.2 bil-lion, which are included in ‘‘Federal debt heldby public’’ in the Statement of Financial Posi-tion. In addition, $16.3 billion and $2.5 billionhave been invested in the Common Stock Indexand the Fixed Income Funds, respectively.

MilitaryThe Department of Defense Military Retire-

ment Fund was authorized in Public Law Num-ber 98-94 for the accumulation of funds inorder to finance liabilities of the Department ofDefense under military retirement and survivorbenefit programs. The fund provides retirementbenefits for military personnel and their survi-vors.

Veterans’ compensation and pensionbenefits

Veterans or their dependents receive com-pensation benefits if the veteran was disabledor died from military service- connectedcauses. War veterans or their dependents re-ceive pension benefits, based on annual eligibil-

ity review, if the veterans were disabled ordied from nonservice-connected causes. Cer-tain pension benefits are subject to specific in-come limitations.

VA has a liability for benefits expected tobe paid in future fiscal years to veterans and,if applicable, their survivors who have met orare expected to meet defined eligibility crite-ria. The liability of the Compensation andPension Programs (C&P) is not currentlyfunded, nor is there any intent to do so.Rather, payments for benefits that becomedue in a particular year are financed from thatyear’s appropriation, in effect, on a pay-as-you-go basis.

The actuarial present value of the liabilityof C&P benefits as determined by VA on Sep-tember 30, 1996 and 1995, is shown in the ta-ble above.

Compensation programsThis amount represents the estimated fu-

ture costs for injuries incurred to date for ap-proved Federal Employees’ CompensationAct cases and Black Lung cases.

Other pension programsOther annual pension reports received

from plans covered by Public Law Number95-595 are reported in the same manner asthose for military personnel and civilian em-ployees (described earlier).

Other benefitsOther benefits consist of various items for

which the Government is responsible, such aslife insurance benefits for veterans and Fed-eral employees. VA insurance includes the fol-lowing programs: United States GovernmentLife Insurance; National Service Life Insur-ance; Veterans Insurance and Indemnities; Vet-erans Special Life Insurance; Veterans

Veterans’ compensation and benefits as of September 30(In billions of dollars) 1996 1995

Compensation:Veterans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167.0 169.3Survivors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.6 59.7

Total compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207.6 229.0

Pension and burial benefits:Veterans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.9 23.7Survivors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 10.3Burial benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 3.6

Total pension and burial benefits . . . . . . . . . . . . . . . . . . . . . 32.4 37.6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240.0 266.6


Reopened Insurance; Service Disabled Veter-ans Insurance; and Servicemen’s Group LifeInsurance.

The Federal insurance program is the Fed-eral Employees Government Life Insurance.These other benefits do not include the actuar-ial liability for the future costs of post-retire-ment health benefits for retirees.

Post employment benefits otherthan pensions

The Federal Government operates a pay-as-you-go system for health benefits for both ci-vilian and military retirees. The actuarialestimates on retirees’ health care costs aresummarized below.

Civilian employees retiree healthbenefits

Generally, employees are eligible for post-retirement health benefits if they participatedin the Program for the 5 years immediatelypreceding their retirement. As a condition ofparticipation, retirees must make contributionstoward their premiums, which, for the vast ma-jority, are deducted directly from theirmonthly annuity payments. Contributions forfuture post-retirement health benefit premi-ums are required neither of active employeesnor their employers.

The Federal Accounting Standards Advi-sory Board (FASAB) has recommended stand-ards for the calculation and reporting of aretirement health benefits obligation. Thesestandards were promulgated in the Statementof Federal Financial Accounting StandardsNumber 5, (SFFAS No. 5), Accounting for Li-abilities of the Federal Government, issued inDecember 1995.

When it is effective, the standard will re-quire the use of the accrual method of account-ing to recognize the cost of retirement healthbenefits over the active years of employeeservice. Upon the implementation of SFFASNo. 5, the Program will recognize a retire-ment obligation (RO), which is the future costof retirement benefits for future retirees relat-ing to active service rendered up to the date ofimplementation. The Program plans to adopt

the standard for fiscal 1997, as required bySFFAS No. 5.

In computing the Program’s RO, an actuarywill apply actuarial assumptions to historicalhealth benefit cost information to estimate thefuture cost of retirement benefits for currentand future retirees. This estimate will be ad-justed for the time value of money (throughdiscounts for interest) and the probability ofhaving to pay (by means of decrements, suchas those for death and withdrawal).

Although the standard has not yet been im-plemented by the Program, the initial (or transi-tion) RO, has been calculated in accordancewith methodology prescribed to be $134.0 bil-lion on October 1, 1995, and $113.4 billion onOctober 1, 1994. [Note: Due to the time-frameunder which these statements must be preparedand audited, all of the information needed tocompute the RO as of the end of the year is notavailable. Therefore, the RO is presented as ofthe beginning of the year.] The program’s ROexpense in 1996 was $14.4 billion and $12.3billion for 1995, rather than the $4.9 billion for1996 and $4.2 billion for 1995 recognized ascontributions expense (deductions from planassets) under current accounting practice.Based on this calculation, employing agencieswere required to recognize a 1996 retirementhealth benefit expense of $2,093 per enrolledemployee for 1996 and $1,844 for 1995.

In these calculations, an annual rate of in-crease in health benefits costs and a discountrate of 7.0 percent were assumed. Demo-graphic assumptions are based on the experi-ence of the Retirement Program, withadjustments based on recent Health BenefitsProgram trends and experience. For more infor-mation, see OPM’s financial statements.

Military retiree health plansMilitary retirees and their dependents are

entitled to health care in military medical facili-ties if the facility can provide the needed care.Until they reach age 65, military retirees andtheir dependents also are entitled to health carefinanced by the Civilian Health and MedicalPrograms of the Uniformed Services (CHAM-PUS). No premium is charged for CHAMPUS-

Retiree health care costs as of September 30Actuarial estimates (unfunded)(In billions of dollars) 1996 1995

Military health programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210.2 210.2Federal Employees Health Benefits Program. . . . . . . . . . . . . . . . . . . 134.0 113.4

Total unfunded retiree health care costs . . . . . . . . . . . . . . . . . . . . . 344.2 323.6


financed care, but there are deductible andcopayment requirements.

After they reach 65 years of age, militaryretirees are entitled to Medicare. The Depart-ment of Defense costs for retiree health careinclude costs of buildings, equipment, edu-cation and training, staffing, operations, andmaintenance of military medical treatmentfacilities. They also consist of claims paidby CHAMPUS and the administra-tion of that program.

Costs are funded annually by di-rect appropriations in the year serv-ices are rendered, except forCHAMPUS. CHAMPUS is fundedwhen services are billed. The 1995cost for CHAMPUS was $3.3 bil-lion, which included both benefitand administrative costs. Thefunded cost totaled $3.3 billion.The estimate of the actuarial liabil-ity for CHAMPUS is $48.6 billionfor fiscal 1997.

10. Other liabilitiesOther reported liabilities are summarized

by agency in the table above. Included inother liabilities are liabilities arising fromloan guarantees, capital leases, and contin-gencies. They also include checks outstand-ing, the liabilities incurred from bankresolution and litigation losses, and othermiscellaneous accrued liabilities.

11. Environmentalliabilities

Since environmental liabilities com-prise a significant portion of Other Liabili-ties, a separate disclosure is provided. TheDepartments of Defense and Energy con-tain a significant portion of environmentalliabilities as indicated below.

Other liabilities as of September 30(In billions of dollars) 1996 1995

Funds Appropriated to the President . . . . . . . . . . . . . . . . . . . . 8.2 6.9

Departments:Treasury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.7 34.9Health and Human Services . . . . . . . . . . . . . . . . . . . . . . . . . 36.4 22.4Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . 35.6 34.4Tennessee Valley Authority. . . . . . . . . . . . . . . . . . . . . . . . . . 24.5 24.4Energy 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.4 17.5Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.0 17.8Housing and Urban Development . . . . . . . . . . . . . . . . . . . . . 14.2 13.7Defense 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.8 .9Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.6 10.5Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.2 45.3

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283.6 228.7

1 Shown net of environmental cleanup liabilities of $228.9 billion in 1996 and $227.2 billion in 1995.2 Shown net of environmental cleanup liabilities of $17.6 billion in 1996 and $.2 billion in 1995.

Environmental liabilities as ofSeptember 30(In billions of dollars) 1996 1995

Department of Defense:

Air Force . . . . . . . . . . . . . 4.2Army . . . . . . . . . . . . . . . . 13.4

Subtotal . . . . . . . . . . . . . 17.6Department of Energy . . . . 228.9 227.2

Total . . . . . . . . . . . . . . . . . 246.5 227.2

12. Net positionThe net position, as presented in the table

on the following page, represents the excessof liabilities over assets. It does not, however,reflect the range of the Government’s re-sources, such as the sovereign power to tax,beyond the conventional assets, nor does it re-flect the range of the Government’s responsi-bilities.


13. LeasesFederal agencies were first required to

provide financial information about leasecommitments in 1986. Agencies are attempt-ing to accumulate the lease information re-quired. The future aggregate minimumrental commitments for noncancelable capi-tal and operating leases as of September 30,1996, are detailed in the chart at right.

The majority of these lease commitmentsrelate to buildings, equipment, and officespace rental. The current portions of leasecosts are included in accounts payable. Thelong term portion of capital leases is re-ported as ‘‘other liabilities.’’ Data for in-tragovernmental leasing transactions werenot available at the time of publication.

14. Social Security andMedicareSocial Security

Two trust funds have been established bylaw to finance the Social Security FederalOld-age Survivors Insurance (OASI) and theFederal Disability (DI) programs (OASDI).OASI pays retirement and survivors’ bene-fits, and DI pays benefits after a worker be-comes disabled.

Revenue to OASDI consists of taxes onearnings that are paid by employees, theiremployers, and the self-employed. OASDIalso receives revenue from the taxation ofSocial Security benefits and interest on itsholdings of Government securities. Reve-nues not needed to pay current benefits oradministrative expenses are invested in spe-cial issue Government securities guaranteedas to both principal and interest and backedby the full faith and credit of the UnitedStates Government.

The Board of Trustees of the OASI andDI Trust Funds provides the President andthe Congress with short-range (10-year) and

Leases for fiscal 1997and beyond(In billions ofdollars)

Operatingleases

Capitalleases

1997. . . . . . . . . 2.0 .21998. . . . . . . . . 1.7 .11999. . . . . . . . . 1.5 .12000. . . . . . . . . 1.3 .1Thereafter . . . . 5.6 1.9

Total . . . . . . . 12.1 2.4

Net position as of September 30(In billions of dollars) 1996 1995

Net position at beginning of period . . . . . . . . . . . . . . . . . . . . . . -4,151.6 -4,006.2

Prior period adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 109.7

Current period results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -197.9 -255.1

Net position at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . -4,349.5 -4,151.6

1 See page 17.

long-range (75-year) actuarial estimates ofeach trust fund balance in its annual report.Because the future cannot be predicted withcertainty, SSA trustees use three alternativesets of economic and demographic assump-tions to show a range of possibilities. As-sumptions are made about many economic,demographic, and programmatic factors in-cluding gross domestic product, earnings,the consumer price index, unemployment,fertility, immigration, mortality, and disabil-ity incidents and termination. The intermedi-ate assumptions, used in the table on page30, reflect the trustees’ best estimate of whatthe future experience will be. The low-costassumption is more optimistic than the high-cost assumption. They show how the trustfunds would operate if economic and demo-graphic conditions are better or worse thanthe best estimate.

The present values of actuarial estimateshave been computed as of the beginning ofthe valuation period, September 30, 1996.The expenditures consist of the sum of thepresent value of all estimated payments dur-ing the valuation period, and the contribu-tions consist of the sum of the present valueof all estimated income during the period.The estimates have been prepared on the ba-


sis of the financing method regarded by boththe Congress and the trustees of the trustfunds as the appropriate one to use for socialinsurance programs, namely that futureworkers will be covered by the program asthey enter the labor force.

Under current legislation and using inter-mediate assumptions, the DI Trust Fund andthe OASI Trust Fund are projected to be ex-hausted in 2016 and 2031 respectively. Com-bined OASDI expenditures will exceedcurrent tax income beginning in 2012, andthey will exceed total current income (includ-ing current interest income) for calendaryear 2019 and later. Thus, current tax in-come plus a portion of annual interest in-come will be needed to meet expendituresfor years 2012 through 2018. Thereafter, inaddition to current tax income and current in-terest income, a portion of the principal (i.e.,combined OASDI assets) will be needed

each year until the combined trust funds aretotally depleted in 2029.

MedicareRevenue to the Federal Hospital Insur-

ance Trust Fund (HI-Medicare Part A) con-sists of taxes on earnings that are paid byemployees, their employers, and the self-em-ployed. HI also receives revenue from thetaxation of Social Security benefits and inter-est on its holdings of Government securities.Revenues that are not needed to pay currentbenefits or administrative expenses are in-vested in special issue U.S. Government se-curities guaranteed as to both principal andinterest, and backed by the full faith andcredit of the U.S. Government.

The HI (Medicare Part A) has an actuar-ial deficit of $1,689.7 billion as computed 25years into the future to fiscal 2021. It in-cludes the book value of assets as of Septem-

Social Security present value estimates (P.V.) for the periodof 75 years into the future, beginning September 30, 1996(In trillions of dollars) OASI DI OASDI

P.V. of actuarial contributions to the year 2071 . . 16.7 2.8 19.5P.V. of actuarial expenditures to the year 2071. . 19.8 3.3 23.1P.V. of future resources needed . . . . . . . . . . . . . -3.1 -.5 -3.6Net assets of Social Security

as of September 30, 1996 . . . . . . . . . . . . . . . . . .5 - .5

Medicare Part A present value (P.V.) estimates for theperiod of 25 years into the future, beginningSeptember 30, 1996(In billions of dollars)

P.V. of actuarial contributions to the year 2021 . . . . . . . . . . . . . . . . . . . . 2,442.7P.V. of actuarial expenditures to the year 2021 . . . . . . . . . . . . . . . . . . . . 4,257.6P.V. of future resources needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,814.9Assets of HI Trust Fund as of September 30, 1996 . . . . . . . . . . . . . . . . . 125.3

Medicare Part B Estimates as of September 30, 1996(In billions of dollars)

Total trust fund assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.0Total unpaid benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3Excess of trust fund assets over unpaid benefits . . . . . . . . . . . . . . . . . . . 24.7


ber 30, 1996, and the present value of vari-ous program income items expected to be re-ceived through the year 2021, less: (a) thepresent value of outlays through the year2021, (b) claims incurred to October 1,1996, but unpaid as of that date, and (c) anyadministrative expenses related to thoseclaims. See the table on the previous pagefor a summary.

The Federal Supplementary Medical In-surance Trust Fund (SMI-Medicare Part B)benefits and administrative expenses are fi-nanced by monthly premiums paid by Medi-care beneficiaries and additionalcontributions by the Federal Government.The Omnibus Budget Reconciliation Act of1990 set specific monthly premium levelsfor 5 calendar years beginning in 1991. Themonthly premium in calendar year 1996 cov-ered 27 percent of the SMI program’s esti-mated 1996 costs.

The Federal Supplementary Medical In-surance Trust Fund (SMI-Medicare Part B)has a surplus of $24.7 billion. This repre-sents the amount of the estimated book valueof the Trust Fund’s assets as of September30, 1996, less unpaid benefits and related ad-ministrative expenses, as summarized on theprevious page.

15. Commitments andcontingencies

Commitments are long-term contracts en-tered into by the Federal Government, suchas leases and undelivered orders, which rep-resent obligations.

Contingencies involve uncertainty as to apossible loss to the Federal Government thatwill be resolved when one or more futureevents occur. Contingencies of the FederalGovernment include loan and credit guaran-tees, insurance, and unadjudicated claims.

In accordance with OMB Bulletin 94-01,‘‘Form and Content of Agency FinancialStatements,’’ estimated losses for commit-ments and contingencies, namely, insurance,indemnity agreements, unadjudicatedclaims, and commitments to international in-stitutions are reported if the amounts can bereasonably estimated and the losses are prob-able. OMB Bulletin 94-01 establishes guide-

lines for the reporting of liabilities for loanguarantees and capital leases.

OMB Bulletin 94-01 states that contin-gencies that do not meet all the conditionsfor liability recognition should be disclosed.The table on the following pages shows theface value of commitments and contingen-cies reported by Federal agencies. Theamounts reported in the commitments andcontingencies table are presented without re-gard to the probability of occurrence andwithout deduction for existing and contin-gent assets that might be available to offsetpotential losses.

‘‘Long-term leases’’ includes both operat-ing and capital leases. ‘‘Government loanand credit guarantees’’ includes guaranteesin force as well as contracts to guarantee.‘‘Insurance’’ includes insurance in force,contracts to insure, and indemnity agree-ments.

The Department of Energy manages oneof the largest environmental programs in theworld. The primary focus of the program isto reduce health and safety risks from radio-active waste and contamination resultingfrom production, development and testing ofnuclear weapons. The Department of Energyissued in fiscal 1995 its first annual BaselineEnvironmental Management Report(BEMR).

The estimate of life cycle costs for the en-vironmental management program rangesfrom $189 billion to $265 billion in constant1996 dollars. The estimate begins in fiscal1996 and ends in approximately 2071, whenenvironmental activities are expected to besubstantially completed. In fiscal 1996, theDepartment of Energy recorded a BEMR li-ability of $202.1 billion. For more informa-tion, see the Department of Energy’sfinancial statements.

The Federal Government, in 1996, contin-ued to be the Nation’s largest source ofcredit and underwriter of risk. Large por-tions of all non-Federal credit outstandinghave been assisted by Federal credit pro-grams, Government-sponsored enterprises,or deposit insurance. In particular, mostcredit for housing, agriculture, and educa-tion is Federally guaranteed. For more infor-mation on commitments and contingencies,refer to the tables on the following pages.


Commitments and Contingenciesof the United States Governmentfor Years Ended September 30(In billions of dollars)

Commitments 1996 1995

Long-term leases:

General Services Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 11.7

Tennessee Valley Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 .5

U.S. Postal Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1.7

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9 1.5

Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.6 15.4

Undelivered orders, public:

Defense 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77.3 94.8

Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.9 30.3

Health and Human Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.3 36.3

Housing and Urban Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148.6 171.7

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.7 17.6

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.7 71.9

Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390.5 422.6

Total commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405.1 438.0

See footnotes on the following page.


Commitments and Contingencies, continued(In billions of dollars)

Face value of contingencies 1996 1995

Insurance:

FDIC Bank Insurance Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,671.8 1,915.3

FDIC Savings Association Insurance Fund . . . . . . . . . . . . . . . . . . 688.2 708.6

Federal Emergency Management Agency . . . . . . . . . . . . . . . . . . . 369.5 325.8

National Credit Union Administration . . . . . . . . . . . . . . . . . . . . . . . 265.1 255.6

Pension Benefit Guaranty Corp. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . - 853.0

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0 2.0

Veterans Affairs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574.5 504.9

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59.0 58.0

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,630.1 4,623.2

Government loan and credit guarantees:

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.1 15.5

Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89.0 90.2

Export-Import Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.5 28.9

Housing and Urban Development . . . . . . . . . . . . . . . . . . . . . . . . . . 420.6 438.3

Small Business Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.3 28.3

Veterans Affairs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.0 59.0

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.7 24.7

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669.2 684.9

Unadjudicated claims:

Health and Human Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.5 25.6

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.6 30.0

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6 4.1

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.7 59.7

Other contingencies:

Defense 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 26.8

Housing and Urban Development . . . . . . . . . . . . . . . . . . . . . . . . . . 10.6 11.9

Multilateral Development Banks 4 . . . . . . . . . . . . . . . . . . . . . . . . . . 53.3 6.5

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 6.5

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76.2 51.7

Total contingencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,447.2 5,419.5

1 Includes Army, Air Force and Defense agencies. 2 Data not available. 3 Decrease is due to recognition as a liability.

4 Increase is due to disclosure of appropriated and program limitationamounts.


supplemental tables

Reconciliation of thechange in net positionto the deficit for theyear

This statement reconciles the budgetdeficit to the change in net position, identi-fying the key elements that cause thedifference. The Federal Government usesbudgetary accounting to control the use offunds and for fiscal planning by recordingobligations (orders placed, contractsawarded, services received, and similar ac-tions requiring payments) and cashoutlays. With few exceptions, outlays andreceipts are measured on a cash rather thanan accrual basis, and a largely cash basisthus becomes the yardstick by which thebudget deficit is measured. In financial ac-counting, the focus is on the cost ofoperations, which dictates the use of ac-crual accounting. The differences between

the two bases of accounting are primarilyexplained by their timing differences inthe recognition of revenue and costs. Thebudget deficit for the year, with minor ex-ceptions, is financed by and reflected inthe Federal debt.

Change in net position is reported onthe Statement of Changes in Net Position.Increase or decrease in net position is dueto timing differences in the recognition ofrevenue. This amount is derived by com-paring the amount of exchange andnonexchange revenue reported on the state-ment of net cost and changes in netposition with the receipts reported in thebudget for similar items. Increase or de-crease in net position due to timingdifferences in the recognition of costs isderived by comparing the costs reportedon the Statement of Net Cost with outlaysfor corresponding categories in the budget.The increase or decrease in net position asa result of nonrecurring items is reportedseparately from other differences.

United States Government Reconciliation of the Changein Net Position to the Deficit for the Year EndedSeptember 30 (Unaudited)(In billions of dollars)

1996 1995 Change in net position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -197.9 -145.4Increase (decrease) in net position due to timing differences in

the recognition of revenue:Accrued exchange revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -115.0 -106.5Accrued non-exchange revenue . . . . . . . . . . . . . . . . . . . . . . . . . . -.6 .6

Increase (decrease) in net position due to timing differences inthe recognition of costs:National defense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35.5 -77.5Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.7 133.1Physical resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131.9 100.8Net interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.2Other functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.4 38.4

Increase (decrease) in net position as a result of nonrecurringitems:Prior period adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iiiiiiiiiii- -109.7

Budget deficit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -107.3 -164.0

34 supplemental tables cfs

Additions tonon-Federal economicresources, fiscal 1996

The Government uses its resources toadd to the physical and human resourcesof the Nation without acquiring physicalassets. The table on page 36, compiledfrom the fiscal 1998 and 1997 ‘‘Budget ofthe United States Government,’’ shows theamounts of these expenditures.

Some of these investment-type expendi-tures, while not adding to Federal assets,add to the assets of State and local govern-ments or private institutions. All areintended to enhance the future productiv-ity of the Nation.

Additions to State and local assets in-clude construction grants for highways,community development, airports, andmass transit. Other developmental expendi-tures include outlays for education andtraining, and research and development.(See the chart below.)

Fiscal 1996Total: $146 billion

cfs supplemental tables 35

Additions to Non-Federal Economic Resourcesfor the Year Ended September 30(In billions of dollars)

Additions to State and local government assets 1996 1995

Community and regional development. . . . . . . . . . . . . . . . . . . . 5.7 5.3

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 2.9

Transportation:

Highways and mass transit . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.3 22.8

Rail and air . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7 1.8

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0 1.0

Total additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.3 33.8

Other developmental expenditures

Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 1.2

Conservation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9 3.2

Defense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.4 37.6

Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.9 28.8

Education-income support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8 8.7

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 3.6

Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.0 12.1

Science and engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7 8.9

Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 7.6

Transportation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7 1.4

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9 1.2

Total developmental expenditures . . . . . . . . . . . . . . . . . . . . . . 112.0 114.3

Total additions to non-Federal economic resources . . . . . . . 146.3 148.1


Estimates for taxexpenditures inthe income tax

This table shows tax expenditures thatare considered revenue losses because ofFederal tax law provisions that allow spe-cial exclusions, exemptions, deductionsfrom gross income, or that provide for spe-cial credits, tax rates, and deferrals.

Revenue loss estimates do not take intoaccount any additional resources requiredto provide the same after-tax incentives if

the expenditure program was administeredas a direct outlay rather than through thetax system.

Revenue loss estimates are not necessar-ily equivalent to the increase in Federalreceipts, or the reduction in budget deficits,that would result from the repeal of the spe-cial provision.

For more information about estimatesfor 1996 and 1995 see table 5-1, ‘‘TotalRevenue Loss Estimates for Tax Expendi-tures in the Income Tax,’’ in the fiscal 1998and 1997 ‘‘Budget of the United States,Analytical Perspectives.’’

Estimates for Tax Expenditures in the Income Taxfor the Year Ended September 30(In billions of dollars) Estimated amount of

revenue lossIncome exclusions 1996 1995 Disability and retirement benefits (private) . . . . . . . . . . . . . . . . . 75.0 71.0Medical care and insurance (employer premiums paid) . . . . . . 64.7 59.6Interest and dividends (State and local bonds and debt, andlife insurance) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.0 30.3Capital gains at death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.5 28.3Social Security benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.5 21.6Payroll benefits and allowances

(group life, accident, and unemployment) . . . . . . . . . . . . . . . . 5.1 4.9Foreign earnings and investment incentives (income earnedabroad) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8 4.4Education allowances (scholarships and GI benefits) . . . . . . . . .9 .9Other (e.g., age 55 or over credit on home sales) . . . . . . . . . . . 5.9 5.2

Income deferralsReal estate (home sales) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.6 14.2Interest on U.S. savings bonds. . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 1.1

Deductions and creditsInterest (mortgage and consumer) . . . . . . . . . . . . . . . . . . . . . . . 50.6 48.1State and local property tax and other taxes . . . . . . . . . . . . . . . 50.3 43.0Accelerated depreciation (rental housing, buildings other thanrental housing, machinery, and equipment) . . . . . . . . . . . . . . . . 35.1 32.9Contributions (charitable and political) . . . . . . . . . . . . . . . . . . . . 24.8 23.6Earned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7 4.9Foreign earnings (corporations doing business in U.S.possessions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 2.7Medical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8 3.5Work incentives (employment credits under work programs)

and dependent care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9 2.7Investments (commercial capital gains, credits, otherinvestment incentives, construction period interest, andexpensing developmental costs) . . . . . . . . . . . . . . . . . . . . . . . . 3.3 2.9Old-age, disability, and other personal exemptions . . . . . . . . . . 2.2 2.2Employee stock ownership plans (funded through investmentand tax credits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7 2.2Property damages and losses (casualty losses) . . . . . . . . . . . . .4 .8Exemptions (credit unions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 .6


Outlays for mandatoryand related programs

The Government commits itself to pro-vide benefits and services by passing lawsthat make spending mandatory. Outlays formandatory programs consist of spendingfor programs whose budget authority iscontrolled by means other than appropria-tion acts or by entitlement authority and

budget authority for the food and stampprogram.

For further information on fiscal 1996,refer to table 14-3, ‘‘Outlays for Mandatoryand Related Programs under Current Law,’’in the ‘‘Budget of the United States Govern-ment, Analytical Perspectives, Fiscal Year1998,’’ pages 242-243. For fiscal 1995, seetable 13-3, ‘‘Outlays for Mandatory and Re-lated Programs under Current Law’’ in the‘‘Budget of the United States Government,Analytical Perspectives, Fiscal Year 1997,’’pages 211-212.

Outlays for Mandatory and Related Programsfor the Year Ended September 30(In billions of dollars)

Human resources programs 1996 1995

Social Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347.1 333.3

Income security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188.0 181.3

Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171.3 156.9

Health. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96.8 93.4

Veterans benefits and services . . . . . . . . . . . . . . . . . . . . . . . . 18.8 19.9

Education, training, and social services . . . . . . . . . . . . . . . . . 13.9 15.7

Total human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835.9 800.5

Other

Other mandatory programs . . . . . . . . . . . . . . . . . . . . . . . . . . . -13.4 -14.7

Offset prior to the total mandatory programs. . . . . . . . . . . . . . -37.6 -44.5

Total mandatory programs . . . . . . . . . . . . . . . . . . . . . . . . . . 784.9 741.3

Net interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241.1 232.2

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,026.0 973.5


Federal obligations

‘‘Obligations’’ are binding agreementsthat will result in Government outlays,either immediately or in the future. Beforeobligations can be incurred legally, budget-ary resources must be available,comprising either new budget authority orunobligated balances of budget authorityprovided in earlier years. Obligations arerecorded at the point at which the Govern-ment makes a binding agreement to acquiregoods and services or makes other arrange-ments requiring the payment of money. Inthe case of acquiring goods and services,obligations are the first of the key elementsthat characterize the acquisition and use ofresources--order, delivery, payment, andconsumption.

In general, obligations consist of ordersplaced, contracts awarded, services re-ceived, and similar transactions requiringthe disbursement of money.

The obligational stage of Governmenttransactions is a strategic point in gaugingthe impact of the Government’s operationson the national economy. Obligations fre-quently stimulate business investment,including inventory purchases and employ-ment of labor, to fulfill those Governmentorders.

Disbursements may not occur formonths after the Government places its or-der, but the order itself usually placesimmediate pressure on the private economy.

For more detail, see ‘‘Object ClassAnalysis, Budget of the United States Gov-ernment,’’ for fiscal years 1998 and 1997.

Obligations by Object Classfor the Year Ended September 30(In billions of dollars)

Personal services and benefits 1996 1995Personnel compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 113.9 113.2Personnel benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.9 42.1Benefits for former personnel. . . . . . . . . . . . . . . . . . . . . . . 28.5 29.8

Contractual services and suppliesSupplies and materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.9 26.5Rent, communications, and utilities . . . . . . . . . . . . . . . . . . 13.0 15.1Travel and transportation of persons . . . . . . . . . . . . . . . . . 6.3 6.5Transportation of things . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8 4.6Printing and reproduction. . . . . . . . . . . . . . . . . . . . . . . . . . .7 .9Other services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153.0 175.8

Acquisition of capital assetsEquipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.5 47.6Investments and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 16.2Lands and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 9.4

Grants and fixed chargesInsurance claims and indemnities . . . . . . . . . . . . . . . . . . . 672.7 633.3Grants, subsidies, and contributions . . . . . . . . . . . . . . . . . 405.7 395.6Interest and dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358.1 355.3Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.9 15.8

Other Undistributed U.S. obligations . . . . . . . . . . . . . . . . . . . . . . 13.6 24.6

Total direct obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,918.2 1,912.3Reimbursable and below reporting threshold obligations . 263.8 232.5

Total gross obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,182.0 2,144.8


from the secretary of the treasury · 2002. 10. 1. · Reforms unfolding in coming years will...

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