The Nation by the NumbersThe Nation by the NumbersThe 2010 Financial Report of the The 2010 Financial Report of the

U.S. GovernmentU.S. Government

AGA – Richmond May 18, 2011

"We might hope to see the finances of the Union as clear and intelligible as a merchant's books, so that every member of Congress and every man

of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to control them."

President Thomas Jefferson to Treasury Secretary Albert Gallatin, 1802

Scott BellSenior Staff Accountant

Department of the Treasury

Key Issues• Current Financial

Position and Condition

• Economic Recovery Efforts

• Social Insurance & Sustainability

Citizen’s Guide

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FY 2010 Audit in Review• Governmentwide Audit – Disclaimer (14th consecutive year)

– DoD accounting weaknesses

– Intragovernmental Balances and Transactions

– Consolidation Process

– SOSI Disclaimer:

• Had been unqualified in 2007, 2008, 2009

• “…significant uncertainties, primarily related to the achievement of projected reductions in Medicare cost growth reflected in the 2010 Statement of Social Insurance, prevented us from expressing an opinion on that statement.”

• 28 of 35 significant reporting agencies received clean audit opinions.

– The total number of CFO Act material weaknesses decreased from 38 to 31.

– 15 agencies earned a clean audit opinion with no material weaknesses (including the Departments of Commerce, Education, Energy, HUD, Interior, Justice, State, and Transportation).

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Deficit Decrease, Cost Increase

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$162.8

$454.8

$1,417.1 $1,294.1

$275.5

$1,009.1

$1,253.7

$2,080.3

$-

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

2007 2008 2009 2010

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Fiscal Year

U.S. Budget Deficit & Net Operating Cost

Budget DeficitNet Operating Cost

$71.3bOther

Net Operating Cost vs Budget Deficit

2010 Net Operating Cost$2,080.3 billion

$223.8bIncrease in estimated

veterans benefits liabilities

=

2010 Budget Deficit$1,294.1billion

+

$86.4bTARP Downward

Reestimate

+

$279.3bIncrease in estimated military and civilian

Benefits

-

5

+$268.0b

Increase in liabilities for Government-

Sponsored Enterprises

+

What Came In

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$1,846.1 $1,999.8 $2,078.4 $1,775.0 $1,732.9

$350.0 $367.2 $299.7

$130.3 $179.6

$244.7 $260.3 $283.3

$293.1 $304.0

$-

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

2006 2007 2008 2009 2010

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Government Revenues

Other RevenueCorporate Tax RevenuePersonal Income Tax and Payroll Tax Revenue

• Total revenues remained at about $2.2 trillion.

• Corporate tax revenue increased 40 percent, after decreasing by more than 50 percent during FY 2009.

• Slight decrease (2.4 percent or $42.1 billion) in personal income tax revenue.

What Went Out• Government’s Net Cost (Gross

Cost less earned revenues) increased $861.3 billion to $4.3 trillion.

• Increase in Federal employee and veterans benefit liabilities = $538 billion (62 %) of total change.

• SFFAS 33 – agencies required to report gains/losses from assumptions changes separately (total $132.9 billion in 2010).

• ‘Bottom Line’ net operating cost (Net Cost less Taxes & Other Revenues) = $2.1 trillion.

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$(200.0)

$-

$200.0

$400.0

$600.0

$800.0

$1,000.0

HHS SSA DOD Treasury VAD

olla

rs in

Bill

ions

Net Cost: 2006-2010

2006 2007 2008 2009 2010

What We Own & What We Owe

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Assets

428.6$

286.2$

Property, Plant & Equipment, Net 828.9$

Other 397.6$

Total Assets 2,883.8$

*Includes Net Loans Receivable and Mortgage-Backed Securities, Troubled Asset Relief Program (TARP) Investments, and Investments in Government-Sponsored Enterprises (GSEs).

Loans Receivable and Investments, Net*

942.5$

Inventories

Cash & Other Monetary Assets

Assets: $2,883.8

Federal Debt Securities Held by

the Public $(9,060.0)

Fed Employee & Vet Benefits

Payable $(5,720.3)

Other $(1,576.3)

$(20,000.0)

$(15,000.0)

$(10,000.0)

$(5,000.0)

$-

$5,000.0

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The Government's Assets and LiabilitiesAs of September 30, 2010

TotalLiabilities:

($16,356.6)

Economic Recovery

• Fannie & Freddie• Funding advances when

liabilities > assets. $85.1 billion to Fannie $63.1 billion to Freddie $359.9 billion combined

liability accrued

• Mortgage-Backed Securities (MBS)

• 9/30/2010: $225.5 billion. $75 billion in principal

and interest repaid. Program expired on

12/31/2009 9

$141.7

$40.3

$13.2

$42.3

$0.4

$48.3

$-

$26.1

$52.7

$15.4

$-

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

Capital Purchase Program

Targeted Investment

Program

AIG Investments

Automotive Industry

Financing Program

Other

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Chart 6TARP Investments Outstanding , Net

2009

2010

• $387.7 billion disbursed.

• $204.1 billion repaid.

• $27.8 billion generated (interest/dividends).

• Reduced GM Ownership, AIG Restructuring.

HERA EESA

Fiscal Sustainability: An Issue Now & in the Future

• Under current conditions, actuaries estimate that there will be a social insurance shortfall of $31 trillion.– 75-year

estimate of future benefit expenditures net of contributions.

– Decline from 2009 ($46t) due to ACA.

0

5

10

15

20

25

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Percent of GDP

Historical and Current Policy Projections for the Composition of Non-interest Spending

Defense

+ Other Non-interest Spending

+ Social Security

+ Medicaid

+ MedicareTotal Receipts

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Fiscal Sustainability:Interest – A compounding problem

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0

5

10

15

20

25

30

35

40

45

1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Percent of GDP

Historical and Current Policy Projections for Total Spending, Net Interest, Non-interest Spending, and Total Receipts, 1980-2085

Non-interest Spending

Total Spending

Net Interest

Total Receipts

Fiscal Sustainability:Effect on the Debt

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0

100

200

300

400

500

600

700

800

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Percent of GDP

Historical and Current Policy Projections for Debt Held By the Public, 1940-2085

Actual

Extrapolation of 2010 Current Policy

2009 Financial Report Projections

Statement of Social Insurance (SOSI)

• Disclaimer - “…significant uncertainties…primarily related to the achievement of projected reductions in Medicare cost growth…prevented us from expressing an opinion on that statement.”

• Projections based on full implementation of Affordable Care Act (ACA), including significant projected Medicare cost decreases related to: – (1) reductions in physician payment rates totaling 30 percent over the next 3

years

– (2) productivity improvements for most other categories of Medicare providers. 13

$ %Open Group (Net):

Social Security (OASDI) (7,947)$ (7,677)$ 270$ 4%Medicare (Parts A, B, & D) (22,813)$ (38,107)$ (15,294)$ -40%Other (97)$ (94)$ 3$ 3%

(15,021)$ -33%

Social Insurance Future Expenditures in Excess of Future Revenues

Dollars in Billions 2010 2009Increase / (Decrease)

Total Social Insurance Expenditures, Net (Open Group)

(45,878)$ (30,857)$

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billions of dollars 2010 2009

Gross Costs (4,472.3)$ (3,735.6)$

Earned Revenues 309.2$ 300.9$ Gain / (Loss) from Assumptions (132.9)$ n/a

Net Cost (4,296.0)$ (3,434.7)$ Total Taxes and Other Revenues 2,216.5$ 2,198.4$

Other (0.8)$ (17.4)$ Net Operating Cost (2,080.3)$ (1,253.7)$

Assets: 2,883.8$ 2,667.9$ Less: Liabilities, comprised of:

Debt Held By the Public (9,060.0)$ (7,582.7)$

Federal Employee & Veteran Benefits (5,720.3)$ (5,283.7)$

Other (1,576.3)$ (1,257.4)$

Total Liabilities (16,356.6)$ (14,123.8)$

Net Position (Assets Minus Liabilities) (13,472.8)$ (11,455.9)$

Statement of Social Insurance: 1Closed Group (current participants) 2 (43,058)$ (52,145)$

Open Group (current + future participants) 3 (30,857)$ (45,878)$

Social Insurance as Percent of Gross Domestic Product (GDP)4:Closed Group (current participants) -5.1% -6.6%

Open Group (current + future participants) -3.7% -5.8%

Unified Budget Deficit (1,294.1)$ (1,417.1)$

NATION BY THE NUMBERSA Snapshot of

The Government's Financial Position & Condition

Sustainability Measures:

Budget Results

On the Web

• Has long been available online in ‘static’ form.• New interactive version of the Financial Report

and the Guide• Easily / quickly navigate throughout the document• View source data behind charts• Access other related online information

– Agency reports

– Accounting standards

– Budget

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http://www.fms.treas.gov/fr

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Find Out More!

http://www.fms.treas.gov/fr/index.html

http://www.whitehouse.gov/omb/financial/index.html

www.gao.gov

www.financialstability.gov

mark.reger@treasury.gov

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