Financial Report of the United States Government: The Official White House Report for 2005

Overview

"Think of the federal government as a gigantic insurance company (with a side line business in national defense and homeland security) which only does its accounting on a cash basis-only counting premiums and payouts as they go in and out the door. An insurance company with cash accounting is not an insurance company at all. It is an accident waiting to happen."

Peter R. Fisher, former Bush Administration Undersecretary of the Treasury

"Our objective in preparing the fiscal year 2005 Financial Report of the U.S. ...

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Financial Report of the United States: The Official Annual White House Report

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Overview

"Think of the federal government as a gigantic insurance company (with a side line business in national defense and homeland security) which only does its accounting on a cash basis-only counting premiums and payouts as they go in and out the door. An insurance company with cash accounting is not an insurance company at all. It is an accident waiting to happen."

Peter R. Fisher, former Bush Administration Undersecretary of the Treasury

"Our objective in preparing the fiscal year 2005 Financial Report of the U.S. Government is to give Congress and the American people a timely and useful report on the cost of the Federal Government's operations."

John W. Snow, former Bush Administration Secretary of the Treasury

"Scoring the budget on an accrual basis-the private sector norm and, I believe, a sensible direction for federal budget accounting-would better underscore the tradeoffs we face. Under accrual accounting, benefits would be counted as they are earned by workers rather than when they are paid out by the government."

Alan Greenspan, former Chairman of the Federal Reserve Board

"The significance of these accrual-based reports is that they show the implications of current budgetary decisions over a longer time horizon…. This information is therefore an important element of the debate about the real effects of governmental commitments."

Paul H. O'Neill, former Bush Administration Secretary of the Treasury

"[A] practical management tool for policy-makers and a source of useful information for the public about the assets, liabilities, and operations of the government."

Lawrence H. Summers, former Clinton Administration Secretary of the Treasury

"We believe that the publication of this financial report is an important step in providing the American public with useful information about their government's assets, liabilities and operations."

Robert E. Rubin, former Clinton Administration Secretary of the Treasury

In December 2005, the White House published its Financial Report of the United States Government-only 2000 copies were printed despite the purpose of the report being to explain the country's financial wellbeing to Congress and the American people. Now, for the first time, that report is widely published so the American people can see what's really going on with the nation's finances.

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Product Details

  • ISBN-13: 9781595550804
  • Publisher: Nelson, Thomas, Inc.
  • Publication date: 8/15/2006
  • Pages: 304
  • Product dimensions: 0.64 (w) x 6.00 (h) x 9.00 (d)

Meet the Author

Jim Cooper is serving his second term as U.S. Representative for the 5th District of Tennessee. As a member of the Blue-Dog Democrats, he sees his job as cutting through federal red tape for people at home and to help pass good federal laws for the nation.

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Read an Excerpt

Financial Report of the United States


NELSON CURRENT

Copyright © 2007 Nelson Current
All right reserved.

ISBN: 978-1-59555-080-4


Chapter One

MANAGEMENT'S DISCUSSION AND ANALYSIS

Introduction

The accompanying 2005 Financial Report of the United States Government (Financial Report) provides the President, Congress, and the American people information about the financial results and position of the Federal Government. It provides, on an accrual basis of accounting as prescribed by U. S. generally accepted accounting principles (GAAP) for Federal entities, a broad, comprehensive view of the Federal Government's finances. This report states the Government's financial position and condition, its revenues and costs, assets and liabilities, and other obligations and commitments. Finally, it discusses important financial issues and significant conditions that may affect future operations.

The Financial Report, required by 31 U.S.C. 331(e)(1), is to be submitted to Congress by March 31 and is subject to audit by the Government Accountability Office (GAO). The Office of Management and Budget (OMB) accelerated its issue date to December 15 beginning with fiscal year 2004. Material deficiencies in financial reporting (which also represent material weaknesses in internal control) and other limitations on the scope of its work resulted in conditions that continued to prevent GAO from forming and expressing an opinion on the U.S. Government's consolidated financial statements for the fiscal years ended September 30, 2005 and 2004. See GAO's disclaimer of opinion on pages 233-263 for a full explanation of this and other material weaknesses that relate to this report.

Some of the significant agencies included in the Financial Report received unqualified opinions on their fiscal year 2005 financial statements. For example, the Department of the Treasury (Treasury), which accounts for substantially all of the Federal Government's revenues and Federal debt, received an unqualified audit opinion on its fiscal year 2005 financial statements. Moreover, the Department of Veterans Affairs (VA), the Office of Personnel Management (OPM), and the Department of Defense's (DOD) Military Retirement Fund, which account for significant amounts included in this report for employee and veteran benefits, all received unqualified audit opinions on their fiscal year 2005 financial statements. Lastly, the Financial Report's Statements of Social Insurance include disclosed amounts subject to considerable scrutiny by the process used by the Trustees to prepare the numbers. These amounts will be audited for the first time starting for fiscal year 2006.

The Financial Report consists of Management's Discussion and Analysis, Statements of Net Cost, Statements of Operations and Changes in Net Position, Reconciliations of Net Operating Cost and Unified Budget Deficit, Statements of Changes in Cash Balance from Unified Budget and Other Activities, Balance Sheets, Stewardship Information, Notes to the Financial Statements, Supplemental Information, and Auditor's Report. The Financial Report's five financial statements are interrelated and work together. Chart A, on page 9, provides an overview of the statements and how selected parts of them tie together.

Management's Discussion and Analysis (MD&A) provides management's perspectives on the information presented in the Federal Government's financial statements and social insurance responsibilities. Table 1 is the table of contents for this MD&A.

Accrual-Based Results and Basis of Accounting

Each year, the Administration issues two reports that detail financial results for the Federal Government: the President's Budget on the cash basis and the Financial Report on the accrual basis. The two reports complement each other. The budget report contains mainly cash receipt and outlay information and compares the results to the appropriations for the current fiscal year. The Financial Report uses those transactions as its base and also contains noncash-based revenues and expenses. For example, revenue accruals produce accounts receivable balances and the expense accruals produce liabilities for items such as pensions for Government workers, accounts payable, and environmental cleanup costs. As a result, this Financial Report is intended to provide the results of the Federal Government's financial operations, its financial condition, its revenues and costs, assets and liabilities, and other obligations and commitments. As such, it can be used with the budget as a planning and control tool not only for the current fiscal year but with a longer term focus as well.

The information in the financial statements (pages 69-73) was prepared based on U.S. GAAP standards developed by the Federal Accounting Standards Advisory Board (FASAB). GAAP for the Federal Government is tailored to the U.S. Government's unique characteristics and special needs. For example, the Stewardship Information section of this report contains important information about diverse subjects such as land set aside for the use and enjoyment of present and future generations, heritage assets, and social insurance programs such as Social Security and Medicare.

Limitations of the Financial Statements

The principal financial statements have been prepared to report the financial position and results of operations of the Federal Government, pursuant to the requirements of 31 U.S.C. 331(e)(1). While the statements have been prepared from the books and records of the entity in accordance with U.S. GAAP for Federal entities and the formats prescribed by OMB, the statements are in addition to the financial reports used to monitor and control budgetary resources which are prepared from the same books and records.

It must be noted that the audit opinions of several significant agencies are disclaimed. This means that the data could not be satisfactorily audited and may be incorrect, perhaps materially so. This report includes the balances provided by all agencies including those with disclaimed opinions. However, 18 of the 24 major Chief Financial Officers Act (CFO) agencies that are consolidated in this report received unqualified audit opinions.

Reporting Entity

These financial statements cover the three branches of the U.S. Federal Government. A list of the significant entities included in these financial statements is in the Appendix. Information from the judicial branch is limited to budgetary activity because its entities are not required by law to submit and do not submit comprehensive financial statement information to the Treasury. Even though the legislative branch is not required by law to submit comprehensive financial statement information to the Treasury, parts of it do so voluntarily while the information for other parts is limited to budgetary activity. The Federal Reserve System is excluded because it is an independent entity having both public purposes and private aspects. The Federal Retirement Thrift Investment Board is excluded because it is fiduciary in nature. Moreover, Government-sponsored but privately-owned enterprises (e.g., the Federal Home Loan Banks, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation) are also excluded.

How the Federal Government's Financial Statements are Related to Each Other

Federal accrual accounting has many similarities with accrual accounting used by virtually any entity, both private and public throughout the globe. On page nine, Chart A depicts how the Government's statements interrelate with each other and how each statement supports the next.

The Government uses several statements the average reader may not be familiar with. For example, items normally found on a private corporation's income statement are shown on two different statements. Expenses are shown on the Government's Statements of Net Cost (net of programmatic revenues), and general governmental revenues are shown on the Statements of Operations and Changes in Net Position. The Reconciliation of Net Operating Revenue (or Cost) and Unified Budget Surplus (or Deficit) statement and the Statements of Changes in Cash Balance from Unified Budget and Other Activities are both unique to the Federal Government. They are extremely important because they show how the budget deficit was funded and how it varies from the accrual results. In the private sector, when costs exceed revenues it is called a loss; in the Federal accrual world, we call this the Net Operating Cost. On the next page, Chart A shows how the statements fit together and which numbers are shown on more than one statement.

(Continues...)



Excerpted from Financial Report of the United States Copyright © 2007 by Nelson Current. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Contents

A Message from the Secretary of the Treasury....................1
Management's Discussion and Analysis....................3
Government Accountability Office Comptroller General's Statement....................53
Financial Statements Statements of Net Cost....................59
Statements of Operations and Changes in Net Position....................60
Reconciliations of Net Operating Cost and Unified Budget Deficit....................63
Statements of Changes in Cash Balance from Unified Budget and Other Activities....................64
Balance Sheets....................65
Stewardship Information (Unaudited) Stewardship Responsibilities....................75
Statements of Social Insurance....................75
Notes to the Statements of Social Insurance....................78
Social Security and Medicare....................80
Railroad Retirement, Black Lung, and Unemployment Insurance....................116
Stewardship Assets....................132
Stewardship Land....................132
Heritage Assets....................133
Collection-Type Heritage Assets....................135
Natural Heritage Assets....................136
Cultural Heritage Assets....................137
Stewardship Investments....................138
Non-Federal Physical Property....................138
Human Capital....................139
Research and Development....................139
Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies....................141
Note 2. Cash and Other Monetary Assets....................150
Note 3. Accounts and Taxes Receivable, Net....................153
Note 4. LoansReceivable and Loan Guarantee Liabilities, Net....................154
Note 5. Inventories and Related Property, Net....................160
Note 6. Property, Plant, and Equipment, Net....................164
Note 7. Securities and Investments....................165
Note 8. Other Assets....................166
Note 9. Accounts Payable....................167
Note 10. Federal Debt Securities Held by the Public and Accrued Interest....................167
Note 11. Federal Employee and Veteran Benefits Payable....................170
Note 12. Environmental and Disposal Liabilities....................181
Note 13. Benefits Due and Payable....................185
Note 14. Insurance Program Liabilities....................185
Note 15. Other Liabilities....................187
Note 16. Collections and Refunds of Federal Revenue....................190
Note 17. Unreconciled Transactions Affecting the Change in Net Position....................193
Note 18. Change in Accounting Principle and Prior Period Adjustments....................194
Note 19. Contingencies....................194
Note 20. Commitments....................200
Note 21. Dedicated Collections....................204
Note 22. Indian Trust Funds....................219
Supplemental Information (Unaudited) Deferred Maintenance....................223
Unexpended Budget Authority....................224
Tax Burden....................225
Tax Gap....................226
Other Claims for Refunds....................227
Appendix Significant Government Entities Included and Excluded from the Financial Statements....................229
Government Accountability Office Auditor's Report....................233
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