Financial Audit: 1999 Financial Report of the United States Government
(Letter Report, 03/31/2000, GAO/AIMD-00-131).

Pursuant to a legislative requirement, GAO reviewed the annual audited
financial statements for 24 major departments and agencies of the U.S.
government.

GAO noted that: (1) certain significant financial systems weaknesses,
problems with fundamental recordkeeping and financial reporting,
incomplete documentation, and weak internal control, including computer
controls, continue to prevent the government from accurately reporting a
significant portion of its assets, liabilities, and costs; (2) some of
these deficiencies primarily relate to specific major agencies--others,
such as intragovernmental transactions, affect the entire government;
(3) these deficiencies affect the reliability of the accompanying
financial statements and much of the related information in the
financial report, as well as the underlying financial information; (4)
the deficiencies also affect the government's ability to accurately
measure the full cost and financial performance of certain programs and
effectively manage related operations; and (5) major problems included
the federal government's inability to: (a) properly account for and
report material amounts of property, equipment, materials, and supplies,
and certain stewardship assets, primarily at the Department of Defense
(DOD); (b) properly estimate the cost of certain major federal credit
programs and the related loans receivable and loan guarantee
liabilities, primarily at the Department of Agriculture; (c) estimate
and reliably report material amounts of environmental and disposal
liabilities and related costs, primarily at DOD; (d) determine the
proper amount of various reported liabilities, including postretirement
health benefits for military employees and accounts payable and other
liabilities for certain agencies; (e) accurately report major portions
of the net cost of government operations; (f) ensure that all
disbursements are properly recorded; and (g) properly prepare the
federal government's financial statements, including balancing the
statements, accounting for substantial amounts of transactions between
governmental entities, properly and consistently compiling the
information in the financial statements, and reconciling the results of
operations to budget results.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-00-131
     TITLE:  Financial Audit: 1999 Financial Report of the United
	     States Government
      DATE:  03/31/2000
   SUBJECT:  Financial statement audits
	     Internal controls
	     Financial management systems
	     Federal agency accounting systems
	     Reporting requirements
	     Financial records
	     Accountability
	     Accounting standards
	     Accounting procedures
IDENTIFIER:  Social Security Trust Fund
	     Medicare Trust Fund

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GAO/AIMD-00-131

GAO United States General Accounting Office
Report to the Congress
March 2000 FINANCIAL AUDIT 1999 Financial Report of the United States Government

GAO/AIMD-00-131

Page 1 AIMD- 00- 131 United States General Accounting Office
Washington, DC 20548 Comptroller General
of the United States
B- 285074
March 31, 2000
The President of the Senate The Speaker of the House of Representatives
Implementation of important legislative reforms remains underway to promote greater accountability in managing the finances of our national government. These reforms include requirements for annual audited financial statements for 24 major departments and agencies as well as preparation of the financial statements of the U. S. government, which GAO is required to audit. Our report is included in the accompanying Treasury publication, Fiscal Year 1999 Financial Report of the United States Government (Financial Report). This letter highlights our conclusions. 1
In summary, certain significant financial systems weaknesses, problems with fundamental recordkeeping and financial reporting, incomplete documentation, and weak internal control, including computer controls, continue to prevent the government from accurately reporting a significant portion of its assets, liabilities, and costs. Some of these deficiencies primarily relate to specific major agencies; others, such as intragovernmental transactions, affect the entire government. These deficiencies affect the reliability of the accompanying financial statements and much of the related information in the Financial Report, as well as the underlying financial information. They also affect the government's ability to accurately measure the full cost and financial performance of certain programs and effectively manage related operations.
Major problems included the federal government's inability to:
 properly account for and report (1) material amounts of property, equipment, materials, and supplies and (2) certain stewardship assets, primarily at the Department of Defense;
 properly estimate the cost of certain major federal credit programs and the related loans receivable and loan guarantee liabilities, primarily at the Department of Agriculture;
 estimate and reliably report material amounts of environmental and disposal liabilities and related costs, primarily at the Department of Defense;
1 See also Auditing the Nation's Finances: Fiscal Year 1999 Results Continue to Highlight Major Issues Needing Resolution (GAO/ T- AIMD- 00- 137, March 31, 2000).
Page 2 AIMD- 00- 131
 determine the proper amount of various reported liabilities, including postretirement health benefits for military employees and accounts payable and other liabilities for certain agencies;
 accurately report major portions of the net cost of government operations;
 ensure that all disbursements are properly recorded; and
 properly prepare the federal government's financial statements, including balancing the statements, accounting for substantial amounts of transactions between governmental entities, properly and consistently compiling the information in the financial statements, and reconciling the results of operations to budget results.
Such deficiencies prevented us from being able to form an opinion on the reliability of the accompanying financial statements, as was the case in our fiscal years 1998 and 1997 audits. These deficiencies continue to significantly impair the federal government's ability to adequately safeguard certain significant assets, properly record various transactions, and comply with selected provisions of laws and regulations related to financial reporting. Additionally, (1) the government is unable to determine the full extent of improper payments estimated to total billions of dollars annually and therefore cannot develop effective strategies to reduce them, (2) serious, long- standing computer security weaknesses expose the government's financial and other sensitive information to inappropriate disclosure, destruction, modification, and fraud, and critical operations to disruption, and (3) material control weaknesses affect the government's tax collection activities.
The executive branch recognizes that, because of the extent and severity of the financial management deficiencies, addressing them will require concerted improvement efforts across government. The President has designated financial management improvement as a priority management objective and efforts are underway across government to address the pervasive, generally long- standing financial management problems discussed in our accompanying report. Thus far, 13 of 24 major agencies have received unqualified opinions on their fiscal year 1999 financial statements and others have resolved certain previously reported financial statement deficiencies for fiscal year 1996, only 6 agencies achieved that goal. As of March 31, 2000, 2 major agencies had not issued audited financial statements. Also, in October 1999, the American Institute of Certified Public Accountants recognized federal accounting standards as a generally accepted basis of accounting, which represents a major milestone for the federal government.
While obtaining unqualified clean audit opinions on federal financial statements is an important objective, it is not an end in and of itself. The key is to take steps to continuously improve internal control and underlying financial and management information systems as a means to assure accountability, increase the economy, improve the efficiency, and enhance the effectiveness of government. These systems must generate timely, accurate, and useful information on an ongoing basis, not just as of the end of the fiscal year. Unfortunately, for fiscal year 1999, the financial management systems of 19 of 22 agencies that have reported thus far were again
Page 3 AIMD- 00- 131
found not to be in substantial compliance with the requirements of the Federal Financial Management Improvement Act of 1996. In addition, while some attention to delineating core competencies and training has occurred, a great deal more needs to be done to improve financial management human capital.
The U. S. government's fiscal year 1999 Financial Report, issued March 31, 2000, and our report, dated March 20, 2000, on the financial statements incorporated therein, include certain information concerning the Social Security and Medicare (Part A) trust funds, such as projected contributions and expenditures, dates when expenditures are expected to exceed contributions, and dates when such funds are expected to be exhausted. Such information is as of January 1, 1999, for Social Security and as of September 30, 1999, for Medicare (Part A).
On March 30, 2000, the government issued updated information as of January 1, 2000, for both programs. The government's issuance of dated information in this Financial Report at about the same time that it issues more current information may cause confusion to the Congress and the public. This can serve to reduce confidence in and the credibility of the government's annual financial report. This is especially true when there are significant differences between the trustees' new projections and those included in the annual report. As a result, steps should be taken, in future years, to ensure that the government's Financial Report contains up- to- date information as of no earlier than the end of the most recent fiscal year for these important federal programs. Because current information on the solvency of the Social Security and Medicare programs is critical to assessing the financial condition of the nation, aiding in budget deliberations, and fostering public debate, we have included a summary of the updated information on these two important federal programs in the appendix to this letter.
We appreciate the cooperation and assistance we received from the Chief Financial Officers and Inspectors General throughout government, as well as Department of the Treasury and Office of Management and Budget officials, in carrying out our responsibility to audit the government's financial statements. We look forward to continuing to work with these officials and the Congress to achieve the goals and objectives associated with financial management reform.
Our report was prepared under the direction of Jeffrey C. Steinhoff, Acting Assistant Comptroller General for Accounting and Information Management, and Robert F. Dacey, Director, Consolidated Audit and Computer Security Issues. If you have any questions, please contact me on (202) 512- 5500 or them on (202) 512- 3317.
David M. Walker Comptroller General of the United States
(919507)
Page 4 AIMD- 00- 131
Appendix
Comparison of Selected Information on the Social Security and Medicare (Part A) Trust Funds Included in the Boards of Trustees Annual Reports, dated March 30, 2000, and the Fiscal Year 1999 Financial Report of the United States Government.
Trust Fund Trustees' Report Financial Report
Social Security -- OASI -- DI
2015 2016 2007
2014 Not Reported Not Reported
First Year Outgo Exceeds Tax Income Excluding Interest
Medicare  Part A 2010 Not Reported Social Security
-- OASI -- DI
2037 2039 2023
2034 2036 2020
Year Trust Fund Is Exhausted
Medicare  Part A 2023 2015 Social Security
-- OASI -- DI
Not Reported Not Reported Not Reported
$2,935 billion 2,413 billion
522 billion
Present Value of Additional Resources Needed
Medicare  Part A Not Reported $2,935 billion Social Security
-- OASI -- DI
1.89% 1.53% 0.37%
Not Reported Not Reported Not Reported
Actuarial Deficit as a Percentage of Taxable Payroll Over the 75 Year Projection Period
Medicare  Part A 1.21 % Not Reported Social Security
-- OASI -- DI
6.18 % 5.40 % 0.78 %
Not Reported Not Reported Not Reported
Actuarial Deficit as a Percentage of Taxable Payroll in Year 75
Medicare  Part A 3.28% Not Reported
Key:
OASI  Federal Old- Age Survivors Trust Fund DI  Federal Disability Insurance Trust Fund
Note: Trustees information is as of January 1, 2000. Financial Report information is as of January 1, 1999, for Social Security and as of September 30, 1999, for Medicare (Part A).
A Mes sage from the Sec re tary of the Treasury .................................... 1
Man age ment's Dis cus sion and Anal y sis.......................................... 3
General Accounting Office Report
Comp trol ler Gen eral's State ment ............................................... 15 Au di tor's Re port ............................................................ 19
Financial Statements
State ment of Op er a tions and Changes in Net Po si tion............................... 46 State ment of Net Cost........................................................ 47 Bal ance Sheet .............................................................. 49
Stewardship Information (Unaudited)
Stew ard ship As sets: Na tional De fense As sets ..................................................... 51 Stew ard ship Land .......................................................... 54 Her i tage As sets............................................................ 56 Stewardship Re sponsibilities:
So cial Se cu rity ............................................................ 58 Medicare ................................................................. 59 Rail road Re tire ment ........................................................ 60 Black Lung Ben e fits ........................................................ 62 Un em ploy ment In sur ance ................................................... 63 Stewardship In vestments:
Non- Federal Phys i cal Prop erty ............................................... 64 Hu man Cap i tal ............................................................ 65 Research and De vel op ment .................................................. 65 Cur rent Ser vices As sess ment .................................................. 67
Notes to the Financial Statements
Note 1 - Sum mary of Sig nif i cant Ac count ing Pol icies............................... 69 Note 2 - Cash and Other Mon e tary As sets ........................................ 72 Note 3 - Ac counts Receivable.................................................. 73 Note 4 - Loan and Loan Guar an tee Pro grams...................................... 74 Note 5 - Taxes Re ceiv able .................................................... 76 Note 6 - In ven tories and Re lated Property ........................................ 76 Note 7 - Prop erty, Plant and Equip ment .......................................... 7 7 Note 8 - Other As sets ........................................................ 77 Note 9 - Ac counts Pay able .................................................... 78 Note 10 - Fed eral Debt Se cu ri ties Held by the Public ............................... 78 Note 11 - Fed eral Em ployee and Vet eran Ben e fits Pay able ........................... 81
Note 12 - En vi ron men tal and Dis posal Li a bil i ties .................................. 84 Note 13 - Ben e fits Due and Pay able ............................................. 85 Note 14 - Other Liabilities .................................................... 85 Note 15 - Col lec tions and Re funds of Fed eral Revenue ............................. 86 Note 16 - Un rec on ciled Trans ac tions Af fecting the Change in Net Position .............. 87 Note 17 - Prior Pe riod Adjustments ............................................. 88 Note 18 - Com mit ments and Contingencies ....................................... 88 Note 19 - Ded i cated Col lec tions ................................................ 91 Note 20 - In dian Trust Funds .................................................. 94
Contents
Supplemental Information (Unaudited)
Net Cost De tail ............................................... 95 De ferred Main te nance ......................................... 101 Rec on cil i a tion of the Ex cess of Rev e nue Over Net Cost................ 102 Un ex pended Bud get Au thor ity................................... 104
Tax Bur den ................................................. 105
Other Information (Unaudited)
Other Claims for Re fund ....................................... 107 Fed eral Taxes Re ceiv able Net ................................... 107
Appendix
List of Sig nif i cant Gov ern ment En tities In cluded and En tities Ex cluded from these Fi nan cial State ments .............. 109
A MES SAGE FROM THE SECRETARY OF THE TREA SURY
I am pleased to present the fiscal year 1999 Financial Report of the United States Government. The Report includes audited financial statements that cover the Executive Branch, as well as parts of the Legislative and Judicial branches of U. S. Government. The Administration initiated the development of this financial report in
order to create what we believe is 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.
This report is another significant milestone in our efforts, begun in 1994, to account for the financial activities of the U. S. Government in a timely and professional manner. Developing the capability for the government to produce financial reports in accordance with generally accepted accounting principles is an enormous task.
I am also pleased to report that the standards developed by the Federal Accounting Standards Advisory Board (FASAB) are now recognized by the American Institute of Certified Public Accountants as being generally accepted accounting principles
(GAAP) for the Federal Government. This is a major accomplishment. It will enhance the acceptability of our reports and will add to the level of financial professionalism throughout the U. S. Government.
Significant progress continues to be made in the area of financial management. More agencies are completing their financial statements on time and the quality of the data continues to improve. The successful Year 2000 remediation process has resulted in better systems and we have established, through the Joint Financial Management Improvement Program, a government- wide financial software certification process
that is beginning to ensure that commercial systems meet the government's needs. Despite this progress, we have much yet to achieve. A great deal of additional effort will be necessary to fully implement an entirely new and reliable system of reporting on the operations of the U. S. Government. The audit report from the General Accounting Office (GAO) discusses many significant areas in which the reliability of
the current financial statements need to be improved before the GAO will be able to render an opinion on these statements.
We are committed to producing and reporting financial information that meets the highest standards of integrity, and to provide to the American people the accountability and professionalism they expect from their government.
Law rence H. Sum mers
DIS CUS SION AND ANAL Y SIS 3
No other en tity in the world com pares in size, scope and com plex ity to the U. S. Gov ern ment. A ci vil ian Fed e r a l workforce of nearly two mil lion in di vid u als serves a di verse Na tion of more than 270 mil lion Amer i cans. The Fed eral Gov ern ment is the larg est land owner in the world. Its bud geted spend ing for fis cal 1999 was $1.7 tril lion.
To ful fill its con sti tu tional man dates, the U. S. Gov ern ment un der takes a wide va ri ety of pro grams to:
 Main tain strong, ready and mod ern mil i tary forces.
 Pro vide crit i cal in ter na tional lead er ship.
 Con trib ute to en ergy se cu rity.
 Pro tect the en vi ron ment.  Boost ag ri cul tural pro ductivity.
 Fa cil i tate com merce and sup port hous ing.
 Sup port the trans por ta tion sys tem.  Help eco nom i cally dis tressed ur ban and ru ral com mu ni ties.  As sist States and lo cal i ties in pro vid ing es sen tial ed u ca - tion and train ing.
 Promote health care.  Fos ter in come se cu rity.  Pro vide ben e fits and ser vices to vet er ans.  Ad min is ter jus tice.
Introduction No other entity
in the world compares in size, scope and complexity
to the U. S. Government . . . Man age ment's Dis cus sion and Anal y sis
Fis cal 1999 Fi nan cial Re port of the United States Gov ern ment Through the bud get pro cess, the Pres i dent and Con gress de cide how much to spend and tax in any one fis cal year. The Fed eral bud get, of course, is not the only bud get that af fects the econ omy or the Amer i can peo ple. The bud gets of State and lo cal gov ern ments have an im pact as well. Fed eral Gov ern ment spend ing was a lit tle less than 19 per cent of the gross do mes tic prod uct (or GDP, which mea sures the size of the econ omy) in 1999, the low est since 1966.
The Budget and Economy
4 DISCUSSION ANDANALYSIS
Continued Improvement in Fiscal Performance
Seven years ago, the Fed eral budget defi cithadexploded. Itdominated the Government'sabil itytomakepol - icyandim posedaninsid iousburden
on our econ omy. In 1992, the $290 bil lion def i cit was the larg est in Amer icanhistory andwasprojected tocon tinuespiraling upwardwithout restraint.The economysuffered, in - ter estrateswerehigh andjobcreation
stalled. Cap i tal that should have been used forproductive investmentsto createnew jobs was used to finance the Gov ern ment's mas sive def i - cit- drivenborrowing.
In 1993, the Om ni bus Bud get Recon cilia tionActwassigned. Itsdeficit reductionplan wastocutthe deficitin half as a per cent age of the econ omy in 5 years. That goal was met in only 3 years.The1997Bal ancedBudgetAct proposedto eliminatethe Federaldefi cit by fis cal 2002. In fact, it reached its goal 4 years ahead of sched ule, producing the first budgetsurplus ($ 69billion) inagener ationin1998.
We can now look back with pride at our prog ress and ahead with con fi - dence as we con sider the suc cess of
our fiscaldis ciplineandthe opportunity to build upon it. To day we have lower in ter est rates, a higher level of investment and unprec edentedprosper ity. Our econ omy has added more than 20 mil lion new jobs. The un employ ment rate is the low est in 30 years; the wel fare rolls are down by more than 50 per cent since 1993; the core in fla tion rate is the low est in 35 years; and more Amer i cans own their homes than at any time in our his tory. Strong eco nomic growth and pas sage ofdef icitreduc tionprogramsplaced thebud getonitspath towardsurplus.
The fiscal dis ci pline we have demon strated, combined with a fast- growing econ omy and ris ing stockmar ket,contributed to another unifiedFed eralbudgetsur plusinfiscal 1999 of $124 bil lion. That was $55 bil lionabovethesur plusinfiscal 1998. The sur plus rel a tive toGDP amounted to 1.4 per cent in 1999, the highest suchratioin almost50years. Fed eral debt held by the pub lic was re duced by more than $85 bil lion in fis cal 1999 and by a to tal of al most $140 bil lion over the last 2 years.
These were the first re duc tions in pub licly held debt since 1969 and the larg estdebtreduc tionsinhistory.
Re ceipts in creased by about 6 percent in fis cal 1999 to $1,827 bil lion. This was slower growth than the 9 per cent in crease in fis cal 1998. The slow down mainly re flected a de cline in net cor po rate tax re ceipts, the first since 1990, due in part to weak ness in over seas econ o mies, which dampened profits of U. S. ex port ers. In di vid ual in come and pay roll tax re ceipts also grew more slowly in 1999 but still posted a siz able 6.5 per cent increase.
Growth of out lays was held to just over 3 per centinfiscal 1999,risingto $1,703 bil lion. The in crease was in line with the gain in 1998. Out lays in re la tion to GDP were the small est since 1974, dip ping to an 18.7 per cent share from 19.1 per cent in fis cal 1998.
Pushing out lays down was a drop of $13 bil lion in net in ter est pay ments, reflectingthe shrinkingsizeof the Fed eral debt and the re place ment of older debt with new debt at lower
in ter est rates. Medicare pay ments also fellmodestlyover thefiscalyear.
Spending in creased for most other major FederalGov ernmentfunctions, including defense(up2.4 percentafter a small de cline in 1998) and So cial Secu rity(upabout3 percent in fisc a l 1999). Thelargestper centagegainby faramongthe majorspending categories was for farm price sup ports, re flect ing largeoutlaysof theCommodity Credit Cor po ra tion in the wake of depressedag riculturalprices.
Accordingto the Fis cal Year 2001 Bud get, the to tal uni fied bud get surpluses are pro jected to in crease each year throughoutthefore casthorizon to 2010. The Ad min is tra tion is commit ted to us ing the bulk of the sur pluses to strengthen and mod ern ize theSo cialSecurity andMedicareprograms; in vest in key pri or i ties that will extendtheeco nomicexpansion, such as ed u ca tion; and pay down the pub licly held debt. Un der Ad min istra tion proposals,the current $3.6 tril lion of debt held by the pub lic is pro jected tobecompletely eliminatedon a net ba sis by 2013. -400
-300 -200
-100 0
100 200
300 400
7 5 78 8 1 84 87 90 93 96 99 02 05 08 (In b i ll ions of doll a rs)
Fiscal years
Today we have lower interest rates, a higher level of investment and
unprecedented prosperity. 
Fig ures for fis cal 2000- 2010 are pro jected. (Fis cal 2001 Bud get)
Unified Federal Budget Surpluses and Deficits
Actual Projected
DISCUSSION ANDANALYSIS 5
Continued Strong Economic Performance
Fiscal1999 wasoneofac celerating eco nomic growth. The ex pan - sion en tered its ninth year and
moved closer to a new re cord length. Real GDP grew by 4.3 per cent across the four quar ters of fis cal 1999,whichen compassesthefourth quar terofcalen dar1998throughthe third quar ter of cal en dar 1999. This was faster than growth over the pre vi ous fis cal year and higher than the average throughoutthe expansionary pe riod.
Growth was led by strong gains in produc tivity.After trendingupatan average annualrateof about1.5percent from 1974 to 1995, av er age increases inla borproductiv ityacceler ated by more than a full per cent age point to 2.7 per cent over the past 4 fis cal years. In 1999, produc tiv ity growth picked up even more, to 3.1 per cent over the four quar ters of the fis cal year. This is an unusu allyfavorable performanceat this stage of an ex pan sion when produc tiv ity growth typ i cally slows down from its ear lier pace. Partly, it reflectsthe capitaldeep eningthathas oc curred in re cent years due to rapid gains in busi ness in vest ment, and partly, it may re flect im prove ments inproduction derivingfrom information tech nol ogy. The faster rate of growth ofproductiv ityhasincreased overall eco nomic growth and standards of liv ing, al low ing the un employ ment rate to fall with out a buildup of inflationary pressures.
Growth in con sumerspendingand businessin vestmentincap italequipment and soft ware was very rapid in fiscal1999.Real consumerpurchases ac celeratedto more than 5 per cent over the year to post the fast est rate of increasein14 years.Higherspending wasfu eledbyrising employmentand in comes and higher net worths primar ily duetotheris ingstockmarket. Pri vateinvestment inequipmentand soft ware, which in creased at double- digit rates over the past 7 years, also accelerated infiscal 1999andrecorded its best year of the ex pan sion, ris ing by 14.5 percent. Falling prices for com put ers and other high- tech
goods duetoimprove mentsinquality andpro cessingcapac itycontributed to the rapid growth in real in vest ment. A widening foreigntradedef icitcontin uedto offsetstrength in other sectors of the econ omy in fis cal 1999, although the drag on real GDP di min ished over the year as ex ports picked up due to some firm ing in over seaseconomies.
Labormarkets remainedstrongin fis cal1999.Theun employmentrate drifted down from 4.5 per cent at the start of the year to 4.2 per cent by the end of fis cal 1999, and dipped even lower in the first quar ter of fis cal 2000. These read ings were the low est in al most three de cades. The share of theworking- agepopu lationwithjobs reached a re cord high, and long- term unemployment fell. The econ omy added 2.7 mil lion jobs in the fis cal year, just a bit less than an nual gains in the prior 2 fiscalyears.
The rate of in fla tion in creased in fis cal 1999 due to higher oil prices, butunder lyinginfla tionarypressures re mained in check even with strong
eco nomic growth and low un em ployment. Theaccel erationin productivity growth to more than 3 per cent helped to hold down costs. The Consumer Price In dex (CPI) rose by 2.6 per centoverthefis calyearcompared with only 1.4 per cent in fis cal 1998 when oilpricesfell.Ex cludingenergy and food, how ever, growth in con- sumer prices slowed to 2.1 per cent in
fis cal 1999 from 2.4 per cent in fis cal 1998.
The Federal R e serve r a i s e d short- term interestrates inthesecond half of the fis cal year and again in fiscal 2000. These ac tions more than reversed ear lier eas ing moves that had been un der taken in 1998 to deal with temporary financial turmoilbothhere and abroad. In rais ing rates, the Federal Re serve cited con cerns that contin ued faster growth in eco nomic demand than in po ten tial sup ply could f o s t e r i n f l a t i o n a r y i m b a l a n c e s . Long- term in ter est rates moved higher over the course of the fis cal year, damp en ing some what the very strong growth in hous ing. -1
0 1
2 3
4 5
90 91 92 93 94 95 96 97 98 99
Growth of Real GDP
Fisc al Ye ars
The expansion entered its ninth year and moved closer to a new
record length.
Per cent age change of the four quar ters of each fis cal year.
6 DIS CUS SION AND ANAL Y SIS
Improving Financial Management of the Federal Government
For the first 200 years of the U. S. Gov ern ment's ex is tence, it did not publish con sol i dated fi nan cial re ports other than on a bud get ary ba sis. Much
prog ress has been made in the area of fi nan cial man age ment over the 3 years since the ini tial au dited Con sol i
dated Fi nan cial Re port of the United States Gov ern ment. Agencies are pro - duc ing better re cords and better fi nan
cial state ments. The Year 2000 (Y2K) pro cess has re sulted in better sys tems, and the Joint Fi nan cial Man age
ment Im prove ment Pro gram ( JFMIP ) cer tif i ca tion pro cess has forced many ven dors to pro duce sys tems
that more di rectly meet Gov ern ment re quire ments. None the less, we have more to achieve.
His torically, ef fec tive man age ment of the U. S. Gov ern ment has been ham pered by a lack of re li able fi nan cial in for ma tion. To help im prove the in teg rity of fi nan cial in for ma tion, in 1990 the Of fice of Man age ment and Bud get (OMB), the De part ment of the Trea sury (Trea sury) and the Gen eral Ac count ing Of fice (GAO) es tab - lished the Fed eral Ac count ing Stan dards
Ad vi sory Board (FASAB) to de velop ac count ing stan dards for the U. S. Gov ern ment. The work of
F ASAB aug ments the ef forts of the JFMIP to strengthen over all Fed eral financial man age ment.
The stan dards de vel oped by the FASAB are now rec og nized by the Amer i can In sti tute of Cer tified Pub lic Ac coun tants (AICPA) as be ing gen er ally ac cepted ac count ing prin ci ples (GAAP) for the Fed eral Gov ern ment. This is a ma jor ac com plish ment. It will en hance the ac cept abil ity of our re ports and will add to the level of fi nan cial pro fes sion al ism through out the U. S. Gov ern ment.
Working to is sue agency fi nan cial re ports con sis tent with GAAP and to ob tain clean au dit opin ions, the Ad - min is tra tion is com mit ted to im prov  ing the re li abil ity of Fed eral fi nan cial
in for ma tion. Achieving an un qual i fied opin ion on the fi nan cial state ments of Fed eral agen cies and the U. S. Gov ern ment is a first step. Un qual i fied opin ions lead to the de vel op ment of better fi nan cial in for ma tion which, when pro vided to man age ment, will pro vide the ba sis for pro duc ing better de ci sions. Agencies and the Gov ern ment as a whole must con tinue to work to im ple ment sys tems that re port fi nan cial and pro gram in for ma tion quickly and re li ably, and then must use that in for ma tion in the stew ard ship of the Na tion's re sources.
The ac com pa ny ing Fi nan cial Re port is re quired by 31 U. S. C. 331( e)( 1) and con sists of the Man - age ment's Dis cus sion and Anal y sis
(MD& A), State ment of Op er a tions and Changes in Net Po si tion, State - ment of Net Cost, Bal ance Sheet,
Stew ard ship In for ma tion, Notes to the Fi nan cial State ments and Sup ple men tal In for ma tion. Each sec tion is pre ceded by a de scrip tion of its con - tents.
Basis of Accounting and Reporting Entity
The ac com pa ny ing fi nan cial state ments gen er ally were pre pared based on GAAP stan dards de vel oped
by FASAB. The re cent rec og ni tion of Fed eral ac count ing stan dards by the AICPA as GAAP en hances their ac cept abil ity. These stan dards form the foun da tion for pre par ing con sis tent
and mean ing ful fi nan cial state ments both for in di vid ual Fed eral agen cies and the Gov ern ment as a whole.
GAAP for the Fed eral Gov ern ment is tai lored to the U. S. Gov ern ment's unique char ac ter is tics and spe cial needs. For ex am ple, land not used in U. S. Gov ern ment op er a tions (stew ard ship land), weapon sys tems and sup port prop erty used in the per for mance of mil i tary mis sions, and ves sels held as part of the Na tional De fense Re serve Fleet (na tional de  fense as sets) are re ported in the
Stew ard ship In for ma tion sec tion rather than val ued on the Bal ance Sheet. The Gov ern ment's re spon si bil i ties and pol icy com mit ments are much broader than the re ported Bal ance Sheet li a bil i ties. They in clude the so cial in sur ance pro grams dis - closed in the Stew ard ship In for ma tion
sec tion, as well as a wide range
Accounting Standards
Much progress has been made
in the area of financial management . . . 
The recent recognition of Federal accounting standards by the AICPA as GAAP enhances their acceptability...
DIS CUS SION AND ANAL Y SIS 7
The fi nan cial state ments cover the ex ec u tive branch, as well as parts of the leg is la tive and ju di cial branches of the U. S. Gov ern ment. A list of the sig nif i cant en ti ties in cluded in these fi nan cial state ments is in the Ap pen dix. In for ma tion from the leg is la tive and ju di cial branches is lim ited be cause those en ti ties are not re quired by law to sub mit com pre hen sive fi nan cial state ment in for ma tion to Trea sury. Due to its in de pend ence, the Fed eral Re serve Sys tem is ex cluded. In ad di tion, Gov ern ment- sponsored but pri vately owned en ter prises (such as Fed eral Home Loan Banks and the Fed - eral Na tional Mort gage As so ci a tion) are ex cluded.
Coverage
of other pro grams un der which the Gov ern ment pro vides ben e fits and ser vices to the peo ple of this Nation.
Stan dards that were implemented in fis cal 1999 at the Governmentwide level re quire re port ing of an nual Fed eral ex penses for stew ard ship in vest ments. These also are ex am ples of stan dards tai lored to the spe cial char  ac ter is tics of the U. S. Gov ern ment.
Such in vest ments in clude:  Non- Federal phys i cal prop erty; the Fed eral in vest ment in prop er ties owned by State and lo cal gov ern ments (e. g., high ways and air ports).
 Hu man cap i tal; in vest ments in ed u ca tion and train ing pro grams fi nanced by the U. S. Gov ern ment for the ben e fit of the pub lic.
 Re search and de vel op ment; the U. S. Gov ern ment's in vest  ments in ba sic and ap plied
re search and de vel op ment. The an nual ex pense re lated to these in vest ments in cluded in the State - ment of Net Cost is sep a rately re ported
in the Stew ard ship In for ma - tion sec tion. A new ac count ing stan dard, which be came ef fec tive for fis cal 1999, re quires that de ferred main te nance be pre sented as re quired sup ple men tary in for ma tion. Re porting de ferred main te nance high lights the re al ity that it is an ex pected cost, which has not been paid.
The ex cess of rev e nue over net cost fig ure (ac crual ba sis) con tained in these fi nan cial state ments for fis cal 1999 is $76.9 bil lion. In fis cal
1999, there was a uni fied bud get sur plus (pri mar ily on the cash ba sis) of $124.4 bil lion. The pri mary com po nents of the dif fer ence that have been iden ti fied are prin ci pal pay ments of pre- credit re form loans, $32.4 bil lion; de creases in the li a bil ity for vet eran com pen sa tion and burial ben e fits, $94.9 bil lion; de creases in the li a bil ity for mil i tary em ployee ben e fits, $31.1 bil lion; in creases in
the li a bil ity for ci vil ian em ployee ben e fits, $41.6 bil lion; in creases in en vi ron men tal li a bil i ties, $88.7 bil lion; and, in creases in cap i tal ized fixed as sets, $41.5 bil lion. For more in for ma tion on the de tailed rec on cil i a tion, see the Rec on cil i a tion of the Ex cess of Rev e nue Over Net Cost to the Unified Bud get Sur plus in the Sup ple men tal In for ma tion sec tion.
Financial Results
These fi nan cial state ments of the U. S. Gov ern ment are pre pared based on GAAP that re quires us ing the ac crual ba sis of ac count ing. Un der the ac crual ba sis, trans ac tions are re ported when the events giv ing rise to the trans ac tions oc cur, rather
than when cash is re ceived or paid (cash ba sis). In con trast, Fed eral bud get ary re port ing is gen er ally on the cash ba sis in ac cor dance with ac cepted bud get con cepts.
The most sig nif i cant dif fer ence be tween these two bases in volves the tim ing of rec og ni tion and mea sure ment of rev e nues and costs. For ex am ple, GAAP re quires rec og ni tion of
li a bil i ties for costs re lated to en vi ron men tal cleanup when the events re quir ing such costs oc cur. By con trast, cur rent bud get con cepts rec og nize such costs later, at the time pay ment is made. The ef fects of these dif - fer ences are re flected in the
Rec on cil i a tion of the Ex cess of Rev e nue Over Net Cost to the Unified Bud get Sur plus, in the Sup ple men tal In for ma tion sec tion of this Fi nan cial Re port.
Accrual Ba sis Ac count ing
Standards, cont.
8 DIS CUS SION AND ANAL Y SIS
Revenue and Expense Summary Rev e nue
Non- exchange rev e nue is an in flow of re sources to the Gov ern ment that the Gov ern ment de mands or re ceives by do na tions. The in flows that it de mands in clude taxes, du ties, fines and pen al ties. Non- exchange rev e nue is the U. S. Gov ern ment's pri mary source of rev e nue and to taled $1,822.4 bil lion in 1999. More than 95 per cent of this to tal came from tax re ceipts, with the re main der com ing from cus toms du ties and other mis cel la neous re ceipts.
Earned rev e nues are in flows of re sources that arise from ex change trans ac tions; for ex am ple, when the U. S. Gov ern ment sells goods or ser vices to the pub lic. Dur ing 1999, the U. S. Gov ern ment earned $192.6 bil lion in ex change rev e nue. Of these rev e nues, $182.1 bil lion is off set against the gross cost of the re lated func tions to ar rive at the func tion's net cost. The U. S. Gov ern ment also earned $10.5 bil lion that was not off set against the cost of any func tion (e. g., roy al ties on the Outer Con ti nen - tal Shelf lands).
0.9% 1.3%
1.4% 2.1%
3.5% 72.3% 9.6%
9.0%
Corporate income tax Excise tax Individual income tax and tax withholdings
Unemployment tax Miscellaneous
Estate and gift tax Customs duties Exchange revenue
72.3% 0.9% 1.3%
1.4% 2.1% 3.5%
9.0% 9.6%
Components of Revenue by Major Source
De tail may not add to to tals due to round ing.
Expenses by Function
The net cost of U. S. Gov ern ment op er a tions was $1,756.0 bil lion for 1999. Net cost rep re sents the gross cost of op er a tions less at trib ut able earned rev e nues. The State ment of Net Cost re flects the cost in curred to carry out the na tional pri or i ties iden ti fied by the Pres i dent and the Con gress. The func t i o n s and subfunctions used to ac cu mu late costs as so ci ated with the na tional pri or i ties are iden ti fied in the Pres i dent's bud get and de scribed in de tail in the Sup ple men tal In for ma - t i o n s e c t i o n o f t h i s F i n a n c i a l
Re port. The ac com pa ny ing chart pres ents the per cent age of the net cost of U. S. Gov ern ment op er a tions rep re sented by each of the U. S. Gov ern ment's ma jor func tions.
51.6% 23.5% 13.1%
6.4% 5.4%
National defense 23.5% Interest 13.1% Human resources 51.6%
Physical resources Other functions
5.4% 6.4%
De tail may not add to to tals due to round ing.
Net Cost by Major Function
DIS CUS SION AND ANAL Y SIS 9
37.6% 2.4% 4.5%
0.5% 1.1% 1.2% 52.6%
Other liabilities Environmental and disposal liabilities
Accounts payable Federal employee and veterans benefits
Benefits due and payable Loan guarantee liabilities Federal debt held by the public
1.1% 2.4%
4.5% 1.2% 37.6%
0.5% 52.6%
Major Categories of Liabilities
De tail may not add to to tals due to round ing.
Asset and Liability Summary Assets
The as sets of the U. S. Gov ern ment are the re sources avail able to pay li a bil i ties or to sat isfy fu ture ser vice needs. The ac com pa ny ing chart de picts the ma jor cat e go ries of re ported as sets as of Sep tem ber 30, 1999, as a per cent age of re ported to tal as sets. De tailed in for ma tion about the com po nents of these as set cat e go ries can be found in the Notes to the Fi nan cial State ments.
The as sets pre sented on the Bal ance Sheet are not a com pre hen sive list of Fed eral re sources. For ex am ple, the U. S. Gov ern ment's most im por tant fi nan cial re source, its abil ity to tax and reg u late com merce, can not be quan ti - fied and is not re flected. Nat u ral re sources,
stew ard ship land (na tional parks, for ests and graz ing lands), na - tional de fense as sets and her i tage as sets
are other ex am ples of re sources that are not in cluded in the $883.0 bil lion of Fed eral as sets re ported on the Bal ance Sheet at the end of fis cal 1999. As can be seen, sig nif i cant as sets of the Fed eral Gov ern ment are not re flected on the Bal ance Sheet.
33.8% 4.0% 13.0%
6.1% 20.8%
19.6%
Loans receivable Inventories and related property Cash and other monetary assets Property, plant and equipment
Accounts receivable Taxes receivable 19.6%
20.8% 13.0% 33.8%
2.6% 6.1% Other
4.0%
2.6% Major Categories
of Assets
De tail may not add to to tals due to round ing.
Liabilities
At the end of fis cal 1999, the U. S. Gov ern ment re ported li a bil i ties of $6,909.2 bil lion. These li a bil i ties are prob a ble and mea sur able fu ture out flows of re sources aris ing out of past trans ac tions or events. The larg est c o m p o n e n t o f t h e s e l i a b i l i t i e s ($ 3,631.6 bil lion) is rep re sented by Fed eral debt se cu ri ties held by the pub lic. The next larg est com po nent ($ 2,600.7 bil lion) re lates to pen sion, dis abil ity and health care costs for Fed eral ci vil ian and mil i tary em ploy ees as well as for vet er ans. In cluded in this com po nent is a De part ment of Vet eran Af fairs pro gram whereby vet er ans or their de pend ents re ceive com pen sa tion ben e fits if the vet eran was dis abled or died from mil i tary ser vice- connected causes. Changes in the as sump tions for this ac tu ar ial li a bil ity re sulted in a li a bil ity de crease of $94.9 bil lion. An other li a bil ity, which will likely re quire sub stan tial fu ture bud get ary
10 DIS CUS SION AND ANAL Y SIS
re sources to liq ui date, is re lated to en v i r o n m e n t a l cleanup costs as so ci ated with en vi ron men tal dam age/ con tam i na tion. As of Sep tem ber 30, 1999, the cost of clean ing up en vi ron men tal dam age/ con tam i na tion across Gov ern ment pro grams was es ti mated to be $313.2 bil lion, an in crease of $88.7 bil lion from 1998.
The ac com pa ny ing chart pres ents the per cent age of to tal Fed eral li a bil i ties rep re sented by each of the cat e go ries of li a bil i ties re ported on the Bal ance Sheet. Ad di tional de tails about the U. S. Gov ern ment's re ported li a bil i ties can be found in the Notes to the Fi nan cial State ments.
The lon ger term eco nomic and bud get out look is fa vor able even more so than only a few years ago. With pru dent fis cal pol icy, the bud get could re main in sur plus for many de cades. The Ad min is tra tion pro jects bud get sur pluses in 2000 and through out the cus tom ary 10- year bud get win dow. How ever, such pro jec tions are in her ently un cer tain, be cause, while pru dent fis cal pol icy can safe guard our hard- earned pros per ity, so too can reck less choices
dis si pate the ben e fits of the bud get dis ci pline that is re spon si ble for our on go ing suc cess.
There are fore see able chal lenges that will threaten bud get ary sta bil ity in the 21 st cen tury. In less than 10
years, the baby- boomers the large gen er a tion born be tween 1946 and 1964 will be come el i gi ble for early re tire ment un der So cial Se cu rity. In the space of two de cades, the el derly's share of the U. S. pop u la tion will jump from around 13 per  c e n t t o 2 1 p e r c e n t . T h i s d e m o graphic
bulge will put pres sure on the Fed e r a l bud g e t through Medicare and So cial Se cu rity. Fis cal dis ci pline pay ing down the debt and re duc ing or elim i nat ing in ter est pay ments im proves the long- run bud get bal ance. Ad di tional re forms such as the Ad min is tra tion pro pos als de scribed be low, will be needed to strengthen So cial Se cu rity and Medicare. Ad di tional in for ma tion on re ceipt and out lay es ti mates can be found in the Cur rent Ser vices As sess ment in the Stew ard ship In for ma tion sec tion of this Fi nan cial Re port.
Long- term Bud getary Out look
Two trust funds have been es tab lished to fi nance the Medicare pro gram. The Medicare Part A Hos pi tal In sur ance Trust Fund is fi nanced by a 2.9 per cent tax on wages and sal a ries re quired to be paid equally by em ploy ees and em ploy ers. The Medicare Part B Sup ple men tary Med i cal In sur ance Trust Fund re ceives pre mium pay ments on be half of Medicare ben e fi cia ries who have elected cov er age. The Bal anced Bud get Act of 1997 pro vides that the Medicare Part B pre mium is set at a level that will cover 25 per cent of pro gram costs. The re main der of the pro gram cost is funded by con gres sio nal ap pro pri a tions.
The 1999 Trustees' An nual Re port pro jects that the Medicare Part A Trust Fund's as sets will be de pleted by 2015 us ing in ter me di ate or best es ti mate as sump tions. The Ad min is tra tion has pro posed changes that will ex tend that date by at least a de cade to at least 2025. Ad di tional in for ma tion about the Medicare pro gram can be found in the Stew ard ship In for ma tion sec tion of this Fi nan cial Re port. At the time this re port was pre pared, the 2000 Trustees' An nual re port was sched uled to be re leased on March 30, 2000. It's re vised es ti mates will dif fer from those re ported the pre vi ous year, which have been in cluded in this Fi nan cial Re port.
Fi nan cial Con di tion of the Medicare Trust Funds Fi nan cial Con di tion of the So cial Se curity Trust Funds
Two trust funds have been es tab lished by law to fi nance the So cial Se cu rity pro gram (OASDI): Fed eral Old- Age and Sur vi vors In sur ance (OASI) and Fed eral Dis abil ity In sur ance (DI). OASI pays re tire ment and sur vi vors ben e fits and DI pays ben e fits af ter a worker be comes dis abled. OASDI rev e nues con sist pri mar ily
of taxes on earn ings that are paid by em ploy ees, their em ploy ers and the self- employed. OASDI also re ceives rev e nue from tax a tion of some So cial Se cu rity ben e fits. Rev e nues that are not needed to pay cur rent ben e fits or ad min is tra tive ex penses are in vested in Trea sury se cu ri ties to earn in ter est for the trust funds. The
Board of Trustees of the OASI and DI Trust Funds pro vides the Pres i dent and the Con g r e s s w i t h short- range (10 years) and long- range (75 years) ac tu ar ial es ti mates of each trust fund. Be cause of the in her ent un cer tainty in es ti mates for as long as 75 years into the fu ture, the So cial Se cu rity Trustees
DIS CUS SION AND ANAL Y SIS 11
use three al ter na tive sets of eco - nomic and de mo graphic as sump tions to show a range of pos si bil i ties. Most an a lysts use the Trustees' in ter me di - ate or best es ti mate set of as sump tions
to eval u ate the fi nan cial con di tion of the So cial Se cu rity pro gram.
Un der cur rent leg is la tion and us ing i n t e r m e d i a t e a s sump tions, the Trustees es ti mated in their 1999 re port, re leased on March 30, 1999, that by 2014 cash dis burse ments for the pro grams will ex ceed cash re ceipts and by 2034 the com bined trust fund as sets, pri mar ily in vest ments in Trea - sury se cu ri ties, will be ex hausted.
With no change in the pro gram, in 2014 the trust funds are ex pected to be gin us ing in ter est on their in vest ments to cover the cash short fall and to pay ben e fits. Starting in 2022, they
would be gin re deem ing their in vest ments in Trea sury se cu ri ties to pro vide the needed fund ing. In 2034, trust fund as sets would be ex hausted; at that time, ded i cated tax rev e nues would be suf fi cient to pay only ap prox i mately 71 per cent of the ben e fits due. At the time this re port was pre pared, the Trustees' An nual Re port was sched uled to be re leased on
March 30, 2000. Its re vised es ti mates will dif fer from those re ported the pre vi ous year, which have been in cluded in this Fi nan cial Re port.
The Ad min is tra tion has pro posed plans that would ex tend the life of the trust funds to at least 2050, and in tends to work with Con gress on a bi par ti san ba sis to en act long- term So - cial Se cu rity sol vency and re form.
Acting sooner rather than later to ad dress the long- term fi nanc ing needs of the pro gram will make the re quired changes less se vere and dis - rup tive and en sure that So cial Se cu - rity works as well for fu t u r e
gen er a tions as it has for past gen er a - tions. Ad di tional in for ma tion about the So cial Se cu rity pro gram can be found in the Stew ard ship In for ma tion sec tion of this Fi nan cial Re port.
Im proving Gov ern ment Man agement Over all
In ad di tion to im prov ing fi nan cial man age ment, the Fed eral Gov ern - ment has in re cent years de voted
sub stan tial ef forts to im prov ing other ar eas of man age ment. These ef forts are es tab lished and re ported an nu ally by OMB as Pri or ity Man - age ment Ob jec tives (PMOs). Co or di
nated, sus tained and in ten sive man age ment ini tia tives have been de signed to ad dress the is sues in the ac com pa ny ing text.
Real prog ress has been made to im prove pro gram im ple men ta tion and ex e cu tion through out the Gov ern ment, on both a Governmentwide and agency- specific ba sis. For ex am ple:
Man aging the Year 2000 (Y2K) com puter prob lem . The Ad min is tra tion's first and fore most man age ment ob jec tive was to re solve the Y2K com puter prob lem. Y2K posed the sin gle larg est tech nol ogy man age ment chal lenge in his tory. The Fed eral Gov ern ment's tran si tion through the date change was, be yond all ex pec ta tions, re mark ably trou ble free.
Mod ern izing stu dent aid de liv ery.
Sig nif i cant prog ress was made mod ern iz ing stu dent aid ben e fit de liv ery
by ex pand ing elec tronic ac cess to ben e fits and ser vices and re form ing con tract ing, sys tems de vel op ment, and pro gram over sight prac tices. The new per for mance- based or ga ni za tion, cre ated in 1998, hired a chief op er at ing of fi cer, as sessed cus tomer needs, de vel oped a sys tems mod ern iza tion blue print, is sued a 5- year per for mance plan and re or ga nized the staff into three ser vice- oriented chan nels for stu dents, schools and fi nan cial in sti tu tions.
Reengineering the nat u ral iza tion pro cess and re duc ing the cit i zen ship ap pli ca tion back log. The De part ment of Jus tice's Im mi gra tion and Nat u ral iza tion Ser vice (INS) re de signed its nat u ral iza tion pro cess to stream line and au to mate op er a tions, and si mul ta neously re duced a back log of more than 1.8 mil lion ap pli ca tions for cit i zen ship. In 1999, INS re  duced the back log by more than
500,000 ap pli ca tions, and the av er age pro cess ing time be tween ap pli ca tion and nat u ral iza tion of qual i fied can di dates has been re duced from 27 months in 1998 to 12 months in 1999. INS ex pects per for mance to im prove fur ther.
Im proving man age ment of the de cen nial cen sus. The Bu reau of the Cen sus in the De part ment of Com merce en sured that the nec es sary sup port struc ture which in cludes open ing data cap ture cen ters, re gional cen sus of fices and lo cal cen sus of fices; print ing forms; es tab lish ing a tele phone ques tion naire as sis tance pro gram; print ing lan guage as sis tance guides; and re cruit ing and train ing tem po rary cen sus work ers was es tab lished and tested and ready for op er a tion.
Co or di nated, sus tained and in tensive man age ment ini tiatives have been de signed
to address the issues . . .  The Ad min is tra tion
has pro posed plans that would ex tend the life of the trust funds
to at least 2050 . . .
12 DIS CUS SION AND ANAL Y SIS
Strengthening Governmentwide Man age ment
1. Use per for mance in for ma tion to im prove pro gram man age ment and make better bud get de ci sions.
2. Improve fi nan cial man age ment in formation. 3. Use cap i tal plan ning and in vest ment con trol to better man age in for ma tion tech nol ogy.
4. Pro vide for com puter se cu rity and pro tect crit i cal in for ma tion in fra struc ture.
5. Strengthen sta tis ti cal pro grams. 6. Im ple ment ac qui si tion re forms. 7. Im ple ment elec tronic Gov ern ment ini tia tives. 8. Better man age Fed eral fi nan cial port fo lios. 9. Align Fed eral hu man re sources to sup port agency goals. 10. Ver ify that the right per son is get ting the right ben e fit. 11. Stream line and sim plify Fed eral grant man age ment. 12. Cap i tal ize on Fed eral en ergy ef fi ciency.
Improving Pro gram Im ple men ta tion
13. Mod ern ize stu dent aid de liv ery. 14. Improve the De part ment of En ergy's (DOE's) pro gram and con tract man age ment.
15. Strengthen the Health Care Fi nancing Ad min is tra tion's (HCFA's) man age ment ca pac ity.
16. Im ple ment Housing and Hu man De vel op ment (HUD) re form. 17. Re form man age ment of In dian Trust Funds. 18. Im ple ment Fed eral Avi a tion Ad min is tra tion (FAA)
man age ment re forms. 19. Im ple ment In ter nal Rev e nue Ser vice (IRS) re forms. 20. Stream line the So cial Se cu rity Ad min is tra tion's (SSA's)
dis abil ity claims pro cess. 21. Rev o lu tion ize De part ment of De fense (DOD) busi ness af fairs. 22. Man age risks in build ing the In ter na tional Space Sta tion. 23. Improve se cu rity at dip lo matic fa cil i ties around the world. 24. Reengineer the nat u ral iza tion pro cess and re duce the cit i zen ship ap pli ca tion back log.
Systems, Controls and Le gal Compliance
The Fed eral Gov ern ment faces daunt ing prob lems in mod ern iz ing its fi nan cial man - age ment sys tems. Changing
tech nol ogy, as well as chang ing in for ma tion needs, are oc - cur ring so rap idly that tech nol - ogy ad vances i n t o day's
sys tems be come ob so lete with iden ti fi ca tion of new data and sys tems re quire ments. The cor ner stone of sound fi nan cial man age ment, as well as performance mea sure ment, is ac cu rate, timely and use ful in - for ma tion. Many Fed eral fi nan
cial sys tems are sim ply un able to pro vide the data needed to man age pro grams and make good de ci sions. The Government needs to up grade and re place many of its fi nan cial man age ment sys tems.
The Fed eral Fi nan cial Man age ment Im prove ment Act (FFMIA) pointed out that the development of fi nan cial man age ment sys tems that sup port GAAP will im prove Fed eral fi nan cial man age ment. Im prove ment in fi nan cial sys tems de pends upon: (1) an en vi ron ment in which fi nan cial man age ment sys tems can be suc cess fully planned, de vel oped, op er ated and main tained; (2) Governmentwide sys tems re quire ments that sup port in for ma tion stan dards; and (3) the avail abil ity of sys tems that meet the Gov ernmentwide sys tems re quire ments ar tic u lated in FFMIA. FFMIA sup ports and com ple ments the Chief Fi nan cial Of fi cers (CFO) Act, the Gov ern ment Per f o r m a n c e a n d Re sults Act, and the Gov ern ment Man age ment Re form Act. It es tab lishes in stat ute cer tain fi nan cial man age ment sys tem re quire ments that are
Priority Man agement Objectives
DIS CUS SION AND ANAL Y SIS 13
al ready es tab lished by the ex ec u tive branch. Spe cifically, Fed eral sys tems must com ply with Fed eral Fi nan cial Man age ment Sys tems re quire ments, Fed eral Ac count ing Stan dards and the Stan dard Gen eral Led ger, at the trans ac tion level.
The CFO Coun cil, OMB, Trea sury, the Joint Fi nan cial Man age ment Im prove ment Pro gram (JFMIP) and Fed eral agen cies are all work ing to im ple ment crit i cal im prove ments to Fed eral fi nan cial man age ment sys tems in six ar eas: (1) plan ning and in vest ment; (2) Governmentwide and agency fi nan  cial man age ment sys tems in fra struc
tures; (3) com pre hen sive data re quire ments; (4) com pre hen sive func tional re quire ments; (5) in dus try part ner ships; and (6) sys tems de ploy ment.
This past year, JFMIP im ple mented a pro gram of com pre hen sive test ing of ven dor core sys tems t o d e t e r m i n e c o m p l i a n c e w i t h JFMIP stan dards. Nine sys tems in volv ing seven ven dors have passed the rig or ous tests. Only those sys tems cer ti fied by JFMIP as com pli ant may be pur chased by pro gram agen cies as of Oc to ber 1, 1999.
Nu mer ous strong in ter nal con trols ex ist over Fed eral as sets. These con trols in clude the ex is tence of a stat u tory bud get and cen tral ized cash man age ment, debt and dis burse ment func tions. In ad di tion, Trea sury's Fi nan cial Man age ment Ser vice (FMS) pub lishes the Monthly Trea sury State ment of Re ceipts and Out lays of the United States Gov ern ment (MTS), a sum mary state ment pre pared from
agency ac count ing re ports. The MTS pres ents the re ceipts, out lays, re sult ing bud get sur plus or def i cit,
and Fed eral debt for the month and the fis cal year- to- date and com pares those fig ures to the same pe riod in the pre vi ous year.
Fi nan cial Man age ment Chal lenges
GAO has re ported that se ri ous fi nan cial man age ment im prove ment chal lenges face the U. S. Gov ern ment. The cen tral chal lenge to pro duc ing re li able, use ful and timely data through out the year and at yearend is over haul ing fi nan cial and re lated man age ment in for ma tion sys tems. Agencies also must ad dress prob lems with fun da men tal recordkeeping, in com plete doc u men ta tion and weak in ter nal con trols be fore their sys tems can pro duce re li able in for ma tion on an on go ing ba sis.
Au dits of agency fi nan cial state ments dis close de fi cien cies that im pede com pli ance with GAAP and, ac cord ingly, im proved f i nan cial man age ment. As a re sult, de spite prog ress over the past year, GAO again was un able to ren der an opin ion on the re l i a b i l i t y of the Governmentwide fi nan cial state ments. The fol low ing ex hibit il lus trates agency prog ress to ward un qual i fied au dit opin ions on their fi nan cial state ments. (Au dits for all of the 24 ma jor agen cies were not re quired un til fis cal 1996.)
In 1996, only six agen cies were able to ob tain clean opin ions. In 1999, 13 (and ul ti mately per haps as many as 15) agen cies re ceived clean opin ions
and 4 oth ers re ceived qual i fied opin ions. This leaves only five agen cies with dis claimed opin ions, a con di tion where the au di tors are un able to ren - der an opin ion, gen er ally be cause of
de fi cien cies in the ac count ing re cords. How ever, in a few cases, agen cies could not pre pare their fi nan cial state ments in time for the au dits to be com pleted within the March 1 timeframe. A to tal of seven agen cies made some im prove ment in their au dit opin ions and four more than last year sub mit ted their state ments by the due date. While ef forts have been sub stan tial and there has been real prog ress, the task is ex tremely large and has been ham pered by Y2K work
re ceiv ing the bulk of sys tems re sources in 1999. Ad di tional prog ress is ex pected in 2000.
While prog ress has been made, re cent au dits dis closed that ma jor agen cies con tinue to have se ri ous short com ings in fi nan cial man age ment re port ing and sys tems that pre clude their fi nan cial re ports from be ing au dited and re ceiv ing un qual i fied opin ions. These agen cies must sat is fac to rily ad dress these prob lems in or der to re ceive an un qual i fied opin ion on their fi nan cial state ments and for the U. S. Gov ern ment to re ceive an un qual i fied opin ion on its fi nan cial state ments.
With re spect to intragovernmental trans ac tions, the chal lenge per tains to iden ti fy ing and elim i nat ing trans ac tions be tween agen cies. The au dits of the U. S. Gov ern ment's fi nan cial state ments for fis cal 1997 through 1999 dis closed that agen cies could not ef fec tively iden tify trans ac tions with other agen cies so they could be elim i nated for Governmentwide re port ing. If these trans ac tions are not prop erly elim i nated, to tal U. S. Gov ern ment as sets, li a bil i ties, rev e nues and ex penses will be mis stated by the amount of these trans ac tions.
While ef forts have been substantial and there has been
real prog ress, the task is ex tremely
large . . . Controls and Com pliance, cont.
14 DIS CUS SION AND ANAL Y SIS
CFO Act Agency Audit Opinions on Financial Statements
Agency 1996 1997 1998 1999
USDA Com merce DOD Education DOE HHS HUD DOI ? DOJ DOL State ? DOT Treasury VA AID EPA FEMA GSA NASA NRC NSF OPM SBA SSA To tal un qual i fied 6 11 12 13
Un qual i fied opin ions
Qual ified opin ions
Opin ion dis claim ers ? Agencies that have
not yet filed. Dur ing fis cal 1999, Trea sury con tin
ued to fo c u s o n r e s o l v i n g intragovernmental trans ac tion is sues. For fi du ciary bal ances to tal ing over $2 tril lion in volv ing the Bu reau of the Pub lic Debt and the Fed eral Fi nancing Bank, vir tu ally all of the ac count ing dif fer ences have been ex plained so that these trans ac tions can be elim i nated. Prog ress also has been made re gard ing intragovernmen tal buy ing and sell ing trans ac tions by us ing a re vised elim i na tion meth od ol ogy, but work re mains to be done in this area.
Trea sury con tin ues to as sist agen cies in rec on cil ing their fund bal ance amount with the amount re ported by Trea sury. Dur ing this past year, Trea sury is sued pol icy state ments and guide lines for ac com plish ing the rec on cil i a tion. Rec on cil i a tion is an on go ing ac count ing func tion, and agen cies have made sig nif i cant strides to in sti tu tion al ize the pro cess.
Additional Information
Ad di tional de tails about the in for ma tion con tained in these fi nan cial state ments can be found in the fi nan cial state ments of the in di vid ual agen cies listed in the Ap pen dix. In ad di tion, re lated U. S. Gov ern ment pub li ca tions such as the Bud get of the United States Gov ern ment, the Trea sury Bul le tin, the Monthly Trea sury State ment of Re ceipts and Out lays of the United States Gov ern ment, the Monthly State ment of the Pub lic Debt of the United States, and the Trustee's re ports for the So cial Se cu rity and Medicare pro grams may be of in ter est.
Challenges, cont.
GENERAL ACCOUNTING OFFICE REPORT 15 B- 285019 March 28, 2000 The President The President of the Senate The Speaker of the House of Representatives
Implementation of important legislative reforms remains underway to promote greater accountability in managing the finances of our national government. These reforms include requirements for annual audited financial statements for 24 major departments and agencies as well as preparation of the financial statements of the U. S. government, which GAO is required to audit. The report on our audit of these financial statements for fiscal year 1999 is enclosed.
These financial reporting requirements are prompting steady improvements in federal financial accountability, and there has been progress toward meeting the related legislative objectives. The President has designated financial management improvement as a priority management objective and efforts are underway across government to address the pervasive, generally long- standing financial management problems discussed in our accompanying report. Thus far, 13 of 24 major agencies have received unqualified opinions on their fiscal year 1999 financial statements and others have resolved certain previously reported financial statement deficiencies. For example, the Department of Energy resolved its previously reported deficiency related to its environmental and disposal liability associated with nuclear weapons. Also, in October 1999, the American Institute of Certified Public Accountants recognized federal accounting standards as a generally accepted basis of accounting, which represents a major milestone for the federal government.
At the same time, several major departments are not yet able to produce auditable financial statements on a consistent basis. There are several major obstacles to overcome, both at the agency level and in preparing reliable financial statements for the U. S. government. The deficiencies discussed in our accompanying report prevented us from being able to form an opinion on the reliability of the accompanying fiscal year 1999 financial statements, as was the case in our fiscal years 1998 and 1997 audits. These deficiencies continue to significantly impair the federal government's ability to
GENERAL ACCOUNTING OFFICE REPORT 16 B- 285019 adequately safeguard certain significant assets, properly record various transactions, and comply with selected provisions of laws and regulations related to financial reporting. Additionally, (1) the government is unable to determine the full extent of improper payments estimated to total billions of dollars annually and therefore cannot develop effective strategies to reduce them, (2) serious, long- standing computer security weaknesses expose the government's financial and other sensitive information to inappropriate disclosure, destruction, modification, and fraud, and critical operations to disruption, and (3) material control weaknesses affect the government's tax collection activities.
The executive branch recognizes that, because of the extent and severity of the financial management deficiencies, addressing them will require concerted improvement efforts across government. With a concerted effort, the federal government, as a whole, can continue to make progress toward achieving accountability and generating reliable financial and management information on a timely basis and in an ongoing manner. Annual financial audits represent an important means to assure continued progress in connection with improving federal financial management.
While obtaining unqualified clean audit opinions on federal financial statements is an important objective, it is not an end in and of itself. The key is to take steps to continuously improve internal control and underlying financial and management information systems as a means to assure accountability, increase the economy, improve the efficiency, and enhance the effectiveness of government. These systems must generate timely, accurate, and useful information on an ongoing basis, not just as of the end of the fiscal year. Unfortunately, for fiscal year 1999, the financial management systems of almost all agencies were again found not to be in substantial compliance with the requirements of the Federal Financial Management Improvement Act of 1996. In addition, while some attention to delineating core competencies and training has occurred, a great deal more needs to be done to improve financial management human capital.
Reliable financial information is essential for analyzing the government's financial condition and helping inform budget deliberations by providing additional information beyond that provided in the budget. The budget of the federal government is primarily formulated on a cash basis, which also is generally the basis for calculating the annual budget surplus or deficit. The financial statements are prepared generally on the accrual basis of accounting. The most significant difference between the budget and accrual basis of accounting is the timing of recognition and measurement of revenues and costs.
GENERAL ACCOUNTING OFFICE REPORT 17 B- 285019 Accrual information can be used with budgetary information to provide a valuable perspective on the costs of agency programs and the government's assets and long- term commitments. This is especially important given current demographic trends and the fiscal challenges that will result.
Last year we discussed the Year 2000 challenge in our report. The federal government has met the date change challenge. The leadership exhibited by the legislative and executive branches and the partnerships formed by a myriad of public, private, and international organizations were critical factors behind this success.
The accompanying Financial Report and our report include certain information concerning the Social Security and Medicare (Part A) trust funds, such as projected contributions and expenditures, dates when expenditures are expected to exceed contributions, and dates when such funds are expected to be exhausted. Such information is as of January 1, 1999 for Social Security and as of September 30, 1999 for Medicare (Part A), the most recent information publicly reported by the government. The government plans to issue, on March 30, 2000, updated information as of January 1, 2000. The government's issuance of dated information in this Financial Report at about the same time that it issues more current information may cause confusion to the Congress and the public. Steps should be taken, in future years, to ensure that the government's Financial Report contains up- to- date information as of no earlier than the end of the most recent fiscal year. Because current information on the solvency of the Social Security and Medicare programs is critical to assessing the financial condition of the federal government, aiding in budget deliberations, and fostering public debate, we will include the updated information on these two important federal programs in a report that will also contain the Fiscal Year 1999 Financial Report of the United States Government.
We appreciate the cooperation and assistance we received from the Chief Financial Officers and Inspectors General throughout government, as well as Department of the Treasury and Office of Management and Budget officials, in carrying out our responsibility to audit the government's financial statements. We look forward to continuing to work with these officials and the Congress to achieve the goals and objectives associated with financial management reform.
GENERAL ACCOUNTING OFFICE REPORT 18 B- 285019 Our report was prepared under the direction of Jeffrey C. Steinhoff, Acting Assistant Comptroller General for Accounting and Information Management, and Robert F. Dacey, Director, Consolidated Audit and Computer Security Issues. If you have any questions, please contact me on (202) 512- 5500 or them on (202) 512- 3317.
David M. Walker Comptroller General of the United States
GENERAL ACCOUNTING OFFICE REPORT 19
B- 285019 The President The President of the Senate The Speaker of the House of Representatives
The Secretary of the Treasury, in coordination with the Director of the Office of Management and Budget (OMB), is required to annually submit financial statements for the U. S. Government to the President and the Congress. 1 GAO is required to audit these statements. This is our report on our audit of the financial statements of the U. S. government for fiscal year 1999. 2
In summary, certain significant financial systems weaknesses, problems with fundamental recordkeeping and financial reporting, incomplete documentation, and weak internal control, including computer controls, continue to prevent the government from accurately reporting a significant portion of its assets, liabilities, and costs. Some of these deficiencies primarily relate to specific major agencies; others, such as intragovernmental transactions, affect the entire government. These deficiencies affect the reliability of the accompanying financial statements and much of the related information in the Fiscal Year 1999 Financial Report of the United States Government, as well as the underlying financial information. They also affect the government's ability to accurately measure the full cost and financial performance of certain programs and effectively manage related operations.
1 The Government Management Reform Act of 1994 requires such reporting beginning with financial statements prepared for fiscal year 1997. 2 Our report on the fiscal year 1998 financial statements is entitled Financial Audit: 1998 Financial Report of the United States Government (GAO/ AIMD- 99- 130, March 31, 1999).
20 GENERAL ACCOUNTING OFFICE REPORT
B- 285019 Major problems included the federal government's inability to:
 properly account for and report (1) material amounts of property, equipment, materials, and supplies and (2) certain stewardship assets, primarily at the Department of Defense;
 properly estimate the cost of certain major federal credit programs and the related loans receivable and loan guarantee liabilities, primarily at the Department of Agriculture;
 estimate and reliably report material amounts of environmental and disposal liabilities and related costs, primarily at the Department of Defense;
 determine the proper amount of various reported liabilities, including postretirement health benefits for military employees and accounts payable and other liabilities for certain agencies;
 accurately report major portions of the net cost of government operations;
 ensure that all disbursements are properly recorded; and
 properly prepare the federal government's financial statements, including balancing the statements, accounting for substantial amounts of transactions between governmental entities, properly and consistently compiling the information in the financial statements, and reconciling the results of operations to budget results.
Such deficiencies prevented us from being able to form an opinion on the reliability of the accompanying fiscal year 1999 financial statements, as was the case in our fiscal years 1998 and 1997 audits. These deficiencies continue to significantly impair the federal government's ability to adequately safeguard certain significant assets, properly record various transactions, and comply with selected provisions of laws and regulations related to financial reporting. Additionally, (1) the government is unable to determine the full extent of improper payments estimated to total billions of dollars annually and, therefore, cannot develop effective strategies to reduce them, (2) serious, long- standing computer security weaknesses expose the government's financial and other sensitive information to inappropriate disclosure, destruction, modification, and fraud, and critical operations to disruption, and (3) material control weaknesses affect the government's tax
GENERAL ACCOUNTING OFFICE REPORT 21
B- 285019 collection activities. Further, the financial management systems of almost all agencies were again found not to be in substantial compliance with the requirements of the Federal Financial Management Improvement Act of 1996.
Our audit and the Inspectors General (IG) audits of major component agencies' financial statements for fiscal year 1999 continue to result in (1) an identification and analysis of deficiencies in the government's recordkeeping, financial reporting, and control systems and (2) recommendations to correct them. Fixing these problems represents a significant challenge because of the size and complexity of the government and the discipline and human capital needed to follow sound financial management and reporting practices.
This report provides our (1) disclaimer of opinion on the government's fiscal year 1999 financial statements, (2) report on internal control, and (3) report on compliance with selected provisions of laws and regulations related to financial reporting. It also provides illustrations of the identified material deficiencies. A more complete discussion of these issues may be found in individual agency reports. Additionally, the report highlights certain long- term financing issues facing government. The objectives, scope, and methodology of our work are discussed in the appendix to this report. We provided a draft of this report to Department of the Treasury and OMB officials, who expressed their commitment to address the deficiencies this report outlines. We did our work in accordance with generally accepted government auditing standards.
DISCLAIMER OF OPINION Because we were unable to determine the reliability of significant portions of the accompanying financial statements for the reasons outlined above and described in more detail below, we are unable to, and we do not, express an opinion on the accompanying fiscal year 1999 financial statements.
Because of the serious deficiencies in the government's systems, recordkeeping, documentation, financial reporting, and controls, readers are cautioned that amounts reported in the financial statements and related notes may not be a reliable source of information for decision- making by the government or the public. These deficiencies also affect the reliability of information contained in the accompanying Management's Discussion and Analysis and any other financial management information-- including information used to manage the government day- to- day and certain budget information reported by agencies-- which is taken from the same data sources as the financial statements.
22 GENERAL ACCOUNTING OFFICE REPORT
B- 285019 Further, while we have not audited and do not express an opinion on the Stewardship Information, Supplemental, or Other Information included in the accompanying Financial Report, we noted certain material omissions related to the presentation of national defense assets and issues related to the reconciliation of the results of operations to budget results, which are discussed below.
The accompanying Financial Report and our report include certain information concerning the Social Security and Medicare (Part A) trust funds, such as projected contributions and expenditures, dates when expenditures are expected to exceed contributions, and dates when such funds are expected to be exhausted. Such information is as of January 1, 1999 for Social Security and as of September 30, 1999 for Medicare (Part A), the most recent information publicly reported by the government. The government plans to issue, on March 30, 2000, updated information as of January 1, 2000. The government's issuance of dated information in this Financial Report at about the same time that it issues more current information may cause confusion to the Congress and the public. Steps should be taken, in future years, to ensure that the government's Financial Report contains up- to- date information as of no earlier than the end of the most recent fiscal year. Because current information on the solvency of the Social Security and Medicare programs is critical to assessing the financial condition of the federal government, aiding in budget deliberations, and fostering public debate, we will include the updated information on these two important programs in a report that will also contain the Fiscal Year 1999 Financial Report of the United States Government.
Material Deficiencies The following sections describe material deficiencies that contribute to our disclaimer of opinion, discuss their effects on the financial statements and the management of government operations, and highlight certain corrective actions. Although the federal government has made steady progress, the fundamental nature of these deficiencies remains unchanged from our fiscal year 1998 and 1997 financial statement reports. Each of these deficiencies also constitutes a material weakness in internal control. 3
3 A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that errors, fraud, or noncompliance in amounts that would be material to the financial statements may occur and not be detected on a timely basis by employees in the normal course of performing their duties.
GENERAL ACCOUNTING OFFICE REPORT 23
B- 285019 Property, Plant, and Equipment and Inventories and Related Property The federal government-- one of the world's largest holders of physical assets does not have adequate systems and controls to ensure the accuracy of information about the amount of assets held to support its domestic and global operations. A majority of the $472 billion of these reported assets is not adequately supported by financial and/ or logistical records. Assets that are not adequately supported include: (1) buildings, structures, facilities, and equipment, (2) various government- owned assets that are in the hands of private sector contractors, and (3) operating materials and supplies comprised largely of ammunition, defense repairable items, and other military supplies. Also, the government cannot ensure that all assets are reported. For example, no Department of Defense (DOD) contractor- held personal property was reported. Further, national defense asset unit information reported as Stewardship Information was incomplete because (1) it did not include major national defense support equipment, such as uninstalled engines and communications equipment, and (2) amounts were reported in units, rather than in dollars as required by current generally accepted accounting principles. DOD, the largest holder of these assets, has acknowledged the challenges it faces to implement effective systems and accurately record data to properly account for and report its physical assets and has a number of initiatives underway that are intended to address this problem. These initiatives are expected to span several years.
Because the government lacks complete and reliable information to support its asset holdings, it could not satisfactorily determine that all assets were included in the financial statements, verify that reported assets actually exist, or substantiate the amounts at which they were valued. For example, periodic physical counts have shown that inventory records contain significant error rates. Further, weak controls significantly impair the government's ability to detect and investigate fraud or theft of assets.
Accurate asset information is necessary for the government to (1) know the assets it owns and their location and condition, (2) safeguard its assets from physical deterioration, theft, or loss, (3) account for acquisitions and disposals of such assets, (4) prevent unnecessary storage and maintenance costs or purchase of assets already on hand, and (5) determine the full costs of government programs that use these assets.
24 GENERAL ACCOUNTING OFFICE REPORT
B- 285019 Loans Receivable and Loan Guarantee Liabilities As of the end of fiscal year 1999, the government reported $184 billion of loans receivable and $35 billion of liabilities for estimated losses related to estimated future defaults of guaranteed loans. Certain federal credit agencies, responsible for significant portions of the government's lending programs, were unable to properly estimate the cost of these programs in accordance with generally accepted accounting principles and budgeting requirements. As an example, the Department of Agriculture, which represents a significant portion of loans receivable, could not estimate the net loan amounts expected to be collected because it does not maintain some of the key historical data needed to predict borrower behavior, such as the amount and timing of future defaults and prepayments. Agriculture's lack of historical data is largely the result of system inadequacies. Certain affected agencies are in the process of implementing action plans intended to develop reliable loan and loan guarantee information. Reliable information about the cost of credit programs is important in supporting annual budget requests for these programs, making future budgetary decisions, managing program costs, and measuring the performance of credit activities. Federal credit programs include direct loans and loan guarantees for farms, rural utilities, low and moderate income housing, small businesses, veterans' mortgages, and student loans.
Environmental and Disposal Liabilities Significant portions of the liability for remediation of environmental contamination and disposal of hazardous waste, reported at $313 billion, lacked adequate support and may not be complete. For example, the estimated cost to remove unexploded ordnance and residual contaminants from training ranges, amounting to over 40 percent of DOD's recorded liability, is not adequately supported. Also, the cost of significant estimated liabilities associated with certain major weapons systems and training ranges, initially recorded in fiscal year 1999, was reported as a current year cost, rather than as a prior period adjustment as required by generally accepted accounting principles.
Properly stating environmental and disposal liabilities and improving internal control supporting the process for their estimation could assist in determining priorities for cleanup and disposal activities and allow for appropriate consideration of future budgetary resources needed to carry out these activities. DOD, which has significant exposure for environmental and disposal liabilities, improved its initial estimate in fiscal
GENERAL ACCOUNTING OFFICE REPORT 25
B- 285019 year 1999 by including additional categories of liabilities, such as nuclear weapons systems. Also, DOD has a project in progress that is intended to better identify and document all additional environmental and disposal liabilities.
Liabilities Adequate systems and cost data were not available to accurately estimate the reported $196 billion military postretirement health benefits liability included in federal employee and veteran benefits payable. Information used to develop such estimates did not include the full cost of providing health care benefits. In addition, some of the underlying patient workload data were not reliable. DOD is evaluating methods to develop a reliable estimate of this liability. Also, some agencies do not maintain adequate records or have systems to ensure that accurate and complete data were used to estimate a reported $86 billion of accounts payable and a reported $169 billion in other liabilities. For example, a liability was not reported for certain amounts owed to contractors that, under the terms of the contracts, were held by the government pending the acceptance of goods or services. Further, the government was unable to provide adequate information to determine whether commitments and contingencies were complete and properly reported. These problems significantly affect the determination of the full cost of the government's current operations, the value of its assets, and the extent of its liabilities.
Cost of Government Operations The government was unable to support significant portions of the $1.76 trillion reported as the total net cost of government operations. The previously discussed material deficiencies in reporting assets and liabilities and the lack of effective cash disbursement reconciliations and deficiencies in financial statement preparation, as discussed below, affect reported net costs. Further, we were unable to determine whether the amounts reported in the individual net cost categories on the Statement of Net Cost and in the subfunction detail in Supplemental Information were properly classified. Accurate cost information is important to the federal government's ability to control and reduce costs, assess performance, evaluate programs, and set fees to recover costs where required.
Cash Disbursement Activity Several major agencies are not effectively reconciling cash disbursements. These reconciliations are intended to be a key control to detect and correct errors and other
26 GENERAL ACCOUNTING OFFICE REPORT
B- 285019 misstatements in financial records in a timely manner-- similar in concept to individuals reconciling personal checkbooks with a bank's records each month. Although improvements in some agency reconciliation processes have been noted, there continued to be billions of dollars of unreconciled differences between agencies' and Treasury records of cash disbursements as of the end of fiscal year 1999. As a result, the government is unable to ensure that all disbursements are properly recorded. Improperly recorded disbursements could result in misstatements in the financial statements and in certain data provided by agencies for inclusion in the President's budget concerning fiscal year 1999 obligations and outlays.
Preparation of Financial Statements The government does not have sufficient systems, controls, or procedures to properly prepare financial statements for the U. S. government. Such deficiencies, described below, impair the government's ability to (1) properly balance the government's financial statements and account for billions of dollars of transactions between governmental entities, (2) properly and consistently compile the information in the financial statements, and (3) effectively reconcile the results of operations reported in the financial statements with budget results. Also, certain financial information required by generally accepted accounting principles was omitted from the financial statements.
Unreconciled Transactions. To make the financial statements balance, Treasury recorded a net $24 billion item on the Statement of Operations and Changes in Net Position, which it labeled unreconciled transactions. Treasury attributes this net out- ofbalance amount to the government's inability to properly identify and eliminate transactions between federal government entities, to agency adjustments that affected net position, and to errors. An additional net $12 billion of unreconciled transactions was improperly recorded in net cost. These unreconciled transactions result in material misstatements of assets, liabilities, revenues, and/ or costs.
Agencies' accounts can be out of balance with each other, for example, when one or the other of the affected agencies does not properly record a transaction with another agency or the agencies record the transactions in different accounting periods. These out- ofbalance conditions can be detected and corrected by instituting procedures for reconciling transactions between agencies on a regular basis and in a timely manner.
GENERAL ACCOUNTING OFFICE REPORT 27
B- 285019 In fiscal year 1999, the government required agencies to reconcile certain intragovernmental accounts. Some of these accounts, such as those related to employee benefits, could not be reconciled. Also, in fiscal year 1999, the government gathered, for the first time, the detail of certain intragovernmental accounts by trading partner agency. Using this information, we estimated that the amounts reported for agency trading partners for these specific intragovernmental accounts were out- ofbalance by more than $350 billion. With trading partner information, the government can begin to analyze the nature of these intragovernmental account differences and develop effective solutions. Solutions will also be required for significant differences reported in other intragovernmental accounts, primarily related to appropriations. The government stated that it plans to require agencies to reconcile additional intragovernmental accounts in fiscal year 2000 and has formed task forces to recommend solutions to this longstanding problem.
Unreconciled transactions also may arise because the government does not have effective controls over reconciling net position. The net position reported in the financial statements is derived by subtracting liabilities from assets, rather than through balanced accounting entries. Also, certain adjustments and eliminations do not balance. Such control weaknesses, combined with unbalanced transactions and the significant volume of transactions and number of reporting entities, result in misstatements in the financial statements, hinder the ability of the government to identify misstatements that may exist, and may contribute to the amount of reported unreconciled transactions.
Financial Statement Compilation. The federal government cannot ensure that the information in the financial statements of the U. S. government is properly and consistently compiled. To prepare the federal government's financial statements, about 70 agencies submit data to Treasury on approximately 2,000 separate reporting components, each having many account balances. In fiscal year 1999, the Department of Treasury, which prepares the accompanying financial statements, implemented a new process for reconciling these financial statements with the related agency financial statements. While the process identified the nature of certain inconsistencies, the government was unable to reconcile all amounts included in these financial statements with agency financial statements. Further, material adjustments and reclassifications were required to (1) make the financial statements more consistent with agency financial statements, (2) correct identified inconsistencies in reporting similar transactions, (3) conform footnote information to related financial statement line items, and (4) record other audit adjustments. We identified over $350 billion of adjustments and
28 GENERAL ACCOUNTING OFFICE REPORT
B- 285019 reclassifications which the government subsequently recorded, such as financial statement compilation errors that had resulted in a $66 billion overstatement of interest cost and a $70 billion overstatement of Medicare costs.
These problems are compounded by the substantial volume of information submitted and limitations in the federal government's general ledger (SGL) account structure. For example, some SGL accounts must be split between different financial statement line items. As a result, additional misclassifications and misstatements in the government's financial statements could exist. Also, the extensive manual intervention required to compile the federal government's financial statements requires significant resources which lessens the government's ability to perform effective financial analysis of the information. For example, because of SGL limitations, the government separately collects additional information needed to compile the financial statements. However, such additional information, historically, is initially inconsistent with the related SGL account balances by hundreds of billions of dollars. After substantial effort, such inconsistencies were reduced to an immaterial amount.
Reconciling the Results of Operations With Budget Results. The federal government does not yet have a process to obtain information to effectively reconcile the reported $77 billion excess of revenue over net cost and a reported unified budget surplus of $124 billion. Consequently, it could not identify all of the items needed to reconcile these amounts. Certain differences are expected to occur because the financial statements of the U. S. government are to be prepared on the accrual basis in accordance with generally accepted accounting principles, which is a different basis than the budget. Under accrual accounting, transactions are reported when the events giving rise to the transactions occur, rather than when cash is received or paid. By contrast, federal budgetary reporting is generally on the cash basis in accordance with accepted budget concepts and policies.
Beginning in fiscal year 1998, 24 major agencies were required to reconcile their reported net costs to budget information, which could provide a basis for preparing the reconciliation. However, significant amounts reported in certain agency reconciliations, including unliquidated obligations and certain other budget information, lacked adequate supporting information and may be unreliable. For example, significant amounts of DOD transactions were not applied or were incorrectly applied to specific budget appropriations, which could misstate certain reported budget information. Once the federal government produces reliable financial statements, an effective reconciliation could help provide additional assurance of the reliability of budget results.
GENERAL ACCOUNTING OFFICE REPORT 29
B- 285019 INEFFECTIVE INTERNAL CONTROL Because of the effects of the material weaknesses discussed below, the federal government has not maintained effective internal control to ensure that (1) transactions are properly recorded, processed, and summarized to permit the preparation of financial statements and stewardship information in accordance with generally accepted accounting principles, and assets are safeguarded against loss from unauthorized acquisition, use, or disposition and (2) transactions are executed in accordance with laws governing the use of budget authority and with other laws and regulations that could have a direct and material effect on the financial statements. Individual agency financial statement audit reports describe the effects of such weaknesses on specific agencies and identify additional internal control weaknesses, some of which are material to individual agencies.
In addition to the material weaknesses related to the deficiencies discussed in our disclaimer on the financial statements, we found that (1) the government's inability to determine the full extent of improper payments impairs the effective reduction of such improper payments, (2) widespread and serious computer control weaknesses affect virtually all federal agencies and significantly contribute to many of the material deficiencies discussed above, and (3) material control weaknesses affect the government's tax collection activities. Due to the deficiencies noted throughout this report, additional material weaknesses may exist that have not been reported.
Improper Payments The government is unable to determine the full extent of improper or erroneous payments, which include payments made for unauthorized purposes, for excessive amounts, such as overpayments to program recipients or contractors and vendors, and/ or not in accordance with applicable laws and regulations. Across government, improper payments occur in a variety of programs and activities, including those related to contract management, federal financial assistance, and tax refunds. Reported estimates of improper payments total billions of dollars annually.
The Department of Health and Human Services (HHS) has been reporting a national estimate of improper Medicare Fee- for- Service payments since fiscal year 1996. In fiscal year 1999, HHS reported estimated improper Medicare Fee- for- Service payments of $13.5 billion, or about 8 percent of such benefits down from $23.2 billion or 14 percent for fiscal year 1996. HHS' reporting and analysis of improper Medicare payments has
30 GENERAL ACCOUNTING OFFICE REPORT
B- 285019 helped lead to the implementation of several initiatives to identify and reduce such payments. Annual estimates of improper payments in future audited financial statements will provide information on the progress of these initiatives.
However, most agencies have not estimated the magnitude of improper payments in their programs, nor have they considered this issue in their annual performance plans. For example, the Earned Income Tax Credit (EITC) program a refundable tax credit available to low income, working taxpayers has historically been vulnerable to high rates of invalid claims. During fiscal year 1999, IRS examined about 573,000 suspicious tax returns claiming $1.25 billion in EITCs and found that $1.08 billion (86 percent) were invalid. Although the full extent of refunds resulting from invalid EITCs is unknown, the IRS has not disclosed any improper payment estimates in its financial statement reports. In another example, HHS has not reported an estimate of improper payments in its $109 billion state- administered Medicaid program, but is currently studying methodologies for developing an estimate and has formed partnerships with various state auditors to share information on improper payments.
Improper payments can result from incomplete or inaccurate data used to make payment decisions, insufficient monitoring and oversight, or other deficiencies in agency information systems and weaknesses in internal control. The risk of improper payments is increased in programs involving (1) complex criteria for computing payments, (2) a significant volume of transactions, or (3) an emphasis on expediting payments. The reasons for improper payments range from inadvertent errors to fraud and abuse.
Without a systematic measurement of the extent of the problem, agency management cannot determine (1) if the problem is significant enough to require corrective action, (2) how much to invest in internal control, or (3) the success of efforts implemented to reduce improper payments. Developing mechanisms to identify, estimate, and report the nature and extent of improper payments in annual financial statements is only a first step for agencies. Without this fundamental knowledge, agencies cannot be fully informed about the magnitude or trends of improper payments, nor can they pinpoint or target mitigation strategies. 4
4 Financial Management: Increased Attention Needed to Prevent Billions in Improper Payments (GAO/ AIMD- 00- 10, October 29, 1999).
GENERAL ACCOUNTING OFFICE REPORT 31
B- 285019 In October 1999, we recommended that OMB develop and implement a methodology for annually estimating and reporting improper payments and for addressing improper payments in agencies' annual performance and strategic plans and performance reports. OMB agrees with this recommendation. In this regard, the President has made estimating and preventing improper payments a priority management objective and OMB plans to require agencies to develop and implement procedures to estimate and report the nature and extent of material improper payments in annual financial statements and have such information audited.
Computer Security Weaknesses Continuing serious and widespread computer security weaknesses are placing enormous amounts of federal assets at risk of inadvertent or deliberate misuse, financial information at risk of unauthorized modification or destruction, sensitive information at risk of inappropriate disclosure, and critical operations at risk of disruption. Significant computer security weaknesses in systems that handle the government's unclassified information have been reported in each of the major federal agencies. The most serious reported problem is inadequately restricted access to sensitive data. Other types of weaknesses pertain to not adequately segregating duties to help ensure that people do not conduct unauthorized actions without detection, preventing unauthorized software from being implemented, and mitigating and recovering from unplanned interruptions in computer service. In today's highly computerized and interconnected environment, such weaknesses are vulnerable to exploitation by outside intruders as well as authorized users with malicious intent. Recent media reports highlight the potential damage that can result from computer security breaches.
The government cannot estimate the full magnitude of actual damage and loss resulting from federal computer security weaknesses because it is likely that many such incidents are either not detected or not reported. GAO and agency reviews illustrate the potential for negative impacts. For instance, weaknesses in DOD information security continue to provide hackers and hundreds of thousands of authorized users the opportunity to modify, steal, and destroy DOD data including financial, procurement, logistics and other sensitive information. Also, identified weaknesses at HCFA, SSA, IRS, and VA place tax, medical and other sensitive records at risk of unauthorized disclosure, modification, and destruction. Unauthorized disclosure of sensitive information has led to instances of identity theft, in which individuals use such information to commit financial crimes, such as fraudulently establishing credit and running up debts. Likewise, serious and pervasive computer security problems at EPA increase the risk that mission- related systems and
32 GENERAL ACCOUNTING OFFICE REPORT
B- 285019 financial operations are vulnerable to tampering, disruption, and misuse. Further, pervasive weaknesses at the Department of the Treasury, which collects virtually all of the government's revenues and makes most of its disbursements, expose such collections and disbursements to significant risk of loss or fraud.
GAO and the IGs have issued numerous reports that identify information security weaknesses in the federal government and made recommendations to address them. 5 Also, GAO has reported information security as a high- risk area across government since February 1997. 6
Information security problems continue to persist, in large part, because agency managers have not fully established comprehensive security management programs. An effective program would include a central security function and effective procedures for assessing risks, establishing appropriate policies and related controls, raising employee awareness of prevailing risks and mitigating controls, and monitoring and evaluating the effectiveness of established controls. Such programs, if properly implemented, would provide the government with a solid foundation for resolving computer security problems and managing computer security risks on an ongoing basis.
The Congress continues to express concern about the significant risks to federal government systems and information that result from computer security weaknesses. Congressional hearings have focused on specific agency deficiencies and have clarified the problem across government. Further, S. 1993, the Government Information Security Act of 1999, recently introduced in Congress, seeks to strengthen information security practices throughout the federal government.
The Administration has recognized the importance of computer security and has taken some steps to prompt improvement from a governmentwide perspective. In January
5 See, for example, Critical Infrastructure Protection: Comprehensive Strategy Can Draw on Year 2000 Experiences (GAO/ AIMD- 00- 1, October 1, 1999) and Information Security: Serious Weaknesses Place Critical Federal Operations at Risk (GAO/ AIMD- 98- 92, September 23, 1998).
6 High- Risk Series: An Update (GAO/ HR- 99- 1, January 1999), High- Risk Series: An Overview (GAO/ HR- 97- 1, February 1997), and High- Risk Series: Information Management and Technology (GAO/ HR- 97- 9, February 1997).
GENERAL ACCOUNTING OFFICE REPORT 33
B- 285019 2000, the President released the National Plan for Information Systems Protection, 7 which calls for new initiatives to strengthen the nation's defenses against threats to public and private sector information systems that are critical to the country's economic and social welfare. In addition, the President designated computer security as a priority management objective.
Tax Collection Activities The federal government continues to have material weaknesses in controls related to its tax collection activities, which affect its ability to efficiently and effectively account for and collect the government's revenue. This situation results in the need for extensive, costly, and time- consuming ad hoc programming and analysis, as well as material audit adjustments, to prepare basic financial information an approach that cannot be used to prepare such information on a timely, routine basis to assist in ongoing decision- making. Additionally, the severity of the system deficiencies that give rise to the need to resort to such procedures for financial reporting purposes, as well as deficient physical safeguards, result in burden to taxpayers and lost revenue.
Serious financial management system deficiencies continue to affect the federal government's ability to effectively manage its taxes receivable and other unpaid assessments. 8 The lack of appropriate subsidiary systems to track the status of taxpayer accounts affects the government's ability to make informed decisions about collection efforts. This weakness has resulted in the government pursuing collection efforts against individual taxpayers who had already paid their taxes in full. In addition, the government does not always pursue collection efforts against taxpayers owing taxes to the federal government. This could result in billions of dollars not being collected and adversely affect future compliance.
7 Defending America's Cyberspace: National Plan for Information Systems Protection: Version 1.0: An Invitation to a Dialogue. Released January 7, 2000. The White House. 8 Other unpaid assessments consist of amounts for which (1) neither the taxpayer nor a court has affirmed are owed or (2) the government does not expect further collections due to factors such as the taxpayer's death, bankruptcy, or insolvency.
34 GENERAL ACCOUNTING OFFICE REPORT
B- 285019 The federal government also continues to be vulnerable to loss of tax revenue due to weaknesses in preventive and detective controls over disbursements for tax refunds. Although the government does have detective controls in place, they are not applied to millions of tax returns estimated to have billions of dollars in underreported tax liabilities. These conditions expose the government to potentially billions of dollars in losses due to inappropriate refund disbursements.
Also, the government does not perform sufficient up- front verification procedures to ensure the validity of amounts claimed by taxpayers as overpayments prior to making disbursements for refunds. Additionally, delays in recording tax amounts owed result in lost opportunities to retain or offset overpayments made by a taxpayer for one period to collect on outstanding amounts owed for another period, resulting in lost revenue. Finally, serious deficiencies in physical controls over cash, checks, and sensitive data received from taxpayers increase both the government's and the taxpayers' exposure to losses and increases the risk of taxpayers becoming victims of crimes committed through identity fraud.
IRS senior management has expressed a commitment to address many of these operational and financial management issues and has made a number of improvements to address some of these weaknesses. Successful implementation of long- term efforts to resolve these serious problems will require the continued commitment of IRS management as well as substantial resources and expertise.
NONCOMPLIANCE WITH CERTAIN LAWS AND REGULATIONS
Tests for compliance with selected provisions of laws and regulations related to financial reporting disclosed no instances of material noncompliance. However, other instances of noncompliance, some of which are material to individual federal agencies, are reported in the individual agency financial statement audit reports. Additionally, as described below, we noted that federal systems do not substantially comply with federal financial management systems requirements. We caution that noncompliance other than that discussed in our report may occur and not be detected by these tests and that our limited testing may not be sufficient for other purposes. Further, the scope of our tests was limited by the material deficiencies discussed above. Our objective was not to, and we do not, express an opinion on overall compliance with laws and regulations.
GENERAL ACCOUNTING OFFICE REPORT 35
B- 285019 Noncompliance With the Federal Financial Management Improvement Act of 1996 The Federal Financial Management Improvement Act (FFMIA) of 1996 requires auditors, as part of financial audits of certain major agencies, to report whether agencies' financial management systems comply substantially with federal accounting standards, financial systems requirements, and the government's standard general ledger at the transaction level. Thus far, for fiscal year 1999, agency financial auditors have reported that 19 of 22 major agencies' financial systems did not comply with the act's requirements. Systems of the remaining two major agencies that have not yet issued audited fiscal year 1999 financial statements did not comply with the act's requirements for fiscal years 1998 and 1997. Noncompliance with FFMIA, which we further discuss in our report, Financial Management: Federal Financial Management Improvement Act Results for Fiscal Year 1998 (GAO/ AIMD- 00- 3, October 1, 1999), is indicative of the overall continuing poor condition of agency financial systems. Also, as we reported, agency remediation plans, required by FFMIA, may not adequately address the system deficiencies. Significant time and investment are needed for agencies to address and correct these long- standing financial management systems problems.
The majority of federal agencies' financial management systems do not meet systems requirements and cannot provide reliable financial information for managing day- to- day government operations and holding managers accountable. For many agencies, the preparation of financial statements requires considerable reliance on ad hoc programming and analysis of data produced by inadequate financial systems that are not integrated, reconciled, and often require significant adjustments. As a result, reliable financial information on a day- to- day basis is not available for effective financial management. For example, as discussed above, the IRS relies on extensive, costly, and time- consuming ad hoc programming and analysis, as well as material audit adjustments, to prepare basic financial information. The significant financial management deficiencies discussed throughout this report underscore the challenge.
FINANCIAL STATEMENTS AND BUDGET DECISIONS: ADDING THE LONG- TERM PERSPECTIVE
A view of the long- term sustainability of fiscal policies can assist decisionmakers in considering the government's financial position and making decisions about resource
36 GENERAL ACCOUNTING OFFICE REPORT
B- 285019 allocation. Such a view requires projections of spending and revenues into the future. In this context, the sovereign power to tax and the commitments of social insurance programs such as Social Security and Medicare must be considered.
The accompanying Financial Report and our report include certain information concerning the Social Security and Medicare (Part A) trust funds, such as projected contributions and expenditures, dates when expenditures are expected to exceed contributions, and dates when such funds are expected to be exhausted. Such information is as of January 1, 1999 for Social Security and as of September 30, 1999 for Medicare (Part A), the most recent information publicly reported by the government. The government plans to issue, on March 30, 2000, updated information as of January 1, 2000. The government's issuance of dated information in this Financial Report at about the same time that it issues more current information may cause confusion to the Congress and the public. Steps should be taken, in future years, to ensure that the government's Financial Report contains up- to- date information as of no earlier than the end of the most recent fiscal year. Because current information on the solvency of the Social Security and Medicare programs is critical to assessing the financial condition of the federal government, aiding in budget deliberations, and fostering public debate, we will include the updated information on these two important federal programs in a report that will also contain the Fiscal Year 1999 Financial Report of the United States Government.
Commitments for the Social Security and Medicare programs are included in the Stewardship Information accompanying the financial statements. The government's 75 year estimates of the present value of expenditures in excess of contributions for the Social Security (Old Age Survivors and Disability Insurance (OASDI)) programs amounted to $ 3.7 trillion, as of January 1, 1999, and for the Medicare (Part A) program amounted to $3.1 trillion, as of September 30, 1999. The government's projections also indicate that Social Security and health care costs will absorb an increasing share of the federal budget.
In fiscal year 1999, Social Security trust funds reported surpluses of $124.7 billion and Medicare (Part A) reported surpluses of $21.5 billion, which included non- cash intragovernmental interest income of $52.1 billion and $9.3 billion, respectively. These surpluses contributed to the $124.4 billion unified budget surplus. However, for example, as discussed in the accompanying Stewardship Information, using the government's best estimates as of January 1, 1999, cash disbursements of the Social
GENERAL ACCOUNTING OFFICE REPORT 37
B- 285019 Security trust funds (OASDI) are expected to exceed cash receipts beginning in fiscal year 2014.
When trust funds' receipts exceed disbursements, they are invested in Treasury securities and used to meet current cash needs of the government. These securities are assets to the trust funds and liabilities to the Treasury. In effect, one part of the government is lending to another. As disclosed in notes 10 and 19, both the investments and liabilities, which amounted to $2 trillion at September 30, 1999, are netted out in the accompanying financial statements. Such investments are expected to increase to over $4 trillion in the next 20 years.
Expected cash shortfalls in the trust funds will require them to redeem their investments in Treasury securities. When this occurs, the government must fund these redemptions through some combination of future surpluses, if available, lower relative spending for other federal programs, higher relative taxes, and/ or greater relative borrowing from the public. Further, under the government's projections, absent any program or financing change, the Social Security trust funds and Medicare (Part A) Trust Fund will exhaust their Treasury security holdings in 2034 and 2015, respectively.
There is general recognition that the Social Security and Medicare (Part A) programs require major reforms to deal with the long- term solvency and sustainability of these two programs. The fact that Social Security is expected to draw down its Treasury securities holdings in less than 15 years, and that it is expected that Medicare will need to do so in less time, highlights the importance of acting soon in order to avoid more dramatic changes in the future.
- - - - We are working with OMB, the Treasury, and other agencies across government to provide recommendations for fixing the major deficiencies cited in our audit. Considerable effort is now being exerted to address the problems, and several agencies, such as SSA, have made good progress toward achieving financial management reform goals. We have designated the most serious situations as high risk, including financial management at DOD, IRS, the Forest Service, and the Federal Aviation Administration, as well as information security.
38 GENERAL ACCOUNTING OFFICE REPORT
B- 285019 In addition, the continued coordinated efforts of the Treasury and OMB will be required to provide solutions for certain governmentwide deficiencies, such as the inability to properly identify and eliminate transactions between federal entities and the compilation of the financial statements. We will continue to provide suggestions for resolving governmentwide problems and to evaluate progress in overcoming them.
David M. Walker Comptroller General of the United States
March 20, 2000
GENERAL ACCOUNTING OFFICE REPORT 39
APPENDIX OBJECTIVES, SCOPE, AND METHODOLOGY The federal government is responsible for
 preparing the annual financial statements in conformity with generally accepted accounting principles;
 establishing, maintaining, and assessing internal control to provide reasonable assurance that the broad control objectives of the Federal Managers' Financial Integrity Act (FMFIA) are met 9 ; and
 complying with applicable laws and regulations and FFMIA requirements. Our objective was to audit the fiscal year 1999 financial statements. The Government Management Reform Act expanded on the requirements of the CFO Act by requiring that the IGs of 24 major federal agencies annually audit agencywide financial statements prepared by these agencies. 10 Our work was performed in close coordination and cooperation with the IGs to achieve our joint audit objectives. This work included separate GAO audits of certain material agency components, as discussed below. Our audit approach focused on the Departments of the Treasury, Defense, and Health and Human Services and the Social Security Administration. These agencies comprise a major portion of the amounts reported in the federal government's financial statements. At other federal agencies, we focused largely on accounts that are material to the financial statements. Additionally, for two agencies, information has been included in these financial statements but the agencies have not, at this date, finalized their individual financial statements for fiscal year 1999. Therefore, we were unable to determine the reliability of the amounts included in the accompanying financial statements for these agencies. We performed sufficient audit work to provide our report on the financial statements, internal control, and compliance with laws and regulations.
9 The FMFIA requires agency managers to evaluate and report annually to the President on the adequacy of their internal controls and accounting systems and what is being done to correct the problems.
10 GMRA authorized OMB to designate agency components that also would receive a financial statement audit.
40 GENERAL ACCOUNTING OFFICE REPORT
APPENDIX We separately audited the following material agency components.
 We audited and expressed an unqualified opinion on the IRS statement of custodial activity for fiscal year 1999. IRS was able to reliably report on the results of its custodial activities, including nearly $1.9 trillion of tax revenue, $185 billion of tax refunds, and $21 billion of net federal taxes receivable. However, we issued an opinion on the IRS balance sheet that was qualified for the components of net position, disclaimed an opinion on its statements of net cost, changes in net position, budgetary resources, and financing, and reported numerous material internal control weaknesses. 11
 We audited and expressed an unqualified opinion on the Schedule of Federal Debt Managed by Treasury's Bureau of the Public Debt for the fiscal year ended September 30, 1999. 12 This schedule reported (1) over $3.6 trillion of federal debt held by the public comprising individuals, corporations, state or local governments, the Federal Reserve System, and foreign governments and central banks, (2) $2 trillion of federal debt held by federal entities, such as the Social Security trust funds, and (3) $230 billion of interest on federal debt held by the public.
 We performed audit procedures on cash balances maintained and internal controls over the cash receipts and disbursements processed by Treasury on behalf of the federal government. We provided the results of our work to the Treasury Office of Inspector General for consideration in its audit of the Treasury's fiscal year 1999 departmentwide financial statements.
11 Financial Audit: IRS' Fiscal Year 1999 Financial Statements (GAO/ AIMD- 00- 76, February 29, 2000). 12 Financial Audit: Bureau of the Public Debt's Fiscal Years 1999 and 1998 Schedules of Federal Debt (GAO/ AIMD- 00- 79, March 1, 2000).
GENERAL ACCOUNTING OFFICE REPORT 41
APPENDIX
 We audited and expressed unqualified opinions on the December 31, 1998, financial statements for the funds administered by the Federal Deposit Insurance Corporation (FDIC), including the Bank Insurance Fund, the Savings Association Insurance Fund, and the FSLIC Resolution Fund. 13 In addition, we performed audit procedures and tests of internal controls for cash, investments, and other material balances of the funds administered by FDIC as of September 30, 1999.
At CFO Act agencies and other agencies, we reviewed the fiscal year 1999 financial statement audits performed by the IGs or their contractors and, for certain agencies, assisted in the development of audit plans for fiscal year 1999 audits. Financial statements and audit reports for these agencies provide additional information about the operations of each of these entities. For example, these audits have identified numerous internal control and accounting systems weaknesses and noncompliance with laws and regulations, some of which are material to the respective agencies or components. Further, as of the completion of our field work on March 20, 2000, 22 of the 24 CFO Act agencies had received audit opinions or disclaimers on their fiscal year 1999 financial statements. Of the 22 agencies, 13 received unqualified opinions. These agencies are the
Social Security Administration, National Science Foundation, General Services Administration, Department of Energy National Aeronautics and Space Administration, Nuclear Regulatory Commission, Department of Labor, Small Business Administration, Federal Emergency Management Agency, Department of Commerce, Department of Health and Human Services, Department of Transportation, and Department of Veterans Affairs.
13 Financial Audit: Federal Deposit Insurance Corporation's 1998 and 1997 Financial Statements (GAO/ AIMD- 99- 202, June 30, 1999).
42
Intentional Blank Page
FI NAN CIAL STATE MENTS 43
Fi nan cial State ments of the United States Gov ern ment for the Year Ended Sep tem ber 30, 1999
This State ment re ports the re sults of Gov ern ment op er a tions. This in cludes rev e nues prin ci pally gen er ated by the Gov ern ment's sov er eign power to tax, levy du ties, and as sess fines and
pen al ties. This state ment cov ers the cost of Gov ern ment op er a tions, net of rev e nue earned from the sale of goods and ser vices to the pub lic. It also in cludes any ad just ments and un rec on ciled trans ac tions that af fect the net po si tion.
Statement of Operations and Changes
Revenue
The main source of rev e nue for Gov ern ment op er a tions con sists of taxes and other rev - e nue the Fed eral Gov ern ment
gen er ates un der its sov er eign pow ers.
In di vid ual In come Tax and Tax With hold ings con sist of Fed eral in di vid ual in come taxes, So cial Se cu rity taxes, Medicare taxes and rail road re tire ment taxes, net of re lated re - funds .
Mis cel la neous earned rev e nue con sists of earned rev e nues re ceived from the pub lic with vir tu ally no as so ci ated cost. This cat e gory in cludes
rev e nues gen er ated from spec trum auc tions and rents and roy al ties on the Outer Con ti nen tal Shelf Lands.
Net Cost of Government Operations
The State ment of Net Cost sum ma rizes the Net cost of Gov ern ment o p er a tions, which is gross cost mi nus earned rev e nue.
Unreconciled Transactions
Un rec on ciled trans ac tions are ad just ments made to bal ance the change in net po si tion.
Net Position, Beginning of Period
The Net po si tion, be gin ning of pe riod re flects the net po si tion re ported on the prior year's Bal ance Sheet.
Prior Period Adjustments
Prior pe riod ad just ments are re vi sions to cor rect the be gin ning net po si tion.
Net Position, End of Period
This amount re flects the net po si tion on the cur rent year's Bal ance Sheet.
44 FI NAN CIAL STATE MENTS
As sets in cluded on the Bal ance Sheet are re sources of the Fed eral Government that re main avail able to meet fu ture needs. The most sig nif i cant as sets that are re ported in the Bal ance Sheet are loans re ceiv able and in ven to ries, as well as prop erty, plant and equip ment. There are,
how ever, other sig nif i cant re sources avail able to the Gov ern ment that ex tend be yond the as sets pre sented in this Fi nan cial State ment. Those as sets in clude Stew ard ship As sets and the Gov ern ment's sov er eign pow ers to tax, reg u late com merce and set
mon e tary pol icy. They also in clude nat u ral re sources .
Se lected as sets are high lighted in the Stew ard ship In for ma tion sec tion of this re port to dem on strate the Fed eral Gov ern ment's ac count abil ity for these as sets. Stew ard ship as sets in clude na tional de fense as sets, stew ard ship land and her i tage as sets.
National defense assets
Na tional de fense as sets are weapon sys tems and sup port ing as sets used by the mil i tary for the Na tion's com mon de fense and gen eral wel fare.
Stewardship land
Stew ard ship land is land that the Fed eral Gov ern ment does not ex pect to use to meet its ob li ga tions, un like
the as sets listed in the Bal ance Sheet. This land in cludes land set aside for the use and en joy ment of pres ent and fu ture gen er a tions and land on which mil i tary bases are lo cated. Stew ard ship land is mea sured in non- financial units such as acres of land and lakes, miles of park ways, and miles of wild and sce nic rivers. Ex am ples of stew ard ship land in clude na tional parks, na tional for ests, wil der ness ar eas, and land used to en hance eco sys tems to en cour age an i mal and plant spe cies and to con serve na ture.
Heritage assets
Her i tage as sets are Gov ern ment- owned as sets that have one or more of the fol low ing char ac ter is tics: his tor i cal or nat u ral sig nif i  This State ment pres ents the net
cost of fis cal 1999 Gov ern ment op er a tions. It also shows the cost to carry out na tional pri or i ties as de termined by law.
It also cat e go rizes costs by ma jor func tion. It pres ents costs in much the same way as does the bud get, ex cept that costs are al lo cated to func tions based on ac count ing stan dards. Thus, this Statement re ports costs on an ac crual ba sis and in some cases al lo cates them dif fer ently than the bud get. For ex am ple, this State ment al lo cates the cost of
pen sions and re tiree health ben e fits among all the func tions that em ploy work ers. The bud get cat e go - rizes pen sion pay ments to ci vil ian
re tir ees as a subfunction, found un der In come se cu rity. The bud get cat e go rizes agency con tri bu tions to re tire ment funds as intragovernmen tal out lays dis trib uted among all the func tions that em ploy work ers. A de scrip tion of each of the func tions and the com po nents of net cost for the ac tiv i ties in cluded in each func tion is pre sented in Sup ple men tal In for ma tion as Net cost de tail.
This State ment con tains the fol low ing three com po nents for each function:
 The gross cost of Gov ern ment op er a tions.  The rev e nues earned from the sale of goods and pro vi sion of ser vices to the pub lic.
 The net cost of Gov ern ment op er a tions, which is gross cost less rev e nue earned.
Gross Cost
Gross cost in cludes the full cost of all func tions. These costs may be di rectly traced, as signed on a cause and ef fect ba sis, or rea son ably al lo cated to the func tion.
Earned Revenue
This is rev e nue the Gov ern ment earned by pro vid ing goods and ser vices to the pub lic at a price.
Net Cost
The Net cost of Gov ern ment op er a tions is com puted by sub tract ing Earned rev e nues from Gross cost.
Statement of Net Cost
The Bal ance Sheet shows the Gov ern ment's as sets and li a bil i ties. When com bined with Stew ard ship In for ma tion, this in for ma tion pres ents a more com pre hen sive un der stand ing of the Gov ern ment's fi nan cial po - si tion. Most line items on the Bal ance Sheet are de scribed in the Notes to
the Fi nan cial State ments. The first note, for ex am ple, pro vides in for ma tion on the ac count ing pol i cies for as sets and li abilities.
Balance Sheet Assets
FI NAN CIAL STATE MENTS 45
cance; cul tural, ed u ca tional, or ar tis t i c i m p o r t a n c e ; o r s i g n i f i c a n t ar chi tec tural fea tures. The cost of her i tage as sets of ten is not de ter mi - na ble or rel e vant to their sig nif i cance.
Like stew ard ship land, the Gov ern ment does not ex pect to use these as sets to meet its ob li ga tions. The most rel e vant in for ma tion about her i tage as sets is non- financial. Ex am ples of her i tage as sets in clude: the Dec la ra tion of In de pend ence, the Con sti tu tion and the Bill of
Rights pre served by the Na tional Ar chives. Also in cluded are na tional mon u ments such as the Viet nam Vet erans Me mo rial, Jef fer son Me mo rial and the Wash ing ton Mon u ment as well as art and cul tural trea sures at the Smith so nian In sti tu tion and the Li brary of Con gress.
Many other sites such as the bat - tle fields, his toric struc tures and na tional his toric land marks also are placed in this cat e gory.
Assets, cont.
Li a bil i ties are ob li ga tions of the Fed eral Gov ern ment re sult ing from prior ac tions that will re quire fi nan cial re sources. The most sig nif i cant li a bil i ties re ported on the Bal ance Sheet are Fed eral debt se cu ri ties held by the pub lic and ac crued pen sion li a bil i ties for cur rent and re tired Fed eral ci vil ian and mil i tary per son nel. Li a bil i ties also in clude so cial in sur ance ben e fits due and pay able as of the re port ing date.
As with re ported as sets, the Gov ern ment's re spon si bil i ties and pol icy com mit ments are much broader than these re ported Bal ance Sheet li a bil i ties. They in clude the so cial in sur ance pro grams dis closed in Stew ard ship In for ma tion, a wide range of other pro grams un der which the Gov ern ment pro vides ben e fits and ser vices to the peo ple of this Na tion, and cer tain fu ture loss contingencies.
The mag ni tude and com plex ity of so cial in - sur ance pro grams, cou pled with the ex treme sen si tiv ity of pro jec tions re lat ing to the many as sump tions of the pro grams, pro duce a large range of pos si ble re sults. The Stew ard ship Re spon si bil ities sec tion de scribes the so cial in sur - ance pro grams, re ports long- range estimates that
can be used to as sess the fi nan cial con di tion of the pro grams, and ex plains some of the fac tors that im pact the var i ous pro grams. Using this in - for ma tion, read ers can ap ply their own judg ment
as to the sol vency and sustainability of the in di - vid ual pro grams. Each of the so cial in sur ance pro grams has an as so ci ated trust fund to ac count for its ac tiv ity. An ex pla na tion of the trust funds for so cial in  sur ance and many of the other large trust funds is
in cluded in Note 19 Ded i cated Col lec tions. That note also con tains in for ma tion about trust fund re ceipts, dis burse ments and as sets.
A broad per spec tive on the Fed eral Gov ern ment's re spon si bil i ties is pro vided by the Cur rent Ser vices As sess ment, which also can be found un der Stew ard ship In for ma tion. Pres ented in ac cor dance with the Pres i dent's bud get, this in for ma tion es ti mates Fed eral ex pen di tures and re ceipts for fis cal 2000 to 2005, pro vided there are no changes to cur rent law.
The Gov ern ment has en tered into con trac tual com mit ments re quir ing the fu ture use of fi nan cial re sources and also has un re solved con tin gen cies where ex ist ing con di tions, sit u a tions or cir cum stances cre ate un cer tainty about fu ture losses. Com mit ments as well as con tin gen cies that do not meet the cri te ria for rec og ni tion as a li a bil ity on the Bal ance Sheet, but for which there is at least a rea son able pos si bil ity that a loss has been in curred, are dis closed in Note 18 Com mit ments and Con tin gencies.
Net po si tion is pre sented as the sum of Bal - ance Sheet as sets less Bal ance Sheet li a bil i ties. The large neg a tive net po si tion amount does not im ply that the Gov ern ment is in sol vent. Be - cause of its sov er eign power to tax, and the
coun try's wide eco nomic base, the Gov ern ment has unique ac cess to fi nan cial re sources to fi - nance its debts. This pro vides the Fed eral Gov ern
ment the abil ity to meet pres ent ob li ga tions and those that are an tic i pated from fu ture op er a tions.
Liabilities and Net Position
46 FI NAN CIAL STATE MENTS
United States Government Statement of Operations and Changes in Net Position for the Year Ended September 30, 1999
(In bil lions of dol lars)
Revenue:
Individual income tax and tax withholdings ............................... 1,456. 0 Corporation income taxes............................................ 182. 2 Unemployment taxes ............................................... 25. 6 Excise taxes ..................................................... 70. 5 Estate and gift taxes ............................................... 27. 7 Customs duties ................................................... 18. 4 Other taxes and receipts ............................................ 42. 0
Miscellaneous earned revenues ....................................... 10. 5 Total revenue ................................................... 1,832. 9
Net Cost of Government Operations:
National defense .................................................. 413. 2 Human resources ................................................. 905. 3 Physical resources ................................................. 95. 1 Interest ......................................................... 230. 1 Other functions ................................................... 112. 3
Total net cost of Government operations............................... 1,756. 0
Excess of revenue over net cost ...................................... 76. 9 Unreconciled transactions affecting the change
in net position (Note 16) ........................................... 24. 4
Increase in net position ............................................. 101. 3
Net position, beginning of period ...................................... (6,134. 4) Prior Period Adjustments (Note 17) ...................................... 6. 9
Net position, end of period ........................................... (6,026. 2) The ac com pa ny ing notes are an in te gral part of these fi nan cial state ments.
FI NAN CIAL STATE MENTS 47
United States Government Statement of Net Cost for the Year Ended September 30, 1999
(In bil lions of dol lars) Gross Cost Earned
Rev e nue Net Cost National defense................................. 451. 2 38. 0 413. 2
Hu man Re sources:
Education, training , employment and social services ............................. 57. 9 1. 4 56. 5 Health........................................ 140. 6 0. 7 139. 9 Medicare ...................................... 207. 0 21. 7 185. 3 Income security ................................. 188. 0 6. 2 181. 8 Social Security.................................. 387. 7 - 387. 7
Veterans benefits and services (Note 11) .............. (43. 2) 2. 7 (45. 9) Total human resources .......................... 938. 0 32. 7 905. 3
Physical Resources:
Energy ....................................... 12. 9 12. 4 0. 5 Natural resources and environment .................. 27. 1 2. 9 24. 2 Commerce and housing credit ...................... 89. 2 73. 9 15. 3 Transportation .................................. 44. 1 1. 1 43. 0
Community and regional development ................ 14. 9 2. 8 12. 1 Total physical resources ......................... 188. 2 93. 1 95. 1
Interest ........................................ 230. 1 - 230. 1
Other Functions:
International affairs .............................. 29. 6 9. 6 20. 0 General science, space and technology ............... 17. 5 0. 1 17. 4 Agriculture ..................................... 27. 2 2. 4 24. 8 Administration of justice ........................... 31. 2 1. 6 29. 6
General government ............................. 25. 1 4. 6 20. 5 Total other functions ............................ 130. 6 18. 3 112. 3
Total ...................................... 1,938. 1 182. 1 1,756. 0 The ac com pa ny ing notes are an in te gral part of these fi nan cial state ments.
48 FI NAN CIAL STATE MENTS
Intentional Blank Page
FI NAN CIAL STATE MENTS 49
United States Government Balance Sheet as of September 30, 1999
(In bil lions of dol lars)
Assets:
Cash and other monetary assets (Note 2)................................ 115. 2 Accounts receivable (Note 3) ......................................... 35. 0 Loans receivable (Note 4) ........................................... 183. 7 Taxes receivable (Note 5) ........................................... 22. 7 Inventories and related property (Note 6) ................................ 173. 3 Property, plant and equipment (Note 7) ................................. 298. 8 Other assets (Note 8) .............................................. 54. 3
Total assets .................................................... 883. 0
Liabilities :
Accounts payable (Note 9)........................................... 85. 8 Federal debt securities held by the public (Note 10) ........................ 3,631. 6 Federal employee and veteran benefits payable (Note 11) ................... 2,600. 7 Environmental and disposal liabilities (Note 12)............................ 313. 2 Benefits due and payable (Note 13) .................................... 73. 8 Loan guarantee liabilities (Note 4) ..................................... 35. 1 Other liabilities (Note 14) ............................................ 169. 0
Total liabilities................................................... 6,909. 2 Commitments and Contingencies (Note 18) Net Position ...................................................... (6,026 .2)
Total liabilities and net position ...................................... 883. 0 The ac com pa ny ing notes are an in te gral part of these fi nan cial state ments.
50 FI NAN CIAL STATE MENTS
Intentional Blank Page
STEW ARD SHIP IN FOR MA TION 51
United States Gov ern ment Stew ard ship In for ma tion for the Year Ended
Sep tem ber 30, 1999 (Un au dited)
The Fed eral Gov ern ment holds Stew ard ship as sets for the ben e - fit of the Na tion. Be cause the Gov ern ment has been en trusted with, and made ac count able for, these re sources and re spon si bil i ties, they are rec og nized in the Fi nan cial Re port of the United States Gov ern - ment.
When ac quired, Stew ard ship as sets are treated as ex penses in the fi nan cial state ments. This sec tion pro vides more de tailed stew ard ship in for ma tion on these re sources to high light their long- term ben e fit and to dem on strate ac count abil ity. This in for ma tion fa cil i tates the un der stand ing of the op er a tions and fi nan cial con di tion of the Government.
Na tional de fense prop erty, plant and equip ment con sist of: (1) as sets owned by the De part ment of De fense in the per for - mance of mil i tary mis sions, such
as com bat op er a tions, peace - keep ing and sup port of ci vil ian au thor i ties dur ing civil emer gen cies; and (2) ves sels held in a pres er va tion sta tus by the Maritime Ad min is tra tion's Na tional De fense Re serve Fleet.
Na tional de fense as sets are de fined in terms of four cat e go ries:
Weapons sys tems equip ment that launches, re leases, car - ries, or fires a par tic u lar piece of
ord nance and/ or car ries weap ons sys tems- related prop erty, equip ment, ma te ri als, or per son nel. Ex am ples in clude air craft, ships, tracked com bat ve hi cles and mis siles.
 Weapons sys tems sup port prin ci pal end items items that are ac quired to sup port weap ons sys tems and may ul ti mately be in cor po rated in weap ons sys tems. Ex am ples in clude air craft en gines, tank en gines, air craft ra dars, ship so nar, uninstalled mis sile mo tors, gun mounts and guid ance sys tems.
 Mis sion sup port equip ment de ploy able equip ment that: (1) is es sen tial to the ef fec tive op er a tion of a weap ons sys tem or is used by the mil i tary de part ments to ef fec tively per form their mil i tary mis sions; (2) has an in de ter mi nate or un pre dict able use ful life due to the man ner in which it is used; and (3) is at a very high risk of be ing de stroyed dur ing use or of pre ma ture ob so les cence.
National Defense Assets Stewardship
Assets
52 STEW ARD SHIP IN FOR MA TION
National Defense Assets
(In number of systems or items)
Restated* Balance as of September 30,
1998 Additions Deletions Balance as of
September 30, 1999
Aircraft: Combat ....................... 8,660 52 351 8,361 Airlift ......................... 6,059 23 148 5,934 Other aircraft ................... 3,740 67 247 3,560
Ships:
Submarines .................... 123 1 7 117 Aircraft carriers ................. 18 - - 18 Surface combatants .............. 269 26 13 282 Amphibious warfare ships .......... 83 - 7 76 Mine warfare ships ............... 38 1 - 39 Support ships ................... 241 6 33 214 Other ships .................... 3,921 55 229 3,747
Combat Vehicles:
Tracked ....................... 44,522 328 684 44,166 Wheeled ...................... 140,376 1,596 - 141,972 Towed ........................ 7,044 - 78 6,966 Other combat vehicles ............ 12,744 829 19 13,554
Guided, Self- propelled Ordnance:
Missiles ....................... 453,056 18,094 6,832 464,318 Torpedoes ..................... 8,486 216 29 8,673
Space Systems:
Satellites ...................... 78 8 1 85
Weapons Systems Support Real Property:
Active ammunition bunkers ........ 23,468 398 756 23,110 Active missile silos............... 993 1 158 836 Active satellite ground stations ...... 81 - - 81
Reserve Fleet Vessels n. a. n. a. n. a. 144 *The bal ances as of Sep tem ber 30, 1998, have been re stated to re flect changes from pre vi ous year's re port ing.
National Defense Assets, cont.
Ex am ples i nclude: sur veil lance unmanned air ve hi cles, non- tactical ve hi cles (e. g., fuel tank ers, com bat op er a tions cen ters, mess ve hi cles), field me te o ro log i cal sys tems, cryp tog ra phy sys tems, and field se cu rity systems.
Weapons sys tems sup port real prop erty fa cil i ties and struc tures af fixed to the land that are in te gral to a weap ons sys tem. Ex am ples in clude am mu ni tion bunk ers in ac tive use
and mis sile si los in ac tive use. The ac com pa ny ing National de fense as set in for ma tion does not re port quan ti ties of mis sion sup port equip ment al though the an nual in vest ments in these items are re ported.
The in vest ment amounts in National de fense as sets pre sented in this re port re flect the sum of an nual in vest ment amounts re ported by
each mil i tary de part ment. DOD does not cur rently have cost ac count ing sys tems that cap ture the full costs, as de scribed in State ment of Fed eral Fi nan cial Ac count ing Stan dards (SFFAS) No. 4 as so ci ated with National de fense as sets. There fore, the an nual in vest ments shown in this re port rep re sent an nual dis burse ments for each cat e gory of National de fense as sets.
n. a. = Not available
STEW ARD SHIP IN FOR MA TION 53
Investments in National Defense Assets for the Period Ended September 30, 1999
(In millions of dollars)
Aircraft:
Combat .................................................... 6,901 Airlift ...................................................... 4,354 Other aircraft ................................................ 2,662 Aircraft support principal end items ................................ 1,387 Other aircraft support property, plant and equipment ................... 1,418
Ships:
Surface combatants ........................................... 3,591 Submarines ................................................. 1,409 Ship support principal end items .................................. 852 Aircraft carriers ............................................... 823 Amphibious warfare ships ....................................... 581 Support ships ................................................ 371 Mine warfare ships ............................................ 73 Other ships .................................................. 30 Other ship support property, plant and equipment ..................... 6
Combat Vehicles:
Combat vehicle support principal end items ......................... 1,199 Tracked .................................................... 354 Wheeled.................................................... 261 Other combat vehicles support property, plant and equipment ............ 1
Guided, Self- propelled Ordnance:
Missiles .................................................... 1,299 Guided, self- propelled support principal end items ..................... 815
Guided, self- propelled ordnance support property, plant and equipment ..... 245 Guided, self- propelled ordnance support ............................ 34 Torpedoes .................................................. 70
Space Systems:
Satellites ................................................... 1,438 Space systems support principal end items .......................... 558
Weapons systems support real property:
Active ammunition bunkers ..................................... 19 General mission support property, plant and equipment ................. 5,274
Other:
Other weapons systems ........................................ 115 Other weapons systems support principal end items ................... 37 Other weapons support property, plant and equipment .................. 62
Reserve fleet vessels ........................................... 1,905 Total investments in national defense assets for fiscal year ended September 30, 1999 ....................... 38,144
54 STEW ARD SHIP IN FOR MA TION
Stewardship Land
United States Government Stewardship Land as of September 30
(In millions of acres) Predominate Use Acres Percentage Agency:
Bureau of Land Management .... Public land 264. 2 40. 9 U. S. Forest Service ........... National Forest system 192. 0 29. 8 U. S. Fish and Wildlife Service .... National Wildlife Refuge system 88. 6 13. 7 National Park Service .......... National Park system 77. 9 12. 1 Department of Defense......... Defense facilities 16. 7 2. 6
Bureau of Reclamation ......... Water, power and recreation 5. 8 0. 9 Total acres ................ 645. 2 100. 0
The De part ment of the In te rior's Bu reau of Land Man age ment (BLM) man ages 264.2 mil lion acres of fed er ally owned land. Con gress has charged the Bu reau with main tain ing this land and its re sources to best serve the pres ent and fu ture needs of the Amer i can peo ple. To ward this end, BLM man ages these lands to al low for a com bi na tion of uses in clud ing min eral de vel op ment, out door rec re ation and nat u ral hab i tat. Some BLM lands are pro tected and used for their sce nic, scientific or his tor i cal value. The fol low ing ta ble de scribes those hold ings.
Bureau of Land Management
Bureau of Land Management Public Lands as of September 30 Number Acreage
(in thousands) Miles
National wild and scenic river segments ..... 34 998 2,038 National wilderness areas ............... 136 5,243 Wilderness study areas ................. 622 17,298 National conservation areas .............. 8 11,692 - National scenic areas................... 1 101 National
recreation areas ................ 1 1,000 National historic trails................... 8 - 3,533 National scenic trails ................... 2 - 568 National recreation trails ................ 26 - 429 Outstanding natural areas ............... 1 - - Herd management areas ................ 200 36,070 National
monuments ................... 1 1,880 Areas of critical environmental concern...... 740 13,112 - Research natural areas ................. 152 347 National
natural landmarks ............... 43 599 National back country byways ............ 64 - 3,518 Globally important bird areas ............. 2 57 National
"multiple use" lands ............. - 175,775 BLM total .......................... 2,041 264,172 10,086
Stew ard ship Land re fers to fed er ally owned land that is not used, or held for use, in Gen eral Gov ern ment op er a tions. This cat e gory in cludes land on which mil i tary bases are lo cated. This cat e gory ex cludes lands ad min is tered by the Bu reau of In dian Af fairs and held in trust.
Most Stew ard ship land is pub lic do main. Be tween 1781 and 1867, the Gov ern ment ac quired acres of land equal to 79.4 per cent of the cur rent acre age of the United States, spend ing a to tal of $85.1 mil lion.
STEW ARD SHIP IN FOR MA TION 55
The U. S. For est Ser vice man ages 192.0 mil lion acres of fed er ally owned lands for the sus tained use of out door rec re ation, range, tim ber, wa ter shed, wild life and fish.
For est land con tains 155 named Na tional For ests to tal ing 153.0 mil lion acres.
The For est Ser vice re for ested 267,013 acres pri mar ily with ge net i cally im proved seed lings in fis cal 1999.
Wil der ness land con tains 34.8 mil lion acres in 38 states and is served by 133,087 miles of trails.
The U. S. For est Ser vice also man ages 20 named grass lands on 3.8 mil lion acres and about 4,348 miles of the wild and sce nic river sys tem.
The U. S. Fish and Wild life Ser - vice man ages 88.6 mil lion acres of fed er ally owned lands held pri mar ily for wild life con ser va tion. It has five goals:
 Pre serve, re store and en hance in their nat ural eco sys tems, all spe cies of an i mals and plants en dan gered or threat ened.
 Per pet u ate the mi gra tory bird re source.
 Pre serve a nat u ral di ver sity and abun dance of fauna and flora.  Pro vide an un der stand ing and ap pre ci a tion of fish and wild life ecol ogy.
 Pro vide ref uge vis i tors a safe, whole some and en joy able rec re ational ex pe ri ence ori ented to ward wild life.
The U. S. Fish and Wild life Ser - vice sub di vides its man age ment re  spon si bil ity into the fol low ing
cat e go ries:  Na tional Wild life Ref uges (521 sites on 87.6 mil lion acres).  Ref uge Co or di na tion ar eas (50 sites on 197,049 acres).  Wa ter fowl Pro duc tion ar eas (200 sites on 715,200 acres).  Fisheries Re search Cen ters (83 sites on 16,083 acres).  Wild and Sce nic Rivers (8 rivers to tal ing 1,258 miles in length).
U. S. Forest Service National Park Service
The Na tional Park Ser vice man ages 77.9 mil lion acres of fed er ally owned lands. These lands are set aside to con serve scen ery, na ture, his toric ob jects and wild life so that cur rent and fu ture gen er a tions of Amer i cans can en joy them.
Other types of park ar eas in clude: na - tional rivers, park ways, na tional lake shores, his toric parks, sce nic trails, wild and sce nic rivers, mil i tary parks, re serves, and bat tle fields.
Summary of Acreage
(In millions of acres) Acreage Type of Park Area:
National parks ...................... 49. 6 National preserves ................... 21. 4 National recreation areas .............. 3. 4 National monuments .................. 1. 9 National seashores................... 0. 5
Other park areas .................... 1. 1 Total acres ....................... 77. 9
U. S. Fish and Wildlife Service
The De part ment of De fense uses 16.7 mil lion acres of fed er ally owned land for mis sion es sen tial pur poses in clud ing:
 Mil i tary bases  In stal la tions  Training ranges
Department of Defense
56 STEW ARD SHIP IN FOR MA TION
The Fed eral Gov ern m e n t i n v e n t o r i e s , p r e serves and in ter prets vast num bers of her i tage as sets for the ben e fit of the Amer i can pub lic. These as sets en com pass many of the Na tion's most pre cious his toric, nat u ral and cul tural re sources. Her i t a g e a s s e t s a r e u n i q u e prop erty, plant and equip ment with:
 His toric or nat u ral sig nif i cance.  Cul tural, ed u ca - tional or ar tis tic im por
tance.  Sig nif i cant ar chi tec tural char ac ter is tics.
The pub lic en trusts the Gov ern ment with these as sets and holds it ac count able for their pres er va tion. Ex am ples of her i tage as sets in clude the Wash ing ton Mon u ment, Dec la ra tion of In de pend ence, Yo sem ite Na tional Park and mu seum ob jects on dis play at the Smith so nian In sti tu tion.
The fol low ing dis cus sion of the Gov ern ment's her i tage as sets is not all- inclusive. Rather, it high lights
sig nif i cant her i tage as sets re ported by Fed eral agen cies.
The Gov ern ment clas si fies her i tage as sets into three broad cat e go - ries:
 Col lec tion- type  Nat u ral
 Cul tural Col lec tion- type her i tage as sets in clude ob jects gath ered and main tained for mu seum and li brary col lec tions. Nat u ral her i tage as sets in  clude na tional wil der ness ar eas,
wild and sce nic rivers, nat u ral land marks, for ests and grass lands. Cul tural her i tage as sets in clude his toric places and struc tures, me mo ri als and mon u ments, na tional cem e ter ies, and ar che o log i cal sites.
See the Stew ard ship Land sec tion for the to tal acre age of some nat u ral her i tage as sets such as Na tional For ests.
Heritage Assets Federal Stewardship Land
Source: Na tional At las of the United States of Amer ica, U. S. Geo log i cal Sur vey
The De part ment of In te rior's Bu reau of Rec la ma tion (BOR) man ages 5.8 mil lion acres of Stew ard ship land. These lands
were with drawn from the pub lic do main in sup port of BOR's man date to pro vide ir ri ga tion wa ter, in dus trial wa ter, flood con trol and power. How ever, if it does not in ter fere with pro ject pur poses, ac tiv i ties such as boat ing and camp ing, fish and wild life man age ment or the graz ing of live stock may be au tho rized.
Bureau of Reclamation
STEW ARD SHIP IN FOR MA TION 57
Con gress has des ig nated sev eral wil der ness ar eas to pre serve their nat u ral con di tions. The De part ment of the In te rior man ages 255 of these wil der ness ar eas com pris ing 66.5 per cent of the Na tion's 103.7 mil lion wil der ness acres. The Cebolla Wil der ness in New Mex ico is one such area.
The Na tional wild and sce nic rivers sys tem in cludes pro tected free- flowing rivers. The Gov ern ment pro tects these ar eas be cause of their fish and wild life, or for their sce nic, rec re ational, geo logic, his toric or cul tural value. The De part ment of the In te rior man ages 54 per cent of these
10,947 river miles, in clud ing the Bluestone Na tional Sce nic River in West Vir ginia.
The Gov ern ment also sets aside nat u ral land marks that ex em plify a re gion's nat u ral char ac ter is tics. The Na tional Park Ser vice iden ti fies 587 na tional nat u ral land marks, such as the Gar den of the Gods in Col o rado.
The U. S. For est Ser vice man ages 155 Na tional For ests and 20 na tional grass lands on over 192.0 mil lion acres. These ar eas en com pass sig nif i cant her i tage re sources. Ex am ples in clude the White Moun tain Na tional For est in New Hamp shire and the Thun der Ba s i n Na tional Grass land in Wy o ming.
Natural Heritage Assets
The Na tional Reg is ter of His toric Places lists his toric places and struc tures. This is Amer ica's of fi cial list of cul tural re sources wor thy of pres er va tion. Of fi cial prop er ties in clude dis tricts, sites, build ings, struc tures and ob jects sig nif i cant to Amer i can his tory. It also in cludes sig nif i cant ar chi tec tural, ar chae o log i cal en gi neer ing and cul tural prop er ties. For est Ser vice land en compasses 887 such prop er ties.
The Na tion's mon u ments and me mo ri als in clude the Wash ing ton Mon u ment, the Viet nam Vet erans Me mo rial and the Jef fer son Me mo rial in Wash ing ton, D. C. The Na tional Park Ser vice man ages these. Also, the Amer i can Bat tle Mon u ments Com mis sion man ages 27 me  mo ri als, mon u ments and mark ers
around the world. This in cludes the Belleau Wood Ma rine Mon u ment in France.
Ar che o log i cal sites con tain the re mains of hu man ac tiv ity. The De part ment of the In te rior man ages over 290,000 ar che o log i cal sites. The an cient earthen mounds at the Hopewell Cul ture Na tional His toric Site in Ohio are no ta ble ex am ples.
Na tional cem e ter ies in clude the Arlington Na tional Cem e tery in Vir ginia and the Fort Lo gan Na tional Cem e tery in Col o rado. The De part ment of the Army man ages the Arlington Na tional Cem e tery. The De part ment of Vet erans Af fairs man ages Fort Lo gan Na tional Cem e tery and 118 other cem eteries. The Smith so nian In sti tu tion
holds some of the most prom i nent Fed eral mu seum col lec tions. The Smith so nian ac quires, pro tects and pre serves ap prox i mately 140 mil lion in di vid ual ob jects for pub lic ex hi bi tion, ed u ca tion and research.
Sim i larly, the Li brary of Con gress holds the world's larg est li - brary col lec tion. That col lec tion
com prises more than 115 mil lion items. The Li brary re ceives two cop ies of ev ery book, pam phlet, map, print, pho to graph and piece of mu sic reg is tered for copy right in the United States.
The Na tional Ar chives holds more than 2 mil lion cu bic feet of re cords. These re cords en sure ready ac cess to es sen tial in for ma - tion doc u ment ing the rights of cit i
zens, ac tions of Fed eral of fi cials and the ef fects of those ac tions on the na tional ex pe ri ence. These re cords in clude text and leg is la tive re cords; car to graphic and ar chi - tec tural re cords; mo tion pic ture,
sound and video re cords; and still pic tures and graph ics. The Na - tional Ar chives also main tains
his tor i cally im por tant doc u ments such as the U. S. Con sti tu tion and the Lou i si ana Pur chase Treaty.
Collection- type Heritage Assets
Cultural Heritage Assets
58 STEWARDSHIP INFORMATION
Con gress passed the So cial Se curity Act in 1935. The Act, as sub sequently amended, includesprograms thatpro videretirement anddisability benefits.
Con gress es tab lished two trust funds for So cial Se cu rity: The Fed eral Old- Age and Sur vi vors In sur ance ( OASI) and the Fed eral Dis ability In sur ance (DI) Trust Funds (OASDI). OASI pays re tire ment and survivors benefitsand DIpaysbene fits to dis abled work ers.
Rev e nue toOASDI con sists primar ily of taxes on earn ings paid by em ployees,theirem ployersandthe self- employed. OASDI also re ceives rev e nue from the in come taxes on some Social Securityand intereston itsinvest mentsinFederaldebt securities. So cial Se cu rity rev e nues not needed to pay cur rent ben e fits or ad min is trativeexpenses areinvestedin special- issueFederaldebt securities. Thosesecu ritiesareguar anteedasto bothprin cipalandin terestandbacked by the full faith and credit of the Gov ern ment.
The Board of Trustees of theOASI and DI Trust Funds pro vides in its
An nual Re port to the Pres i dent and Con gress short- range (10 year) and long- range (75 year) ac tu ar ial es ti mates of each trust fund. Be cause of theinher entuncertainty inestimates for 75 years into the fu ture, the Board of Trusteesusesthreeal ternativesets of eco nomic and de mo graphic assump tions to show the range of pos sibil ities.Assump tionsaremadeabout many eco nomic, and de mo graphic fac tors,including grossdomestic prod uct, earn ings, the Con sumer Price Index(CPI),the unemployment rate,the fertilityrate, immigration, mortal ity,anddisabil ityincidence and terminations. Theassumptions usedintheac companying tablesgener allyreferred toasthein termediate assump tion,reflectthe bestestimate ofexpected futureexpe rience,under cur rent law.
Thepresentval uesofactu arialesti mates were com puted as of Jan u ary 1, 1999,thebe ginningofthe valuation period.The actuarial estimatedcon tri bu tionsequalthesum ofthepresent value of all es ti mated non- interest income during theperiod.The actuarial esti matedexpendi turesequalthesum
of the pres ent value of all es ti mated paymentsdur ingthevalu ationperiod. These estimateswere preparedusing the fi nanc ing method deemed the most appropriate bybothCongress and the Board of Trustees. Es ti mates as sumetheprogram willcoverfuture workers astheyenter thelaborforce.
Undercur rentlegisla tionandusing interme diateassump tions,theDIand OASITrust Funds are pro jected to be ex hausted in 2020 and 2036 re spectively. Com bined OASDI expenditures will ex ceed cur rent tax in come beginning in2014andwill exceedtotal cur rentincome(in cludingcurrent inter estincome)for calendaryears 2022 and later. Thus, cur rent tax income plusa portionofan nualinterest income willbeneededto meetexpendi tures for the years 2014 through 2021.There af ter, in ad di tion to current tax in come and cur rent in ter est in come, a por tion of the prin ci pal (com bined OASDI as sets) will be needed each year un til the trust fund as sets are to tally ex hausted in 2034. At that point, cur rent tax in come will be suf fi cient to pay only ap prox imately 71 percentofthe benefitsdue.
Social Security Stewardship Responsibilities
-20, 0 00 -15, 0 00
-10, 0 00 -5, 0 00
0 5, 0 00
2001 20 13 2 025 2037 20 49 2 061 2073 (Inb illions ofd o l la rs)
F ederal Old- Age and S urvivors Insu ran ce Trust Fund Net Ass ets
Fe deralDisab ility Ins uranc e Trust Fu nd Net As sets
Fisc alyears
Social Security Estimated Trust Fund Balances
StewardshipResponsibilities provides information on the largest Social Insurance pro grams: So cial Security,Medicare, RailroadRetire  ment, Black Lung and Unemploy mentInsur ance.Itspurpose is to as  sist the Ameri c a n peop l e in evaluatingthefinan cialcondition and sustainability of these pro grams.
STEW ARD SHIP IN FOR MA TION 59
Social Security Present Value Estimates for the Period of 75 Years into the Future, as of January 1, 1999
(In billions of dollars) OASI DI O ASDI Present value of contributions to December 31, 2074.......................... 16,830 2,763 19,593 Present value of expenditures
to December 31, 2074.......................... 19,925 3,366 23,291 Present value of future resources needed ............. 3,095 603 3,698
Less: Net assets of Social Security as of January 1, 1999 . 682 81 763 Present value of additional resources needed .......... 2,413 522 2,935
Social Security, cont.
Federal Hospital InsuranceTrust Fundrev enueconsists primarilyof taxes onearningspaid byemployees, their em ploy ers and the selfemployed. The fund also re ceives revenue frompartofthe taxationof SocialSecu ritybenefits andfrominter est onitsinvest mentsinFederal debtse curities.Rev enuesnotneeded topaycur rentbenefits oftheFederal Hospital Insurance program (Medicare PartA)orad ministrative expensesarein vestedinspecial issue Federal debt se curities.These securities beara marketrateof interestand are guar an teed both as to prin ci pal and interest.In addition,the securities are backed by the full faith and credit of the U. S. Gov ern ment.
Thepresentval uesofactu arialesti mates were com puted as of the begin ning of the val u a tion pe riod, Sep tem ber 30, 1999. The con tri butions con sistofthesum ofthepresent value of var i ous pro gram in come itemsexpectedto bereceivedthrough fiscal 2074.Theexpen ditureconsists of the sum of the pres ent value of esti mated payments through fis cal 2074, claims in curred through Septem ber 30, 1999, that were un paid as of that date, and ad min is tra tive expenses re lated to those claims. Un der inter mediateas sumptionsfromthe
1999 TrusteesReport,and legislation in place at the time, the fund is pro jected to be ex hausted in the cal en dar year 2015.
Appropria tionsaswellas premi ums paidbymed icalbene ficiariesfi nance theben efitsandad ministrative expenses oftheFederal Supplementary Med i cal In sur ance (SMI) program (Medicare Part B). The Bal anced Bud get Act of 1997 pro vides that the monthly pre mium be set to cover 25 per cent of the Medicare Part
B pro gram's es ti mated cost of each cal endaryear'ses timatedFederal Supplemen taryMedical Insurance pro gram costs.
Medicare Part B has a sur plus of $35.2billion. Thisrepresents theestimated book value amount of the Federal Supple mentaryMedi calInsurance Trust Fund assetsasof September30, 1999,less unpaidbene fitsandrelated ad ministrative expensesincurred throughSeptember 30, 1999.
Medicare
10 30
50 70
90 1 10
1 30 1 50
20 00 2003 20 06 2009 2012 2 01 5 Calend ar y ears (In billio ns of dollars )
Estimated Balances of Federal Hospital Insurance Trust Fund (Medicare Part A) Under Intermediate Assumptions
60 STEW ARD SHIP IN FOR MA TION
Medicare Part A (Hospital Insurance) Present Value Estimates for the Period of 75 Years into the Future, Beginning September 30, 1999
(In billions of dollars) Present value of contributions
to the year 2074 ......................................... 6,538. 6 Present value of expenditures
to the year 2074 ......................................... 9,615. 2 Present value of future resources needed ...................... 3,076. 6 Less: Net assets in Federal Hospital Insurance
Trust Fund as of September 30 (Note 19) ..................... 141. 4 Present value of additional resources needed.................... 2,935. 2
Medicare Part B (Supplementary Medical Insurance) Balances as of September 30, 1999
(In billions of dollars) Total Federal Supplementary Medical Insurance
Trust Fund assets (Note 19) ............... 45. 6 Total unpaid benefits ....................... 10. 4
Excess of trust fund assets over unpaid benefits ................... 35. 2
Rail road re tire ment pays full an nu ities when el i gi ble per sons reach age 65 with 10 years of ser vice or age 62 with 30 years of ser vice. It pays re duced an nu ities to el i gi ble ben e fi cia ries who are age 62 with 10 to 29 years of ser vice, or age 60 with 30 years of ser vice. The Rail road Re tire ment pro gram pays dis abil ity an nu ities based on to tal or oc cu pa tional disability. It also pays an nu ities to di vorced spouses, re mar ried widow( er) s, sur viv ing di vorced spouses, chil dren and par ents of de ceased rail road work ers. Medicare cov ers qual i fied rail road re tire ment
ben e fi cia ries in the same way as So - cial Se cu rity ben e fi cia ries. The Rail road Re tire ment Board (RRB) and So cial Se cu rity Ad min is tra tion (SSA) share ju ris dic tion over the pay ment of re tire ment and sur vi vors ben e fits. RRB has ju ris dic tion over the pay ment of re tire ment ben e fits if the em ployee had at least 10 years of rail road ser vice. Ad di tionally, for sur vi vor ben e fits, RRB re quires that the em ployee's last reg u lar em ploy ment be fore re tire ment or death was in the rail road in dus try. If a railroad em ployee or his or her sur vi vors do not qual ify for rail road re tire  ment ben e fits, the RRB trans fers the
em ployee's rail road re tire ment cred its to SSA. SSA treats them as So cial Se cu rity cred its.
Pay roll taxes paid by rail road em ploy ers and their em ploy ees pro vide the pri mary source of in come for the Rail road Re tire ment- Survivor Ben e fit pro gram. By law, rail road re tire ment taxes are co or di nated with So cial Se cu rity taxes. Em ployees and em ploy ers pay tier I taxes at the same rate as So cial Se cu rity taxes. Tier II taxes fi nance rail road re tire ment ben e fit pay ments that are higher than So cial Se cu rity lev els.
Railroad Retirement
STEW ARD SHIP IN FOR MA TION 61
Railroad Retirement Account Present Value Estimates for the Period of 75 Years into the Future, Beginning September 30, 1999*
(In billions of dollars) Present value of contributions to December 31, 2074 .......................... 66. 5 Present value of expenditures to December 31, 2074 .......................... 75. 5 Present value of excess estimated expenditures over
estimated contributions ............................................... 9. 0 Assets in the Railroad Retirement Account as of September 30, 1999............. 21. 9 *These fig ures take into ac count fu ture en trants as well as for mer and pres ent em ploy ees.
0 10 30
40 50
60 70
2000 2012 2024 20 36 2048 2060 2 072 Annual co ntributions
An nual e xpen diture s Fisc al ye ars (In bil lions o fdollars)
Railroad Retirement Account Estimated Activity Railroad Retirement, cont.
Other sources of pro gram in come include:
 Financial interchangeswith the So cial Se cu rity trust funds.  Intereston investments.
 Reve nueresulting from Fed20 eral in come taxes on rail road retire mentbenefits.  Appropri ations(provided af - ter 1974 as part of a phase- out
of cer tain vested dual ben e fits). The net book value of as sets in the Railroad RetirementAc countatSep tember30,1999, was$21.9billion.
62 STEWARDSHIP INFORMATION
The Black Lung Disabil ityBen efitsprogram compensates eligible coalmin erswhoaredis - abled be cause of employ
ment- related pneumo coni osis(blacklung dis ease).Theprogram provides bothmedical andsurvi vorbenefits. Un der Part C, the Black Lung Dis abil ity Trust Fund (BLDTF) pro vides benefitpay mentstoeli gi ble dis abled min ers when no re spon si ble mineopera torcanbeas signed theli ability.The De part ment of La bor (La bor) op er ates Part C of the Black Lung Disabil ityBen efitsprogram.
Ex cise taxes on coal mine op er ators, based on the sale of coal, par - tially fund the black lung dis abil ity
payments andtherelated administra tive and in ter est costs. Intragovernmen tal ad vances to the Black Lung Dis abil ity Trust Fund, which must be re paid with in ter est, fund the short- fall.
Under current condi tions,analysts pro jectthatscheduled reductionin taxes on coal sales will de crease cash
in flowsfortheyear 2014andbeyond. Be tween the years 2013 and 2015, projectionses timatea49- percentdecrease in ex cise tax col lec tions. By theyear2040, theratereduc tionisexpected to de crease cash in flows by a to tal of more than $12.6 bil lion.
To ad dress the Black Lung Dis abil ity Trust Fund's grow ing def i cit prob lem, the fis cal 2001 bud get states thatthe Administra tionwillpropose leg islationthat will re struc ture the
BLDTFdebt and ex tend ex cise taxes at cur rent rates.
Theto talliabil ities(netborrowings from Trea sury to cover ben e fit payments) of the Black Lung Dis abil ity Trust Fund ex ceed as sets by $6.3 billion. Thisdeficit representsthe accumu lated shortfallofex cisetaxesneces sary to meet ben e fit pay ments and inter estexpenses.Intragovernmental ad vances, which the Trust Fund must repaywith interest,fi nancetheshortfall.
Black Lung Benefits Black Lung Disability Trust Fund Present Value Estimates for the Period of 41 Years into the Future, Beginning September 30, 1999
(In billions of dollars) Present value of contributions to September 30, 2040 .......................... 9. 4
Present value of expenditures to September 30, 2040 .......................... 16. 7 Present value of excess estimated expenditures over
estimated contributions ............................................... 7. 3 Excess of liabilities over assets in the Black Lung Disability Trust Fund .............
as of September 30, 1999 ............................................. (6. 3)
Black Lung Fund Estimated Activity
0 50 0
1, 00 0 1, 50 0
2, 00 0 2, 50 0
20 00 20 10 2020 2030 20 40 Fiscal ye ars Annua le xpenditures
Annual contributions (In millions o fdollars )
STEW ARD SHIP IN FOR MA TION 63
Congress cre ated the Un employ ment Trust Fund in 1935. The Fundprovidesin comeassistance to un em ployed work ers who have lost their jobs through no fault of their own. A unique sys tem of Fed eral and State part ner shipsad ministersthe Unemploy mentIn suranceprogram. Althoughestab lishedbyFederal law, State of fi cials ex e cute the program.La borprovidesbroad pol icyguidanceand programdirec tion. State unemployment in sur ancestatuteses tablishlocal pro gram de tails, which they ad min ister.
Fed eral and State un em ployment taxes paid by em ploy ers fi nance the Un employmentTrust Fund. The Govern mentdeposits those funds in the Un em ployment Trust Fund and re ports the in come as Fed eral tax rev e nue.
TotalUn employmentTrust Fundas setsexceededli abilities by $78.9 bil lion. This bal ance ap proximatesthe accumulated sur plus of tax rev e nues and the earningonthese revenues.This surplus remainsavailable to sup ple mentfutureben efitpayments if andwhenannual revenuesbe - come insufficient. Treasuryinvests
the sur plus in Fed eral debt securities.
Unemployment Insurance Unemployment Trust Fund Present Value Estimates in Nominal Dollars for the Period of 9 Years into the Future, Beginning September 30, 1999
(In billions of dollars) Present value of contributions
to September 30, 2008 .............. 296. 1 Present value of expenditures
to September 30, 2008 .............. 262. 3 Present value of excess
estimated contributions over estimated expenditures ........... 33. 8
Excess of assets over liabilities in the Unemployment Trust Fund as of September 30, 1999 (Note 19)..... 78. 9
Unemployment Fund Estimated Activity
0 10
20 30
40 50
60 1 999 2 001 2003 2005 20 07
Fiscalye ars Annual co ntributions
Annuale xpenditure s (In b illions o f dollars)
64 STEW ARD SHIP IN FOR MA TION
Stewardship Investments
The Fed eral Gov ern ment makes grants and pro vides funds for the pur chase, con struc tion and/ or ma jor ren o va tion of State and lo cal gov ern ment phys i cal prop er ties.
The Fed eral High way Ad min is tra tion re im burses States for con struc tion costs on pro jects re lated to the Fed eral High way sys tem. Im prove ments to na tional high ways, in ter state sys tems, sur face
trans por ta tion as well as con ges tion mit i ga tion and air qual ity im prove ment are backed by these ef forts. States con trib ute 10 per cent of the cost for in ter state sys tem im prove ments and 20 per cent of costs for other con struc tion.
The En vi ron men tal Pro tec tion Agency (EPA) pro vides in fra struc ture as sis tance to State and tribal gov ern ments. This as sis tance is in the form of grants for the con struc tion of wastewater and drink ing wa ter treat ment fa cil i ties and ground wa ter pro tec tion.
Mean while, for mula grants as sist ur ban and non- urban ar eas. States and lo cal i ties use these grants for a va ri ety of mass tran sit pur poses in clud ing plan ning, con  struc tion of fa cil i ties, and pur chases
of railcars and buses. Funding also pays for trans por ta tion for the el derly and dis abled.
The Fed eral Avi a tion Ad min is tra tion's (FAA's) Air Trans por ta tion pro gram pro vides fund ing to sus tain the cur rent in fra struc ture and ad vances mod ern iza tion and im prove ment of the Na tional Air space sys tem.
Gen eral Tran sit Ad min is tra tion discretionary grants pro vide cap i tal as sis tance to fi nance ac qui si tion, con struc tion, re con struc tion and im prove ment of fa cil i ties and equip ment. Dis cre tion ary grants fund the cat e go ries of new starts, fixed guid ance mod ern iza tion and bus and bus- related ac tiv i ties.
Investments in Non- Federal Physical Property for the Period Ended September 30
(In billions of dollars) Highway program .................................................. 22. 9 Water infrastructure grants, Environmental Protection Agency ................. 2. 2 Formula grants .................................................... 2. 1 Air transportation .................................................. 1. 6 General Transit Administration ........................................ 1. 5 Economic Development Administration .................................. 0. 4 Washington Metro ................................................. 0. 2
Investments from all other programs .................................... 0. 3 Fiscal 1999 investments in non- Federal physical property .................. 31. 2
Non- Federal Physical Property
Stew ard ship Investments fo cus on Gov ern ment pro grams aimed at pro vid ing long- term ben e fits by im prov ing the Nation's pro duc tiv ity and en hanc ing eco nomic growth. These investments can be pro vided through di rect Fed eral spend ing or grants to State and lo cal gov ern ments for cer  tain ed u ca tion and train ing pro grams,
re search and de vel op ment, and fed er ally fi nanced but not fed er ally owned prop erty, such as bridges and roads. When in curred, these in vest ments are in cluded as expenses in de ter min ing the net cost of op er a tions.
STEW ARD SHIP IN FOR MA TION 65
The Fed eral Gov ern ment runs sev - eral pro grams that in vest in hu man cap i tal. Those in vest ments go to ward in creas ing and main tain ing a healthy econ omy by ed u cat ing and train ing the gen eral pub lic. Costs do not in clude train ing ex penses for Fed eral work ers.
Education Grants and Administrative Pro grams
Ed u ca tion grant ac tiv i ties cover im prove ments of both pub lic and pri vate pre school and sec ond ary ed u ca tion; as sis tance to post- secondary ed u ca tional in sti tu tions and stu dents pur su ing a post- sec ond ary ed u ca tion; pro grams that as sist in ed u cat ing chil dren and adults with spe cial needs and dis abil i ties; bi lin gual ed u ca tion; and vo ca tional- technical ed u ca tion.
Employment and Training Administration
The De part ment of La bor pro vides job train ing for the gen eral pub lic to in crease and main tain na tional eco nomic pro duc tive ca pac ity. Pro grams in clude: adult em ploy ment and train ing; dis lo cated worker em ploy ment and train ing; youth train ing; school- to- work op por - tu ni ties; Job Corps; train ing pro grams
for Na tive Amer i cans and mi grant and seasonal farm work ers.
Federal Fam ily Ed ucation Loan Pro gram
The Fed eral Fam ily Ed u ca tion Loan pro gram op er ates with State and pri vate non profit guar anty agen cies to pro vide loan guar an tees and in ter est sup ple ments on loans by pri vate lend ers to el i gi ble stu dents at tend ing par tic i pat ing post- secondary schools.
Veterans Ben efits Administration
This agency pro vides train ing to as sist dis abled vet er ans to be come em  ploy able. Ed u ca tional as sis tance also
is pro vided to vet er ans un der the GI bill.
National In stitute of Health (NIH)
The NIH Re search and Training and Ca reer De vel op ment pro gram ad dresses the need for trained per son nel to con duct med i cal re search. The pri mary goal is to pro duce highly trained in ves ti ga tors who are likely to per form re search that will ben e fit the Na tion's health.
Veterans Health Administration
This agency pro vides ed u ca tion and train ing ef forts for health pro fes sion stu dents and res i dents through part ner - ships with af fil i ated ac a demic in sti tu tions.
Bureau of In dian Af fairs
This agency pro vides ed u ca tion and Job Corps pro grams.
Investments in Human Capital for the Period Ended September 30
(In billions of dollars) Education grants and administrative programs ............................. 31. 5 Employment and training administration .................................. 5. 5 Federal family education loans program .................................. 3. 1 Veterans Benefits Administration ....................................... 1. 6 National Institutes of Health ........................................... 0. 8 Veterans Health Administration......................................... 0. 7 Bureau of Indian Affairs.............................................. 0. 5
Investments from all other programs..................................... 1. 3 Fiscal 1999 investments in human capital ............................... 45. 0
Fed eral in vest ments in re search and de vel op ment com prise those ex - penses for ba sic re search, ap plied re search
and de vel op ment that are in tended to in crease or main tain na tional eco nomic pro duc tive ca pac ity or yield other fu ture ben e fits.
In vest ments in ba sic re search are a sys tem atic study to gain knowl edge
or un der stand ing of the fun da men tal as pects of phe nom ena and of ob serv - able facts with out spe cific ap pli ca tions
to ward pro cesses or prod ucts in mind.
In vest ments in ap plied re search are a sys tem atic study to gain knowl edge or un der stand ing nec es sary for de ter  min ing the means by which a rec og nized
and spe cific need may be met. In vest ments in de vel op ment are sys tem atic use of the knowl edge and un der stand ing gained from re search for the pro duc tion of use ful ma te ri als, devices, sys tems, or meth ods, in clud ing the de sign and de vel op ment of pro to types and pro cesses.
Human Capital Research and Development
66 STEW ARD SHIP IN FOR MA TION
Investments in Development for the Period Ended September 30
(In billions of dollars) Department of Defense.............................................. 31. 9 Science, Aeronautics and Technology ................................... 2. 7 Human Space Flight ................................................ 2. 5 Department of Energy ............................................... 2. 2 National Institutes of Health .......................................... 1. 7
Investments from all other programs .................................... 0. 4 Fiscal 1999 investments in development................................ 41. 4
Investments in Basic Research for the Period Ended September 30
(In billions of dollars) National Institutes of Health .......................................... 7. 9 Department of Energy............................................... 2. 5 Science, Aeronautics and Technology ................................... 1. 8 Department of Defense.............................................. 1. 1 Environmental Protection Agency ...................................... 0. 6 Agricultural Research............................................... 0. 4 Cooperative State Research, Education and Extension Service ................ 0. 2
Investments from all other programs .................................... 1. 1 Fiscal 1999 investments in basic research .............................. 15. 6
Investments in Applied Research for the Period Ended September 30
(In billions of dollars) National Institute of Health ........................................... 3. 9 Department of Defense.............................................. 3. 0 Science, Aeronautics and Technology ................................... 2. 6 Department of Energy ............................................... 2. 0 National Oceanic and Atmospheric Administration .......................... 1. 0 U. S. Geological Survey.............................................. 0. 7
Investments from all other programs .................................... 3. 0 Fiscal 1999 investments in applied research............................. 16. 2
Research and Development, cont.
STEW ARD SHIP IN FOR MA TION 67
The Cur rent Ser vices As sess ment ta ble shows the Of fice of Man age ment and Bud get's (OMB's) es ti mated re ceipts, out lays, and sur plus or def i cit in the bud get if no changes are made to laws that are al ready en acted. Re ceipts and man da tory out lays, such as So cial Se cu rity ben e fits and net in ter est, in volve on go ing ac tiv i ties that gen er ally op er ate un der per ma nent le gal au thor ity au tho rized by leg is la tion. The cur rent ser vices es ti mates of re ceipts and man da tory spend ing as sume that re ceipts and man da tory spend ing con tinue in the fu ture as spec i fied by cur - rent laws. The cur rent ser vices
es ti mates for dis cre tion ary spend ing as sume dis cre tion ary fund ing for fis  cal 2000 equals ap pro pri a tions en acted
by Con gress. It also as sumes that dis cre tion ary fund ing for sub se quent years holds con stant in real terms. Be - cause laws al ready en acted pro vide the
bases for cur rent ser vices es ti mates, they do not con sti tute a pro posed bud - get, nor do they pre dict the most likely
budget out comes. The cur rent ser vices es ti mates may be used to as sess the sustainability of pro grams un der cur rent law. That is, they may be used to pro ject if fu ture re sources can sus tain pub lic ser vices and meet ob li ga tions as they come due. In this way, they can warn of fu ture prob lems in her ent in cur rent law.
They also can pro vide a bench mark against which tax and spend ing pro pos als can be com pared. Cur rent ser vices es ti mates are use ful in as sess ing the mag ni tude of pro posed changes. Also, they can pro vide an an a lyt i cal per spec tive of Gov ern ment by show - ing the short- and me dium- term di rec tion
of cur rent pro grams. The fol low ing sched ule pres ents the ac tual bud get re sults for fis cal 1999 and the cur rent ser vices es ti mates for all Fed eral taxes and spend ing pro grams for the sub se quent 6 years. It shows re ceipts by source and out lays by func tion. The es ti mates for these years are iden ti cal to the cur rent ser - vices es ti mates in the Pres i dent's bud get
for fis cal 2001. The fol low ing es ti mates are based on the same eco nomic, pro gram matic and other tech ni cal as sump tions as the cur rent ser vices es ti mates doc u ment.
Current Services Assessment Current Services Assessment Receipt and Outlay Estimates as Presented in the President's Budget
(In billions of dollars)
Base Fiscal Year 1999 2000 2001 2002 2003 2004 2005
Receipts:
Individual income taxes ........... 879 952 978 1,006 1,040 1,086 1,143 Corporate income taxes ........... 185 192 190 190 192 196 205 Social Insurance and
retirement receipts . 612 650 683 713 742 771 814 Excise taxes ....... 70 68 69 71 72 74 76
Other receipts ...... 81 94 90 100 105 111 11 2 Total receipts ..... 1,827 1,956 2,010 2,080 2,151 2,238 2,350
Outlays:
National defense .... 275 284 295 300 309 318 326 Social Security...... 390 407 426 446 469 493 520 Medicare .......... 190 203 221 227 245 259 281 Income Security ..... 238 249 261 274 286 297 310 Health ............ 141 154 166 179 191 205 220 Veteran benefits and services ......... 43 45 48 49 52 54 58 Education, training,
employment and social services .... 56 63 69 70 72 74 76 Transportation...... 43 47 48 50 51 53 55
Other programmatic functions ......... 137 148 143 139 141 143 145 Net interest ........ 230 220 208 198 189 176 161
Undistributed offsetting receipts ......... (40) (43) (46) (49) (47) (47) (4 9)
Total outlays...... 1,703 1,777 1,839 1,883 1,958 2,025 2,103 Unified surplus... 124 179 171 197 193 213 247
68 STEW ARD SHIP IN FOR MA TION
Intentional Blank Page
NOTES TO THE FI NAN CIAL STATEMENTS 69
United States Gov ern ment Notes to the Fi nan cial State ments for the Year Ended Sep tem ber 30, 1999 Note 1. Summary of Sig nificant Ac count ing Pol icies
A. Reporting Entity
This Fi nan cial Re port in cludes the fi nan cial sta tus and ac tiv i ties of the ex ec u tive branch and por tions of the leg is la tive and ju di cial branches of the Gov ern ment. This in cludes those Gov ern ment cor po ra tions that are part of the Fed eral Gov ern ment. The Ap pen dix con tains a list of sig nif i cant Gov ern ment en ti ties in cluded in these fi nan cial state ments and also con tains a par tial list of en ti ties ex  cluded. For the pur poses of this doc u ment,
Gov ern ment re fers to the U. S. Gov ern ment. The fi nan cial re port ing pe riod is the same used for the an nual bud get. It is based on the Gov ern ment's fis cal year, which ends Sep tem ber 30.
Ma te rial intragovernmental trans ac tions were elim i nated in con sol i da tion, ex cept as de scribed in Note 16.
The Fi nan cial Re port was gen er ally based on gen er ally ac cepted ac count ing prin ci ples. These prin ci ples typ i cally rec og nize:
 Ex penses when in curred.  Non- exchange rev e nues on a mod i fied
cash ba sis of ac count ing.  Ex change (earned) rev e nues when earned.
This ba sis of ac count ing dif fers from that used for bud get ary re port ing.
This fis cal year, new ac count ing stan dards be came ef fec tive per tain ing to de ferred main te nance.
B. Basis of Accounting C. Revenue Recognition
Gov ern ment rev e nue co mes from two sources: non- exchange trans ac tions and ex change trans ac tions. Non- exchange rev e nues arise pri mar ily from ex er cise of the Gov ern ment's power to tax and levy du ties, fines and pen al ties. Ex change (earned) rev e nues arise when a Gov ern ment en tity pro vides goods and ser vices to the pub lic for a price.
Re mit tances of non- exchange rev e nue are rec og nized when re ceived. Re lated re ceiv ables are rec og nized when mea sur  able and le gally col lect ible. Re funds
and other off sets are rec og nized when mea sur able and le gally pay able and net ted against non- exchange rev e nue.
Earned rev e nue rep re sents rev e nue earned from user charges such as ad mis sion fees to Fed eral parks, in sur ance pre mi ums, and fees on Fed eral hous ing and loan pro grams. It is rec og nized when the Gov ern ment pro vides the goods or ser vices.
70 NOTES TO THE FI NAN CIAL STATE MENTS
Di rect loans ob li gated and loan guar an tees com mit ted af ter fis cal 1991 are re ported based on the pres ent value of the net cash- flows es ti mated over the life of the loan or guar an tee. The dif fer ence be tween the out stand ing prin ci pal of the loans and the pres ent value of their net cash inflows is rec og nized as a sub sidy cost al low ance; the pres ent value of es ti mated net cash out flows of the loan guar an tees is rec og nized as a li a bil ity for loan guar an tees. The sub sidy ex pense for di rect or guar an teed loans dis bursed dur ing a year is the pres ent value of es ti mated net cash
out flows for those loans or guar an tees. A sub sidy ex pense also is rec og nized for mod i fi ca tions made dur ing the year to loans and guar an - tees out stand ing and for reestimates
made as of the end of the year to the sub sidy al low ances or loan guar an tee li a bil ity for loans and guar an tees out stand ing.
Di rect loans ob li gated and loan guar an tees com mit ted be fore fis cal 1992 may be re ported un der the al low ance- for- loss method or the pres ent- value method. Un der the al low ance- for- loss method, the out stand ing prin ci pal of di rect loans is re duced by
an al low ance for uncollectible amounts; and the li a bil ity for loan guar an tees is the amount the agency es ti mates would more likely than not re quire a fu ture cash out flow to pay de fault claims.
Under the pres ent- value method, the out stand ing prin ci pal of di rect loans is re duced by an al low ance equal to the dif fer ence be tween the out stand ing prin ci pal and the pres ent value of the ex pected net cash- flows; and the li a bil ity for loan guar an tees is the pres ent value of ex pected net cash out flows due to the loan guar an tees.
Taxes re ceiv able pri mar ily con sist of un col lected tax as sess ments, pen al ties and in ter est when tax pay ers have agreed the amounts are owed, or a court has de ter mined the as sess ments are owed. The Bal ance Sheet does not in clude un paid as sess ments when
nei ther tax pay ers nor a court has agreed that the amounts are owed
(com pli ance as sess ments) or the Gov ern ment does not ex pect fur ther col lec tions due to fac tors such as the tax payer's death, bank ruptcy or in s o l v e n c y (writeoffs). Taxes re ceiv able are re ported net of an al low ance for the es ti mated por tion deemed to be uncollectible.
E. Taxes Receivable
Prop erty, plant and equip ment used in Gov ern ment op er a tions are car ried at cost. De pre ci a tion and am or ti za tion ex pense ap plies to prop erty, plant and equip ment re ported in the Bal ance Sheet ex cept land, un lim ited du ra tion land rights, and con struc tion in prog ress. De pre ci a tion is rec og nized us ing the straight- line method over the as sets es ti mated use ful lives.
Pen sion and post- retirement health ben e fit ex penses are re corded dur ing the time em ployee ser vices are ren dered. The re lated li a bil i ties for de fined ben e fit pen sion plans and post- retirement health ben e fits are re - corded at es ti mated pres ent value of fu ture ben e fits, less the es ti mated
pres ent value of fu ture nor mal cost con tri bu tions. Nor mal cost is the por tion of the ac tu ar ial pres ent value of pro jected ben e fits al lo cated as ex pense for em ployee ser vices ren dered in the cur rent year. Ac tu ar ial gains and losses (and prior and past ser vice cost, if any) are rec og nized im me di ately in the year they oc cur, with out am or ti za tion.
H. Pension and Post- Retirement Health Benefits Programs
F. Inventories and Related Property
In ven tories are val ued at his tor i cal cost. His tor i cal cost meth ods in - clude first- in- first- out, weighted av er
age and mov i n g av e r a g e . Es ti mated re pair costs re duce the value of in ven tory held for re pair. Ex cess, ob so lete and un ser vice able in ven to ries are val ued at es ti mated net re al iz able val ues.
D. Direct Loans and Loan Guarantees
G. Property, Plant and Equipment
NOTES TO THE FI NAN CIAL STATEMENTS 71
En vi ron men tal li a bil i ties are re corded at the es ti mated cur rent cost to remediate haz ard ous waste and en vi ron men tal con tam i na tion, as sum ing the use of cur rent tech nol ogy. Remediation con sists of re moval, treat ment and/ or safe con tain ment. Where tech nol ogy does not ex ist to cleanup haz ard ous waste, only the es ti ma ble por tion of the li a bil ity, typ i cally safe con tain ment, is re corded.
I. Environmental Liabilities De ferred main te nance is main te nance that was not per formed
when it should have been or was sched uled to be per formed and, there fore, is put off or de layed for a fu ture pe riod. Main te nance is the act of keep ing fixed as sets in ac cept able con di tion in clud ing pre ven ta tive main te nance, nor mal re pairs, and other ac tiv i ties needed to pre serve the as set so that it con tin ues to pro vide ac cept able ser vices and achieves its ex pected life. Main te nance ex cludes ac tiv i ties aimed at ex pand ing the ca pac ity of an as set or oth er wise up grad ing it to serve needs dif fer ent from those orig i nally in tended. De ferred main te nance in for ma tion is dis closed in the Sup ple men tal In for ma tion to the Fi nan cial State ments.
De ferred main te nance ex penses are not ac crued in the State ment of Net Cost, or rec og nized as li a bil i ties on the Bal ance Sheet.
Li a bil i ties for con tin gen cies are rec og nized on the Bal ance Sheet when both:
 A past trans ac tion or event has oc curred.  A fu ture out flow or other sac ri fice of re - sources is prob a ble and
mea sur able. The es ti mated con tin gent li a bility may be a spe cific amount or a range of amounts. If some amount within the range is a better es ti mate than any other
amount within the range, then that amount is rec og nized. If no a mount within the range is a better es ti mate than any other amount, then the min i mum amount in the range is rec og nized.
Con tin gent li a bil i ties that do not meet the above cri te ria for rec og ni tion, but for which there is at least a rea son able pos si bil ity that a loss has been in curred are dis closed in Note 18 Com mit ments and Con tin gencies.
K. Contingencies
A li a bil ity for so cial in sur ance pro grams (So cial Se cu rity, Medicare, rail road re tire ment, black lung and un em ploy ment) is rec og nized for any un paid amounts due as of the re port ing date. No li a bil ity is rec og nized for fu ture ben e fit pay ments not yet due. For fur ther in for ma tion, see the Stew ard ship In for ma tion sec tion on Stew ard ship Re spon si bil ities and Note 19 on Dedicated Collections.
L. Social Insurance
Fed eral Re serve Banks (FRBs), which are not part of the re port ing en tity, serve as the Gov ern ment's de pos i tary and fis cal agent. They pro cess Fed eral pay ments and de pos its to Trea sury's ac count and ser vice Fed eral debt se cu ri ties. FRBs owned $488.9 bil lion of Fed eral debt se cu - ri ties held by the pub lic as of Sep tem ber 30, 1999. FRB
earn ings that ex ceed stat u tory amounts of sur plus es tab lished for FRBs are paid to the Gov ern ment and are rec og nized as non- exchange rev e nue. Those earn ings to taled $26.0 bil lion for the year ended Sep tem ber 30, 1999. The
pri mary source of these earn ings is from in ter est earned on Fed eral debt se cu ri ties held by the FRBs.
FRBs is sue Fed eral Re serve notes, the cir cu lat ing cur rency of the United States. These notes are col lat er al ized by spe cific as sets owned by FRBs, typ i cally Fed eral debt se cu ri ties. Fed eral Re serve notes are backed by the full faith and credit of the U. S. Gov ern ment.
The Gov ern ment does not guar an tee pay ment of Gov ern ment- sponsored en ter prises li a bil i ties such as the Fed eral Na tional Mort gage As so ci a tion or the Fed eral Home Loan Mort gage Cor po ra tion, which are pri vately owned. These en ter prises also are ex cluded from the re port ing en tity.
M. Related Party Transactions J. Deferred Maintenance
72 NOTES TO THE FI NAN CIAL STATE MENTS
Note 2. Cash and Other Mon etary As sets Cash, in the amount of $60.4 bil lion, con sists of:  Trea sury bal ances held at the FRBs, net of out stand ing checks.
 Trea sury bal ances in spe cial depositaries , known as the U. S.
Trea sury Tax and Loan Note ac counts.
 Funds held out side of Trea sury and the FRBs by au tho - rized fis cal of fi cers or agents.
 Mon ies held by Gov ern ment col lec tion and dis burs ing of fi - cers, agen cies' undeposited col lec
tions, un con firmed de pos its, and cash trans fers.
 Time de pos its at fi nan cial in sti tu tions.
The Gov ern ment main tains for mal ar range ments with nu mer ous banks to main tain time de pos its known as com pen sat ing bal ances. These bal ances com pen sate the banks for ser - vices pro vided to the Gov ern ment,
such as main tain ing zero- balance ac counts for the col lec tion of pub lic mon ies.
Cash
Gold is val ued at the stat u tory price of $42.2222 per fine troy ounce. As of Sep tem ber 30, 1999, the num ber of fine troy ounces was 261,571,005. The mar ket value of gold on the Lon don Fixing as of the re port ing date was $299.00 per fine troy ounce. Gold was pledged as col lat eral for gold cer tif i cates is sued to the FRBs to tal ing $11.0 bil lion. See Note 14 Other Li a bil i ties.
Gold Cash and Other Monetary Assets as of September 30
(In billions of dollars) Cash ............................... 60. 4 Gold ................................ 11. 0 Domestic monetary assets ................ 1. 7
International monetary assets .............. 42. 1 Total cash and other monetary assets ..... 115. 2
Domestic Monetary Assets Do mes tic mon e tary as sets con sist of liq uid as sets, other than cash that are based on the U. S. dol lar, in - clud ing coins, sil ver bul lion and other coin age met als.
These items to taled $1.7 bil lion.
International Monetary Assets
As sets val ued on a ba sis other than the U. S. dol lar com prise In ter na tional mon e tary as sets.
The U. S. re serve po si tion in the In ter na tional Mon e tary Fund (IMF) rep re sents an in vest ment in the IMF. The IMF pro vides fi nan cial as sis tance to about 180 coun tries. It seeks to pro mote cur rency ex change sta bil ity.
Only a por tion of the re quired pay ment to the IMF was paid in cash, with the re main der treated as a sub  scrip tion. The re corded bal ance is
shown net of the sub scrip tion por tion, which rep re sents a let ter of credit pay able to the IMF.
As of Sep tem ber 30, 1999, the re main ing avail able bal ance un der the let ter of credit to taled $31.4 bil lion. The U. S. re serve po si tion in the IMF has a U. S. dol lar equiv a lent of $19.2 bil lion as of that date.
Spe cial Draw ing Rights (SDRs) are in ter est- bearing as sets ob tained through ei ther IMF al lo ca tions, trans  ac tions with IMF mem ber coun tries
or in ter est earn ings on SDR hold ings. Trea sury's Ex change Sta bi li za tion Fund held SDRs to tal ing $10.3 bil lion at the end of fis cal 1999. Those hold ings are sim i lar to an in vest ment in the IMF.
On Sep tem ber 30, 1999, Other li a bil i ties in cluded an $6.8 bil lion in ter est- bearing li a bil ity to the IMF. This li a bil ity con sisted of SDRs ob tained through IMF al locations.
NOTES TO THE FI NAN CIAL STATEMENTS 73
Ac counts re ceiv able in clud ing re lated in ter est re ceiv able, rep re sent claims to cash or other as sets from en ti ties out side the Fed eral Gov ern ment that arise from the sale of goods or ser vices, du ties, fines, cer tain li cense fees, re cov er ies, or other pro vi sions of the law.
An al low ance for es ti mated losses due to uncollectible amounts is es tab lished when it is more likely than not that the receivables will not be to tally col lected. Ac counts re ceiv able are net of an al low ance for uncollectible amounts of $12.5 bil lion as of Sep tem ber 30, 1999. The SDR Act of 1968 au tho rized
the Sec re tary of the Trea sury to is sue SDR cer tif i cates to FRBs i n e x change for cash. The value of these certificates can not ex ceed the value of the SDR hold ings. The Sec re tary of the Trea sury de ter mines when the FRBs can re deem the SDR cer tif i cates. The li a bil ity for such re demp  tions, which to taled $7.2 bil lion at the
end of the fis cal year, is in cluded in Note 14 Other Li a bil i ties. Each SDR was val ued at $1.38769 as of Sep tem ber 30, 1999.
In ter na tional mon e tary as sets also in clude for eign cur rency and other mon e tary as sets de nom i nated in for eign cur rency.
Note 3. Ac counts Receivable International
Monetary Assets, cont.
Accounts Receivable as of September 30
(In billions of dollars)
Agency or Program Name:
Department of Energy ........................................ 4. 1 Bureau of Reclamation ........................................ 3. 5 Foreign military sales ......................................... 2. 4 Federal family education loan program ............................ 1. 8 Operations and maintenance ................................... 1. 6 Multi- Peril Crop Insurance Fund ................................. 0. 8 Tennessee Valley Authority power program ......................... 0. 7 Hazardous Substance Superfund ................................ 0. 6 Minerals Management Service .................................. 0. 5 Mail delivery service .......................................... 0. 5 Veterans Health Administration .................................. 0. 4 Veterans Benefits Administration................................. 0. 2
All other programs ........................................... 17. 9
Total accounts receivable, net ................................ 35. 0
74 NOTES TO THE FI NAN CIAL STATE MENTS
Note 4. Loan and Loan Guar antee Programs
The Fed eral Gov ern ment uses two meth ods, di rect loans and loan guar an tee pro grams, to ac com plish the same goals. These goals are to pro mote the Na tion's wel fare by mak ing di rect loans and guar an tee ing non- Federal loans to seg ments of the pop u la tion not ad e quately served by non- Federal in sti tu tions. For those un able to af ford credit at the mar ket rate, Fed eral credit pro grams pro vide sub si dies in the form of di rect loans of fered at an in ter est rate lower than the mar ket rate. For those to whom non- Federal fi nan cial in sti tu tions are re luc tant to grant credit be cause of the high risk in volved, Fed eral credit pro grams guar an tee the pay ment of these non- Federal loans and ab sorb the cost of de faults.
The long- term cost of loans and guar an tees out stand ing for loans ob li gated or guar an tees com mit ted af ter fis cal 1991 is the sub sidy cost al low ance for di rect loans out stand ing and the li a bil ity for loan guar an tees out stand ing as of the end of fis cal 1999. The long- term cost for loans ob li gated or guar an tees com mit ted be fore fis cal 1992 is the al low ance for uncollectible amounts (or pres ent value al low ance) for di rect loans out stand ing and the li a bil ity for loan guar an tees out s t a n d i n g . The long- term cost is based on all di rect loans and guar an teed loans dis bursed in fis cal 1999 and pre vi ous years that are out stand ing as of the end of fis cal 1999. It in cludes the sub sidy cost of these loans and guar an tees es ti mated as of the time of loan dis burse ment and sub se quent ad just ments such as mod i fi ca tions, reestimates, am or ti za tion and write- offs.
Net Loans Re ceiv able in clude re lated in ter est and fore closed prop erty. They are in cluded in the as sets sec tion of the Bal ance Sheet.
The to tal sub sidy ex pense is the cost of di rect loans and loan guar an tees rec og nized dur ing fis cal 1999. It con sists of the sub sidy ex pense in curred for di rect and guar an teed loans dis bursed dur ing fis cal 1999, for
mod i fi ca tions made dur ing fis cal 1999 of loans and guar an tees out stand ing, and for reestimates as of the end of fis cal 1999 of the cost of loans and guar an tees out stand ing. This ex pense is in cluded in the State ment of Net Cost.
The Di rect Stu dent Loan pro gram, es tab lished in fis cal 1994, of fers four types of ed u ca tion loans: Stafford, Unsubsidized Stafford, PLUS for par ents and con sol i da tion loans. Ev i dence of fi nan cial need is re quired for a stu dent to re ceive a sub si dized Stafford loan. The other three loan pro grams are avail able to bor row ers at all in come lev els. These loans usu ally ma ture 9 to13 years af ter the stu dent is no lon ger en rolled. They are un se cured.
Ru ral Elec tri fi ca tion and Tele com mu ni ca tions loans are for the con struc tion and op er a tion of gen er at ing plants, elec tric trans mis sion, and dis tri bu tion lines or sys tems. These loans carry an av er age ma tu rity of greater than 20 years and are usu ally se cured.
The ma jor ru ral pro grams are funded through the Ru ral Housing In sur ance Fund pro gram ac count, which includes:
 Very low and low- to- mod er ate in come home own er ship loans and guar an tees.  Very low- income hous ing re pair loans.  Multifamily hous ing loans and guar an tees.  Do mes tic farm la bor hous ing loans.  Housing site loans.
 Credit sales of ac quired prop erty. Loan pro grams are lim ited to ru ral ar eas that in clude towns, vil lages and other places not part of an ur ban area. The ma jor ity of these loans ma ture in ex cess of 25 years and are se cured by the prop erty of the bor rower.
The Fed eral Fam ily Ed u ca tion Loan pro gram, for merly known as the Guar an teed Stu dent Loan pro gram, was es tab lished in fis cal 1965. Like
the Di rect Stu dent Loan pro gram, it of fers four types of loans: Stafford, Unsubsidized Stafford, PLUS for par ents and con sol i da tion loans.
The Agency for In ter na tional De vel op ment pro vides eco nomic as sis tance to se lected coun tries in sup port of U. S. ef forts to pro mote sta bil ity and se cu rity in ter ests in stra te gic re gions of the world.
Ex port- Import Bank aids in fi nanc ing and pro mot ing U. S. ex ports. To ac com plish its ob jec tives, the bank's au thor ity and re sources are used to:
 As sume com mer cial and po lit i cal risk that ex port ers or pri vate in sti tu tions are un will ing or are un able to un der take.  Over come ma tu rity and other lim i ta tions in pri vate sec tor fi nanc ing.  Assist U. S. ex ports to meet
for eign of fi cially spon sored ex port credit com pe ti tion.  Pro vide lead er ship and guid ance in ex port fi nanc ing to the U. S. ex port ing and bank ing com mu ni ties and to for eign bor row ers. Re pay ment terms for these loans are usu ally 1 to 7 years.
The Fed eral Housing Ad min is tra tion (FHA) pro vides mort gage in sur ance en cour ag ing lend ers to make credit avail able to ex pand home own er ship. FHA pre dom i nately serves borrowers that the con ven tional mar ket does not ad e quately serve such as first- time home buy ers, mi nor i ties, lower- income fam i lies and res i dents of un der served ar eas.
Vet eran Housing Ben e fits pro vide par tial guar anty of res i den tial mort gage loans is sued to el i gi ble vet er ans re serv ists and ser vice mem bers by pri vate lend ers. This guar an tee al lows vet er ans, re serv ists and ser vice mem bers to pur chase a home with out a sub stan tial down pay ment.
Other loan guar an tees in clude: Small Busi ness Ad min is tra tion loans to mi nor ity busi nesses; and the Farm Ser vice Agency for farm own er ship, emer gency and di sas ter loans.
NOTES TO THE FI NAN CIAL STATEMENTS 75
Loan and Loan Guarantee Programs as of September 30
(In billions of dollars)
Loans and Loan Guarantees Outstanding
Long- term Cost of Loans and
Loan Guarantees Outstanding
Net Loans Receivable Amount
Guaranteed by the Federal Government
Subsidy Expense for the Fiscal
Year ended September 30,
1999 Di rect Loans:
Federal direct student loans ........ 46. 5 0. 4 46. 1 0. 4
Rural development ...... 68. 9 13. 1 55. 8 Federal family
education loan programs........ 23. 7 14. 5 9. 2
Assistance for states of the former Soviet Union ......... 11. 0 4. 4 6. 6
Food for progress credits ............. 10. 6 7. 2 3. 4 0. 5
HUD, all other ......... 10. 3 0. 6 9. 7 Direct loans
for spectrum auction sales ......... 8. 3 (0. 4) 8. 7 1. 2
Export credit guarantees.......... 6. 9 3. 9 3. 0
All other direct loan programs ........... 49. 9 8. 7 41. 2 1. 7
Total .............. 236. 1 52. 4 183. 7 3. 8
Guaranteed Loans:
Federal Housing Administration........ 551. 4 5. 9 508. 1 (5. 2)
Veterans housing benefit program....... 213. 5 5. 8 84. 0 1. 1
Federal family education loan programs........ 127. 6 12. 2 121. 2 3. 1
Small business loans .... 39. 6 1. 4 31. 9 (0. 1) Financing account
guarantees and insurance ........... 24. 2 5. 6 24. 2 1. 9
Rural Housing Service..... 10. 0 0. 2 9. 0 All other guaranteed
loan programs........ 38. 6 4. 0 36. 9 1. 0
Total............... 1,004. 9 35. 1 815. 3 1. 8
76 NOTES TO THE FI NAN CIAL STATE MENTS
Note 6. In ventories and Re lated Property
In ven tories and re lated prop erty con sist of the cat e go ries listed be low, net of al low ance for ob so lete and un ser vice able in ven tory, as of Sep tem ber 30, 1999.
In ven tory held for sale in cludes tan gi ble per sonal prop erty held for sale, net of al low ances.
Op er ating Ma te rials and Sup - plies are com prised of tan gi ble per sonal prop erty pur chased for use in nor mal op er a tions.
Ma te rials and sup plies held for fu ture use in clude tan gi ble per sonal prop erty not readily avail able in the mar ket or held be cause there is more
than a re mote chance that they will even tu ally be needed.
Stock pile ma te ri als are stra te gic and crit i cal ma te ri als held for use in na tional de fense, con ser va tion or na tional emer gen cies due to stat u tory re quire ments; for ex am ple, co balt, tin and nickel.
Com mod i ties in clude items of com merce or trade that have an ex change value used to sta bi lize or sup port mar ket prices.
Seized mon e tary in stru ments com prise only mon e tary in stru ments. These mon e tary in stru ments are await ing judge ment to de ter mine
own er ship. The re lated li a bil ity is in cluded in Other li a bil i ties. Other prop erty seized by the Gov ern ment, such as real prop erty and tan gi ble per sonal prop erty, is not in cluded as a Gov ern ment as set. It is ac counted for in agency prop erty- management re cords un til the prop erty is for feited, re turned or oth er wise liq ui dated.
For feited prop erty is com prised of mon e tary in stru ments, in tan gi ble prop erty, real prop erty and tan gi ble per sonal prop erty ac quired through for fei ture pro ceed ings; prop erty ac quired by the Gov ern ment to sat isfy a tax li a bil ity; and un claimed and aban doned mer chan dise.
Inventories and Related Property as of September 30
(In bil lions of dol lars) De fense All Oth ers Total
Inventory held for sale ................. 67. 0 1. 1 68. 1 Operating materials and supplies ......... 40. 9 5. 5 46. 4 Materials and supplies held for future use... 17. 8 0. 1 17. 9 Stockpile materials ................... 2. 8 37. 5 40. 3 Commodities ........................ - 0. 4 0. 4 Seized monetary instruments ............ - 0. 1 0. 1
Forfeited property .................... - 0. 1 0. 1 Total inventories and related property ... 128. 5 44. 8 173. 3
Taxes Receivable as of September 30
(In billions of dollars) Gross taxes receivable .............. 79. 2 Allowance for doubtful accounts ....... (56. 5)
Taxes receivable, net ............. 22. 7
Note 5. Taxes Re ceiv able
Taxes re ceiv able are the gross tax re ceiv ables net of al low ance for doubt ful ac counts.
NOTES TO THE FI NAN CIAL STATEMENTS 77
Note 7. Property, Plant and Equipment
Prop erty, plant and equip ment con sist of tan gi ble as sets, in clud ing land, build ings, struc tures and other as sets used to pro vide goods
and ser vices. Cer tain types of tan gi ble as sets, col lec tively re ferred to as Stew ard ship As sets, are not re ported as prop erty, plant and equipment or else where on the Bal ance Sheet. This is based on ac count ing stan dards that be came ef fec tive for fis cal 1998. Stew ard ship as sets in clude Na tional de fense as sets, Her i tage as sets and Stew ard ship land. These as sets are pre sented in the Stew ard ship In for ma tion sec tion.
Property, Plant and Equipment as of September 30
(In bil lions of dol lars) Cost Ac cu mu lated
De pre ci a tion/ Am or ti za tion Net
Buildings, structures and facilities .......... 284. 8 135. 3 149. 5 Furniture, fixtures and equipment .......... 151. 0 75. 0 76. 0 Construction in progress................. 49. 3 - 49. 3 Land and land improvements ............. 25. 4 5. 5 19. 9 Automated data processing software........ 3. 8 2. 0 1. 8 Assets under capital lease ............... 1. 5 0. 5 1. 0 Leasehold improvements ................ 2. 0 0. 7 1. 3
Total property, plant and equipment ...... 517. 8 219. 0 298. 8
Note 8. Other As sets
The cat e gory of Other as sets con sists of ad - vances and pre pay ments, se cu ri ties and in vest ments, and other Gov ern ment as sets not oth er wise clas si fied. This fig ure pres ents se cu ri ties at cost, net of un am or - tized pre mi ums and dis counts.
Other Assets as of September 30
(In billions of dollars) Securities and investments ....... 17. 2 Advances and prepayments....... 13. 0
Other ....................... 24. 1 T otal other assets ............ 54. 3
78 NOTES TO THE FI NAN CIAL STATE MENTS
Note 9. Accounts Payable
Accounts Payable as of September 30
(In billions of dollars)
Agency:
Interest on Federal debt securities held by the public ....................... 42. 6
DOD .................................. 16. 7 OPM .................................. 1. 2 U. S. Postal Service ....................... 4. 0 NASA ................................. 2. 9 Agriculture.............................. 2. 7 VA .................................... 2. 3 HUD .................................. 1. 8 Justice ................................. 1. 6 AID ................................... 1. 4 General Services Administration .............. 1. 2 Transportation ........................... 1. 0 Energy ................................. 1. 0 Executive Office of the President ............. 1. 0 All other departments ...................... 4. 4
Total accounts payable.................. 85. 8
The fig ure un der Ac counts pay able in cludes In ter est on Fed eral debt se cu ri ties held by the pub lic. This re flects un paid in ter est ac crued on Federal debt se cu ri ties held by the pub lic (see Note 10) as of Sep tem ber 30, 1999. Other ac counts pay able are for goods and prop erty or dered and re ceived, and for ser vices ren dered by other than em ploy ees.
Fed eral debt held by the pub lic to taled $3,631.6 bil lion at the end of fis cal 1999. The ac com pa ny ing Fed eral Debt Se cu ri ties ta ble de tails Gov ern ment bor row ing to fi nance op er a tions. This ta ble shows debt at face value. Un am or tized pre mi ums are added and un am or tized dis counts sub tracted.
 Intragovernmental hold ings rep re sent the por tion of the gross Fed eral debt held as in vest ments by Gov ern ment en ti ties.
This in cludes ma jor trust funds. F o r m o r e i n f o r m a t i o n o n t r u s t funds, see Note 19 Ded i cated Col lec tions. This re port elim i nates
intragovernmental hold ings in con - solidation. Se cu ri ties that rep re sent debt held by the pub lic are pri mar ily is sued by the Trea sury and in clude:
 In ter est- bearing mar ket able se cu ri ties (bills, notes and bonds).
 In ter est- bearing non mar ket able se cu ri ties (for eign se ries, State and lo cal gov ern ment se  ries, do mes tic se ries, and
sav ings bonds).  Non- interest bear ing debt (ma tured and other). As of Sep tem ber 30, 1999, $5,568 bil lion of Fed eral debt was sub ject t o a s t a t u t o r y l i m i t (3 1 U .S .C . 3101). That limit was $5,950 bil lion. The debt sub ject to the limit in cludes:
 Debt held by the pub lic and intragovernmental hold ings,
Definitions of Debt
 Gross Fed eral Debt - All Gov ern ment debt, whether is sued by Trea sury (Trea sury se cu ri ties) or by other agen cies (agency se curities). Gross Fed eral debt is ei ther held by the pub lic or by Fed eral Gov ern ment en ti ties.
 Debt Held by the Pub lic - Fed eral debt held out side the Gov ern ment by in di vid u als, cor po ra tions, State or lo cal gov ern ments, the Fed eral Re serve Sys tem, and for eign gov ern ments and cen tral banks.
 Intragovernmental hold ings - Fed eral debt held by Gov ern ment trust funds, re volv ing funds and spe cial funds.
Note 10. Federal Debt Securities Held by the Pub lic
NOTES TO THE FI NAN CIAL STATEMENTS 79
Federal Debt Securities Held by the Public as of September 30
(In bil lions of dol lars)
Be gin ning Balance Sept. 30,
1998 Net
Change Dur ing
Fiscal 1999
End ing Balance Sept. 30,
1999 Av er age
Interest Rate Dur ing Fis cal 1999
Treasury Securities:
Marketable securities ................... 3,331. 0 (98. 0) 3,233. 0 6.341% Non- marketable securities ................ 2,187. 7 226. 6 2,414. 3 6.674%
Non- interest bearing debt ................ 7. 5 1. 5 9. 0 Total Treasury securities ............... 5,526. 2 130. 1 5,656. 3 Plus: Unamortized premium
on Treasury securities................ 16. 9 (0. 9) 16. 0 Less: Unamortized discount
on Treasury securities................ 78. 9 1. 5 80. 4 Total Treasury securities,
net of unamortized premiums and discounts.................... 5,464. 2 127. 7 5,591. 9
Agency Securities:
Tennessee Valley Authority ............... 26. 7 (0. 8) 25. 9 All other agencies ...................... 2. 3 (0. 2) 2. 1
Total agency securities, net of unamortized premiums and discounts ............ 29. 0 (1. 0) 28. 0
Total Federal debt ................ 5,493. 2 126. 7 5,619. 9 Less: Intragovernmental holdings,
net of unamortized premiums and discounts .................. 1,775. 5 212. 8 1,988. 3
Total Federal debt securities held by the public .............. 3,717. 7 (86. 1) 3,631. 6
Types of mar ket able se cu ri ties:
Bills Short- term ob li ga tions is sued with a term of 1 year or less. Notes Me dium- term ob li ga tions is sued with a term of at least 1 year, but not more than 10 years. Bonds Long- term ob li ga tions of more than 10 years.
less most agency securities, Fed eral Fi nancing Bank debt, mis cel la neous debt, and un re al ized dis count on Gov ern ment ac count se ries se cu ri ties.
 Un am or tized net dis counts on pub lic is sues of Trea sury notes and bonds (other than zero- coupon bonds).
Note 10. Federal Debt, cont.
80 NOTES TO THE FI NAN CIAL STATE MENTS
Intragovernmental Holdings: Federal Debt Securities Held as Investments by Government Accounts as of September 30
(In billions of dollars)
Be gin ning Balance Sept. 30,
1998 Net
Change Dur ing
Fis cal 1999
End ing Bal ance Sept. 30,
1999
SSA, Old- Age and Survivors Insurance .............. 653. 3 108. 9 762. 2 OPM, civil service retirement and disability ............ 451. 3 30. 0 481. 3 DOD, military retirement ......................... 133. 8 7. 5 141. 3 HHS, Hospital Insurance Fund..................... 118. 3 35. 4 153. 7 SSA, disability insurance......................... 77. 0 15. 7 92. 7 Labor, unemployment............................ 70. 6 6. 8 77. 4 HHS, supplementary medical insurance .............. 39. 5 (13. 0) 26. 5 FDIC funds ................................... 39. 1 1. 7 40. 8 Railroad Retirement Board........................ 21. 8 2. 6 24. 4 OPM, Employees Life Insurance ................... 19. 4 1. 3 20. 7 Transportation, Highway Trust Fund ................. 17. 9 10. 2 28. 1 Energy, nuclear waste disposal .................... 11. 2 4. 0 15. 2 All other programs and funds ...................... 117. 6 8. 0 125. 6
Subtotal ................................... 1,770. 8 219. 1 1,989. 9 Plus: Unamortized net premiums (discounts) .......... 4. 7 (6. 3) (1. 6)
Total intragovernmental holdings, net ............. 1,775. 5 212. 8 1,988. 3
NOTES TO THE FI NAN CIAL STATE MENTS 81
The Gov ern ment of fers its em ploy ees life and health in sur ance, as well as re tire ment and other ben e fits. These ben e fits ap ply to ci vil ian and mil i tary em ploy ees. The Fed eral Gov ern ment ad min is ters more than 40 pen sion plans.
The Of fice of Per son nel Man age ment (OPM) ad min is ters the larg est ci vil ian plan. De part ment of De fense (DOD), mean while, ad min is ters the larg est mil i tary plan. The Gov ern ment of fers both de fined ben e fit and de fined con tri bu tion pen sion plans. The larg est are de fined ben e fit plans. The change in ac tu ar ial ac crued post- retirement health ben e fits li a bil ity and com po nents of re lated ex pense for fis cal 1999 are pre - sented be low.
Federal Employee and Veteran Benefits Payable as of September 30
(In billions of dollars) Civilian Military Total
Pensions.................................. 1,025. 2 661. 8 1,687. 0 Post- retirement health benefits ................. 179. 7 196. 2 375. 9 Veterans compensation
and burial benefits ......................... - 483. 2 483. 2 Liability for other benefits...................... 49. 0 5. 6 54. 6
Total Federal employee and veteran benefits payable ................... 1,253. 9 1,346. 8 2,600. 7
Note 11. Federal Em ployee and Vet eran Benefits Payable
Change in Actuarial Accrued Pension Liability and Components of Related Expenses
(In billions of dollars) Civilian 1 Military To tal
Actuarial accrued pension liability, as of September 30, 1998.................... 990. 3 650. 5 1,640. 8
Pen sion ex pense: Normal costs ............................. 22. 2 10. 4 32. 6 Interest on liability .......................... 72. 0 33. 7 105. 7 Plan amendments and assumption changes ...... - 5. 7 5. 7 Actuarial (gains)/ losses ...................... (13. 2) (6. 5) (19. 7)
Total pension expense ..................... 81. 0 43. 3 124. 3 Benefits paid ............................. (46. 1) (32. 0) (78. 1)
Actuarial accrued pension liability, as of September 30, 1999 ................ 1,025. 2 661. 8 1,687. 0
1 Does not in clude U. S. Tax Court and ju di cial branch
Significant Assumptions Used in Determining Pension Liability and the Related Expense
(In percentages)
Civilian Military
Rate of interest ............................. 7. 00% 6. 25% Rate of inflation ............................. 4. 00% 3. 00%
Projected salary increases ..................... 4.25% 3.50%
82 NOTES TO THE FI NAN CIAL STATE MENTS
Pensions
The larg est ci vil ian pen sion plan is ad min is tered by OPM and cov ers ap prox i mately 90 per cent of all Fed eral ci vil ian em ploy ees. This plan in cludes two com po nents of de fined ben e fits. Those are the Civil Ser vice Re tire ment Sys tem ( CSRS) and the Fed eral Em ployees' Re tire ment Sys tem (FERS ). The ba sic ben e fit com po nents of the CSRS and the FERS are fi nanced and op er ated through the Civil Ser vice Re tire ment and Dis abil ity Fund (CSRDF).
CSRDF mon eys are gen er ated pri mar ily from em ploy ees, agency con tri bu tions, pay ments from the gen eral fund and in ter est on in vest ments in
Fed eral debt se cu ri ties. See Note 19 Ded i cated Col lec tions, Civil Ser vice Re tire ment and Dis abil ity Fund.
The Fed eral Re tire ment Thrift In vest ment Board, an in de pend ent Gov ern ment agency, op er ates the Thrift Sav ings Plan. Fed eral em ploy ees and re tir ees cov ered by CSRS and FERS own the fund's as sets. This Fi nan cial Re port ex cludes this fund be cause the em ploy ees own its as sets.
Fed eral debt held by the fund is in cluded and clas si fied as Fed eral debt held by the pub lic. FERS em ploy ees may con trib ute up to 10 per cent of base pay to the plan, which the Gov - ern ment matches up to 5 per cent.
CSRS em ploy ees may con trib ute up to 5 per cent of base pay with no Gov - ern ment match.
The Thrift Sav ings Plan held $29.4 bil lion in non mar ket able Trea sury se  cu ri ties as of Sep tem ber 30, 1999.
The Fed eral Gov ern ment's re lated li a bil ity is in cluded in To tal Fed eral debt se cu ri ties held by the pub lic in the Bal ance Sheet.
Health Benefits
Ci vil ian re tir ees pay the same in sur ance pre mium as ac tive em ploy ees un der the Fed eral Em ployee Health Ben e fits Pro gram (FEHBP). These pre mi ums cover only a por tion of the costs.
Other Benefits
Em ployee and an nu itant con tri bu tions and in ter est on in vest ments fund a por tion of the Fed eral Em ployees Group Life In sur ance pro gram. This in sur ance pro gram pays pri vate in sur ance com pa nies for Fed eral em ploy ees' group life in sur ance. The Of fice of Per son nel Man age ment ad min is ters this pro gram.
Civilian Employees Significant Assumptions Used in Determining
Post- Retirement Health Benefits and the Related Expense
(In percentages) Ci vil ian Mil i tary
Rate of interest .............................. 7. 0% 6. 5% Rate of health care cost inflation ................. 7. 0% 4.5- 10.4%
Change in Actuarial Accrued Post- Retirement Health Benefits Liability and Components of Related Expenses
(In billions of dollars) Civilian Military To tal
Actuarial accrued post- retirement health benefits liability, as of September 30, 1998 ........................ 181. 8 223. 4 405. 2
Prior period adjustments ........................... - (37. 5) (37. 5) Corrected beginning post- retirement health
benefits liability ................................ 181. 8 185. 9 367. 7
Post- retirement health ben e fits ex pense:
Normal costs ................................. 6. 0 4. 7 10. 7 Interest on liability .............................. 11. 8 12. 0 23. 8
Actuarial (gains)/ losses .......................... (13. 5) - (13. 5) Total post- retirement
health benefits expense ...................... 4. 3 16. 7 21. 0 Claims paid .................................... (6. 4) (6. 4) (12. 8)
Actuarial accrued post- retirement health benefits liability, as of September 30, 1999 ... 179. 7 196. 2 375. 9
NOTES TO THE FI NAN CIAL STATE MENTS 83
Pensions
The De part ment of De f e n s e (DOD) Mil i tary Re tire ment Fund fi nances mil i tary re tire ment and sur - vi vor ben e fit pro grams.
The mil i tary re tire ment sys tem c o n s i s t s o f a f u n d e d , noncontributory, de fined ben e fit plan. It ap plies to the Army, Navy, Ma rine Corps and Air Force. This sys tem in cludes non- disability re tire ment pay, dis abil ity re tire ment pay and re tire ment pay for re serve ser vice and sur vi vor an nu ity pro grams.
Health Benefits
Mil i tary ben e fits en ti tle re tir ees and their de pend ents to health care in mil i tary med i cal fa cil i ties if a fa - cil ity can pro vide the needed care.
Un til they reach age 65, mil i tary re tir ees and their de pend ents also are en ti tled to be re im bursed for the cost of health care from ci vil ian pro vid ers. A pre mium is charged to en - roll in DOD's ci vil ian care pro gram.
In ad di tion, there are de duct ible and copayment re quire ments for ci vil - ian care. Af ter they reach 65 years
of age, Medicare cov ers mil i tary re - tir ees. Mil i tary re tiree health care fig - ures in clude the cost of ed u ca tion
and train ing, staff ing, build ings and equip ment, as well as the op er a tions and main te nance of med i cal fa cil i ties. They also in clude claims paid to ci vil ian pro vid ers and the cost of ad min is ter ing the pro gram.
Compensation and Burial Benefits
The Gov ern ment com pen sates dis abled vet er ans and their sur vi - vors. Vet erans com pen sa tion is pay able
as a dis abil ity ben e fit or a sur - v i v o r ' s b e n e f i t . E n t i t l e m e n t t o com pen sa tion de pends on: the vet eran's dis abil i ties hav ing been in - curred in, or ag gra vated dur ing, ac tive
mil i tary ser vice; death while on duty, or death re sult ing from ser - vice- connected dis abil i ties, if not in
ac tive duty. Burial ben e fits in clude a burial and plot or in ter ment al low ance pay able for a vet eran, who at the time of death, qual i fied to re ceive c o m p e n s a t i o n o r a p e n s i o n , o r whose death oc curred in a VA fa cil ity.
The li a bil ity for vet er ans com pen sa tion and burial ben e fits pay able de creased in fis cal 1999 by $97.8
bil lion. The pri mary fac tor con trib - ut ing to this de crease was a change in in ter est rate as sump tions. Due to this change, the State ment of Net Cost item ti tled Vet erans ben e fits and ser vices de creased by $204.8 bil lion.
Other Benefits
Vet erans in sur ance in cludes the fol low ing pro grams:
 United States Gov ern ment Life In sur ance es tab lished in 1919 to han dle new is sues and the con ver sion of World War I Risk Term In sur ance.
 Na tional Ser vice Life In sur ance es tab lished in 1940 to meet the needs of World War II ser vice per son nel.  Vet erans Spe cial Life In sur ance es tab lished in 1951 for Ko rean vet er ans who did not have ser vice- connected dis abil i ties.  Ser vice- Disabled Vet erans In sur ance es tab lished in 1951 for vet er ans with ser vice- connected dis abil i ties.  Vet erans Re opened In sur ance es tab lished a 1- year re open ing in 1965 of Na tional Ser vice Life In sur ance for cer tain dis abled World War II and Ko rean vet er ans. Military Employees (Including Veterans)
Veterans Compensation and Burial Benefits Payable as of September 30 (In billions of dollars)
Veterans ................................................... 397. 5 Survivors ................................................... 82. 8 Burial benefits ............................................... 2. 9
Total compensation and burial benefits payable ..................... 483. 2
84 NOTES TO THE FI NAN CIAL STATE MENTS
Dur ing World War II and the Cold War, the United States de vel oped a mas sive in dus trial com plex to re search, pro duce and test nu clear weap ons. This in cluded nu clear re ac tors, chem i cal pro cess ing build ings, metal ma chin ing plants, lab o ra to ries and main te nance fa cil i ties.
These ac tiv i ties left an en vi ron men tal leg acy of con tam i nated ar eas and build ings. Vol umes of waste and spe cial nu clear ma te ri als re quire treat ment, sta bi li za tion and dis posal. The re sult ing en vi ron men tal li a bil i ties con sist of the costs as so ci ated with re mov ing, con tain ing and/ or dis pos ing of this haz ard ous waste.
Of those en vi ron men tal li a bil i ties, this re port pres ents only cleanup c o s t s f r o m F e d e r a l o p e r a t i o n s known to re sult in haz ard ous waste that the Fed eral Gov ern ment is re quired to clean up by Fed eral, State, or lo cal stat utes and/ or reg u la tions. The De part ment of En ergy in curred
op er at ing and cap i tal ex pen di tures to tal ing $5.8 bil lion in fis cal
1999. It used these funds to remediate leg acy waste. This in cludes nu clear ma te ri als and fa cil i ties sta bi li za tion, and waste treat ment, stor age and dis posal ac tiv i ties at each in stal la tion.
En vi ron men tal man age ment fa - cil i ties and sites in clude costs for en vi ron men tal res to ra tion; nu clear ma te rial and fa cil ity sta bi li za tion; and waste treat ment, stor age and dis posal ac tiv i ties at each in stal la tion. It also in cludes cost for re lated ac tiv i ties such as land lord re spon si bil i ties, pro gram man age ment and le - gally pre scribed grants for
par tic i pa tion and over sight by Na tive Amer i can tribes and reg u la tory agen cies.
Ac tive and sur plus fa cil i ties rep re sent an tic i pated remediation cost for those fa cil i ties that are con duct ing on go ing op er a tions but ul ti mately will re quire sta bi li za tion, de ac ti va tion and de commissioning.
High- level waste and spent nu - clear fuel in clude the full cost to pro vide for per ma nent dis posal of
the Na tion's high- level ra dio ac tive waste and spent nu clear fuel.
Pro jects with no cur rent fea si bil ity remediation ap proach are ex cluded from the es ti mate. Sig nif i cant pro jects not in cluded are:
 Nu clear ex plo sion test ar eas (e. g., Ne vada test site).  Large sur face wa ter bod ies (e. g., Clinch and Co lum bia Rivers).  Most ground wa ter (even with treat ment, fu ture use will be re stricted).  Some spe cial nu clear ma te rial (e. g., ura nium hexafluoride). The De p a r t m e n t of De f e n s e (DOD) is re spon si ble for the cleanup of fa cil i ties it op er ates or has op er ated, in clud ing res to ra tion of ac tive and Base Re align ment and Clo sure in stal la tions and for merly used de fense sites; dis posal of chem i cal weap ons; en vi ron men tal costs as so ci ated with the dis posal of weap ons sys tems (pri mar ily nu clear pow ered air craft car ri ers and sub ma rines); and for train ing range cleanup.
Environmental and Disposal Liabilities as of September 30
(In billions of dollars)
Department of Energy:
Environmental management facilities and sites .................... 183. 7 Active and surplus facilities ................................... 25. 4 High- level waste and spent nuclear fuel .......................... 14. 9 Other ................................................... 6. 7
Total Energy ............................................ 230. 7
DOD:
Training ranges............................................ 34. 0 Active installations ......................................... 15. 4 Nuclear powered aircraft carriers and submarines .................. 10. 8 Chemical weapons disposal .................................. 8. 9
Other ................................................... 10. 6 Total DOD.............................................. 79. 7
All other agencies ........................................ 2. 8 Total environmental and disposal liabilities..................... 313. 2 Note 12. En vironmental and Dis posal Li abilities
NOTES TO THE FI NAN CIAL STATE MENTS 85
Benefits Due and Payable as of September 30
(In billions of dollars) Federal Old- Age and Survivors Insurance.... 29. 0 Federal Hospital Insurance (Medicare Part A) . 13. 3 Grants to States for Medicaid ............. 11. 6 Federal Supplemental Medical Insurance
(Medicare Part B) .................... 10. 4 Federal Disability Insurance .............. 6. 8
Supplemental security income ............ 1. 0 Railroad retirement..................... 0. 7 Unemployment insurance ................ 0. 4 Other benefits ........................ 0. 6
Total benefits due and payable .......... 73. 8
Note 13. Ben e fits Due
These amounts are the ben e fits owed to pro gram re cip i ents or med i cal ser vice pro vid ers as of the fis cal year end that have not yet been paid. For a de scrip tion of the pro grams, see the Stew ard ship Re spon si bil ities sec tion un der Stew ard ship In for ma tion.
Note 14. Other Li abilities
In sur ance pro grams in clude bank de posit in sur ance, guar an tees of pen sion ben e fits, life and med i cal in sur ance. They also in clude in sur - ance against dam age to prop erty
(home, crops and air planes) caused by per ils such as flood ing and other nat u ral di sas ters, risk of war, and in solvency.
Ac crued wages and ben e fits con sist of the es ti mated li a bil ity for ci vil ian and com mis sioned of fi cers' sal a ries and wages earned but un  paid. They also in clude funded
an nual leave and other em ployee ben e fits that have been earned but are un paid. Amounts re ceived for goods and
ser vices to be pro vided com prise Advances from oth ers.
Ex change Sta bi li za tion Fund in cludes Spe cial Draw ing Rights (SDRs) cer tif i cates is sued to the Fed eral Re serve Banks and al lo ca tions from the In ter na tional Mon e tary Fund.
Other debt in cludes Gov ern ment ob li ga tions, whether se cured or un se cured, not in cluded in pub lic debt.
Gold cer tif i cates are monetarized por tions of gold and the cer tif i cates are de pos ited in the Fed eral Re serve Bank.
De ferred rev e nue re fers to rev e nue re ceived but not yet earned. Other mis cel la neous li a bil i ties in clude amounts ac crued for con tin gent liabilities.
Other Liabilities as of September 30
(In billions of dollars) Insurance programs ........................................ 21. 2 Accrued wages and benefits ................................. 18. 5 Advances from others ...................................... 16. 0 Exchange Stabilization Fund ................................. 14. 0 Other debt............................................... 11. 3 Gold certificates .......................................... 11. 0 Deferred revenue ......................................... 9. 5 Unclassified deposited funds ................................. 7. 1 Other miscellaneous liabilities ................................ 60. 4
Total other liabilities ...................................... 169. 0
86 NOTES TO THE FI NAN CIAL STATE MENTS
Note 15. Col lections and Re funds of Fed eral Revenue
Trea sury is the Fed eral Gov ern ment's prin ci pal rev e nue- collecting agency. Col lec tions of In di vid ual income and tax with hold ings in clude es ti mated in come tax pay ments by in di vid u als, So cial Se cu rity and Medicare taxes, rail road re tire - ment taxes and in di vid ual in come tax with hold ings.
Re funds of In di vid ual in come and tax with hold ings in clude re funds from the Earned In come Tax Credit (EITC). The EITC is a re fund able credit for tax pay ers who work and whose earn ings fall be low the es tab lished
ceil ing. A re fund able credit is first used to off set any in di vid ual taxes owed; any re main ing amounts are is sued to the tax payer. Amounts re ported for cor po rate in come taxes in tax year 1999 in clude cor po rate taxes of $8 bil lion for tax year 2000. In fis cal 1999, the IRS is sued $25.6 bil lion in EITC re funds. An ad di tional $4.9 bil lion of the EITC cred its were ap plied to re duce tax payer li a bil ity. These EITC amounts are in cluded in Gross Cost in the Statement of Net Costs as a com po nent of the in come se cu rity func tion.
Collections of Federal Revenue for the Fiscal Year Ended September 30 Tax year to which collections relate
(In billions of dollars)
Federal Revenue Collections 1999 1998 1997 Prior
years
Individual income and tax withholdings ... 1,588. 2 1,020. 4 547. 4 11. 4 9. 0 Corporate income taxes .............. 216. 0 142. 8 62. 5 1. 1 9. 6 Unemployment taxes ................. 26. 5 24. 6 1. 9 - Excise taxes ....................... 72. 0 48. 4 23. 5 - 0. 1 Estate and gift taxes ................. 28. 4 - 25. 0 1. 0 2. 4 Customs duties..................... 19. 1 19. 1 - - Federal Reserve Bank earnings......... 26. 0 18. 6 7. 4 - Fees and licenses................... 1. 6 1. 6 - - Fines, penalties, interest and other taxes.. 6. 7 4. 4 2. 3 - Total ........................... 1,984. 5 1,279. 9 670. 0 13. 5 21. 1
NOTES TO THE FI NAN CIAL STATE MENTS 87
Federal Tax Refunds Disbursed for the Fiscal Year Ended September 30 Tax year to which the refunds relate
(In billions of dollars)
Refunds Dispersed 1999 1998 1997 Prior
years
Individual income and tax withholdings .............. 149. 2 0. 6 138. 9 7. 2 2. 5
Corporate income taxes ............. 33. 8 1. 5 14. 2 6. 3 11. 8 Unemployment taxes ............... 0. 1 - 0. 1 - Excise taxes ..................... 1. 3 0. 2 0. 4 - 0. 7 Customs duties ................... 1. 2 0. 4 0. 3 0. 1 0. 4 Estate and gift taxes ............... 0. 7 - 0. 2 0. 3 0. 2 Total ......................... 186. 3 2. 7 154. 1 13. 9 15. 6
Note 16. Un reconciled Trans actions Af fecting the Change in Net Po sition
The rec on cil i a tion of the Change in Net Po si tion re quires that the dif fer ence be tween end ing and be gin ning net po si tion equals the ex cess of rev e nues over cost, plus or mi nus prior pe riod ad just ments.
The un rec on ciled trans ac tions needed to bring the change in net po si tion into bal ance net to $24.4 bil lion.
The three pri mary fac tors af fect ing this out- of- balance sit u a tion are:
 Im proper re cord ing of intragovernmental trans ac tions by agen cies.  Trans ac tions af fect ing Bal ance Sheet as sets and li a bil i ties not prop erly iden ti fied by agen cies as prior pe riod ad just ments.  Tim ing dif fer ences and er rors in the re port ing of trans ac tions. The Fed eral fi nan cial com mu nity con sid ers the iden ti fi ca tion and re port ing of these un rec on ciled trans ac tions a pri or ity.
88 NOTES TO THE FI NAN CIAL STATE MENTS
The Gov ern ment has en tered into con trac tual com mit ments that re quire fu ture use of fi nan cial re sources. It has sig nif i cant amounts of long- term lease ob li - ga tions as shown in the ta ble be low.
Un de liv ered or ders rep re - sent the value of goods and ser vices or dered that have not yet been re ceived.
Con tin gent li a bil i ties re lated to the loan guar an tee pro grams are de scribed in Note 4.
A con tin gency is an ex ist ing con di tion or sit u a tion in volv ing un cer tainty as to a pos si ble loss. A loss is con sid ered rea son ably
pos si ble if the fu ture con firm ing event or events are more than re - mote, but less than prob a ble.
These con tin gen cies do not in - clude ex ist ing con di tions or sit u - a tions where the fu ture oc cur ring event is only con sid ered re mote, nor do they in clude con tin gen cies that would re sult in a gain.
The Gov ern ment also is sub ject to con tin gen cies, in clud ing lit i ga tion, that arise in the nor mal course of op er a tions. The ul ti mate dis po si tion of these mat ters is un known. Based on in for ma - tion cur rently avail able, how ever,
it is man age ment's opin ion that the ex pected out come of these
mat ters, in di vid u ally or in the ag gre gate, will not have a ma te rial ad verse ef fect on the fi nan cial state ments, ex cept for lit i ga tion de scribed in the next para graph.
Nu mer ous cases are pend ing in volv ing su per vi sory good will at sav - ings and loan in sti tu tions, Medicare
cost re port set tle ments, har bor main te nance fees and cer tain other mat - ters. While it is likely that the United
States will have to pay some amount of dam ages on the claims, the ul ti - mate costs can not be rea son ably es ti mated
at this time. The Gov ern ment also has un used stat u tory lines of credit to Gov ern ment spon sored en ter prises to tal ing $10 bil lion.
Financial Treatment of Loss Contingencies Probability of Loss Probable Reasonably Possible, more
than remote but less than probable
Remote, chance of occurrence slight
Financial Treatment Balance Sheet Footnote Disclosure No disclosure
Prior pe riod ad just ments con sist of a net $6.9 bil lion ad just ment to the open ing net po si tion, to cor rect er rors in prior pe ri ods.
Sig nif i cant com po nents of this net ad just ment in clude:
 A $37.5 bil lion de crease of the be gin ning post- re tire ment health ben e fits li a bil ity for mil i tary per son nel (see Note 11 Fed eral Em ployee and Vet eran Ben e fits Pay able), and
 A $28.5 bil lion in crease of the en vi ron men tal li a bil i ties for long- term sur veil lance and main te nance, and de con tam i na tion and de com mis sion ing costs.
Note 17. Prior Pe riod Ad justments Note 18. Com mitments and Con tin gencies
NOTES TO THE FI NAN CIAL STATE MENTS 89
Commitments as of September 30
(In billions of dollars)
Capital Leases Operating
Leases Long- term Leases:
General Services Administration (GSA) ................ 0. 3 15. 7 U. S. Postal Service ............................... 0. 6 8. 5 Department of Justice ............................. - 3. 9 National Institutes of Health......................... - 0. 6 Other long- term leases ............................ 0. 9 2. 3
Total long- term leases ........................... 1. 8 31. 0
Undelivered Orders:
HUD .......................................... 104. 3 Navy .......................................... 28. 0 Education ...................................... 21. 5 HHS .......................................... 19. 7 Executive Office of the President ..................... 16. 4 Defense agencies ................................ 14. 1 Rural development ............................... 13. 9 Other undelivered orders........................... 187. 1
Total undelivered orders .......................... 405. 0
Other Commitments:
National Oceanic and Atmospheric Administration satellites and weather systems ..................... 5. 6
Transportation ................................... 3. 0 GSA .......................................... 1. 5 Navy .......................................... 0. 4 Commodity Credit Corporation ....................... 0. 3
Total other commitments ......................... 10. 8
90 NOTES TO THE FI NAN CIAL STATE MENTS
Contingencies as of September 30
(In billions of dollars)
Insurance:
Export- Import Bank................................ 40. 9 Pension Benefit Guaranty Corporation .................. 19. 0 Overseas Private Investment Corporation ............... 0. 2 Bank Insurance Fund .............................. 0. 2 Other insurance programs........................... 0. 2
Total insurance programs .......................... 60. 5
Unadjudicated Claims:
Air Force ....................................... 0. 8 Interior ......................................... 0. 4 GSA ........................................... 0. 2 Federal Savings and Loan Insurance Corporation
Resolution Fund ................................ 0. 1 Bank Insurance Fund .............................. 0. 1 Army .......................................... 0. 1 Other unadjudicated claims .......................... 0. 6
Total unadjudicated claims ......................... 2. 3
Other Contingencies:
Multi- lateral development banks....................... 67. 4 Production flexibility program......................... 5. 1 Conservation reserve program ........................ 1. 3 Environmental cleanup ............................. 1. 1 Contingent liabilities ............................... 0. 5 Nuclear waste fund................................ 0. 5 Real property activities ............................. 0. 4 Other contingencies ............................... 1. 4
Total other contingencies........................... 77. 7
NOTES TO THE FI NAN CIAL STATE MENTS 91
The term trust fund, as used in this re port and in Fed eral bud get ac count ing, is fre quently mis un der stood. In the pri vate sec tor, trust fund re fers to funds of one party held by a sec ond party (the trustee) in a fi du ciary ca pac ity. In the Fed eral bud get, the term trust fund means only that the law re quires the funds be ac counted for sep a rately, used only for spec i fied pur poses and des ig nated as a trust fund. A change in law may change the fu ture re ceipts and the terms un der which the fund's re sources are spent.
Trust fund as sets rep re sent the un ex pended bal ance from all sources
of re ceipts and amounts due the trust fund, re gard less of source. This in cludes re lated gov ern men tal trans ac tions. These are trans ac tions be tween two dif fer ent en ti ties within the Fed eral Gov ern ment (for ex am ple, mon ies re ceived by one en tity of the Gov ern ment from an other en tity of the Government).
Intragovernmental net as sets are com prised of in vest ments in Fed eral debt se cu ri ties, re lated ac crued in ter est and fund bal ance with Trea sury. These amounts were elim i nated in preparing this Fi nan cial Re port.
Consolidated as sets rep re sent only the amounts due from in di vid u  als and other en ti ties out side the Gov ern
ment. This means that all re lated gov ern men tal trans ac tions are re moved to pres ent the Gov ern ment's po si tion as a whole.
The ma jor ity of trust fund as sets is in vested in intragovernmental Fed eral debt se cu ri ties. These se cu ri ties re quire re demp tion if a fund's dis burse ments ex ceed its re ceipts. Re deeming these se cu ri ties will in crease the Gov ern ment's fi nanc ing needs and re quire more bor row ing from the pub lic (or less re pay ment of debt prior to ma tu rity) or will re sult in higher taxes than oth er wise would have been needed.
Note 19. Ded icated Col lections Dedicated Collections as of September 30*
As sets
(In billions of dollars) Receipts Disbursements Trust
Fund Net Assets
Less Intragovern- mental Net
Assets Consolidated
Assets Fund Name Federal Old- Age and
Survivors Insurance Trust Fund .......... 444. 7 334. 4 745. 9 745. 9 Federal Disability Insurance Trust Fund .. 67. 9 52. 0 87. 1 87. 1 Medicare Part A........ 150. 5 132. 4 141. 4 141. 4 - Medicare Part B ....... 85. 1 79. 6 45. 6 45. 6 Unemployment
Trust Fund .......... 31. 8 25. 0 78. 9 78. 9 - Hazardous Substance Superfund .......... 0. 9 1. 5 4. 4 4. 4 Highway Trust Fund..... 39. 3 29. 3 28. 0 28. 0 - Airport and Airway
Trust Fund .......... 11. 1 7. 7 12. 7 12. 7 Civil Service Retirement and Disability Fund .... 73. 9 43. 9 490. 4 490. 1 0.3 Military Retirement Fund . 38. 0 32. 0 156. 0 156. 0 - Railroad Retirement Board
Trust Fund .......... 5. 1 8. 2 21. 9 21. 9 - *By law, cer tain ex penses (costs) re lated to the ad min is tra tion of the above funds are not c harged to the funds and are fi nanced by other sources.
92 NOTES TO THE FI NAN CIAL STATE MENTS
The Fed eral Hos pi tal In sur ance Trust Fund fi nances the Hos pi tal In sur ance pro gram (Medicare Part A). This pro - gram funds the cost of hos pi tal and re lated care for in di vid u
als age 65 or older, who meet cer tain in sured sta tus re - quire ments, and for el i gi ble dis abled peo ple. The De part ment of Health and Hu man Ser vices (HHS) ad min is ters the pro gram.
The Fed eral Hos pi tal In sur ance Trust Fund is fi nanced pri mar ily by pay roll taxes, in clud ing those paid by Fed eral agen cies. It also re ceives in come from in ter est earn ings on Fed eral debt se cu ri ties and a por tion of in come taxes paid on So cial Se cu rity ben e fits. This trust fund pro vides as sis tance
and pro tec tion against the loss of earn ings due to re tire ment or death. The as sis tance is in the form of money pay ments. The Fed eral Old- Age and Sur vi vors In sur ance Trust Fund is ad min is  tered by the So cial Se cu rity Ad min
is tra tion (SSA). Pay roll and self- employment taxes pri mar ily fund the Fed eral Old- Age and Sur vi vors In sur ance Trust Fund. In ter est earn ings on Fed eral debt se cu ri ties, Fed eral
agen cies' pay ments for the So cial Se curity ben e fits earned by mil i tary and Fed eral ci vil ian em ploy ees, and
Trea sury pay ments for a por tion of in come taxes paid on So cial Se cu rity ben e fits pro vide the fund with ad di tional in come.
Federal Disability Insurance Trust Fund
The Fed eral Sup ple men tary Med i cal In sur ance Trust Fund fi nances the Sup ple men tal Med i cal In sur ance pro gram (Medicare Part
B), which pro vides sup ple men tary med i cal in sur ance for el i gi ble par  tic i pants to cover med i cal ex penses
not cov ered by Medicare Part A. The De part ment of Health and Hu man Ser vices ad min is ters the pro gram. A p p r o p r i a t i o n s , p r e m i u m s
charged to en rollees and in ter est earned on in vest ments in Fed eral debt se cu ri ties fund the Fed eral
Sup ple men tary Med i cal In sur ance Trust Fund.
Federal Hospital Insurance Trust Fund
Federal Supplementary Medical Insurance Trust Fund (Medicare Part B)
The Fed eral Dis abil ity In sur ance Trust Fund pro vides as sis tance and pro tec tion against the loss of earn ings due to a wage earner's dis abil ity. The as sis tance is in the form of money pay ments. SSA ad min is ters the Fed eral Dis abil ity In sur ance Trust Fund.
Like the Fed eral Old- Age and Sur vi vors In sur ance Trust Fund, pay roll taxes pri mar ily fund the Fed eral Dis abil ity In - sur ance Trust Fund. The Fund also re ceives
in come from in ter est earn ings on Fed eral debt se cu ri ties, Fed eral agen cies' pay ments for the So cial Se cu rity ben e fits earned by mil i tary and Fed eral ci vil ian em ploy ees, and a por tion of in come taxes paid on So cial Se cu rity ben e fits.
Federal Old- Age and Survivors Insurance Trust Fund
The Un em ploy ment Trust Fund pro tects work ers who lose their jobs through no fault of their own. The Un em ploy ment In sur ance pro gram is a unique Fed eral and State part ner ship based on Fed eral law, but ex e cuted through State law by State of fi cials. The De part ment of La bor ad min is ters the Fed eral op er a tions of the pro gram.
Taxes on em ploy ers pri mar ily fund the Un em ploy ment Trust Fund. How ever, in ter est earned on in vest ments in Fed eral debt se cu ri ties also pro vides in come to
the fund. Ap pro pri a tions have sup ple mented its in come dur ing pe ri ods of high and ex tended un em ploy ment.
Unemployment Trust Fund
NOTES TO THE FI NAN CIAL STATE MENTS 93
The Haz ard ous Sub stance Superfund was au tho rized to ad dress pub lic health and en vi ron men tal threats
from spills of haz ard ous ma te ri als and from sites con tam i nated with haz ard ous sub stances. The En vi ron men tal Pro tec tion Agency (EPA) ad min is ters the fund.
The fol low ing fi nance the Haz ard ous Sub stance Superfund:
 Ex cise taxes col lected on pe tro leum, chem i cals and im - ported sub stances (ex pired in
1995).  En vi ron men tal taxes from
cor po ra tions with al ter na tive min i mum tax able in come in ex cess of $2 mil lion (ex pired in 1995).  Fi nes and pen al ties and cost re cov er ies from re spon si ble par ties.  Ap pro pri a tions.
 In ter est earned on in vest - ments in Fed eral debt se cu ri ties.
Hazardous Substance Superfund
Highway Trust Fund
The Air port and Air way Trust Fund pro vides for air port im prove ment, main te nance of air port fa cil i ties and equip - ment, re search, and a por tion of op er a tions. Trans por ta tion
ad min is ters the Air port and Air way Trust Fund. The fol low ing pro vide fund ing for the Air port and Air way Trust Fund:
 Taxes re ceived from trans por ta tion of per sons and prop erty in the air and fuel used in non- commercial air craft.
 In ter na tional de par ture taxes.  In ter est earned on in vest ments in Fed eral debt se cu ri ties.
Airport and Airway Trust Fund Military Retirement Fund
The Mil i tary Re tire ment Fund pro vides re tire ment ben e fits for Army, Navy, Ma rine Corps and Air Force per son nel and their sur vi vors. The fund is fi nanced by DOD con tri bu tions, ap pro pri a tions and in ter est earned on in vest ments in Fed eral debt se cu ri ties. The High way Trust Fund was es tab lished to pro mote do mes tic in ter state
trans por ta tion, and mov ing peo ple and goods. The fund pro vides Fed eral grants to States for high way con struc tion and re lated trans por ta tion pur poses. Trans por ta tion ad min is ters the High way Trust Fund.
The fol low ing pro vide all fi nanc ing for the High way Trust Fund:  Ear marked taxes on gas o line and other fu els, cer tain tires, ve hi cle and truck use.  In ter est earned on in vest ments in Fed eral debt se cu ri ties.
The Civil Ser vice Re tire ment and Dis abil ity Fund cov ers two Fed eral ci vil ian re tire ment sys tems: the Civil Ser vice Re tire ment Sys tem (CSRS) for em ploy ees hired be fore 1984 and the Fed eral Em ployee Re tire ment Sys tem (FERS), for em ploy ees hired af ter 1983.
The CSRS is fi nanced by:  Fed eral ci vil ian em ploy ees' con tri bu tions.  Agencies' con tri bu tions on be half of the em ploy ees.  Ap pro pri a tions.  In ter est earned on in vest - ments in Fed eral debt se cu ri ties.
Civil Service Retirement and Disability Fund
Railroad Retirement Trust Fund
The Rail road Re tire ment Trust Fund pro vides an nu ities and sur vi vor ben e fits to el i gi ble rail road em - ploy ees and their sur vi vors. The
fund also pays dis abil ity an nu ities based on to tal or oc cu pa tional dis - abil ity.
Pay roll taxes paid by rail road em ploy ers and their em ploy ees pro vide the pri mary source of in - come for the Rail road Re tire ment
Sur vi vor Ben e fit pro gram. By law, rail road taxes are co or di nated with So cial Se cu rity taxes.
94 NOTES TO THE FI NAN CIAL STATE MENTS
Note 20. In dian Trust Funds
The In dian Trust Funds dif fer from other ded i cated col lec tions re ported in Note 19. The De part ment of the In te rior (In te rior) has re spon si bil ity for the as sets held in trust on be half of Amer i can In dian tribes and in di vid u als. The trust
funds are held in ac counts for ap prox i mately 315 tribes, 317,000 in di vid ual In dian ac counts and other funds, in clud ing the Alaska Na tive Es crow Fund.
The as sets held in trust for Na tive Amer i cans are owned by the trust ben e fi cia ries and are not the Fed eral Gov ern - ment's as sets. There fore, these amounts
are not re flected in the Bal ance Sheet or State ment of Op er a tions and Changes in Net Po si tion ex cept for their hold ings of non mar ket able Trea sury se cu ri ties, for which the Gov ern ment's li a bil ity is in - cluded in Fed eral debt se cu ri ties held by
the pub lic.
U. S. Government as Trustee for Indian Trust Funds Held for Indian Tribes and Other Special Trust Funds Statement of Changes in Trust Fund Balances as of September 30 (Unaudited)
(In millions of dollars) Receipts ............................................... 873. 0
Disbursements .......................................... (736. 7) Receipts in excess of disbursements .......................... 136. 3 Trust fund balances, beginning of year ........................ 2,460. 0
Adjustment ............................................. (0. 5) Trust fund balances, end of year ........................... 2,595. 8
U. S. Government as Trustee for Indian Trust Funds Held for Individual Indian Monies Trust Funds Statement of Changes in Trust Fund Balances as of September 30
(Unaudited)
(In millions of dollars) Receipts ............................................... 306. 7
Disbursements .......................................... (336. 6) Receipts in excess of disbursements .......................... (29. 9)
Trust fund balances, beginning of year ......................... 479. 2 Trust fund balances, end of year............................ 449. 3
SUP PLE MEN TAL IN FOR MA TION 95
Education, Training, Employment and Social Services
(In bil lions of dol lars) Gross Cost Earned Revenue Net Cost Subfunctions :
Elementary, secondary and vocational education..... 17. 6 - 17. 6
Higher education ........ 14. 5 1. 4 13. 1 Research and general
education aids......... 2. 5 - 2. 5 Training and employment .. 5. 7 - 5. 7 Other labor services ...... 1. 0 - 1. 0 Social services.......... 16. 6 - 16. 6
Total education, training, employment and social services ... 57. 9 1. 4 56. 5
Human Resources United States Gov ern ment
Sup ple men tal In for ma tion for the Year Ended Sep tem ber 30, 1999 (Un au dited)
Education, Training, Employment and Social Services
The Ed u ca tion, train ing, em ploy ment and so cial ser vices func tion serves to ex tend knowl edge and skills, en hance em p l o y m e n t and em ploy ment op por tu ni ties, pro tect work place stan dards and pro vide ser vices to the needy.
The State ment of Net Cost pres ents the cost of the Gov ern ment's ma jor func tions. The ob jec tives of each of the func tions are de scribed be low. Also, the state ment con tains the def i ni tions of Gross cost, Earned rev e nue and Net cost.
Amounts listed un der this func tion in clude the cost to pro vide mil i tary forces to de ter war; to be pre pared to en gage in war; and to pre serve the peace and se cu rity of the United States, the Ter ri tories, Com mon wealth, its pos ses sions and any area oc cu pied by the United States. Na tional de fense also in cludes the cost to train, equip, com  pen sate and pro vide re tire ment ben efits
for the armed forces; de velop, ac quire, uti lize and dis pose of weapon sys tems; con duct re search and de vel op ment to main tain tech no
log i cal su pe ri or ity, cut costs and im prove per for mance of weapon sys tems; and carry out other de fense re lated ac tiv i ties.
Net Cost Detail National Defense
96 SUPPLEMENTAL IN FOR MA TION
Human Resources, cont.
Health
(In bil lions of dol lars) Gross Cost Earned
Revenue Net Cost Subfunctions:
Health care services ........ 123. 4 0. 5 122. 9 Health research
and training............. 14. 7 0. 1 14. 6 Consumer and occupational health and safety ......... 2. 5 0. 1 2. 4
Total health ........... 140. 6 0. 7 139. 9
Income Security
The cost of pro vid ing pay ments to per sons un re lated to any cur rent ser vice com prises the In come se cu rity func tion. In cluded are dis abil ity, rail road re tire ment ben e fits, tem po rary as sis tance to needy fam i lies and sim i lar pro grams, other than amounts re lated to So cial Se cu rity and vet er ans. Also in cluded are food stamps, spe cial milk and child nu tri tion pro grams;
un em ploy ment com pen sa tion; and work ers' com pen sa tion earned in come tax credit re funds and re duc tion of tax payer liabilities; pub lic as sis tance cash pay ments; ben e fits paid to the el derly and coal min ers; and low- and mod er ate- income hous ing as sis tance. The cost of Fed eral pen sions and re tiree health ben e fits are al lo cated to other func tions.
Income Security
(In bil lions of dol lars) Gross Cost Earned
Revenue Net Cost Subfunctions:
Unemployment compensation......... 24. 5 0. 7 23. 8
Housing assistance...... 27. 8 - 27. 8 Food and
nutritional assistance ... 34. 1 0. 1 34. 0 Other income security .... 89. 8 3. 7 86. 1 Cost not allocated
to subfunctions........ 11. 8 1. 7 10. 1 Total income
security ............ 188. 0 6. 2 181. 8
Health
Listed un der the Health func tion are the costs to pro mote phys i cal and men tal health, in clud ing the pre ven - tion of ill ness and ac ci dents
and the Medicaid pro gram. Al though the Medicare pro gram is the larg est Fed eral health pro gram, by law it is in a sep a rate func tion for bud get pur poses. Also ex cluded from the Health subfunction is Fed eral health care for mil i tary per son nel and vet er ans.
Medicare
Fed eral Hos pi tal In sur ance (Medicare Part A) and Fed eral Sup ple men tary Med i cal In sur ance (Medicare Part B) pro grams make up Medicare. This func tion is not fur ther sub di vided. For more in for ma tion on Medicare, see the note in the Stew ard ship Re spon si bil ities sec tion of Stew ard ship In for ma tion, and Note 19 Ded i cated Col lec tions.
Social Security
So cial Se cu rity costs in - clude pay ments to el i gi ble ben e fi cia ries of the Old- Age and Sur vi vors In sur ance (OASI ) and Dis abil ity In sur ance (DI) pro grams. These are col lec - tively re ferred to as So cial Se - cu rity. The So cial Se cu rity
pro gram is the sin gle larg est Fed eral pro gram and is funded pri mar ily by pay roll taxes. For more in for ma tion on So cial Se cu rity, re fer to the Stew ard ship In for ma tion sec tion on Stew ard ship Re spon si bil ities and Note 19 Ded i cated Col lec tions.
SUP PLE MEN TAL IN FOR MA TION 97
Human Resources, cont.
Veterans Benefits and Services
The amounts listed un der this func tion in clude spe cific ben e fits and ser vices paid to those with prior mil i tary ser vice or their spouse, de pend ents and sur vi vors. In cluded are vet er ans com pen sa tion, life in sur ance, pen sions, burial ben e fits, ed u ca tion, train ing, med i cal care, vet er ans hous ing and ad min is tra tive ex penses of the De part ment of Vet erans Af fairs. The net cost line ti tled Veterans ben e fits and ser vice de creased this fis cal year by $204.8 bil lion pri mar ily due to a change in in ter est rate as sump tions in the cal cu lation of the re lated li a bil ity for vet er ans com pen sa tion.
Veterans Benefits and Services
(In bil lions of dol lars) Gross Cost Earned Revenue Net Cost Subfunctions:
Income security for veterans .............. (65. 5) - (65. 5) Veterans education, training and rehabilitation ............... 1. 7 0. 2 1. 5
Hospital and medical care for veterans ....... 18. 2 1. 8 16. 4 Veterans housing....................... 1. 3 0. 5 0. 8 Other veterans benefits and services ........ 1. 1 0. 2 0. 9
Total veterans benefits and services ....... (43. 2) 2. 7 (45. 9)
Physical Resources
Energy
The En ergy function in cludes the cost of pro mot ing an ad e quate sup ply and ap pro pri ate use of en ergy to serve the needs of the Na tion.
Energy
(In bil lions of dol lars) Gross Cost Earned Rev e nue Net Cost Subfunctions:
Energy supply........... 11. 3 11. 9 (0. 6) Energy conservation ...... 0. 6 - 0. 6 Emergency energy
preparedness ......... 0. 2 - 0. 2 Energy information, policy and regulation... 0. 8 0. 5 0. 3 Total energy .......... 12. 9 12. 4 0. 5
Natural Resources and Environment
This func tion is com prised of costs in curred to de velop, man age and main tain the Na tion's nat u ral re sources and en vi ron ment. Ex cluded are fund ing for com mu nity wa ter sup - ply pro grams, ba sic sewer sys tems
and waste treat ment plants that are part of com mu nity or re gional de vel - op ment pro grams.
Natural Resources and Environment
(In bil lions of dol lars) Gross Cost Earned Revenue Net Cost Subfunctions:
Water resources................................ 5. 5 0. 5 5. 0 Conservation and land management ................. 6. 2 0. 9 5. 3 Recreational resources........................... 3. 0 0. 3 2. 7 Pollution control and abatement .................... 8. 6 0. 6 8. 0
Other natural resources .......................... 3. 8 0. 6 3. 2 Total natural resources and environment ............ 27. 1 2. 9 24. 2
98 SUPPLEMENTAL IN FOR MA TION
Physical Resources, cont.
Commerce and Housing Credit
(In bil lions of dol lars) Gross Cost Earned Rev e nue Net Cost Subfunctions:
Mortgage credit .......... (3. 4) 3. 7 (7. 1) Postal Service ........... 80. 0 61. 9 18. 1 Deposit insurance ........ 4. 3 1. 4 2. 9 Other advancement
of commerce .......... 8. 3 6. 9 1. 4 Total commerce and housing credit..... 89. 2 73. 9 15. 3
Commerce and Housing Credit
This func tion en com passes the pro mo tion and reg u la tion of the com merce, hous ing and de posit in sur ance in dus tries. In cluded un der Com merce and hous ing credit are costs to col lect and dis sem i nate so cial and eco nomic data; pro vide gen eral pur pose sub si dies to busi ness and in di vid u als, in clud ing credit
sub si dies for hous ing; and sup port the Postal Ser vice fund. Transportation
(In bil lions of dol lars) Gross Cost Earned Revenue Net Cost Subfunctions:
Ground transportation .... 29. 2 - 29. 2 Air transportation ........ 9. 6 0. 4 9. 2 Water transportation ..... 5. 1 0. 7 4. 4 Other transportation...... 0. 2 - 0. 2
Total transportation..... 44. 1 1. 1 43. 0
Transportation
Grants to States and oth ers for lo cal or na tional trans por ta tion of pas sen gers and prop erty make up the bulk of the cost as so ci ated with this func tion. In cluded are costs to con struct fa cil i ties; pur chase equip ment; do re search, test ing and eval u a tion; and pro vide op er at ing sub si dies to transportation fa cil i ties (such as air ports and rail roads).
The costs of pro mot ing vi a ble com mu nity econ o mies by de vel op ing phys i cal fa cil i ties or fi nan cial in fra struc tures com prise this func tion. Also in cluded are the costs of
de vel op ing trans por ta tion fa cil i ties that are in te gral parts of com mu nity de vel op ment pro grams. Aids to busi nesses is usu ally ex cluded from this func tion un less it pro  motes the eco nomic de vel op ment of
de pressed ar eas and is not de signed to pro mote par tic u lar lines of busi - ness for their own sake.
Community and Regional Development Community and Regional Development
(In bil lions of dol lars) Gross Cost Earned Rev e nue Net Cost Subfunctions:
Community development .................... 5. 1 - 5. 1 Area and regional development ............... 4. 2 1. 1 3. 1
Disaster relief and insurance ................. 5. 6 1. 7 3. 9 Total community
and regional development ................ 14. 9 2. 8 12. 1
SUP PLE MEN TAL IN FOR MA TION 99
International Affairs
(In bil lions of dol lars) Gross Cost Earned
Rev e nue Net Cost Subfunctions:
International development and humanitarian assistance .................... 9. 8 0. 4 9. 4 International security assistance ..................... 5. 8 0. 8 5. 0 Conduct of foreign affairs .......................... 6. 1 1. 0 5. 1 Foreign information and exchange activities ............ 1. 2 - 1. 2 International financial programs ..................... 6. 7 7. 4 (0. 7)
Total international affairs......................... 29. 6 9. 6 20. 0
In ter est costs are pri mar ily amounts on Fed eral debt se cu ri ties held by the pub lic. In ter est pay ments on these se cu ri ties are made by Trea sury's Bu reau of the Pub lic Debt. Interest
International Affairs
This func tion in cludes the cost of main tain ing peace ful re la tions, sup port ing com merce and travel be tween
the United States and the rest of the world, and pro mot ing in ter na tional se cu rity and eco nomic de vel op ment abroad.
General Science, Space and Technology
This func tion cov ers the cost of Na tional Sci ence Foun da tion re search, NASA space pro grams and De part  ment of En ergy gen eral sci ence re search.
Agriculture
Costs as so ci ated with pro mot ing ag ri cul tural eco nomic sta bil ity and main tain ing and in creas ing ag ri cul tural pro duc tion are found un der the Ag ri cul ture func tion.
Other Functions General Science, Space and Technology
(In bil lions of dol lars) Gross Cost Earned Rev e nue Net Cost Subfunctions:
General science and basic research ................. 5. 6 - 5. 6 Space flight, research and supporting activities ......... 11. 9 0. 1 11. 8
Total general science, space and technology ......... 17. 5 0. 1 17. 4
Agriculture
(In bil lions of dol lars) Gross Cost Earned Revenue Net Cost Subfunctions:
Farm income stabilization ......................... 23. 7 1. 9 21. 8 Agriculture research and service .................... 3. 5 0. 5 3. 0
Total agriculture............................... 27. 2 2. 4 24. 8
100 SUPPLEMENTAL IN FOR MA TION
Administration of Justice
The cost of ju di cial ser vices in cludes po lice pro tec tion, law en force ment (in clud ing civil rights), re ha bil i ta tion and in car cer a tion of crim i nals, and the gen eral main te nance of do mes tic or der. It also in cludes the cost of pro vid ing court- appointed coun sel or other le gal ser vices for in di vid u als. Not found un der Ad min is tra tion of jus tice are the costs of the leg is la tive branch and po lice and guard ac tiv i ties that pro tect Fed eral prop erty. Also, the cost of Na tional Guard per son nel and mil i tary per son nel who are called
upon oc ca sion ally to main tain pub lic safety and the cost of mil i tary po lice are in cluded un der the na tional de fense func tion.
General Government
Gen eral Gov ern ment cov ers gen eral over head costs of the Fed eral Gov ern ment. This in cludes leg is la tive and ex ec u tive ac tiv i ties as well as cen tral fis cal, per son nel and prop erty ac tiv i ties. All ac tiv i ties rea son ably or closely as so ci ated with other func tions are in cluded in those func tions rather than Gen eral Gov ern ment.
General Government
(In bil lions of dol lars) Gross Cost Earned Rev e nue Net Cost Subfunctions:
Legislative functions ........................... 1. 9 - 1. 9 Executive direction and management ............... 0. 7 - 0. 7 Central fiscal operations ........................ 13. 1 0. 5 12. 6 General property and records management .......... 0. 1 0. 1 - Central personnel management................... 0. 3 - 0. 3 General purpose fiscal assistance ................. 1. 1 - 1. 1 Other general Government ...................... 7. 9 4. 0 3. 9
Total general Government .................... 25. 1 4. 6 20. 5
Administration of Justice
(In bil lions of dol lars) Gross Cost Earned Rev e nue Net Cost Subfunctions:
Federal law enforcement activities ................. 14. 8 0. 8 14. 0 Federal litigative and judicial activities ............... 7. 8 0. 3 7. 5 Federal correctional activities ..................... 3. 6 0. 1 3. 5 Criminal justice activities ........................ 5. 0 0. 4 4. 6
Total administration of justice.................. 31. 2 1. 6 29. 6
Other Functions, cont.
SUP PLE MEN TAL IN FOR MA TION 101
De ferred main te nance is the es ti mated cost to bring Gov ern ment owned prop erty to an ac cept able con di tion. This re sults from not per form ing main te nance on a timely ba sis. De ferred main te nance ex cludes the cost of ex pand ing the ca pac ity of as sets or up grad ing them to serve needs dif fer ent from those orig i nally in tended. The con se quences of not per form ing reg u lar main te nance could in clude in creased safety haz ards, poor ser vice to the pub lic, higher cost in the fu ture and in ef fi  cient op er a tions. Es ti mated de ferred
main te nance costs are not ac crued in the State ment of Net Cost or rec og nized as a li a bil ity on the Bal ance Sheet.
The amounts dis closed for de ferred main te nance have been mea sured us ing the fol low ing two meth ods:
 Con di tion as sess ment sur veys are pe ri odic in spec tions of the Gov ern ment owned prop erty to de ter mine the cur rent con di tion and es ti mated
cost to bring the prop erty to an ac cept able con di tion.
 Life- cycle cost fore cast is an ac qui si tion or pro cure ment tech nique that con sid ers op er at ing, main te nance and other costs in ad di tion to the ac qui si tion cost of as sets.
Some de ferred main te nance has been deemed to be crit i cal. Such amounts and con di tions are de fined by the in di vid ual agen cies with re spon si bil ity for the safe keep ing for these as sets.
Deferred Maintenance Deferred Maintenance as of September 30
Deferred Maintenance Cost Range
(In bil lions of dol lars) Low Estimate High
Estimate Crit i cal
Maintenance Asset Category:
Buildings, structures and facilities ................. 44. 3 52. 5 43. 8 Furniture, fixtures and equipment.................. .4 .8 Other general property, plant and equipment ......... .2 .3 Total general property, plant and equipment .......... 44. 9 53. 6 43. 8 Heritage assets ............................... .3 1. 0 1. 0 National defense assets ........................ 2. 7 2. 7 Total stewardship assets ........................ 3. 0 3. 7 1. 0
Total deferred maintenance ................... 47. 9 57. 3 44. 8
102 SUPPLEMENTAL IN FOR MA TION
For fis cal 1999, the uni fied bud get re ported a sur plus of $124.4 bil lion. For the same pe riod, the Fi nan cial Re port re ports an ex cess of rev e nue over cost of $76.9 bil lion. The dif fer ence be tween these two amounts oc curs be cause they are pre pared pri mar ily on dif fer ent mea sure ment bases to carry out their dif fer ent ob jec tives.
The Fi nan cial Re port gen er ally is based on gen er ally ac cepted ac count ing prin ci ples. Thus, ex penses and ex change rev e nue are gen er ally rec og nized when the events giv ing rise to the trans ac tions oc cur
rather than when the cash is re ceived or paid.
Non- exchange rev e nues are rec og nized on a mod i fied cash ba sis of ac count ing. By con trast, the uni fied bud get is com puted pri mar ily on the cash ba sis, ac cord ing to ac cepted bud get con cepts and pol i cies. The most sig nif i cant dif fer ences be tween these two bases in volve the tim ing of rec og ni tion and mea sure ment of rev e nue and costs.
The dif fer ences be tween these two bases of ac count ing can be
di vided into four pri mary cat e go ries.
1. Re ceipts rec og nized in the bud get that are not rec og nized as revenue in the Fi nan cial Re port, such as:
 Col lec tions of pre- credit re form loans.  Col lec tions of taxes re ceiv able.  Col lec tions of ac counts re ceiv able.
 Pro ceeds from the sale of cap i tal as sets rep re sent - ing book value.
2. Rev e nues rec og nized in the Fi nan cial Re port that are not rec og nized as re ceipts in the bud - get, such as:
 In creases in taxes re ceiv able.  In creases in ac counts re ceiv able.
3. Out lays rec og nized in the bud get that are not rec og nized as costs in the Fi nan cial Re port, such as:
 Pur chases of in ven tory and gen eral prop erty, plant and equip ment.
 Payments of ac counts pay able.
 Pay ments of em ployee pen sions and other ben e fits that re duce prior re lated li a bil i ties.  Pay ments of en vi ron - men tal cleanup and dis posal
costs that re duce prior re lated li a bil i ties.
4. Costs rec og nized in the Fi nan cial Re port that are not rec og nized as out lays in the bud get, such as:
 De pre ci a tion on gen eral property, plant and equip ment.
 In creases in li a bil i ties for em ployee pen sions and other ben e fits.
 In creases in es ti mated en vi ron men tal li a bil i ties.
 De faults on pre- credit re form loans.
 De creases in in ven tory.  In creases in ac counts payable. The re main ing un iden ti fied dif fer ence is a net of $30.5 bil lion. Since some of the dif fer ences may be off set ting, the gross dif fer ence is larger than the $30.5 bil lion and may in clude trans ac tions in all four cat e go ries listed above. It also in cludes the ef fect of misclassifying intragov ern men tal trans ac tions and rel a tively small dif fer ences in en tity cov er age.
Reconciliation of Excess of Revenue over Net Cost
SUP PLE MEN TAL IN FOR MA TION 103
Reconciliation of the Excess of Revenue over Net Cost to the Unified Budget Surplus for the Year Ended September 30 (Unaudited)
(In billions of dollars)
Excess of revenue over net cost........................... 76. 9 Decrease in veteran compensation and burial benefits:
Decrease in liability for veterans ........................... (64. 8) Decrease in liability for survivors........................... (29. 3)
Decrease in liability for burial benefits ....................... (0. 8) Decrease in liability for veterans ......................... (94. 9)
Increase in environmental liabilities:
Increase in Energy's environmental liabilities .................. 44. 3 Increase in Defense's environmental liabilities ................. 45. 7 Decrease in all others environmental liabilities ................. (1. 3)
Increase in environmental liabilities ....................... 88. 7
Capitalized fixed assets:
Department of Defense.................................. (23. 5) Civilian agencies ...................................... (18. 0)
Total capitalized fixed assets ............................ (41. 5)
Increase in liability for civilian employee benefits:
Increase in civilian pension liabilities........................ 28. 8 Decrease in civilian health liabilities ........................ (2. 1) Increase in other civilian benefits liabilities ................... 14. 9
Increase in liability for civilian employee benefits liabilities ...... 41. 6
Decrease in liability for military employee benefits:
Increase in military pension liabilities........................ 11. 3 Decrease in military health liabilities ........................ (27. 2)
Decrease in other military benefits ......................... (15. 2) Decrease in liability for military employee benefits ............ (31. 1)
Depreciation expense 1999 ................................ 17. 3 Decrease in benefits due and payable ........................ (3. 8) Increase in inventory ..................................... (6. 5) Decrease in taxes receivable ............................... 4. 4 Increase in other liabilities ................................. 14. 4 Seigniorage and sale of gold ............................... (1. 0) Decrease in accounts payable .............................. (4. 2) Decrease in accounts receivable ............................ 1. 2 Principal repayments of pre- credit reform loans ................. 32. 4
Net amount of all other differences......................... 30. 5
Unified budget surplus ............................... 124. 4
104 SUPPLEMENTAL IN FOR MA TION
Unexpended Budget Authority as of September 30, 1999 (Unaudited)
(In bil lions of dol lars)
Unobligated Bud get
Au thor ity Ob li gated
Bud get Au thor ity
Social Security Administration...................... 819. 6 36. 1 Office of Personnel Management ................... 502. 8 5. 9 Department of Health and Human Services ............ 198. 8 55. 8 Department of Defense- Military ..................... 60. 6 152. 7 Other Defense Civil Programs ...................... 149. 9 2. 8 Department of Housing and Urban Development ........ 36. 8 107. 0 Department of Transportation ...................... 58. 9 52. 5 Department of the Treasury........................ 21. 6 18. 4 International Assistance Program ................... 36. 0 65. 2 Department of Labor ............................. 90. 4 8. 4 Independent agencies ............................ 74. 1 5. 9 Department of Agriculture ......................... 23. 2 15. 1 Department of Education ......................... 10. 2 24. 4 Department of Veterans Affairs ..................... 16. 1 7. 1 Department of Energy ........................... 12. 5 7. 8 Department of Justice............................ 4. 7 13. 8 Environmental Protection Agency ................... 8. 0 8. 5 Department of State ............................. 12. 7 3. 0 Federal Emergency Management Agency ............. 0. 8 8. 3 Department of the Interior ......................... 5. 3 2. 9 National Aeronautics and Space Administration ......... 0. 9 5. 3 Department of Commerce ......................... 0. 8 3. 7 Corps of Engineers .............................. 4. 0 0. 4 National Science Foundation ....................... 0. 2 4. 2
General Services Administration .................... 3. 8 0. 5 Legislative Branch .............................. 1. 7 0. 4 Small Business Administration ..................... 0. 7 1. 0 Judicial Branch ................................. 0. 7 0. 5 Executive Office of the President.................... 0. 3 0. 1
Total ....................................... 2,156. 1 617. 7
Un ex pended Bud get Au thor ity is the sum of the ob li gated, but un liq ui dated, and unobligated bud get au thor ity.
Unobligated bud get au thor ity, in clud ing trust fund bal ances, is the cu mu la tive amount of bud get au thor ity that is not ob li gated and that re mains avail able for ob li ga - tion. In 1- year ac counts the
unobligated bal ance is not avail able af ter the end of the fis cal year. In multi- year ac counts the ob li gated bal ance may be car ried for ward and re mains avail able for ob li ga tion for the pe riod spec i fied. In no year ac counts the unobligated bal ance is car ried for ward un til spe cif i cally re scinded by law, or
un til the pur poses for which it was pro vided have been ac com plished.
Ob li gated bud get au thor ity is the cu mu la tive amount of bud get au thor ity that has been ob li gated but not yet liquidated. This bal ance can be car ried for ward for a max i mum of 5 years af ter the ap pro pri a - tion has ex pired.
Unexpended Budget Authority
SUP PLE MEN TAL IN FOR MA TION 105
The In ter nal Rev e nue Code pro vides for pro gres sive rates of tax, whereby higher in comes are gen er ally sub ject to higher rates of tax. The ta bles pres ent the lat est avail able in for ma tion on in come tax and on re lated in come, de duc tions and credit for in di vid u als by in come level and for cor po ra tions by size of as sets.
Tax Burden Individual Income Tax Returns for Tax Year 1997
Size of Adjusted Gross Income
(In mil lions of dol lars un less oth er wise noted)
Un der $15,000
$15,000 un der
$30,000 $30,000
un der $50,000
$50,000 un der
$100,000 $100,000
un der $200,000
Greater than
$200,000
Total number of returns .......... 41.4 29.4 22.8 21.6 5.4 1.8
Gross income ...... 251.9 649.1 895.2 1,490.0 717.3 1,013.4 Adjusted gross income .......... 247.9 642.9 887.9 1,478.9 707.8 1,004.5
Tax .............. 9.1 47.4 90.6 191.6 126.7 274.0 Tax burden,
percentage of gross total receipts ......... 3.60% 7.30% 10.13% 12.86% 17.67% 27.04% Average tax dollars per return........ 219 1,612 3,983 8,858 23,562 151,565
Deductions on taxable income:
Standard deduction .. 175. 4 137. 2 82. 6 42. 1 3. 6 0. 9 Medical and dental
expense......... 5. 2 8. 6 6. 6 6. 2 2. 0 0. 6 Interest ........... 5. 3 18. 4 45. 5 100. 0 46. 5 34. 9 Charitable contributions ..... 1. 2 5. 5 12. 3 29. 9 16. 9 33. 4
Other itemized deductions....... 3. 5 14. 0 35. 9 91. 1 50. 5 46. 7 Total itemized
deductions ..... 15. 2 46. 5 100. 3 227. 2 115. 9 115. 6 Total deductions ... 190. 6 183. 7 182. 9 269. 3 119. 5 116. 5
Total expenditures, deductions....... 6. 9 13. 4 18. 5 34. 6 21. 1 31. 5
Credit against tax liability:
Child care credit .... - 0. 6 0. 7 0. 9 0. 2 Credit for elderly and disabled ......... - - - - - Foreign tax credit.... - - 0. 1 0. 3 0. 6 3. 0 EITC, offset tax liability....... 0. 4 3. 5 - - - Other
credits....... - - 0. 1 0. 3 0. 3 1. 0
Total credits....... 0. 4 4. 1 0. 9 1. 5 1. 1 4. 2
Total expenditures and credits, individual ....... 7. 3 17. 5 19. 4 36. 1 22. 2 35. 7
106 SUPPLEMENTAL IN FOR MA TION
Corporate Income Tax Returns for Tax Year 1996 Size of Total Assets (in thousands)
(In mil lions of dol lars un less oth er wise noted) Under
$1,000 $1,000
un der $10,000
$10,000 un der $50,000
$50,000 un der $100,000
$100,000 un der $250,000
Greater than $250,000
Total returns (in thousands) ....... 4,193. 3 370. 9 42. 9 8. 5 7. 6 8. 2
Total receipts .......... 2,103. 7 2,204. 3 1,357. 3 505. 4 741. 0 8,614. 1 Taxable income ........ 24. 0 26. 2 25. 8 16. 3 28. 9 518. 6 Total tax .............. 5. 6 8. 1 8. 4 5. 2 9. 0 134. 2 Tax burden, percent
of gross total receipts .. 0.27% 0.37% 0.62% 1.04% 1.22% 1.56% Average tax per return (in thousands) ...... 1. 3 21. 8 196. 1 618. 5 1,187. 2 16,346 .4
Deductions on taxable income:
Net operating loss ..... 10. 2 5. 6 4. 4 2. 5 4. 2 28. 2 Dividends received .... 0. 4 0. 5 0. 6 0. 4 0. 9 16. 9 Public utility dividends paid ...... - - - - - 0. 1
Total deductions ........ 2,064. 5 2,163. 3 1,326. 2 486. 7 703. 4 7,984. 1
Total expenditures, deductions .......... 5. 5 7. 9 8. 2 5. 0 8. 6 124. 4
Credits against tax liability:
Foreign tax credit ..... 0. 1 - 0. 1 0. 2 0. 6 39. 2 U. S. Possessions tax credit .......... - - 0. 2 0. 2 0. 3 2. 4
Nonconventional source fuel credit .... - - - - - 0. 8 General business credit ...... 0. 2 0. 1 0. 1 0. 1 0. 1 3. 6
Other credits......... 0. 1 0. 2 0. 2 0. 1 0. 1 4. 1
Total credits......... 0. 4 0. 3 0. 6 0. 6 1. 1 50. 1
Total expenditures, corporation ........ 5. 9 8. 2 8. 8 5. 6 9. 7 174. 5
OTHER IN FOR MA TION 107
Federal Taxes Receivable Net
Man age ment has es ti mated amounts that may be paid out as other claims for tax re funds. This es ti mate rep re sents an amount (prin ci pal and in ter est) that may be paid for claims pend ing ju di cial re view by the Fed eral courts or, in ter nally, by Ap peals. The to tal es ti mated pay out (in clud ing prin ci pal and in ter est) for claims pend ing ju di cial re view by the
Fed eral courts is $7.6 bil lion and by Ap peals is $11.4 bil lion. Al though these re fund claims have been deemed to be prob a ble, they do not meet the cri te ria in SFFAS No. 5 for re port ing the amounts in the bal ance sheet or for dis clo sure in the notes to the fi nan cial state ments. How ever, they meet the cri te ria in SFFAS No. 7 for in clu sion as sup ple men tal in for ma tion.
In ac cor dance with SFFAS No. 7, some un paid as sess ments do not meet the cri te ria for fi nan cial state ment rec og ni tion as dis cussed in Note 1 to the fi nan cial state ments. Al though com pli ance as sess ments and write- offs are not con sid ered re ceiv ables un der Fed eral ac count ing stan dards, they rep re sent le gally en force able claims of the
IRS act ing on be half of the Fed eral Gov ern ment. There is, how ever, a sig nif i cant dif fer ence in the col lec tion po ten tial of these cat e go ries.
The com po nents of the to tal un paid as sess ments and der i va tion of net Fed eral taxes re ceiv able at Sep tem ber 30, 1999, were as fol lows:
Federal Taxes Receivable as of September 30
(In billions of dollars) Total unpaid assessments ................. $233. 2 Less: Compliance assessments............. (27. 0)
Write- Offs ........................ (127. 0) Gross Federal Taxes Receivable ............ 79. 2
Less: Allowance for doubtful accounts ........ (56. 5) Federal Taxes Receivable, Net ............. 22. 7
Other Information (Unaudited)
The Gov ern ment can not rea son - ably es ti mate the amount of al low - ance for doubt ful ac counts per tain ing to its com pli ance as sess ments, and thus can not de ter mine their net re al iz able value or the value of the pre- as sess ment work- in- prog ress.
To elim i nate dou ble- count ing, the com pli ance as sess ments re ported above ex clude trust fund re cov ery
pen al ties, to tal ing $15 bil lion, as sessed against of fi cers and di rec tors of busi nesses who were in volved in the non re mit tance of Fed eral taxes withheld from their em ploy ees. The re lated un paid as sess ments of those busi nesses are re ported as taxes re ceiv able or write- offs, but the Gov ern ment also may re cover por tions of those busi nesses' un - paid as sess ments from any and all in di vid ual of fi cers
and di rec tors against whom a trust fund re cov ery pen alty is as sessed.
Other Claims for Refund
108 APPENDIX
This Fi nan cial Re port in cludes the ex ec u tive, leg is la tive and ju di cial branches of the Gov ern ment. Ex cluded are pri vately owned Gov ern ment- sponsored en ter prises such as the Fed eral Home Loan Banks and the Fed eral Na tional Mort gage As so ci a tion. The Fed eral Re serve Sys tem also
is ex cluded be cause or ga ni za tions and func tions per tain ing to mon e tary pol icy are tra di tion ally sep a rate from, and in de pend ent of, other cen tral Gov ern ment or ga ni za tions and func tions.
Significant Entities Included in these Statements: Appendix: List of Significant Government
Entities Included and Excluded
Department of Ag riculture (Ag ri cul ture) www. usda. gov Department of Com merce (Com merce)
www. doc. gov Department of De fense (DOD)
www. defenselink. mil Department of Ed u ca tion (Ed u ca tion)
www. ed. gov Department of En ergy (En ergy)
www. doe. gov De part ment of Health and Hu man Ser vices (HHS)
www. hhs. gov De part ment of Housing and Ur ban De vel op ment (HUD)
www. hud. gov Department of In te rior (In te rior)
www. doi. gov Department of Jus tice (Jus tice)
www. usdoj. gov Department of La bor (La bor)
www. dol. gov Department of State (State)
www. state. gov Department of the Air Force (Air Force)
www. af. mil Department of the Army (Army)
www. army. mil Army Corps of En gi neers
www. usace. gov Department of the Navy (Navy)
www. navy. mil Department of Trans por ta tion (Trans por ta tion)
www. dot. gov Department of the Trea sury (Trea sury)
www. ustreas .gov Department of Vet erans Af fairs (VA)
www. va. gov Agency for In ter na tional De vel op ment (AID)
www. info. usaid. gov Cen tral In tel li gence Agency (CIA)
www. odci. gov/ cia/ ciahome. html Con gres sio nal Bud get Of fice (CBO)
www. cbo. gov Commodity Credit Cor po ra tion
Com mod ity Fu tures Trading Com mis sion En vi ron men tal Pro tec tion Agency (EPA)
www. epa .gov Ex ec u tive Of fice of the Pres ident Ex port- Import Bank of the United States
www. exim. gov Farm Credit Ad min is tra tion (FCA)
www. fca. gov Fed eral Com mu ni ca tions Com mis sion (FCC)
www. fcc. gov Fed eral De posit In sur ance Cor po ra tion (FDIC)
www. fdic. gov Fed eral Emer gency Man age ment Agency (FEMA)
www.fema. gov Fed eral Trade Com mis sion (FTC)
www. ftc. gov Gen eral Ac count ing Of fice (GAO)
www. gao. gov Gen eral Ser vices Ad min is tra tion (GSA)
www. gsa .gov Gov ern ment Print ing Of fice (GPO)
www. gpo. gov Li brary of Con gress (LOC)
www. loc. gov Na tional Aero nau tics and Space Ad min is tra tion (NASA)
www. nasa. gov Na tional Ar chives and Re cords Ad min is tra tion
www. nara. gov Na tional Credit Un ion Ad min is tra tion (NCUA)
www. ncua. gov Na tional Sci ence Foun da tion (NSF)
www. nsf. gov Na tional Trans por ta tion Safety Board ( NTSB)
www. ntsb. gov Nu clear Reg u la tory Com mis sion (NRC)
www. nrc .gov Of fice of Man age ment and Bud get (OMB)
www. whitehouse. gov/ wh/ eop/ omb/ html/ omb home. html Of fice of Per son nel Man age ment (OPM)
www. opm. gov
AP PEN DIX 109
Army and Air Force Ex change Ser vice Board of Gov er nors of the Fed eral Re serve Sys tem Fan nie Mae Farm Credit Sys tem Fed eral Home Loan Banks Fed eral Re serve Banks (FRBs) Fed eral Re tire ment Thrift In vest ment Board
Significant Entities Excluded from these Statements: Entities Included, cont.
Fi nancing Cor po ra tion Freddie Mac Ma rine Corps Ex change Navy Ex change Ser vice Com mand Res o lu tion Funding Cor po ra tion Sal lie Mae Thrift Sav ings Fund Other boards and commissions
Other leg is la tive and ju di cial Pen sion Ben e fit Guar anty Cor po ra tion
www. pbgc. gov Rail road Re tire ment Board (RRB)
www. rrb. gov Se cu ri ties and Ex change Com mis sion (SEC)
www. sec. gov Small Busi ness Ad min is tra tion (SBA)
www. sba. gov Smith so nian In sti tu tion
www. si. edu So cial Se cu rity Ad min is tra tion (SSA)
www. ssa. gov Ten nes see Val ley Au thor ity (TVA)
www. tva. gov U. S. In for ma tion Agency
www. usia. gov U. S. Postal Ser vice www.usps. gov
 GAO United States General Accounting Office Report to the
Congress March 2000 FINANCIAL AUDIT 1999 Financial Report of the
United States Government   GAO/AIMD-00-131  Page 1 AIMD- 00- 131
United States General Accounting Office Washington, DC 20548
Comptroller General of the United States B-285074 March 31, 2000
The President of the Senate The Speaker of the House of
Representatives Implementation of important legislative reforms
remains underway to promote greater accountability in managing the
finances of our national government. These reforms include
requirements for annual audited financial statements for 24 major
departments and agencies as well as preparation of the financial
statements of the U. S. government, which GAO is required to
audit. Our report is included in the accompanying Treasury
publication, Fiscal Year 1999 Financial Report of the United
States Government (Financial Report). This letter highlights our
conclusions. 1 In summary, certain significant financial systems
weaknesses, problems with fundamental recordkeeping and financial
reporting, incomplete documentation, and weak internal control,
including computer controls, continue to prevent the government
from accurately reporting a significant portion of its assets,
liabilities, and costs. Some of these deficiencies primarily
relate to specific major agencies; others, such as
intragovernmental transactions, affect the entire government.
These deficiencies affect the reliability of the accompanying
financial statements and much of the related information in the
Financial Report, as well as the underlying financial information.
They also affect the government's ability to accurately measure
the full cost and financial performance of certain programs and
effectively manage related operations. Major problems included the
federal government's inability to:  properly account for and
report (1) material amounts of property, equipment, materials, and
supplies and (2) certain stewardship assets, primarily at the
Department of Defense;  properly estimate the cost of certain
major federal credit programs and the related loans receivable and
loan guarantee liabilities, primarily at the Department of
Agriculture;  estimate and reliably report material amounts of
environmental and disposal liabilities and related costs,
primarily at the Department of Defense; 1 See also Auditing the
Nation's Finances: Fiscal Year 1999 Results Continue to Highlight
Major Issues Needing Resolution (GAO/T-AIMD-00-137, March 31,
2000). Page 2 AIMD- 00- 131  determine the proper amount of
various reported liabilities, including postretirement health
benefits for military employees and accounts payable and other
liabilities for certain agencies;  accurately report major
portions of the net cost of government operations;  ensure that
all disbursements are properly recorded; and  properly prepare the
federal government's financial statements, including balancing the
statements, accounting for substantial amounts of transactions
between governmental entities, properly and consistently compiling
the information in the financial statements, and reconciling the
results of operations to budget results. Such deficiencies
prevented us from being able to form an opinion on the reliability
of the accompanying financial statements, as was the case in our
fiscal years 1998 and 1997 audits. These deficiencies continue to
significantly impair the federal government's ability to
adequately safeguard certain significant assets, properly record
various transactions, and comply with selected provisions of laws
and regulations related to financial reporting. Additionally, (1)
the government is unable to determine the full extent of improper
payments estimated to total billions of dollars annually and
therefore cannot develop effective strategies to reduce them, (2)
serious, long- standing computer security weaknesses expose the
government's financial and other sensitive information to
inappropriate disclosure, destruction, modification, and fraud,
and critical operations to disruption, and (3) material control
weaknesses affect the government's tax collection activities. The
executive branch recognizes that, because of the extent and
severity of the financial management deficiencies, addressing them
will require concerted improvement efforts across government. The
President has designated financial management improvement as a
priority management objective and efforts are underway across
government to address the pervasive, generally long- standing
financial management problems discussed in our accompanying
report. Thus far, 13 of 24 major agencies have received
unqualified opinions on their fiscal year 1999 financial
statements and others have resolved certain previously reported
financial statement deficiencies for fiscal year 1996, only 6
agencies achieved that goal. As of March 31, 2000, 2 major
agencies had not issued audited financial statements. Also, in
October 1999, the American Institute of Certified Public
Accountants recognized federal accounting standards as a generally
accepted basis of accounting, which represents a major milestone
for the federal government. While obtaining unqualified clean
audit opinions on federal financial statements is an important
objective, it is not an end in and of itself. The key is to take
steps to continuously improve internal control and underlying
financial and management information systems as a means to assure
accountability, increase the economy, improve the efficiency, and
enhance the effectiveness of government. These systems must
generate timely, accurate, and useful information on an ongoing
basis, not just as of the end of the fiscal year. Unfortunately,
for fiscal year 1999, the financial management systems of 19 of 22
agencies that have reported thus far were again Page 3 AIMD- 00-
131 found not to be in substantial compliance with the
requirements of the Federal Financial Management Improvement Act
of 1996. In addition, while some attention to delineating core
competencies and training has occurred, a great deal more needs to
be done to improve financial management human capital. The U. S.
government's fiscal year 1999 Financial Report, issued March 31,
2000, and our report, dated March 20, 2000, on the financial
statements incorporated therein, include certain information
concerning the Social Security and Medicare (Part A) trust funds,
such as projected contributions and expenditures, dates when
expenditures are expected to exceed contributions, and dates when
such funds are expected to be exhausted. Such information is as of
January 1, 1999, for Social Security and as of September 30, 1999,
for Medicare (Part A). On March 30, 2000, the government issued
updated information as of January 1, 2000, for both programs. The
government's issuance of dated information in this Financial
Report at about the same time that it issues more current
information may cause confusion to the Congress and the public.
This can serve to reduce confidence in and the credibility of the
government's annual financial report. This is especially true when
there are significant differences between the trustees' new
projections and those included in the annual report. As a result,
steps should be taken, in future years, to ensure that the
government's Financial Report contains up- to- date information as
of no earlier than the end of the most recent fiscal year for
these important federal programs. Because current information on
the solvency of the Social Security and Medicare programs is
critical to assessing the financial condition of the nation,
aiding in budget deliberations, and fostering public debate, we
have included a summary of the updated information on these two
important federal programs in the appendix to this letter. We
appreciate the cooperation and assistance we received from the
Chief Financial Officers and Inspectors General throughout
government, as well as Department of the Treasury and Office of
Management and Budget officials, in carrying out our
responsibility to audit the government's financial statements. We
look forward to continuing to work with these officials and the
Congress to achieve the goals and objectives associated with
financial management reform. Our report was prepared under the
direction of Jeffrey C. Steinhoff, Acting Assistant Comptroller
General for Accounting and Information Management, and Robert F.
Dacey, Director, Consolidated Audit and Computer Security Issues.
If you have any questions, please contact me on (202) 512- 5500 or
them on (202) 512- 3317. David M. Walker Comptroller General of
the United States (919507) Page 4 AIMD- 00- 131 Appendix
Comparison of Selected Information on the Social Security and
Medicare (Part A) Trust Funds Included in the Boards of Trustees
Annual Reports, dated March 30, 2000, and the Fiscal Year 1999
Financial Report of the United States Government. Trust Fund
Trustees' Report Financial Report Social Security -- OASI -- DI
2015 2016 2007 2014 Not Reported Not Reported First Year Outgo
Exceeds Tax Income Excluding Interest Medicare  Part A 2010 Not
Reported Social Security -- OASI -- DI 2037 2039 2023 2034 2036
2020 Year Trust Fund Is Exhausted Medicare  Part A 2023 2015
Social Security -- OASI -- DI Not Reported Not Reported Not
Reported $2,935 billion 2,413 billion 522 billion Present Value of
Additional Resources Needed Medicare  Part A Not Reported $2,935
billion Social Security -- OASI -- DI 1.89% 1.53% 0.37% Not
Reported Not Reported Not Reported Actuarial Deficit as a
Percentage of Taxable Payroll Over the 75 Year Projection Period
Medicare  Part A 1.21 % Not Reported Social Security -- OASI -- DI
6.18 % 5.40 % 0.78 % Not Reported Not Reported Not Reported
Actuarial Deficit as a Percentage of Taxable Payroll in Year 75
Medicare  Part A 3.28% Not Reported Key: OASI  Federal Old- Age
Survivors Trust Fund DI  Federal Disability Insurance Trust Fund
Note: Trustees information is as of January 1, 2000. Financial
Report information is as of January 1, 1999, for Social Security
and as of September 30, 1999, for Medicare (Part A). A Mes sage
from the Sec re tary of the Treasury
.................................... 1 Man age ment's Dis cus sion
and Anal y sis.......................................... 3 General
Accounting Office Report Comp trol ler Gen eral's State ment
............................................... 15 Au di tor's Re
port ............................................................
19 Financial Statements State ment of Op er a tions and Changes in
Net Po si tion............................... 46 State ment of Net
Cost........................................................ 47
Bal ance Sheet
.............................................................. 49
Stewardship Information (Unaudited) Stew ard ship As sets: Na
tional De fense As sets
..................................................... 51 Stew ard
ship Land
.......................................................... 54 Her
i tage As
sets............................................................
56 Stewardship Re sponsibilities: So cial Se cu rity
............................................................ 58
Medicare
.................................................................
59 Rail road Re tire ment
........................................................ 60 Black
Lung Ben e fits
........................................................ 62 Un em
ploy ment In sur ance
................................................... 63 Stewardship
In vestments: Non- Federal Phys i cal Prop erty
............................................... 64 Hu man Cap i
tal ............................................................
65 Research and De vel op ment
.................................................. 65 Cur rent Ser
vices As sess ment
.................................................. 67 Notes to the
Financial Statements Note 1 - Sum mary of Sig nif i cant Ac count
ing Pol icies............................... 69 Note 2 - Cash and
Other Mon e tary As sets ........................................
72 Note 3 - Ac counts
Receivable.................................................. 73
Note 4 - Loan and Loan Guar an tee Pro
grams...................................... 74 Note 5 - Taxes Re
ceiv able .................................................... 76
Note 6 - In ven tories and Re lated Property
........................................ 76 Note 7 - Prop erty,
Plant and Equip ment .......................................... 7
7 Note 8 - Other As sets
........................................................ 77 Note 9
- Ac counts Pay able
.................................................... 78 Note 10 -
Fed eral Debt Se cu ri ties Held by the Public
............................... 78 Note 11 - Fed eral Em ployee
and Vet eran Ben e fits Pay able ........................... 81
Note 12 - En vi ron men tal and Dis posal Li a bil i ties
.................................. 84 Note 13 - Ben e fits Due and
Pay able ............................................. 85 Note 14
- Other Liabilities
.................................................... 85 Note 15 -
Col lec tions and Re funds of Fed eral Revenue
............................. 86 Note 16 - Un rec on ciled Trans
ac tions Af fecting the Change in Net Position .............. 87
Note 17 - Prior Pe riod Adjustments
............................................. 88 Note 18 - Com mit
ments and Contingencies ....................................... 88
Note 19 - Ded i cated Col lec tions
................................................ 91 Note 20 - In
dian Trust Funds
.................................................. 94 Contents
Supplemental Information (Unaudited) Net Cost De tail
............................................... 95 De ferred Main
te nance ......................................... 101 Rec on cil
i a tion of the Ex cess of Rev e nue Over Net Cost................
102 Un ex pended Bud get Au thor
ity................................... 104 Tax Bur den
................................................. 105 Other
Information (Unaudited) Other Claims for Re fund
....................................... 107 Fed eral Taxes Re ceiv
able Net ................................... 107 Appendix List of
Sig nif i cant Gov ern ment En tities In cluded and En tities Ex
cluded from these Fi nan cial State ments .............. 109 A MES
SAGE FROM THE SECRETARY OF THE TREA SURY I am pleased to present
the fiscal year 1999 Financial Report of the United States
Government. The Report includes audited financial statements that
cover the Executive Branch, as well as parts of the Legislative
and Judicial branches of U. S. Government. The Administration
initiated the development of this financial report in order to
create what we believe is 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. This report
is another significant milestone in our efforts, begun in 1994, to
account for the financial activities of the U. S. Government in a
timely and professional manner. Developing the capability for the
government to produce financial reports in accordance with
generally accepted accounting principles is an enormous task. I am
also pleased to report that the standards developed by the Federal
Accounting Standards Advisory Board (FASAB) are now recognized by
the American Institute of Certified Public Accountants as being
generally accepted accounting principles (GAAP) for the Federal
Government. This is a major accomplishment. It will enhance the
acceptability of our reports and will add to the level of
financial professionalism throughout the U. S. Government.
Significant progress continues to be made in the area of financial
management. More agencies are completing their financial
statements on time and the quality of the data continues to
improve. The successful Year 2000 remediation process has resulted
in better systems and we have established, through the Joint
Financial Management Improvement Program, a government- wide
financial software certification process that is beginning to
ensure that commercial systems meet the government's needs.
Despite this progress, we have much yet to achieve. A great deal
of additional effort will be necessary to fully implement an
entirely new and reliable system of reporting on the operations of
the U. S. Government. The audit report from the General Accounting
Office (GAO) discusses many significant areas in which the
reliability of the current financial statements need to be
improved before the GAO will be able to render an opinion on these
statements. We are committed to producing and reporting financial
information that meets the highest standards of integrity, and to
provide to the American people the accountability and
professionalism they expect from their government. Law rence H.
Sum mers DIS CUS SION AND ANAL Y SIS 3 No other en tity in the
world com pares in size, scope and com plex ity to the U. S. Gov
ern ment. A ci vil ian Fed e r a l workforce of nearly two mil
lion in di vid u als serves a di verse Na tion of more than 270
mil lion Amer i cans. The Fed eral Gov ern ment is the larg est
land owner in the world. Its bud geted spend ing for fis cal 1999
was $1.7 tril lion. To ful fill its con sti tu tional man dates,
the U. S. Gov ern ment un der takes a wide va ri ety of pro grams
to:  Main tain strong, ready and mod ern mil i tary forces.  Pro
vide crit i cal in ter na tional lead er ship.  Con trib ute to en
ergy se cu rity.  Pro tect the en vi ron ment.  Boost ag ri cul
tural pro ductivity.  Fa cil i tate com merce and sup port hous
ing.  Sup port the trans por ta tion sys tem.  Help eco nom i
cally dis tressed ur ban and ru ral com mu ni ties.  As sist
States and lo cal i ties in pro vid ing es sen tial ed u ca - tion
and train ing.  Promote health care.  Fos ter in come se cu rity.
Pro vide ben e fits and ser vices to vet er ans.  Ad min is ter
jus tice. Introduction No other entity in the world compares in
size, scope and complexity to the U. S. Government . . . Man age
ment's Dis cus sion and Anal y sis Fis cal 1999 Fi nan cial Re
port of the United States Gov ern ment Through the bud get pro
cess, the Pres i dent and Con gress de cide how much to spend and
tax in any one fis cal year. The Fed eral bud get, of course, is
not the only bud get that af fects the econ omy or the Amer i can
peo ple. The bud gets of State and lo cal gov ern ments have an im
pact as well. Fed eral Gov ern ment spend ing was a lit tle less
than 19 per cent of the gross do mes tic prod uct (or GDP, which
mea sures the size of the econ omy) in 1999, the low est since
1966. The Budget and Economy 4 DISCUSSION ANDANALYSIS Continued
Improvement in Fiscal Performance Seven years ago, the Fed eral
budget defi cithadexploded. Itdominated the Government'sabil
itytomakepol - icyandim posedaninsid iousburden on our econ omy.
In 1992, the $290 bil lion def i cit was the larg est in Amer
icanhistory andwasprojected tocon tinuespiraling upwardwithout
restraint.The economysuffered, in - ter estrateswerehigh
andjobcreation stalled. Cap i tal that should have been used
forproductive investmentsto createnew jobs was used to finance the
Gov ern ment's mas sive def i - cit- drivenborrowing. In 1993, the
Om ni bus Bud get Recon cilia tionActwassigned. Itsdeficit
reductionplan wastocutthe deficitin half as a per cent age of the
econ omy in 5 years. That goal was met in only 3 years.The1997Bal
ancedBudgetAct proposedto eliminatethe Federaldefi cit by fis cal
2002. In fact, it reached its goal 4 years ahead of sched ule,
producing the first budgetsurplus ($ 69billion) inagener
ationin1998. We can now look back with pride at our prog ress and
ahead with con fi - dence as we con sider the suc cess of our
fiscaldis ciplineandthe opportunity to build upon it. To day we
have lower in ter est rates, a higher level of investment and
unprec edentedprosper ity. Our econ omy has added more than 20 mil
lion new jobs. The un employ ment rate is the low est in 30 years;
the wel fare rolls are down by more than 50 per cent since 1993;
the core in fla tion rate is the low est in 35 years; and more
Amer i cans own their homes than at any time in our his tory.
Strong eco nomic growth and pas sage ofdef icitreduc
tionprogramsplaced thebud getonitspath towardsurplus. The fiscal
dis ci pline we have demon strated, combined with a fast- growing
econ omy and ris ing stockmar ket,contributed to another
unifiedFed eralbudgetsur plusinfiscal 1999 of $124 bil lion. That
was $55 bil lionabovethesur plusinfiscal 1998. The sur plus rel a
tive toGDP amounted to 1.4 per cent in 1999, the highest
suchratioin almost50years. Fed eral debt held by the pub lic was
re duced by more than $85 bil lion in fis cal 1999 and by a to tal
of al most $140 bil lion over the last 2 years. These were the
first re duc tions in pub licly held debt since 1969 and the larg
estdebtreduc tionsinhistory. Re ceipts in creased by about 6
percent in fis cal 1999 to $1,827 bil lion. This was slower growth
than the 9 per cent in crease in fis cal 1998. The slow down
mainly re flected a de cline in net cor po rate tax re ceipts, the
first since 1990, due in part to weak ness in over seas econ o
mies, which dampened profits of U. S. ex port ers. In di vid ual
in come and pay roll tax re ceipts also grew more slowly in 1999
but still posted a siz able 6.5 per cent increase. Growth of out
lays was held to just over 3 per centinfiscal 1999,risingto $1,703
bil lion. The in crease was in line with the gain in 1998. Out
lays in re la tion to GDP were the small est since 1974, dip ping
to an 18.7 per cent share from 19.1 per cent in fis cal 1998.
Pushing out lays down was a drop of $13 bil lion in net in ter est
pay ments, reflectingthe shrinkingsizeof the Fed eral debt and the
re place ment of older debt with new debt at lower in ter est
rates. Medicare pay ments also fellmodestlyover thefiscalyear.
Spending in creased for most other major FederalGov
ernmentfunctions, including defense(up2.4 percentafter a small de
cline in 1998) and So cial Secu rity(upabout3 percent in fisc a l
1999). Thelargestper centagegainby faramongthe majorspending
categories was for farm price sup ports, re flect ing
largeoutlaysof theCommodity Credit Cor po ra tion in the wake of
depressedag riculturalprices. Accordingto the Fis cal Year 2001
Bud get, the to tal uni fied bud get surpluses are pro jected to
in crease each year throughoutthefore casthorizon to 2010. The Ad
min is tra tion is commit ted to us ing the bulk of the sur pluses
to strengthen and mod ern ize theSo cialSecurity
andMedicareprograms; in vest in key pri or i ties that will
extendtheeco nomicexpansion, such as ed u ca tion; and pay down
the pub licly held debt. Un der Ad min istra tion proposals,the
current $3.6 tril lion of debt held by the pub lic is pro jected
tobecompletely eliminatedon a net ba sis by 2013. -400 -300 -200 -
100 0 100 200 300 400 7 5 78 8 1 84 87 90 93 96 99 02 05 08 (In b
i ll ions of doll a rs) Fiscal years Today we have lower interest
rates, a higher level of investment and unprecedented prosperity.
Fig ures for fis cal 2000- 2010 are pro jected. (Fis cal 2001 Bud
get) Unified Federal Budget Surpluses and Deficits Actual
Projected DISCUSSION ANDANALYSIS 5 Continued Strong Economic
Performance Fiscal1999 wasoneofac celerating eco nomic growth. The
ex pan - sion en tered its ninth year and moved closer to a new re
cord length. Real GDP grew by 4.3 per cent across the four quar
ters of fis cal 1999,whichen compassesthefourth quar terofcalen
dar1998throughthe third quar ter of cal en dar 1999. This was
faster than growth over the pre vi ous fis cal year and higher
than the average throughoutthe expansionary pe riod. Growth was
led by strong gains in produc tivity.After trendingupatan average
annualrateof about1.5percent from 1974 to 1995, av er age
increases inla borproductiv ityacceler ated by more than a full
per cent age point to 2.7 per cent over the past 4 fis cal years.
In 1999, produc tiv ity growth picked up even more, to 3.1 per
cent over the four quar ters of the fis cal year. This is an unusu
allyfavorable performanceat this stage of an ex pan sion when
produc tiv ity growth typ i cally slows down from its ear lier
pace. Partly, it reflectsthe capitaldeep eningthathas oc curred in
re cent years due to rapid gains in busi ness in vest ment, and
partly, it may re flect im prove ments inproduction derivingfrom
information tech nol ogy. The faster rate of growth ofproductiv
ityhasincreased overall eco nomic growth and standards of liv ing,
al low ing the un employ ment rate to fall with out a buildup of
inflationary pressures. Growth in con sumerspendingand businessin
vestmentincap italequipment and soft ware was very rapid in
fiscal1999.Real consumerpurchases ac celeratedto more than 5 per
cent over the year to post the fast est rate of increasein14
years.Higherspending wasfu eledbyrising employmentand in comes and
higher net worths primar ily duetotheris ingstockmarket. Pri
vateinvestment inequipmentand soft ware, which in creased at
double- digit rates over the past 7 years, also accelerated
infiscal 1999andrecorded its best year of the ex pan sion, ris ing
by 14.5 percent. Falling prices for com put ers and other high-
tech goods duetoimprove mentsinquality andpro cessingcapac
itycontributed to the rapid growth in real in vest ment. A
widening foreigntradedef icitcontin uedto offsetstrength in other
sectors of the econ omy in fis cal 1999, although the drag on real
GDP di min ished over the year as ex ports picked up due to some
firm ing in over seaseconomies. Labormarkets remainedstrongin fis
cal1999.Theun employmentrate drifted down from 4.5 per cent at the
start of the year to 4.2 per cent by the end of fis cal 1999, and
dipped even lower in the first quar ter of fis cal 2000. These
read ings were the low est in al most three de cades. The share of
theworking- agepopu lationwithjobs reached a re cord high, and
long- term unemployment fell. The econ omy added 2.7 mil lion jobs
in the fis cal year, just a bit less than an nual gains in the
prior 2 fiscalyears. The rate of in fla tion in creased in fis cal
1999 due to higher oil prices, butunder lyinginfla
tionarypressures re mained in check even with strong eco nomic
growth and low un em ployment. Theaccel erationin productivity
growth to more than 3 per cent helped to hold down costs. The
Consumer Price In dex (CPI) rose by 2.6 per centoverthefis
calyearcompared with only 1.4 per cent in fis cal 1998 when
oilpricesfell.Ex cludingenergy and food, how ever, growth in con-
sumer prices slowed to 2.1 per cent in fis cal 1999 from 2.4 per
cent in fis cal 1998. The Federal R e serve r a i s e d short-
term interestrates inthesecond half of the fis cal year and again
in fiscal 2000. These ac tions more than reversed ear lier eas ing
moves that had been un der taken in 1998 to deal with temporary
financial turmoilbothhere and abroad. In rais ing rates, the
Federal Re serve cited con cerns that contin ued faster growth in
eco nomic demand than in po ten tial sup ply could f o s t e r i n
f l a t i o n a r y i m b a l a n c e s . Long- term in ter est
rates moved higher over the course of the fis cal year, damp en
ing some what the very strong growth in hous ing. -1 0 1 2 3 4 5
90 91 92 93 94 95 96 97 98 99 Growth of Real GDP Fisc al Ye ars
The expansion entered its ninth year and moved closer to a new
record length. Per cent age change of the four quar ters of each
fis cal year. 6 DIS CUS SION AND ANAL Y SIS Improving Financial
Management of the Federal Government For the first 200 years of
the U. S. Gov ern ment's ex is tence, it did not publish con sol i
dated fi nan cial re ports other than on a bud get ary ba sis.
Much prog ress has been made in the area of fi nan cial man age
ment over the 3 years since the ini tial au dited Con sol i dated
Fi nan cial Re port of the United States Gov ern ment. Agencies
are pro - duc ing better re cords and better fi nan cial state
ments. The Year 2000 (Y2K) pro cess has re sulted in better sys
tems, and the Joint Fi nan cial Man age ment Im prove ment Pro
gram ( JFMIP ) cer tif i ca tion pro cess has forced many ven dors
to pro duce sys tems that more di rectly meet Gov ern ment re
quire ments. None the less, we have more to achieve. His
torically, ef fec tive man age ment of the U. S. Gov ern ment has
been ham pered by a lack of re li able fi nan cial in for ma tion.
To help im prove the in teg rity of fi nan cial in for ma tion, in
1990 the Of fice of Man age ment and Bud get (OMB), the De part
ment of the Trea sury (Trea sury) and the Gen eral Ac count ing Of
fice (GAO) es tab - lished the Fed eral Ac count ing Stan dards Ad
vi sory Board (FASAB) to de velop ac count ing stan dards for the
U. S. Gov ern ment. The work of F ASAB aug ments the ef forts of
the JFMIP to strengthen over all Fed eral financial man age ment.
The stan dards de vel oped by the FASAB are now rec og nized by
the Amer i can In sti tute of Cer tified Pub lic Ac coun tants
(AICPA) as be ing gen er ally ac cepted ac count ing prin ci ples
(GAAP) for the Fed eral Gov ern ment. This is a ma jor ac com
plish ment. It will en hance the ac cept abil ity of our re ports
and will add to the level of fi nan cial pro fes sion al ism
through out the U. S. Gov ern ment. Working to is sue agency fi
nan cial re ports con sis tent with GAAP and to ob tain clean au
dit opin ions, the Ad - min is tra tion is com mit ted to im prov
ing the re li abil ity of Fed eral fi nan cial in for ma tion.
Achieving an un qual i fied opin ion on the fi nan cial state
ments of Fed eral agen cies and the U. S. Gov ern ment is a first
step. Un qual i fied opin ions lead to the de vel op ment of
better fi nan cial in for ma tion which, when pro vided to man age
ment, will pro vide the ba sis for pro duc ing better de ci sions.
Agencies and the Gov ern ment as a whole must con tinue to work to
im ple ment sys tems that re port fi nan cial and pro gram in for
ma tion quickly and re li ably, and then must use that in for ma
tion in the stew ard ship of the Na tion's re sources. The ac com
pa ny ing Fi nan cial Re port is re quired by 31 U. S. C. 331( e)(
1) and con sists of the Man - age ment's Dis cus sion and Anal y
sis (MD& A), State ment of Op er a tions and Changes in Net Po si
tion, State - ment of Net Cost, Bal ance Sheet, Stew ard ship In
for ma tion, Notes to the Fi nan cial State ments and Sup ple men
tal In for ma tion. Each sec tion is pre ceded by a de scrip tion
of its con - tents. Basis of Accounting and Reporting Entity The
ac com pa ny ing fi nan cial state ments gen er ally were pre
pared based on GAAP stan dards de vel oped by FASAB. The re cent
rec og ni tion of Fed eral ac count ing stan dards by the AICPA as
GAAP en hances their ac cept abil ity. These stan dards form the
foun da tion for pre par ing con sis tent and mean ing ful fi nan
cial state ments both for in di vid ual Fed eral agen cies and the
Gov ern ment as a whole. GAAP for the Fed eral Gov ern ment is tai
lored to the U. S. Gov ern ment's unique char ac ter is tics and
spe cial needs. For ex am ple, land not used in U. S. Gov ern ment
op er a tions (stew ard ship land), weapon sys tems and sup port
prop erty used in the per for mance of mil i tary mis sions, and
ves sels held as part of the Na tional De fense Re serve Fleet (na
tional de  fense as sets) are re ported in the Stew ard ship In
for ma tion sec tion rather than val ued on the Bal ance Sheet.
The Gov ern ment's re spon si bil i ties and pol icy com mit ments
are much broader than the re ported Bal ance Sheet li a bil i
ties. They in clude the so cial in sur ance pro grams dis - closed
in the Stew ard ship In for ma tion sec tion, as well as a wide
range Accounting Standards Much progress has been made in the area
of financial management . . .  The recent recognition of Federal
accounting standards by the AICPA as GAAP enhances their
acceptability... DIS CUS SION AND ANAL Y SIS 7 The fi nan cial
state ments cover the ex ec u tive branch, as well as parts of the
leg is la tive and ju di cial branches of the U. S. Gov ern ment.
A list of the sig nif i cant en ti ties in cluded in these fi nan
cial state ments is in the Ap pen dix. In for ma tion from the leg
is la tive and ju di cial branches is lim ited be cause those en
ti ties are not re quired by law to sub mit com pre hen sive fi
nan cial state ment in for ma tion to Trea sury. Due to its in de
pend ence, the Fed eral Re serve Sys tem is ex cluded. In ad di
tion, Gov ern ment- sponsored but pri vately owned en ter prises
(such as Fed eral Home Loan Banks and the Fed - eral Na tional
Mort gage As so ci a tion) are ex cluded. Coverage of other pro
grams un der which the Gov ern ment pro vides ben e fits and ser
vices to the peo ple of this Nation. Stan dards that were
implemented in fis cal 1999 at the Governmentwide level re quire
re port ing of an nual Fed eral ex penses for stew ard ship in
vest ments. These also are ex am ples of stan dards tai lored to
the spe cial char  ac ter is tics of the U. S. Gov ern ment. Such
in vest ments in clude:  Non- Federal phys i cal prop erty; the
Fed eral in vest ment in prop er ties owned by State and lo cal
gov ern ments (e. g., high ways and air ports).  Hu man cap i tal;
in vest ments in ed u ca tion and train ing pro grams fi nanced by
the U. S. Gov ern ment for the ben e fit of the pub lic.  Re
search and de vel op ment; the U. S. Gov ern ment's in vest  ments
in ba sic and ap plied re search and de vel op ment. The an nual
ex pense re lated to these in vest ments in cluded in the State -
ment of Net Cost is sep a rately re ported in the Stew ard ship In
for ma - tion sec tion. A new ac count ing stan dard, which be
came ef fec tive for fis cal 1999, re quires that de ferred main
te nance be pre sented as re quired sup ple men tary in for ma
tion. Re porting de ferred main te nance high lights the re al ity
that it is an ex pected cost, which has not been paid. The ex cess
of rev e nue over net cost fig ure (ac crual ba sis) con tained in
these fi nan cial state ments for fis cal 1999 is $76.9 bil lion.
In fis cal 1999, there was a uni fied bud get sur plus (pri mar
ily on the cash ba sis) of $124.4 bil lion. The pri mary com po
nents of the dif fer ence that have been iden ti fied are prin ci
pal pay ments of pre- credit re form loans, $32.4 bil lion; de
creases in the li a bil ity for vet eran com pen sa tion and
burial ben e fits, $94.9 bil lion; de creases in the li a bil ity
for mil i tary em ployee ben e fits, $31.1 bil lion; in creases in
the li a bil ity for ci vil ian em ployee ben e fits, $41.6 bil
lion; in creases in en vi ron men tal li a bil i ties, $88.7 bil
lion; and, in creases in cap i tal ized fixed as sets, $41.5 bil
lion. For more in for ma tion on the de tailed rec on cil i a
tion, see the Rec on cil i a tion of the Ex cess of Rev e nue Over
Net Cost to the Unified Bud get Sur plus in the Sup ple men tal In
for ma tion sec tion. Financial Results These fi nan cial state
ments of the U. S. Gov ern ment are pre pared based on GAAP that
re quires us ing the ac crual ba sis of ac count ing. Un der the
ac crual ba sis, trans ac tions are re ported when the events giv
ing rise to the trans ac tions oc cur, rather than when cash is re
ceived or paid (cash ba sis). In con trast, Fed eral bud get ary
re port ing is gen er ally on the cash ba sis in ac cor dance with
ac cepted bud get con cepts. The most sig nif i cant dif fer ence
be tween these two bases in volves the tim ing of rec og ni tion
and mea sure ment of rev e nues and costs. For ex am ple, GAAP re
quires rec og ni tion of li a bil i ties for costs re lated to en
vi ron men tal cleanup when the events re quir ing such costs oc
cur. By con trast, cur rent bud get con cepts rec og nize such
costs later, at the time pay ment is made. The ef fects of these
dif - fer ences are re flected in the Rec on cil i a tion of the
Ex cess of Rev e nue Over Net Cost to the Unified Bud get Sur
plus, in the Sup ple men tal In for ma tion sec tion of this Fi
nan cial Re port. Accrual Ba sis Ac count ing Standards, cont. 8
DIS CUS SION AND ANAL Y SIS Revenue and Expense Summary Rev e nue
Non- exchange rev e nue is an in flow of re sources to the Gov ern
ment that the Gov ern ment de mands or re ceives by do na tions.
The in flows that it de mands in clude taxes, du ties, fines and
pen al ties. Non- exchange rev e nue is the U. S. Gov ern ment's
pri mary source of rev e nue and to taled $1,822.4 bil lion in
1999. More than 95 per cent of this to tal came from tax re
ceipts, with the re main der com ing from cus toms du ties and
other mis cel la neous re ceipts. Earned rev e nues are in flows
of re sources that arise from ex change trans ac tions; for ex am
ple, when the U. S. Gov ern ment sells goods or ser vices to the
pub lic. Dur ing 1999, the U. S. Gov ern ment earned $192.6 bil
lion in ex change rev e nue. Of these rev e nues, $182.1 bil lion
is off set against the gross cost of the re lated func tions to ar
rive at the func tion's net cost. The U. S. Gov ern ment also
earned $10.5 bil lion that was not off set against the cost of any
func tion (e. g., roy al ties on the Outer Con ti nen - tal Shelf
lands). 0.9% 1.3% 1.4% 2.1% 3.5% 72.3% 9.6% 9.0% Corporate income
tax Excise tax Individual income tax and tax withholdings
Unemployment tax Miscellaneous Estate and gift tax Customs duties
Exchange revenue 72.3% 0.9% 1.3% 1.4% 2.1% 3.5% 9.0% 9.6%
Components of Revenue by Major Source De tail may not add to to
tals due to round ing. Expenses by Function The net cost of U. S.
Gov ern ment op er a tions was $1,756.0 bil lion for 1999. Net
cost rep re sents the gross cost of op er a tions less at trib ut
able earned rev e nues. The State ment of Net Cost re flects the
cost in curred to carry out the na tional pri or i ties iden ti
fied by the Pres i dent and the Con gress. The func t i o n s and
subfunctions used to ac cu mu late costs as so ci ated with the na
tional pri or i ties are iden ti fied in the Pres i dent's bud get
and de scribed in de tail in the Sup ple men tal In for ma - t i o
n s e c t i o n o f t h i s F i n a n c i a l Re port. The ac com
pa ny ing chart pres ents the per cent age of the net cost of U.
S. Gov ern ment op er a tions rep re sented by each of the U. S.
Gov ern ment's ma jor func tions. 51.6% 23.5% 13.1% 6.4% 5.4%
National defense 23.5% Interest 13.1% Human resources 51.6%
Physical resources Other functions 5.4% 6.4% De tail may not add
to to tals due to round ing. Net Cost by Major Function DIS CUS
SION AND ANAL Y SIS 9 37.6% 2.4% 4.5% 0.5% 1.1% 1.2% 52.6% Other
liabilities Environmental and disposal liabilities Accounts
payable Federal employee and veterans benefits Benefits due and
payable Loan guarantee liabilities Federal debt held by the public
1.1% 2.4% 4.5% 1.2% 37.6% 0.5% 52.6% Major Categories of
Liabilities De tail may not add to to tals due to round ing. Asset
and Liability Summary Assets The as sets of the U. S. Gov ern ment
are the re sources avail able to pay li a bil i ties or to sat
isfy fu ture ser vice needs. The ac com pa ny ing chart de picts
the ma jor cat e go ries of re ported as sets as of Sep tem ber
30, 1999, as a per cent age of re ported to tal as sets. De tailed
in for ma tion about the com po nents of these as set cat e go
ries can be found in the Notes to the Fi nan cial State ments. The
as sets pre sented on the Bal ance Sheet are not a com pre hen
sive list of Fed eral re sources. For ex am ple, the U. S. Gov ern
ment's most im por tant fi nan cial re source, its abil ity to tax
and reg u late com merce, can not be quan ti - fied and is not re
flected. Nat u ral re sources, stew ard ship land (na tional
parks, for ests and graz ing lands), na - tional de fense as sets
and her i tage as sets are other ex am ples of re sources that are
not in cluded in the $883.0 bil lion of Fed eral as sets re ported
on the Bal ance Sheet at the end of fis cal 1999. As can be seen,
sig nif i cant as sets of the Fed eral Gov ern ment are not re
flected on the Bal ance Sheet. 33.8% 4.0% 13.0% 6.1% 20.8% 19.6%
Loans receivable Inventories and related property Cash and other
monetary assets Property, plant and equipment Accounts receivable
Taxes receivable 19.6% 20.8% 13.0% 33.8% 2.6% 6.1% Other 4.0% 2.6%
Major Categories of Assets De tail may not add to to tals due to
round ing. Liabilities At the end of fis cal 1999, the U. S. Gov
ern ment re ported li a bil i ties of $6,909.2 bil lion. These li
a bil i ties are prob a ble and mea sur able fu ture out flows of
re sources aris ing out of past trans ac tions or events. The larg
est c o m p o n e n t o f t h e s e l i a b i l i t i e s ($
3,631.6 bil lion) is rep re sented by Fed eral debt se cu ri ties
held by the pub lic. The next larg est com po nent ($ 2,600.7 bil
lion) re lates to pen sion, dis abil ity and health care costs for
Fed eral ci vil ian and mil i tary em ploy ees as well as for vet
er ans. In cluded in this com po nent is a De part ment of Vet
eran Af fairs pro gram whereby vet er ans or their de pend ents re
ceive com pen sa tion ben e fits if the vet eran was dis abled or
died from mil i tary ser vice- connected causes. Changes in the as
sump tions for this ac tu ar ial li a bil ity re sulted in a li a
bil ity de crease of $94.9 bil lion. An other li a bil ity, which
will likely re quire sub stan tial fu ture bud get ary 10 DIS CUS
SION AND ANAL Y SIS re sources to liq ui date, is re lated to en v
i r o n m e n t a l cleanup costs as so ci ated with en vi ron men
tal dam age/ con tam i na tion. As of Sep tem ber 30, 1999, the
cost of clean ing up en vi ron men tal dam age/ con tam i na tion
across Gov ern ment pro grams was es ti mated to be $313.2 bil
lion, an in crease of $88.7 bil lion from 1998. The ac com pa ny
ing chart pres ents the per cent age of to tal Fed eral li a bil i
ties rep re sented by each of the cat e go ries of li a bil i ties
re ported on the Bal ance Sheet. Ad di tional de tails about the
U. S. Gov ern ment's re ported li a bil i ties can be found in the
Notes to the Fi nan cial State ments. The lon ger term eco nomic
and bud get out look is fa vor able even more so than only a few
years ago. With pru dent fis cal pol icy, the bud get could re
main in sur plus for many de cades. The Ad min is tra tion pro
jects bud get sur pluses in 2000 and through out the cus tom ary
10- year bud get win dow. How ever, such pro jec tions are in her
ently un cer tain, be cause, while pru dent fis cal pol icy can
safe guard our hard- earned pros per ity, so too can reck less
choices dis si pate the ben e fits of the bud get dis ci pline
that is re spon si ble for our on go ing suc cess. There are fore
see able chal lenges that will threaten bud get ary sta bil ity in
the 21 st cen tury. In less than 10 years, the baby- boomers the
large gen er a tion born be tween 1946 and 1964 will be come el i
gi ble for early re tire ment un der So cial Se cu rity. In the
space of two de cades, the el derly's share of the U. S. pop u la
tion will jump from around 13 per  c e n t t o 2 1 p e r c e n t .
T h i s d e m o graphic bulge will put pres sure on the Fed e r a
l bud g e t through Medicare and So cial Se cu rity. Fis cal dis
ci pline pay ing down the debt and re duc ing or elim i nat ing in
ter est pay ments im proves the long- run bud get bal ance. Ad di
tional re forms such as the Ad min is tra tion pro pos als de
scribed be low, will be needed to strengthen So cial Se cu rity
and Medicare. Ad di tional in for ma tion on re ceipt and out lay
es ti mates can be found in the Cur rent Ser vices As sess ment in
the Stew ard ship In for ma tion sec tion of this Fi nan cial Re
port. Long- term Bud getary Out look Two trust funds have been es
tab lished to fi nance the Medicare pro gram. The Medicare Part A
Hos pi tal In sur ance Trust Fund is fi nanced by a 2.9 per cent
tax on wages and sal a ries re quired to be paid equally by em
ploy ees and em ploy ers. The Medicare Part B Sup ple men tary Med
i cal In sur ance Trust Fund re ceives pre mium pay ments on be
half of Medicare ben e fi cia ries who have elected cov er age.
The Bal anced Bud get Act of 1997 pro vides that the Medicare Part
B pre mium is set at a level that will cover 25 per cent of pro
gram costs. The re main der of the pro gram cost is funded by con
gres sio nal ap pro pri a tions. The 1999 Trustees' An nual Re
port pro jects that the Medicare Part A Trust Fund's as sets will
be de pleted by 2015 us ing in ter me di ate or best es ti mate as
sump tions. The Ad min is tra tion has pro posed changes that will
ex tend that date by at least a de cade to at least 2025. Ad di
tional in for ma tion about the Medicare pro gram can be found in
the Stew ard ship In for ma tion sec tion of this Fi nan cial Re
port. At the time this re port was pre pared, the 2000 Trustees'
An nual re port was sched uled to be re leased on March 30, 2000.
It's re vised es ti mates will dif fer from those re ported the
pre vi ous year, which have been in cluded in this Fi nan cial Re
port. Fi nan cial Con di tion of the Medicare Trust Funds Fi nan
cial Con di tion of the So cial Se curity Trust Funds Two trust
funds have been es tab lished by law to fi nance the So cial Se cu
rity pro gram (OASDI): Fed eral Old- Age and Sur vi vors In sur
ance (OASI) and Fed eral Dis abil ity In sur ance (DI). OASI pays
re tire ment and sur vi vors ben e fits and DI pays ben e fits af
ter a worker be comes dis abled. OASDI rev e nues con sist pri mar
ily of taxes on earn ings that are paid by em ploy ees, their em
ploy ers and the self- employed. OASDI also re ceives rev e nue
from tax a tion of some So cial Se cu rity ben e fits. Rev e nues
that are not needed to pay cur rent ben e fits or ad min is tra
tive ex penses are in vested in Trea sury se cu ri ties to earn in
ter est for the trust funds. The Board of Trustees of the OASI and
DI Trust Funds pro vides the Pres i dent and the Con g r e s s w i
t h short- range (10 years) and long- range (75 years) ac tu ar
ial es ti mates of each trust fund. Be cause of the in her ent un
cer tainty in es ti mates for as long as 75 years into the fu
ture, the So cial Se cu rity Trustees DIS CUS SION AND ANAL Y SIS
11 use three al ter na tive sets of eco - nomic and de mo graphic
as sump tions to show a range of pos si bil i ties. Most an a
lysts use the Trustees' in ter me di - ate or best es ti mate set
of as sump tions to eval u ate the fi nan cial con di tion of the
So cial Se cu rity pro gram. Un der cur rent leg is la tion and us
ing i n t e r m e d i a t e a s sump tions, the Trustees es ti
mated in their 1999 re port, re leased on March 30, 1999, that by
2014 cash dis burse ments for the pro grams will ex ceed cash re
ceipts and by 2034 the com bined trust fund as sets, pri mar ily
in vest ments in Trea - sury se cu ri ties, will be ex hausted.
With no change in the pro gram, in 2014 the trust funds are ex
pected to be gin us ing in ter est on their in vest ments to cover
the cash short fall and to pay ben e fits. Starting in 2022, they
would be gin re deem ing their in vest ments in Trea sury se cu ri
ties to pro vide the needed fund ing. In 2034, trust fund as sets
would be ex hausted; at that time, ded i cated tax rev e nues
would be suf fi cient to pay only ap prox i mately 71 per cent of
the ben e fits due. At the time this re port was pre pared, the
Trustees' An nual Re port was sched uled to be re leased on March
30, 2000. Its re vised es ti mates will dif fer from those re
ported the pre vi ous year, which have been in cluded in this Fi
nan cial Re port. The Ad min is tra tion has pro posed plans that
would ex tend the life of the trust funds to at least 2050, and in
tends to work with Con gress on a bi par ti san ba sis to en act
long- term So - cial Se cu rity sol vency and re form. Acting
sooner rather than later to ad dress the long- term fi nanc ing
needs of the pro gram will make the re quired changes less se vere
and dis - rup tive and en sure that So cial Se cu - rity works as
well for fu t u r e gen er a tions as it has for past gen er a -
tions. Ad di tional in for ma tion about the So cial Se cu rity
pro gram can be found in the Stew ard ship In for ma tion sec tion
of this Fi nan cial Re port. Im proving Gov ern ment Man agement
Over all In ad di tion to im prov ing fi nan cial man age ment,
the Fed eral Gov ern - ment has in re cent years de voted sub stan
tial ef forts to im prov ing other ar eas of man age ment. These
ef forts are es tab lished and re ported an nu ally by OMB as Pri
or ity Man - age ment Ob jec tives (PMOs). Co or di nated, sus
tained and in ten sive man age ment ini tia tives have been de
signed to ad dress the is sues in the ac com pa ny ing text. Real
prog ress has been made to im prove pro gram im ple men ta tion
and ex e cu tion through out the Gov ern ment, on both a
Governmentwide and agency- specific ba sis. For ex am ple: Man
aging the Year 2000 (Y2K) com puter prob lem . The Ad min is tra
tion's first and fore most man age ment ob jec tive was to re
solve the Y2K com puter prob lem. Y2K posed the sin gle larg est
tech nol ogy man age ment chal lenge in his tory. The Fed eral Gov
ern ment's tran si tion through the date change was, be yond all
ex pec ta tions, re mark ably trou ble free. Mod ern izing stu
dent aid de liv ery. Sig nif i cant prog ress was made mod ern iz
ing stu dent aid ben e fit de liv ery by ex pand ing elec tronic
ac cess to ben e fits and ser vices and re form ing con tract ing,
sys tems de vel op ment, and pro gram over sight prac tices. The
new per for mance- based or ga ni za tion, cre ated in 1998, hired
a chief op er at ing of fi cer, as sessed cus tomer needs, de vel
oped a sys tems mod ern iza tion blue print, is sued a 5- year per
for mance plan and re or ga nized the staff into three ser vice-
oriented chan nels for stu dents, schools and fi nan cial in sti
tu tions. Reengineering the nat u ral iza tion pro cess and re duc
ing the cit i zen ship ap pli ca tion back log. The De part ment
of Jus tice's Im mi gra tion and Nat u ral iza tion Ser vice (INS)
re de signed its nat u ral iza tion pro cess to stream line and au
to mate op er a tions, and si mul ta neously re duced a back log
of more than 1.8 mil lion ap pli ca tions for cit i zen ship. In
1999, INS re  duced the back log by more than 500,000 ap pli ca
tions, and the av er age pro cess ing time be tween ap pli ca tion
and nat u ral iza tion of qual i fied can di dates has been re
duced from 27 months in 1998 to 12 months in 1999. INS ex pects
per for mance to im prove fur ther. Im proving man age ment of the
de cen nial cen sus. The Bu reau of the Cen sus in the De part
ment of Com merce en sured that the nec es sary sup port struc
ture which in cludes open ing data cap ture cen ters, re gional
cen sus of fices and lo cal cen sus of fices; print ing forms; es
tab lish ing a tele phone ques tion naire as sis tance pro gram;
print ing lan guage as sis tance guides; and re cruit ing and
train ing tem po rary cen sus work ers was es tab lished and
tested and ready for op er a tion. Co or di nated, sus tained and
in tensive man age ment ini tiatives have been de signed to
address the issues . . .  The Ad min is tra tion has pro posed
plans that would ex tend the life of the trust funds to at least
2050 . . . 12 DIS CUS SION AND ANAL Y SIS Strengthening
Governmentwide Man age ment 1. Use per for mance in for ma tion to
im prove pro gram man age ment and make better bud get de ci
sions. 2. Improve fi nan cial man age ment in formation. 3. Use
cap i tal plan ning and in vest ment con trol to better man age in
for ma tion tech nol ogy. 4. Pro vide for com puter se cu rity and
pro tect crit i cal in for ma tion in fra struc ture. 5.
Strengthen sta tis ti cal pro grams. 6. Im ple ment ac qui si tion
re forms. 7. Im ple ment elec tronic Gov ern ment ini tia tives.
8. Better man age Fed eral fi nan cial port fo lios. 9. Align Fed
eral hu man re sources to sup port agency goals. 10. Ver ify that
the right per son is get ting the right ben e fit. 11. Stream line
and sim plify Fed eral grant man age ment. 12. Cap i tal ize on
Fed eral en ergy ef fi ciency. Improving Pro gram Im ple men ta
tion 13. Mod ern ize stu dent aid de liv ery. 14. Improve the De
part ment of En ergy's (DOE's) pro gram and con tract man age
ment. 15. Strengthen the Health Care Fi nancing Ad min is tra
tion's (HCFA's) man age ment ca pac ity. 16. Im ple ment Housing
and Hu man De vel op ment (HUD) re form. 17. Re form man age ment
of In dian Trust Funds. 18. Im ple ment Fed eral Avi a tion Ad min
is tra tion (FAA) man age ment re forms. 19. Im ple ment In ter
nal Rev e nue Ser vice (IRS) re forms. 20. Stream line the So cial
Se cu rity Ad min is tra tion's (SSA's) dis abil ity claims pro
cess. 21. Rev o lu tion ize De part ment of De fense (DOD) busi
ness af fairs. 22. Man age risks in build ing the In ter na tional
Space Sta tion. 23. Improve se cu rity at dip lo matic fa cil i
ties around the world. 24. Reengineer the nat u ral iza tion pro
cess and re duce the cit i zen ship ap pli ca tion back log.
Systems, Controls and Le gal Compliance The Fed eral Gov ern ment
faces daunt ing prob lems in mod ern iz ing its fi nan cial man -
age ment sys tems. Changing tech nol ogy, as well as chang ing in
for ma tion needs, are oc - cur ring so rap idly that tech nol -
ogy ad vances i n t o day's sys tems be come ob so lete with iden
ti fi ca tion of new data and sys tems re quire ments. The cor ner
stone of sound fi nan cial man age ment, as well as performance
mea sure ment, is ac cu rate, timely and use ful in - for ma tion.
Many Fed eral fi nan cial sys tems are sim ply un able to pro vide
the data needed to man age pro grams and make good de ci sions.
The Government needs to up grade and re place many of its fi nan
cial man age ment sys tems. The Fed eral Fi nan cial Man age ment
Im prove ment Act (FFMIA) pointed out that the development of fi
nan cial man age ment sys tems that sup port GAAP will im prove
Fed eral fi nan cial man age ment. Im prove ment in fi nan cial
sys tems de pends upon: (1) an en vi ron ment in which fi nan cial
man age ment sys tems can be suc cess fully planned, de vel oped,
op er ated and main tained; (2) Governmentwide sys tems re quire
ments that sup port in for ma tion stan dards; and (3) the avail
abil ity of sys tems that meet the Gov ernmentwide sys tems re
quire ments ar tic u lated in FFMIA. FFMIA sup ports and com ple
ments the Chief Fi nan cial Of fi cers (CFO) Act, the Gov ern ment
Per f o r m a n c e a n d Re sults Act, and the Gov ern ment Man
age ment Re form Act. It es tab lishes in stat ute cer tain fi nan
cial man age ment sys tem re quire ments that are Priority Man
agement Objectives DIS CUS SION AND ANAL Y SIS 13 al ready es tab
lished by the ex ec u tive branch. Spe cifically, Fed eral sys
tems must com ply with Fed eral Fi nan cial Man age ment Sys tems
re quire ments, Fed eral Ac count ing Stan dards and the Stan dard
Gen eral Led ger, at the trans ac tion level. The CFO Coun cil,
OMB, Trea sury, the Joint Fi nan cial Man age ment Im prove ment
Pro gram (JFMIP) and Fed eral agen cies are all work ing to im ple
ment crit i cal im prove ments to Fed eral fi nan cial man age
ment sys tems in six ar eas: (1) plan ning and in vest ment; (2)
Governmentwide and agency fi nan  cial man age ment sys tems in
fra struc tures; (3) com pre hen sive data re quire ments; (4) com
pre hen sive func tional re quire ments; (5) in dus try part ner
ships; and (6) sys tems de ploy ment. This past year, JFMIP im ple
mented a pro gram of com pre hen sive test ing of ven dor core sys
tems t o d e t e r m i n e c o m p l i a n c e w i t h JFMIP stan
dards. Nine sys tems in volv ing seven ven dors have passed the
rig or ous tests. Only those sys tems cer ti fied by JFMIP as com
pli ant may be pur chased by pro gram agen cies as of Oc to ber 1,
1999. Nu mer ous strong in ter nal con trols ex ist over Fed eral
as sets. These con trols in clude the ex is tence of a stat u tory
bud get and cen tral ized cash man age ment, debt and dis burse
ment func tions. In ad di tion, Trea sury's Fi nan cial Man age
ment Ser vice (FMS) pub lishes the Monthly Trea sury State ment of
Re ceipts and Out lays of the United States Gov ern ment (MTS), a
sum mary state ment pre pared from agency ac count ing re ports.
The MTS pres ents the re ceipts, out lays, re sult ing bud get sur
plus or def i cit, and Fed eral debt for the month and the fis cal
year- to- date and com pares those fig ures to the same pe riod in
the pre vi ous year. Fi nan cial Man age ment Chal lenges GAO has
re ported that se ri ous fi nan cial man age ment im prove ment
chal lenges face the U. S. Gov ern ment. The cen tral chal lenge
to pro duc ing re li able, use ful and timely data through out the
year and at yearend is over haul ing fi nan cial and re lated man
age ment in for ma tion sys tems. Agencies also must ad dress prob
lems with fun da men tal recordkeeping, in com plete doc u men ta
tion and weak in ter nal con trols be fore their sys tems can pro
duce re li able in for ma tion on an on go ing ba sis. Au dits of
agency fi nan cial state ments dis close de fi cien cies that im
pede com pli ance with GAAP and, ac cord ingly, im proved f i nan
cial man age ment. As a re sult, de spite prog ress over the past
year, GAO again was un able to ren der an opin ion on the re l i a
b i l i t y of the Governmentwide fi nan cial state ments. The fol
low ing ex hibit il lus trates agency prog ress to ward un qual i
fied au dit opin ions on their fi nan cial state ments. (Au dits
for all of the 24 ma jor agen cies were not re quired un til fis
cal 1996.) In 1996, only six agen cies were able to ob tain clean
opin ions. In 1999, 13 (and ul ti mately per haps as many as 15)
agen cies re ceived clean opin ions and 4 oth ers re ceived qual i
fied opin ions. This leaves only five agen cies with dis claimed
opin ions, a con di tion where the au di tors are un able to ren -
der an opin ion, gen er ally be cause of de fi cien cies in the ac
count ing re cords. How ever, in a few cases, agen cies could not
pre pare their fi nan cial state ments in time for the au dits to
be com pleted within the March 1 timeframe. A to tal of seven agen
cies made some im prove ment in their au dit opin ions and four
more than last year sub mit ted their state ments by the due date.
While ef forts have been sub stan tial and there has been real
prog ress, the task is ex tremely large and has been ham pered by
Y2K work re ceiv ing the bulk of sys tems re sources in 1999. Ad
di tional prog ress is ex pected in 2000. While prog ress has been
made, re cent au dits dis closed that ma jor agen cies con tinue
to have se ri ous short com ings in fi nan cial man age ment re
port ing and sys tems that pre clude their fi nan cial re ports
from be ing au dited and re ceiv ing un qual i fied opin ions.
These agen cies must sat is fac to rily ad dress these prob lems
in or der to re ceive an un qual i fied opin ion on their fi nan
cial state ments and for the U. S. Gov ern ment to re ceive an un
qual i fied opin ion on its fi nan cial state ments. With re spect
to intragovernmental trans ac tions, the chal lenge per tains to
iden ti fy ing and elim i nat ing trans ac tions be tween agen
cies. The au dits of the U. S. Gov ern ment's fi nan cial state
ments for fis cal 1997 through 1999 dis closed that agen cies
could not ef fec tively iden tify trans ac tions with other agen
cies so they could be elim i nated for Governmentwide re port ing.
If these trans ac tions are not prop erly elim i nated, to tal U.
S. Gov ern ment as sets, li a bil i ties, rev e nues and ex penses
will be mis stated by the amount of these trans ac tions. While ef
forts have been substantial and there has been real prog ress, the
task is ex tremely large . . . Controls and Com pliance, cont. 14
DIS CUS SION AND ANAL Y SIS CFO Act Agency Audit Opinions on
Financial Statements Agency 1996 1997 1998 1999 USDA Com merce DOD
Education DOE HHS HUD DOI ? DOJ DOL State ? DOT Treasury VA AID
EPA FEMA GSA NASA NRC NSF OPM SBA SSA To tal un qual i fied 6 11
12 13 Un qual i fied opin ions Qual ified opin ions Opin ion dis
claim ers ? Agencies that have not yet filed. Dur ing fis cal
1999, Trea sury con tin ued to fo c u s o n r e s o l v i n g
intragovernmental trans ac tion is sues. For fi du ciary bal ances
to tal ing over $2 tril lion in volv ing the Bu reau of the Pub
lic Debt and the Fed eral Fi nancing Bank, vir tu ally all of the
ac count ing dif fer ences have been ex plained so that these
trans ac tions can be elim i nated. Prog ress also has been made
re gard ing intragovernmen tal buy ing and sell ing trans ac tions
by us ing a re vised elim i na tion meth od ol ogy, but work re
mains to be done in this area. Trea sury con tin ues to as sist
agen cies in rec on cil ing their fund bal ance amount with the
amount re ported by Trea sury. Dur ing this past year, Trea sury
is sued pol icy state ments and guide lines for ac com plish ing
the rec on cil i a tion. Rec on cil i a tion is an on go ing ac
count ing func tion, and agen cies have made sig nif i cant
strides to in sti tu tion al ize the pro cess. Additional
Information Ad di tional de tails about the in for ma tion con
tained in these fi nan cial state ments can be found in the fi nan
cial state ments of the in di vid ual agen cies listed in the Ap
pen dix. In ad di tion, re lated U. S. Gov ern ment pub li ca
tions such as the Bud get of the United States Gov ern ment, the
Trea sury Bul le tin, the Monthly Trea sury State ment of Re
ceipts and Out lays of the United States Gov ern ment, the Monthly
State ment of the Pub lic Debt of the United States, and the
Trustee's re ports for the So cial Se cu rity and Medicare pro
grams may be of in ter est. Challenges, cont. GENERAL ACCOUNTING
OFFICE REPORT 15 B-285019 March 28, 2000 The President The
President of the Senate The Speaker of the House of
Representatives Implementation of important legislative reforms
remains underway to promote greater accountability in managing the
finances of our national government. These reforms include
requirements for annual audited financial statements for 24 major
departments and agencies as well as preparation of the financial
statements of the U. S. government, which GAO is required to
audit. The report on our audit of these financial statements for
fiscal year 1999 is enclosed. These financial reporting
requirements are prompting steady improvements in federal
financial accountability, and there has been progress toward
meeting the related legislative objectives. The President has
designated financial management improvement as a priority
management objective and efforts are underway across government to
address the pervasive, generally long- standing financial
management problems discussed in our accompanying report. Thus
far, 13 of 24 major agencies have received unqualified opinions on
their fiscal year 1999 financial statements and others have
resolved certain previously reported financial statement
deficiencies. For example, the Department of Energy resolved its
previously reported deficiency related to its environmental and
disposal liability associated with nuclear weapons. Also, in
October 1999, the American Institute of Certified Public
Accountants recognized federal accounting standards as a generally
accepted basis of accounting, which represents a major milestone
for the federal government. At the same time, several major
departments are not yet able to produce auditable financial
statements on a consistent basis. There are several major
obstacles to overcome, both at the agency level and in preparing
reliable financial statements for the U. S. government. The
deficiencies discussed in our accompanying report prevented us
from being able to form an opinion on the reliability of the
accompanying fiscal year 1999 financial statements, as was the
case in our fiscal years 1998 and 1997 audits. These deficiencies
continue to significantly impair the federal government's ability
to GENERAL ACCOUNTING OFFICE REPORT 16 B-285019 adequately
safeguard certain significant assets, properly record various
transactions, and comply with selected provisions of laws and
regulations related to financial reporting. Additionally, (1) the
government is unable to determine the full extent of improper
payments estimated to total billions of dollars annually and
therefore cannot develop effective strategies to reduce them, (2)
serious, long- standing computer security weaknesses expose the
government's financial and other sensitive information to
inappropriate disclosure, destruction, modification, and fraud,
and critical operations to disruption, and (3) material control
weaknesses affect the government's tax collection activities. The
executive branch recognizes that, because of the extent and
severity of the financial management deficiencies, addressing them
will require concerted improvement efforts across government. With
a concerted effort, the federal government, as a whole, can
continue to make progress toward achieving accountability and
generating reliable financial and management information on a
timely basis and in an ongoing manner. Annual financial audits
represent an important means to assure continued progress in
connection with improving federal financial management. While
obtaining unqualified clean audit opinions on federal financial
statements is an important objective, it is not an end in and of
itself. The key is to take steps to continuously improve internal
control and underlying financial and management information
systems as a means to assure accountability, increase the economy,
improve the efficiency, and enhance the effectiveness of
government. These systems must generate timely, accurate, and
useful information on an ongoing basis, not just as of the end of
the fiscal year. Unfortunately, for fiscal year 1999, the
financial management systems of almost all agencies were again
found not to be in substantial compliance with the requirements of
the Federal Financial Management Improvement Act of 1996. In
addition, while some attention to delineating core competencies
and training has occurred, a great deal more needs to be done to
improve financial management human capital. Reliable financial
information is essential for analyzing the government's financial
condition and helping inform budget deliberations by providing
additional information beyond that provided in the budget. The
budget of the federal government is primarily formulated on a cash
basis, which also is generally the basis for calculating the
annual budget surplus or deficit. The financial statements are
prepared generally on the accrual basis of accounting. The most
significant difference between the budget and accrual basis of
accounting is the timing of recognition and measurement of
revenues and costs. GENERAL ACCOUNTING OFFICE REPORT 17 B-285019
Accrual information can be used with budgetary information to
provide a valuable perspective on the costs of agency programs and
the government's assets and long- term commitments. This is
especially important given current demographic trends and the
fiscal challenges that will result. Last year we discussed the
Year 2000 challenge in our report. The federal government has met
the date change challenge. The leadership exhibited by the
legislative and executive branches and the partnerships formed by
a myriad of public, private, and international organizations were
critical factors behind this success. The accompanying Financial
Report and our report include certain information concerning the
Social Security and Medicare (Part A) trust funds, such as
projected contributions and expenditures, dates when expenditures
are expected to exceed contributions, and dates when such funds
are expected to be exhausted. Such information is as of January 1,
1999 for Social Security and as of September 30, 1999 for Medicare
(Part A), the most recent information publicly reported by the
government. The government plans to issue, on March 30, 2000,
updated information as of January 1, 2000. The government's
issuance of dated information in this Financial Report at about
the same time that it issues more current information may cause
confusion to the Congress and the public. Steps should be taken,
in future years, to ensure that the government's Financial Report
contains up- to- date information as of no earlier than the end of
the most recent fiscal year. Because current information on the
solvency of the Social Security and Medicare programs is critical
to assessing the financial condition of the federal government,
aiding in budget deliberations, and fostering public debate, we
will include the updated information on these two important
federal programs in a report that will also contain the Fiscal
Year 1999 Financial Report of the United States Government. We
appreciate the cooperation and assistance we received from the
Chief Financial Officers and Inspectors General throughout
government, as well as Department of the Treasury and Office of
Management and Budget officials, in carrying out our
responsibility to audit the government's financial statements. We
look forward to continuing to work with these officials and the
Congress to achieve the goals and objectives associated with
financial management reform. GENERAL ACCOUNTING OFFICE REPORT 18
B-285019 Our report was prepared under the direction of Jeffrey C.
Steinhoff, Acting Assistant Comptroller General for Accounting and
Information Management, and Robert F. Dacey, Director,
Consolidated Audit and Computer Security Issues. If you have any
questions, please contact me on (202) 512- 5500 or them on (202)
512- 3317. David M. Walker Comptroller General of the United
States GENERAL ACCOUNTING OFFICE REPORT 19 B-285019 The President
The President of the Senate The Speaker of the House of
Representatives The Secretary of the Treasury, in coordination
with the Director of the Office of Management and Budget (OMB), is
required to annually submit financial statements for the U. S.
Government to the President and the Congress. 1 GAO is required to
audit these statements. This is our report on our audit of the
financial statements of the U. S. government for fiscal year 1999.
2 In summary, certain significant financial systems weaknesses,
problems with fundamental recordkeeping and financial reporting,
incomplete documentation, and weak internal control, including
computer controls, continue to prevent the government from
accurately reporting a significant portion of its assets,
liabilities, and costs. Some of these deficiencies primarily
relate to specific major agencies; others, such as
intragovernmental transactions, affect the entire government.
These deficiencies affect the reliability of the accompanying
financial statements and much of the related information in the
Fiscal Year 1999 Financial Report of the United States Government,
as well as the underlying financial information. They also affect
the government's ability to accurately measure the full cost and
financial performance of certain programs and effectively manage
related operations. 1 The Government Management Reform Act of 1994
requires such reporting beginning with financial statements
prepared for fiscal year 1997. 2 Our report on the fiscal year
1998 financial statements is entitled Financial Audit: 1998
Financial Report of the United States Government (GAO/AIMD-99-130,
March 31, 1999). 20 GENERAL ACCOUNTING OFFICE REPORT B-285019
Major problems included the federal government's inability to:
properly account for and report (1) material amounts of property,
equipment, materials, and supplies and (2) certain stewardship
assets, primarily at the Department of Defense;  properly estimate
the cost of certain major federal credit programs and the related
loans receivable and loan guarantee liabilities, primarily at the
Department of Agriculture;  estimate and reliably report material
amounts of environmental and disposal liabilities and related
costs, primarily at the Department of Defense;  determine the
proper amount of various reported liabilities, including
postretirement health benefits for military employees and accounts
payable and other liabilities for certain agencies;  accurately
report major portions of the net cost of government operations;
ensure that all disbursements are properly recorded; and  properly
prepare the federal government's financial statements, including
balancing the statements, accounting for substantial amounts of
transactions between governmental entities, properly and
consistently compiling the information in the financial
statements, and reconciling the results of operations to budget
results. Such deficiencies prevented us from being able to form an
opinion on the reliability of the accompanying fiscal year 1999
financial statements, as was the case in our fiscal years 1998 and
1997 audits. These deficiencies continue to significantly impair
the federal government's ability to adequately safeguard certain
significant assets, properly record various transactions, and
comply with selected provisions of laws and regulations related to
financial reporting. Additionally, (1) the government is unable to
determine the full extent of improper payments estimated to total
billions of dollars annually and, therefore, cannot develop
effective strategies to reduce them, (2) serious, long- standing
computer security weaknesses expose the government's financial and
other sensitive information to inappropriate disclosure,
destruction, modification, and fraud, and critical operations to
disruption, and (3) material control weaknesses affect the
government's tax GENERAL ACCOUNTING OFFICE REPORT 21 B-285019
collection activities. Further, the financial management systems
of almost all agencies were again found not to be in substantial
compliance with the requirements of the Federal Financial
Management Improvement Act of 1996. Our audit and the Inspectors
General (IG) audits of major component agencies' financial
statements for fiscal year 1999 continue to result in (1) an
identification and analysis of deficiencies in the government's
recordkeeping, financial reporting, and control systems and (2)
recommendations to correct them. Fixing these problems represents
a significant challenge because of the size and complexity of the
government and the discipline and human capital needed to follow
sound financial management and reporting practices. This report
provides our (1) disclaimer of opinion on the government's fiscal
year 1999 financial statements, (2) report on internal control,
and (3) report on compliance with selected provisions of laws and
regulations related to financial reporting. It also provides
illustrations of the identified material deficiencies. A more
complete discussion of these issues may be found in individual
agency reports. Additionally, the report highlights certain long-
term financing issues facing government. The objectives, scope,
and methodology of our work are discussed in the appendix to this
report. We provided a draft of this report to Department of the
Treasury and OMB officials, who expressed their commitment to
address the deficiencies this report outlines. We did our work in
accordance with generally accepted government auditing standards.
DISCLAIMER OF OPINION Because we were unable to determine the
reliability of significant portions of the accompanying financial
statements for the reasons outlined above and described in more
detail below, we are unable to, and we do not, express an opinion
on the accompanying fiscal year 1999 financial statements. Because
of the serious deficiencies in the government's systems,
recordkeeping, documentation, financial reporting, and controls,
readers are cautioned that amounts reported in the financial
statements and related notes may not be a reliable source of
information for decision- making by the government or the public.
These deficiencies also affect the reliability of information
contained in the accompanying Management's Discussion and Analysis
and any other financial management information-- including
information used to manage the government day- to- day and certain
budget information reported by agencies-- which is taken from the
same data sources as the financial statements. 22 GENERAL
ACCOUNTING OFFICE REPORT B-285019 Further, while we have not
audited and do not express an opinion on the Stewardship
Information, Supplemental, or Other Information included in the
accompanying Financial Report, we noted certain material omissions
related to the presentation of national defense assets and issues
related to the reconciliation of the results of operations to
budget results, which are discussed below. The accompanying
Financial Report and our report include certain information
concerning the Social Security and Medicare (Part A) trust funds,
such as projected contributions and expenditures, dates when
expenditures are expected to exceed contributions, and dates when
such funds are expected to be exhausted. Such information is as of
January 1, 1999 for Social Security and as of September 30, 1999
for Medicare (Part A), the most recent information publicly
reported by the government. The government plans to issue, on
March 30, 2000, updated information as of January 1, 2000. The
government's issuance of dated information in this Financial
Report at about the same time that it issues more current
information may cause confusion to the Congress and the public.
Steps should be taken, in future years, to ensure that the
government's Financial Report contains up- to- date information as
of no earlier than the end of the most recent fiscal year. Because
current information on the solvency of the Social Security and
Medicare programs is critical to assessing the financial condition
of the federal government, aiding in budget deliberations, and
fostering public debate, we will include the updated information
on these two important programs in a report that will also contain
the Fiscal Year 1999 Financial Report of the United States
Government. Material Deficiencies The following sections describe
material deficiencies that contribute to our disclaimer of
opinion, discuss their effects on the financial statements and the
management of government operations, and highlight certain
corrective actions. Although the federal government has made
steady progress, the fundamental nature of these deficiencies
remains unchanged from our fiscal year 1998 and 1997 financial
statement reports. Each of these deficiencies also constitutes a
material weakness in internal control. 3 3 A material weakness is
a condition in which the design or operation of one or more of the
internal control components does not reduce to a relatively low
level the risk that errors, fraud, or noncompliance in amounts
that would be material to the financial statements may occur and
not be detected on a timely basis by employees in the normal
course of performing their duties. GENERAL ACCOUNTING OFFICE
REPORT 23 B-285019 Property, Plant, and Equipment and Inventories
and Related Property The federal government-- one of the world's
largest holders of physical assets does not have adequate systems
and controls to ensure the accuracy of information about the
amount of assets held to support its domestic and global
operations. A majority of the $472 billion of these reported
assets is not adequately supported by financial and/ or logistical
records. Assets that are not adequately supported include: (1)
buildings, structures, facilities, and equipment, (2) various
government- owned assets that are in the hands of private sector
contractors, and (3) operating materials and supplies comprised
largely of ammunition, defense repairable items, and other
military supplies. Also, the government cannot ensure that all
assets are reported. For example, no Department of Defense (DOD)
contractor- held personal property was reported. Further, national
defense asset unit information reported as Stewardship Information
was incomplete because (1) it did not include major national
defense support equipment, such as uninstalled engines and
communications equipment, and (2) amounts were reported in units,
rather than in dollars as required by current generally accepted
accounting principles. DOD, the largest holder of these assets,
has acknowledged the challenges it faces to implement effective
systems and accurately record data to properly account for and
report its physical assets and has a number of initiatives
underway that are intended to address this problem. These
initiatives are expected to span several years. Because the
government lacks complete and reliable information to support its
asset holdings, it could not satisfactorily determine that all
assets were included in the financial statements, verify that
reported assets actually exist, or substantiate the amounts at
which they were valued. For example, periodic physical counts have
shown that inventory records contain significant error rates.
Further, weak controls significantly impair the government's
ability to detect and investigate fraud or theft of assets.
Accurate asset information is necessary for the government to (1)
know the assets it owns and their location and condition, (2)
safeguard its assets from physical deterioration, theft, or loss,
(3) account for acquisitions and disposals of such assets, (4)
prevent unnecessary storage and maintenance costs or purchase of
assets already on hand, and (5) determine the full costs of
government programs that use these assets. 24 GENERAL ACCOUNTING
OFFICE REPORT B-285019 Loans Receivable and Loan Guarantee
Liabilities As of the end of fiscal year 1999, the government
reported $184 billion of loans receivable and $35 billion of
liabilities for estimated losses related to estimated future
defaults of guaranteed loans. Certain federal credit agencies,
responsible for significant portions of the government's lending
programs, were unable to properly estimate the cost of these
programs in accordance with generally accepted accounting
principles and budgeting requirements. As an example, the
Department of Agriculture, which represents a significant portion
of loans receivable, could not estimate the net loan amounts
expected to be collected because it does not maintain some of the
key historical data needed to predict borrower behavior, such as
the amount and timing of future defaults and prepayments.
Agriculture's lack of historical data is largely the result of
system inadequacies. Certain affected agencies are in the process
of implementing action plans intended to develop reliable loan and
loan guarantee information. Reliable information about the cost of
credit programs is important in supporting annual budget requests
for these programs, making future budgetary decisions, managing
program costs, and measuring the performance of credit activities.
Federal credit programs include direct loans and loan guarantees
for farms, rural utilities, low and moderate income housing, small
businesses, veterans' mortgages, and student loans. Environmental
and Disposal Liabilities Significant portions of the liability for
remediation of environmental contamination and disposal of
hazardous waste, reported at $313 billion, lacked adequate support
and may not be complete. For example, the estimated cost to remove
unexploded ordnance and residual contaminants from training
ranges, amounting to over 40 percent of DOD's recorded liability,
is not adequately supported. Also, the cost of significant
estimated liabilities associated with certain major weapons
systems and training ranges, initially recorded in fiscal year
1999, was reported as a current year cost, rather than as a prior
period adjustment as required by generally accepted accounting
principles. Properly stating environmental and disposal
liabilities and improving internal control supporting the process
for their estimation could assist in determining priorities for
cleanup and disposal activities and allow for appropriate
consideration of future budgetary resources needed to carry out
these activities. DOD, which has significant exposure for
environmental and disposal liabilities, improved its initial
estimate in fiscal GENERAL ACCOUNTING OFFICE REPORT 25 B-285019
year 1999 by including additional categories of liabilities, such
as nuclear weapons systems. Also, DOD has a project in progress
that is intended to better identify and document all additional
environmental and disposal liabilities. Liabilities Adequate
systems and cost data were not available to accurately estimate
the reported $196 billion military postretirement health benefits
liability included in federal employee and veteran benefits
payable. Information used to develop such estimates did not
include the full cost of providing health care benefits. In
addition, some of the underlying patient workload data were not
reliable. DOD is evaluating methods to develop a reliable estimate
of this liability. Also, some agencies do not maintain adequate
records or have systems to ensure that accurate and complete data
were used to estimate a reported $86 billion of accounts payable
and a reported $169 billion in other liabilities. For example, a
liability was not reported for certain amounts owed to contractors
that, under the terms of the contracts, were held by the
government pending the acceptance of goods or services. Further,
the government was unable to provide adequate information to
determine whether commitments and contingencies were complete and
properly reported. These problems significantly affect the
determination of the full cost of the government's current
operations, the value of its assets, and the extent of its
liabilities. Cost of Government Operations The government was
unable to support significant portions of the $1.76 trillion
reported as the total net cost of government operations. The
previously discussed material deficiencies in reporting assets and
liabilities and the lack of effective cash disbursement
reconciliations and deficiencies in financial statement
preparation, as discussed below, affect reported net costs.
Further, we were unable to determine whether the amounts reported
in the individual net cost categories on the Statement of Net Cost
and in the subfunction detail in Supplemental Information were
properly classified. Accurate cost information is important to the
federal government's ability to control and reduce costs, assess
performance, evaluate programs, and set fees to recover costs
where required. Cash Disbursement Activity Several major agencies
are not effectively reconciling cash disbursements. These
reconciliations are intended to be a key control to detect and
correct errors and other 26 GENERAL ACCOUNTING OFFICE REPORT B-
285019 misstatements in financial records in a timely manner--
similar in concept to individuals reconciling personal checkbooks
with a bank's records each month. Although improvements in some
agency reconciliation processes have been noted, there continued
to be billions of dollars of unreconciled differences between
agencies' and Treasury records of cash disbursements as of the end
of fiscal year 1999. As a result, the government is unable to
ensure that all disbursements are properly recorded. Improperly
recorded disbursements could result in misstatements in the
financial statements and in certain data provided by agencies for
inclusion in the President's budget concerning fiscal year 1999
obligations and outlays. Preparation of Financial Statements The
government does not have sufficient systems, controls, or
procedures to properly prepare financial statements for the U. S.
government. Such deficiencies, described below, impair the
government's ability to (1) properly balance the government's
financial statements and account for billions of dollars of
transactions between governmental entities, (2) properly and
consistently compile the information in the financial statements,
and (3) effectively reconcile the results of operations reported
in the financial statements with budget results. Also, certain
financial information required by generally accepted accounting
principles was omitted from the financial statements. Unreconciled
Transactions. To make the financial statements balance, Treasury
recorded a net $24 billion item on the Statement of Operations and
Changes in Net Position, which it labeled unreconciled
transactions. Treasury attributes this net out- ofbalance amount
to the government's inability to properly identify and eliminate
transactions between federal government entities, to agency
adjustments that affected net position, and to errors. An
additional net $12 billion of unreconciled transactions was
improperly recorded in net cost. These unreconciled transactions
result in material misstatements of assets, liabilities, revenues,
and/ or costs. Agencies' accounts can be out of balance with each
other, for example, when one or the other of the affected agencies
does not properly record a transaction with another agency or the
agencies record the transactions in different accounting periods.
These out- ofbalance conditions can be detected and corrected by
instituting procedures for reconciling transactions between
agencies on a regular basis and in a timely manner. GENERAL
ACCOUNTING OFFICE REPORT 27 B-285019 In fiscal year 1999, the
government required agencies to reconcile certain
intragovernmental accounts. Some of these accounts, such as those
related to employee benefits, could not be reconciled. Also, in
fiscal year 1999, the government gathered, for the first time, the
detail of certain intragovernmental accounts by trading partner
agency. Using this information, we estimated that the amounts
reported for agency trading partners for these specific
intragovernmental accounts were out- ofbalance by more than $350
billion. With trading partner information, the government can
begin to analyze the nature of these intragovernmental account
differences and develop effective solutions. Solutions will also
be required for significant differences reported in other
intragovernmental accounts, primarily related to appropriations.
The government stated that it plans to require agencies to
reconcile additional intragovernmental accounts in fiscal year
2000 and has formed task forces to recommend solutions to this
longstanding problem. Unreconciled transactions also may arise
because the government does not have effective controls over
reconciling net position. The net position reported in the
financial statements is derived by subtracting liabilities from
assets, rather than through balanced accounting entries. Also,
certain adjustments and eliminations do not balance. Such control
weaknesses, combined with unbalanced transactions and the
significant volume of transactions and number of reporting
entities, result in misstatements in the financial statements,
hinder the ability of the government to identify misstatements
that may exist, and may contribute to the amount of reported
unreconciled transactions. Financial Statement Compilation. The
federal government cannot ensure that the information in the
financial statements of the U. S. government is properly and
consistently compiled. To prepare the federal government's
financial statements, about 70 agencies submit data to Treasury on
approximately 2,000 separate reporting components, each having
many account balances. In fiscal year 1999, the Department of
Treasury, which prepares the accompanying financial statements,
implemented a new process for reconciling these financial
statements with the related agency financial statements. While the
process identified the nature of certain inconsistencies, the
government was unable to reconcile all amounts included in these
financial statements with agency financial statements. Further,
material adjustments and reclassifications were required to (1)
make the financial statements more consistent with agency
financial statements, (2) correct identified inconsistencies in
reporting similar transactions, (3) conform footnote information
to related financial statement line items, and (4) record other
audit adjustments. We identified over $350 billion of adjustments
and 28 GENERAL ACCOUNTING OFFICE REPORT B-285019 reclassifications
which the government subsequently recorded, such as financial
statement compilation errors that had resulted in a $66 billion
overstatement of interest cost and a $70 billion overstatement of
Medicare costs. These problems are compounded by the substantial
volume of information submitted and limitations in the federal
government's general ledger (SGL) account structure. For example,
some SGL accounts must be split between different financial
statement line items. As a result, additional misclassifications
and misstatements in the government's financial statements could
exist. Also, the extensive manual intervention required to compile
the federal government's financial statements requires significant
resources which lessens the government's ability to perform
effective financial analysis of the information. For example,
because of SGL limitations, the government separately collects
additional information needed to compile the financial statements.
However, such additional information, historically, is initially
inconsistent with the related SGL account balances by hundreds of
billions of dollars. After substantial effort, such
inconsistencies were reduced to an immaterial amount. Reconciling
the Results of Operations With Budget Results. The federal
government does not yet have a process to obtain information to
effectively reconcile the reported $77 billion excess of revenue
over net cost and a reported unified budget surplus of $124
billion. Consequently, it could not identify all of the items
needed to reconcile these amounts. Certain differences are
expected to occur because the financial statements of the U. S.
government are to be prepared on the accrual basis in accordance
with generally accepted accounting principles, which is a
different basis than the budget. Under accrual accounting,
transactions are reported when the events giving rise to the
transactions occur, rather than when cash is received or paid. By
contrast, federal budgetary reporting is generally on the cash
basis in accordance with accepted budget concepts and policies.
Beginning in fiscal year 1998, 24 major agencies were required to
reconcile their reported net costs to budget information, which
could provide a basis for preparing the reconciliation. However,
significant amounts reported in certain agency reconciliations,
including unliquidated obligations and certain other budget
information, lacked adequate supporting information and may be
unreliable. For example, significant amounts of DOD transactions
were not applied or were incorrectly applied to specific budget
appropriations, which could misstate certain reported budget
information. Once the federal government produces reliable
financial statements, an effective reconciliation could help
provide additional assurance of the reliability of budget results.
GENERAL ACCOUNTING OFFICE REPORT 29 B-285019 INEFFECTIVE INTERNAL
CONTROL Because of the effects of the material weaknesses
discussed below, the federal government has not maintained
effective internal control to ensure that (1) transactions are
properly recorded, processed, and summarized to permit the
preparation of financial statements and stewardship information in
accordance with generally accepted accounting principles, and
assets are safeguarded against loss from unauthorized acquisition,
use, or disposition and (2) transactions are executed in
accordance with laws governing the use of budget authority and
with other laws and regulations that could have a direct and
material effect on the financial statements. Individual agency
financial statement audit reports describe the effects of such
weaknesses on specific agencies and identify additional internal
control weaknesses, some of which are material to individual
agencies. In addition to the material weaknesses related to the
deficiencies discussed in our disclaimer on the financial
statements, we found that (1) the government's inability to
determine the full extent of improper payments impairs the
effective reduction of such improper payments, (2) widespread and
serious computer control weaknesses affect virtually all federal
agencies and significantly contribute to many of the material
deficiencies discussed above, and (3) material control weaknesses
affect the government's tax collection activities. Due to the
deficiencies noted throughout this report, additional material
weaknesses may exist that have not been reported. Improper
Payments The government is unable to determine the full extent of
improper or erroneous payments, which include payments made for
unauthorized purposes, for excessive amounts, such as overpayments
to program recipients or contractors and vendors, and/ or not in
accordance with applicable laws and regulations. Across
government, improper payments occur in a variety of programs and
activities, including those related to contract management,
federal financial assistance, and tax refunds. Reported estimates
of improper payments total billions of dollars annually. The
Department of Health and Human Services (HHS) has been reporting a
national estimate of improper Medicare Fee- for- Service payments
since fiscal year 1996. In fiscal year 1999, HHS reported
estimated improper Medicare Fee- for- Service payments of $13.5
billion, or about 8 percent of such benefits down from $23.2
billion or 14 percent for fiscal year 1996. HHS' reporting and
analysis of improper Medicare payments has 30 GENERAL ACCOUNTING
OFFICE REPORT B-285019 helped lead to the implementation of
several initiatives to identify and reduce such payments. Annual
estimates of improper payments in future audited financial
statements will provide information on the progress of these
initiatives. However, most agencies have not estimated the
magnitude of improper payments in their programs, nor have they
considered this issue in their annual performance plans. For
example, the Earned Income Tax Credit (EITC) program a refundable
tax credit available to low income, working taxpayers has
historically been vulnerable to high rates of invalid claims.
During fiscal year 1999, IRS examined about 573,000 suspicious tax
returns claiming $1.25 billion in EITCs and found that $1.08
billion (86 percent) were invalid. Although the full extent of
refunds resulting from invalid EITCs is unknown, the IRS has not
disclosed any improper payment estimates in its financial
statement reports. In another example, HHS has not reported an
estimate of improper payments in its $109 billion state-
administered Medicaid program, but is currently studying
methodologies for developing an estimate and has formed
partnerships with various state auditors to share information on
improper payments. Improper payments can result from incomplete or
inaccurate data used to make payment decisions, insufficient
monitoring and oversight, or other deficiencies in agency
information systems and weaknesses in internal control. The risk
of improper payments is increased in programs involving (1)
complex criteria for computing payments, (2) a significant volume
of transactions, or (3) an emphasis on expediting payments. The
reasons for improper payments range from inadvertent errors to
fraud and abuse. Without a systematic measurement of the extent of
the problem, agency management cannot determine (1) if the problem
is significant enough to require corrective action, (2) how much
to invest in internal control, or (3) the success of efforts
implemented to reduce improper payments. Developing mechanisms to
identify, estimate, and report the nature and extent of improper
payments in annual financial statements is only a first step for
agencies. Without this fundamental knowledge, agencies cannot be
fully informed about the magnitude or trends of improper payments,
nor can they pinpoint or target mitigation strategies. 4 4
Financial Management: Increased Attention Needed to Prevent
Billions in Improper Payments (GAO/AIMD-00-10, October 29, 1999).
GENERAL ACCOUNTING OFFICE REPORT 31 B-285019 In October 1999, we
recommended that OMB develop and implement a methodology for
annually estimating and reporting improper payments and for
addressing improper payments in agencies' annual performance and
strategic plans and performance reports. OMB agrees with this
recommendation. In this regard, the President has made estimating
and preventing improper payments a priority management objective
and OMB plans to require agencies to develop and implement
procedures to estimate and report the nature and extent of
material improper payments in annual financial statements and have
such information audited. Computer Security Weaknesses Continuing
serious and widespread computer security weaknesses are placing
enormous amounts of federal assets at risk of inadvertent or
deliberate misuse, financial information at risk of unauthorized
modification or destruction, sensitive information at risk of
inappropriate disclosure, and critical operations at risk of
disruption. Significant computer security weaknesses in systems
that handle the government's unclassified information have been
reported in each of the major federal agencies. The most serious
reported problem is inadequately restricted access to sensitive
data. Other types of weaknesses pertain to not adequately
segregating duties to help ensure that people do not conduct
unauthorized actions without detection, preventing unauthorized
software from being implemented, and mitigating and recovering
from unplanned interruptions in computer service. In today's
highly computerized and interconnected environment, such
weaknesses are vulnerable to exploitation by outside intruders as
well as authorized users with malicious intent. Recent media
reports highlight the potential damage that can result from
computer security breaches. The government cannot estimate the
full magnitude of actual damage and loss resulting from federal
computer security weaknesses because it is likely that many such
incidents are either not detected or not reported. GAO and agency
reviews illustrate the potential for negative impacts. For
instance, weaknesses in DOD information security continue to
provide hackers and hundreds of thousands of authorized users the
opportunity to modify, steal, and destroy DOD data including
financial, procurement, logistics and other sensitive information.
Also, identified weaknesses at HCFA, SSA, IRS, and VA place tax,
medical and other sensitive records at risk of unauthorized
disclosure, modification, and destruction. Unauthorized disclosure
of sensitive information has led to instances of identity theft,
in which individuals use such information to commit financial
crimes, such as fraudulently establishing credit and running up
debts. Likewise, serious and pervasive computer security problems
at EPA increase the risk that mission- related systems and 32
GENERAL ACCOUNTING OFFICE REPORT B-285019 financial operations are
vulnerable to tampering, disruption, and misuse. Further,
pervasive weaknesses at the Department of the Treasury, which
collects virtually all of the government's revenues and makes most
of its disbursements, expose such collections and disbursements to
significant risk of loss or fraud. GAO and the IGs have issued
numerous reports that identify information security weaknesses in
the federal government and made recommendations to address them. 5
Also, GAO has reported information security as a high- risk area
across government since February 1997. 6 Information security
problems continue to persist, in large part, because agency
managers have not fully established comprehensive security
management programs. An effective program would include a central
security function and effective procedures for assessing risks,
establishing appropriate policies and related controls, raising
employee awareness of prevailing risks and mitigating controls,
and monitoring and evaluating the effectiveness of established
controls. Such programs, if properly implemented, would provide
the government with a solid foundation for resolving computer
security problems and managing computer security risks on an
ongoing basis. The Congress continues to express concern about the
significant risks to federal government systems and information
that result from computer security weaknesses. Congressional
hearings have focused on specific agency deficiencies and have
clarified the problem across government. Further, S. 1993, the
Government Information Security Act of 1999, recently introduced
in Congress, seeks to strengthen information security practices
throughout the federal government. The Administration has
recognized the importance of computer security and has taken some
steps to prompt improvement from a governmentwide perspective. In
January 5 See, for example, Critical Infrastructure Protection:
Comprehensive Strategy Can Draw on Year 2000 Experiences
(GAO/AIMD-00-1, October 1, 1999) and Information Security: Serious
Weaknesses Place Critical Federal Operations at Risk (GAO/AIMD-98-
92, September 23, 1998). 6 High- Risk Series: An Update (GAO/HR-
99-1, January 1999), High- Risk Series: An Overview (GAO/HR-97-1,
February 1997), and High- Risk Series: Information Management and
Technology (GAO/HR-97-9, February 1997). GENERAL ACCOUNTING OFFICE
REPORT 33 B-285019 2000, the President released the National Plan
for Information Systems Protection, 7 which calls for new
initiatives to strengthen the nation's defenses against threats to
public and private sector information systems that are critical to
the country's economic and social welfare. In addition, the
President designated computer security as a priority management
objective. Tax Collection Activities The federal government
continues to have material weaknesses in controls related to its
tax collection activities, which affect its ability to efficiently
and effectively account for and collect the government's revenue.
This situation results in the need for extensive, costly, and
time- consuming ad hoc programming and analysis, as well as
material audit adjustments, to prepare basic financial information
an approach that cannot be used to prepare such information on a
timely, routine basis to assist in ongoing decision- making.
Additionally, the severity of the system deficiencies that give
rise to the need to resort to such procedures for financial
reporting purposes, as well as deficient physical safeguards,
result in burden to taxpayers and lost revenue. Serious financial
management system deficiencies continue to affect the federal
government's ability to effectively manage its taxes receivable
and other unpaid assessments. 8 The lack of appropriate subsidiary
systems to track the status of taxpayer accounts affects the
government's ability to make informed decisions about collection
efforts. This weakness has resulted in the government pursuing
collection efforts against individual taxpayers who had already
paid their taxes in full. In addition, the government does not
always pursue collection efforts against taxpayers owing taxes to
the federal government. This could result in billions of dollars
not being collected and adversely affect future compliance. 7
Defending America's Cyberspace: National Plan for Information
Systems Protection: Version 1.0: An Invitation to a Dialogue.
Released January 7, 2000. The White House. 8 Other unpaid
assessments consist of amounts for which (1) neither the taxpayer
nor a court has affirmed are owed or (2) the government does not
expect further collections due to factors such as the taxpayer's
death, bankruptcy, or insolvency. 34 GENERAL ACCOUNTING OFFICE
REPORT B-285019 The federal government also continues to be
vulnerable to loss of tax revenue due to weaknesses in preventive
and detective controls over disbursements for tax refunds.
Although the government does have detective controls in place,
they are not applied to millions of tax returns estimated to have
billions of dollars in underreported tax liabilities. These
conditions expose the government to potentially billions of
dollars in losses due to inappropriate refund disbursements. Also,
the government does not perform sufficient up- front verification
procedures to ensure the validity of amounts claimed by taxpayers
as overpayments prior to making disbursements for refunds.
Additionally, delays in recording tax amounts owed result in lost
opportunities to retain or offset overpayments made by a taxpayer
for one period to collect on outstanding amounts owed for another
period, resulting in lost revenue. Finally, serious deficiencies
in physical controls over cash, checks, and sensitive data
received from taxpayers increase both the government's and the
taxpayers' exposure to losses and increases the risk of taxpayers
becoming victims of crimes committed through identity fraud. IRS
senior management has expressed a commitment to address many of
these operational and financial management issues and has made a
number of improvements to address some of these weaknesses.
Successful implementation of long- term efforts to resolve these
serious problems will require the continued commitment of IRS
management as well as substantial resources and expertise.
NONCOMPLIANCE WITH CERTAIN LAWS AND REGULATIONS Tests for
compliance with selected provisions of laws and regulations
related to financial reporting disclosed no instances of material
noncompliance. However, other instances of noncompliance, some of
which are material to individual federal agencies, are reported in
the individual agency financial statement audit reports.
Additionally, as described below, we noted that federal systems do
not substantially comply with federal financial management systems
requirements. We caution that noncompliance other than that
discussed in our report may occur and not be detected by these
tests and that our limited testing may not be sufficient for other
purposes. Further, the scope of our tests was limited by the
material deficiencies discussed above. Our objective was not to,
and we do not, express an opinion on overall compliance with laws
and regulations. GENERAL ACCOUNTING OFFICE REPORT 35 B-285019
Noncompliance With the Federal Financial Management Improvement
Act of 1996 The Federal Financial Management Improvement Act
(FFMIA) of 1996 requires auditors, as part of financial audits of
certain major agencies, to report whether agencies' financial
management systems comply substantially with federal accounting
standards, financial systems requirements, and the government's
standard general ledger at the transaction level. Thus far, for
fiscal year 1999, agency financial auditors have reported that 19
of 22 major agencies' financial systems did not comply with the
act's requirements. Systems of the remaining two major agencies
that have not yet issued audited fiscal year 1999 financial
statements did not comply with the act's requirements for fiscal
years 1998 and 1997. Noncompliance with FFMIA, which we further
discuss in our report, Financial Management: Federal Financial
Management Improvement Act Results for Fiscal Year 1998 (GAO/AIMD-
00-3, October 1, 1999), is indicative of the overall continuing
poor condition of agency financial systems. Also, as we reported,
agency remediation plans, required by FFMIA, may not adequately
address the system deficiencies. Significant time and investment
are needed for agencies to address and correct these long-
standing financial management systems problems. The majority of
federal agencies' financial management systems do not meet systems
requirements and cannot provide reliable financial information for
managing day- to- day government operations and holding managers
accountable. For many agencies, the preparation of financial
statements requires considerable reliance on ad hoc programming
and analysis of data produced by inadequate financial systems that
are not integrated, reconciled, and often require significant
adjustments. As a result, reliable financial information on a day-
to- day basis is not available for effective financial management.
For example, as discussed above, the IRS relies on extensive,
costly, and time- consuming ad hoc programming and analysis, as
well as material audit adjustments, to prepare basic financial
information. The significant financial management deficiencies
discussed throughout this report underscore the challenge.
FINANCIAL STATEMENTS AND BUDGET DECISIONS: ADDING THE LONG- TERM
PERSPECTIVE A view of the long- term sustainability of fiscal
policies can assist decisionmakers in considering the government's
financial position and making decisions about resource 36 GENERAL
ACCOUNTING OFFICE REPORT B-285019 allocation. Such a view requires
projections of spending and revenues into the future. In this
context, the sovereign power to tax and the commitments of social
insurance programs such as Social Security and Medicare must be
considered. The accompanying Financial Report and our report
include certain information concerning the Social Security and
Medicare (Part A) trust funds, such as projected contributions and
expenditures, dates when expenditures are expected to exceed
contributions, and dates when such funds are expected to be
exhausted. Such information is as of January 1, 1999 for Social
Security and as of September 30, 1999 for Medicare (Part A), the
most recent information publicly reported by the government. The
government plans to issue, on March 30, 2000, updated information
as of January 1, 2000. The government's issuance of dated
information in this Financial Report at about the same time that
it issues more current information may cause confusion to the
Congress and the public. Steps should be taken, in future years,
to ensure that the government's Financial Report contains up- to-
date information as of no earlier than the end of the most recent
fiscal year. Because current information on the solvency of the
Social Security and Medicare programs is critical to assessing the
financial condition of the federal government, aiding in budget
deliberations, and fostering public debate, we will include the
updated information on these two important federal programs in a
report that will also contain the Fiscal Year 1999 Financial
Report of the United States Government. Commitments for the Social
Security and Medicare programs are included in the Stewardship
Information accompanying the financial statements. The
government's 75 year estimates of the present value of
expenditures in excess of contributions for the Social Security
(Old Age Survivors and Disability Insurance (OASDI)) programs
amounted to $ 3.7 trillion, as of January 1, 1999, and for the
Medicare (Part A) program amounted to $3.1 trillion, as of
September 30, 1999. The government's projections also indicate
that Social Security and health care costs will absorb an
increasing share of the federal budget. In fiscal year 1999,
Social Security trust funds reported surpluses of $124.7 billion
and Medicare (Part A) reported surpluses of $21.5 billion, which
included non- cash intragovernmental interest income of $52.1
billion and $9.3 billion, respectively. These surpluses
contributed to the $124.4 billion unified budget surplus. However,
for example, as discussed in the accompanying Stewardship
Information, using the government's best estimates as of January
1, 1999, cash disbursements of the Social GENERAL ACCOUNTING
OFFICE REPORT 37 B-285019 Security trust funds (OASDI) are
expected to exceed cash receipts beginning in fiscal year 2014.
When trust funds' receipts exceed disbursements, they are invested
in Treasury securities and used to meet current cash needs of the
government. These securities are assets to the trust funds and
liabilities to the Treasury. In effect, one part of the government
is lending to another. As disclosed in notes 10 and 19, both the
investments and liabilities, which amounted to $2 trillion at
September 30, 1999, are netted out in the accompanying financial
statements. Such investments are expected to increase to over $4
trillion in the next 20 years. Expected cash shortfalls in the
trust funds will require them to redeem their investments in
Treasury securities. When this occurs, the government must fund
these redemptions through some combination of future surpluses, if
available, lower relative spending for other federal programs,
higher relative taxes, and/ or greater relative borrowing from the
public. Further, under the government's projections, absent any
program or financing change, the Social Security trust funds and
Medicare (Part A) Trust Fund will exhaust their Treasury security
holdings in 2034 and 2015, respectively. There is general
recognition that the Social Security and Medicare (Part A)
programs require major reforms to deal with the long- term
solvency and sustainability of these two programs. The fact that
Social Security is expected to draw down its Treasury securities
holdings in less than 15 years, and that it is expected that
Medicare will need to do so in less time, highlights the
importance of acting soon in order to avoid more dramatic changes
in the future. - - - - We are working with OMB, the Treasury, and
other agencies across government to provide recommendations for
fixing the major deficiencies cited in our audit. Considerable
effort is now being exerted to address the problems, and several
agencies, such as SSA, have made good progress toward achieving
financial management reform goals. We have designated the most
serious situations as high risk, including financial management at
DOD, IRS, the Forest Service, and the Federal Aviation
Administration, as well as information security. 38 GENERAL
ACCOUNTING OFFICE REPORT B-285019 In addition, the continued
coordinated efforts of the Treasury and OMB will be required to
provide solutions for certain governmentwide deficiencies, such as
the inability to properly identify and eliminate transactions
between federal entities and the compilation of the financial
statements. We will continue to provide suggestions for resolving
governmentwide problems and to evaluate progress in overcoming
them. David M. Walker Comptroller General of the United States
March 20, 2000 GENERAL ACCOUNTING OFFICE REPORT 39 APPENDIX
OBJECTIVES, SCOPE, AND METHODOLOGY The federal government is
responsible for  preparing the annual financial statements in
conformity with generally accepted accounting principles;
establishing, maintaining, and assessing internal control to
provide reasonable assurance that the broad control objectives of
the Federal Managers' Financial Integrity Act (FMFIA) are met 9 ;
and  complying with applicable laws and regulations and FFMIA
requirements. Our objective was to audit the fiscal year 1999
financial statements. The Government Management Reform Act
expanded on the requirements of the CFO Act by requiring that the
IGs of 24 major federal agencies annually audit agencywide
financial statements prepared by these agencies. 10 Our work was
performed in close coordination and cooperation with the IGs to
achieve our joint audit objectives. This work included separate
GAO audits of certain material agency components, as discussed
below. Our audit approach focused on the Departments of the
Treasury, Defense, and Health and Human Services and the Social
Security Administration. These agencies comprise a major portion
of the amounts reported in the federal government's financial
statements. At other federal agencies, we focused largely on
accounts that are material to the financial statements.
Additionally, for two agencies, information has been included in
these financial statements but the agencies have not, at this
date, finalized their individual financial statements for fiscal
year 1999. Therefore, we were unable to determine the reliability
of the amounts included in the accompanying financial statements
for these agencies. We performed sufficient audit work to provide
our report on the financial statements, internal control, and
compliance with laws and regulations. 9 The FMFIA requires agency
managers to evaluate and report annually to the President on the
adequacy of their internal controls and accounting systems and
what is being done to correct the problems. 10 GMRA authorized OMB
to designate agency components that also would receive a financial
statement audit. 40 GENERAL ACCOUNTING OFFICE REPORT APPENDIX We
separately audited the following material agency components.  We
audited and expressed an unqualified opinion on the IRS statement
of custodial activity for fiscal year 1999. IRS was able to
reliably report on the results of its custodial activities,
including nearly $1.9 trillion of tax revenue, $185 billion of tax
refunds, and $21 billion of net federal taxes receivable. However,
we issued an opinion on the IRS balance sheet that was qualified
for the components of net position, disclaimed an opinion on its
statements of net cost, changes in net position, budgetary
resources, and financing, and reported numerous material internal
control weaknesses. 11  We audited and expressed an unqualified
opinion on the Schedule of Federal Debt Managed by Treasury's
Bureau of the Public Debt for the fiscal year ended September 30,
1999. 12 This schedule reported (1) over $3.6 trillion of federal
debt held by the public comprising individuals, corporations,
state or local governments, the Federal Reserve System, and
foreign governments and central banks, (2) $2 trillion of federal
debt held by federal entities, such as the Social Security trust
funds, and (3) $230 billion of interest on federal debt held by
the public.  We performed audit procedures on cash balances
maintained and internal controls over the cash receipts and
disbursements processed by Treasury on behalf of the federal
government. We provided the results of our work to the Treasury
Office of Inspector General for consideration in its audit of the
Treasury's fiscal year 1999 departmentwide financial statements.
11 Financial Audit: IRS' Fiscal Year 1999 Financial Statements
(GAO/AIMD-00-76, February 29, 2000). 12 Financial Audit: Bureau of
the Public Debt's Fiscal Years 1999 and 1998 Schedules of Federal
Debt (GAO/AIMD-00-79, March 1, 2000). GENERAL ACCOUNTING OFFICE
REPORT 41 APPENDIX  We audited and expressed unqualified opinions
on the December 31, 1998, financial statements for the funds
administered by the Federal Deposit Insurance Corporation (FDIC),
including the Bank Insurance Fund, the Savings Association
Insurance Fund, and the FSLIC Resolution Fund. 13 In addition, we
performed audit procedures and tests of internal controls for
cash, investments, and other material balances of the funds
administered by FDIC as of September 30, 1999. At CFO Act agencies
and other agencies, we reviewed the fiscal year 1999 financial
statement audits performed by the IGs or their contractors and,
for certain agencies, assisted in the development of audit plans
for fiscal year 1999 audits. Financial statements and audit
reports for these agencies provide additional information about
the operations of each of these entities. For example, these
audits have identified numerous internal control and accounting
systems weaknesses and noncompliance with laws and regulations,
some of which are material to the respective agencies or
components. Further, as of the completion of our field work on
March 20, 2000, 22 of the 24 CFO Act agencies had received audit
opinions or disclaimers on their fiscal year 1999 financial
statements. Of the 22 agencies, 13 received unqualified opinions.
These agencies are the Social Security Administration, National
Science Foundation, General Services Administration, Department of
Energy National Aeronautics and Space Administration, Nuclear
Regulatory Commission, Department of Labor, Small Business
Administration, Federal Emergency Management Agency, Department of
Commerce, Department of Health and Human Services, Department of
Transportation, and Department of Veterans Affairs. 13 Financial
Audit: Federal Deposit Insurance Corporation's 1998 and 1997
Financial Statements (GAO/AIMD-99-202, June 30, 1999). 42
Intentional Blank Page FI NAN CIAL STATE MENTS 43 Fi nan cial
State ments of the United States Gov ern ment for the Year Ended
Sep tem ber 30, 1999 This State ment re ports the re sults of Gov
ern ment op er a tions. This in cludes rev e nues prin ci pally
gen er ated by the Gov ern ment's sov er eign power to tax, levy
du ties, and as sess fines and pen al ties. This state ment cov
ers the cost of Gov ern ment op er a tions, net of rev e nue
earned from the sale of goods and ser vices to the pub lic. It
also in cludes any ad just ments and un rec on ciled trans ac
tions that af fect the net po si tion. Statement of Operations and
Changes Revenue The main source of rev e nue for Gov ern ment op
er a tions con sists of taxes and other rev - e nue the Fed eral
Gov ern ment gen er ates un der its sov er eign pow ers. In di vid
ual In come Tax and Tax With hold ings con sist of Fed eral in di
vid ual in come taxes, So cial Se cu rity taxes, Medicare taxes
and rail road re tire ment taxes, net of re lated re - funds . Mis
cel la neous earned rev e nue con sists of earned rev e nues re
ceived from the pub lic with vir tu ally no as so ci ated cost.
This cat e gory in cludes rev e nues gen er ated from spec trum
auc tions and rents and roy al ties on the Outer Con ti nen tal
Shelf Lands. Net Cost of Government Operations The State ment of
Net Cost sum ma rizes the Net cost of Gov ern ment o p er a tions,
which is gross cost mi nus earned rev e nue. Unreconciled
Transactions Un rec on ciled trans ac tions are ad just ments made
to bal ance the change in net po si tion. Net Position, Beginning
of Period The Net po si tion, be gin ning of pe riod re flects the
net po si tion re ported on the prior year's Bal ance Sheet. Prior
Period Adjustments Prior pe riod ad just ments are re vi sions to
cor rect the be gin ning net po si tion. Net Position, End of
Period This amount re flects the net po si tion on the cur rent
year's Bal ance Sheet. 44 FI NAN CIAL STATE MENTS As sets in
cluded on the Bal ance Sheet are re sources of the Fed eral
Government that re main avail able to meet fu ture needs. The most
sig nif i cant as sets that are re ported in the Bal ance Sheet
are loans re ceiv able and in ven to ries, as well as prop erty,
plant and equip ment. There are, how ever, other sig nif i cant re
sources avail able to the Gov ern ment that ex tend be yond the as
sets pre sented in this Fi nan cial State ment. Those as sets in
clude Stew ard ship As sets and the Gov ern ment's sov er eign pow
ers to tax, reg u late com merce and set mon e tary pol icy. They
also in clude nat u ral re sources . Se lected as sets are high
lighted in the Stew ard ship In for ma tion sec tion of this re
port to dem on strate the Fed eral Gov ern ment's ac count abil
ity for these as sets. Stew ard ship as sets in clude na tional de
fense as sets, stew ard ship land and her i tage as sets. National
defense assets Na tional de fense as sets are weapon sys tems and
sup port ing as sets used by the mil i tary for the Na tion's com
mon de fense and gen eral wel fare. Stewardship land Stew ard ship
land is land that the Fed eral Gov ern ment does not ex pect to
use to meet its ob li ga tions, un like the as sets listed in the
Bal ance Sheet. This land in cludes land set aside for the use and
en joy ment of pres ent and fu ture gen er a tions and land on
which mil i tary bases are lo cated. Stew ard ship land is mea
sured in non- financial units such as acres of land and lakes,
miles of park ways, and miles of wild and sce nic rivers. Ex am
ples of stew ard ship land in clude na tional parks, na tional for
ests, wil der ness ar eas, and land used to en hance eco sys tems
to en cour age an i mal and plant spe cies and to con serve na
ture. Heritage assets Her i tage as sets are Gov ern ment- owned
as sets that have one or more of the fol low ing char ac ter is
tics: his tor i cal or nat u ral sig nif i  This State ment pres
ents the net cost of fis cal 1999 Gov ern ment op er a tions. It
also shows the cost to carry out na tional pri or i ties as de
termined by law. It also cat e go rizes costs by ma jor func tion.
It pres ents costs in much the same way as does the bud get, ex
cept that costs are al lo cated to func tions based on ac count
ing stan dards. Thus, this Statement re ports costs on an ac crual
ba sis and in some cases al lo cates them dif fer ently than the
bud get. For ex am ple, this State ment al lo cates the cost of
pen sions and re tiree health ben e fits among all the func tions
that em ploy work ers. The bud get cat e go - rizes pen sion pay
ments to ci vil ian re tir ees as a subfunction, found un der In
come se cu rity. The bud get cat e go rizes agency con tri bu
tions to re tire ment funds as intragovernmen tal out lays dis
trib uted among all the func tions that em ploy work ers. A de
scrip tion of each of the func tions and the com po nents of net
cost for the ac tiv i ties in cluded in each func tion is pre
sented in Sup ple men tal In for ma tion as Net cost de tail. This
State ment con tains the fol low ing three com po nents for each
function:  The gross cost of Gov ern ment op er a tions.  The rev
e nues earned from the sale of goods and pro vi sion of ser vices
to the pub lic.  The net cost of Gov ern ment op er a tions, which
is gross cost less rev e nue earned. Gross Cost Gross cost in
cludes the full cost of all func tions. These costs may be di
rectly traced, as signed on a cause and ef fect ba sis, or rea son
ably al lo cated to the func tion. Earned Revenue This is rev e
nue the Gov ern ment earned by pro vid ing goods and ser vices to
the pub lic at a price. Net Cost The Net cost of Gov ern ment op
er a tions is com puted by sub tract ing Earned rev e nues from
Gross cost. Statement of Net Cost The Bal ance Sheet shows the Gov
ern ment's as sets and li a bil i ties. When com bined with Stew
ard ship In for ma tion, this in for ma tion pres ents a more com
pre hen sive un der stand ing of the Gov ern ment's fi nan cial po
- si tion. Most line items on the Bal ance Sheet are de scribed in
the Notes to the Fi nan cial State ments. The first note, for ex
am ple, pro vides in for ma tion on the ac count ing pol i cies
for as sets and li abilities. Balance Sheet Assets FI NAN CIAL
STATE MENTS 45 cance; cul tural, ed u ca tional, or ar tis t i c i
m p o r t a n c e ; o r s i g n i f i c a n t ar chi tec tural fea
tures. The cost of her i tage as sets of ten is not de ter mi - na
ble or rel e vant to their sig nif i cance. Like stew ard ship
land, the Gov ern ment does not ex pect to use these as sets to
meet its ob li ga tions. The most rel e vant in for ma tion about
her i tage as sets is non- financial. Ex am ples of her i tage as
sets in clude: the Dec la ra tion of In de pend ence, the Con sti
tu tion and the Bill of Rights pre served by the Na tional Ar
chives. Also in cluded are na tional mon u ments such as the Viet
nam Vet erans Me mo rial, Jef fer son Me mo rial and the Wash ing
ton Mon u ment as well as art and cul tural trea sures at the
Smith so nian In sti tu tion and the Li brary of Con gress. Many
other sites such as the bat - tle fields, his toric struc tures
and na tional his toric land marks also are placed in this cat e
gory. Assets, cont. Li a bil i ties are ob li ga tions of the Fed
eral Gov ern ment re sult ing from prior ac tions that will re
quire fi nan cial re sources. The most sig nif i cant li a bil i
ties re ported on the Bal ance Sheet are Fed eral debt se cu ri
ties held by the pub lic and ac crued pen sion li a bil i ties for
cur rent and re tired Fed eral ci vil ian and mil i tary per son
nel. Li a bil i ties also in clude so cial in sur ance ben e fits
due and pay able as of the re port ing date. As with re ported as
sets, the Gov ern ment's re spon si bil i ties and pol icy com mit
ments are much broader than these re ported Bal ance Sheet li a
bil i ties. They in clude the so cial in sur ance pro grams dis
closed in Stew ard ship In for ma tion, a wide range of other pro
grams un der which the Gov ern ment pro vides ben e fits and ser
vices to the peo ple of this Na tion, and cer tain fu ture loss
contingencies. The mag ni tude and com plex ity of so cial in -
sur ance pro grams, cou pled with the ex treme sen si tiv ity of
pro jec tions re lat ing to the many as sump tions of the pro
grams, pro duce a large range of pos si ble re sults. The Stew ard
ship Re spon si bil ities sec tion de scribes the so cial in sur -
ance pro grams, re ports long- range estimates that can be used to
as sess the fi nan cial con di tion of the pro grams, and ex
plains some of the fac tors that im pact the var i ous pro grams.
Using this in - for ma tion, read ers can ap ply their own judg
ment as to the sol vency and sustainability of the in di - vid ual
pro grams. Each of the so cial in sur ance pro grams has an as so
ci ated trust fund to ac count for its ac tiv ity. An ex pla na
tion of the trust funds for so cial in  sur ance and many of the
other large trust funds is in cluded in Note 19 Ded i cated Col
lec tions. That note also con tains in for ma tion about trust
fund re ceipts, dis burse ments and as sets. A broad per spec tive
on the Fed eral Gov ern ment's re spon si bil i ties is pro vided
by the Cur rent Ser vices As sess ment, which also can be found un
der Stew ard ship In for ma tion. Pres ented in ac cor dance with
the Pres i dent's bud get, this in for ma tion es ti mates Fed
eral ex pen di tures and re ceipts for fis cal 2000 to 2005, pro
vided there are no changes to cur rent law. The Gov ern ment has
en tered into con trac tual com mit ments re quir ing the fu ture
use of fi nan cial re sources and also has un re solved con tin
gen cies where ex ist ing con di tions, sit u a tions or cir cum
stances cre ate un cer tainty about fu ture losses. Com mit ments
as well as con tin gen cies that do not meet the cri te ria for
rec og ni tion as a li a bil ity on the Bal ance Sheet, but for
which there is at least a rea son able pos si bil ity that a loss
has been in curred, are dis closed in Note 18 Com mit ments and
Con tin gencies. Net po si tion is pre sented as the sum of Bal -
ance Sheet as sets less Bal ance Sheet li a bil i ties. The large
neg a tive net po si tion amount does not im ply that the Gov ern
ment is in sol vent. Be - cause of its sov er eign power to tax,
and the coun try's wide eco nomic base, the Gov ern ment has
unique ac cess to fi nan cial re sources to fi - nance its debts.
This pro vides the Fed eral Gov ern ment the abil ity to meet pres
ent ob li ga tions and those that are an tic i pated from fu ture
op er a tions. Liabilities and Net Position 46 FI NAN CIAL STATE
MENTS United States Government Statement of Operations and Changes
in Net Position for the Year Ended September 30, 1999 (In bil
lions of dol lars) Revenue: Individual income tax and tax
withholdings ............................... 1,456. 0 Corporation
income taxes............................................ 182. 2
Unemployment taxes ...............................................
25. 6 Excise taxes
..................................................... 70. 5 Estate
and gift taxes ............................................... 27.
7 Customs duties
................................................... 18. 4 Other
taxes and receipts ............................................
42. 0 Miscellaneous earned revenues
....................................... 10. 5 Total revenue
................................................... 1,832. 9 Net
Cost of Government Operations: National defense
.................................................. 413. 2 Human
resources ................................................. 905. 3
Physical resources
................................................. 95. 1 Interest
......................................................... 230. 1
Other functions
................................................... 112. 3 Total
net cost of Government operations...............................
1,756. 0 Excess of revenue over net cost
...................................... 76. 9 Unreconciled
transactions affecting the change in net position (Note 16)
........................................... 24. 4 Increase in net
position ............................................. 101. 3 Net
position, beginning of period
...................................... (6,134. 4) Prior Period
Adjustments (Note 17) ...................................... 6. 9
Net position, end of period
........................................... (6,026. 2) The ac com
pa ny ing notes are an in te gral part of these fi nan cial state
ments. FI NAN CIAL STATE MENTS 47 United States Government
Statement of Net Cost for the Year Ended September 30, 1999 (In
bil lions of dol lars) Gross Cost Earned Rev e nue Net Cost
National defense................................. 451. 2 38. 0
413. 2 Hu man Re sources: Education, training , employment and
social services ............................. 57. 9 1. 4 56. 5
Health........................................ 140. 6 0. 7 139. 9
Medicare ...................................... 207. 0 21. 7 185.
3 Income security ................................. 188. 0 6. 2
181. 8 Social Security.................................. 387. 7 -
387. 7 Veterans benefits and services (Note 11) ..............
(43. 2) 2. 7 (45. 9) Total human resources
.......................... 938. 0 32. 7 905. 3 Physical Resources:
Energy ....................................... 12. 9 12. 4 0. 5
Natural resources and environment .................. 27. 1 2. 9
24. 2 Commerce and housing credit ...................... 89. 2 73.
9 15. 3 Transportation .................................. 44. 1 1.
1 43. 0 Community and regional development ................ 14. 9
2. 8 12. 1 Total physical resources ......................... 188.
2 93. 1 95. 1 Interest ........................................
230. 1 - 230. 1 Other Functions: International affairs
.............................. 29. 6 9. 6 20. 0 General science,
space and technology ............... 17. 5 0. 1 17. 4 Agriculture
..................................... 27. 2 2. 4 24. 8
Administration of justice ........................... 31. 2 1. 6
29. 6 General government ............................. 25. 1 4. 6
20. 5 Total other functions ............................ 130. 6
18. 3 112. 3 Total ...................................... 1,938. 1
182. 1 1,756. 0 The ac com pa ny ing notes are an in te gral part
of these fi nan cial state ments. 48 FI NAN CIAL STATE MENTS
Intentional Blank Page FI NAN CIAL STATE MENTS 49 United States
Government Balance Sheet as of September 30, 1999 (In bil lions of
dol lars) Assets: Cash and other monetary assets (Note
2)................................ 115. 2 Accounts receivable
(Note 3) ......................................... 35. 0 Loans
receivable (Note 4) ...........................................
183. 7 Taxes receivable (Note 5)
........................................... 22. 7 Inventories and
related property (Note 6) ................................ 173. 3
Property, plant and equipment (Note 7)
................................. 298. 8 Other assets (Note 8)
.............................................. 54. 3 Total assets
.................................................... 883. 0
Liabilities : Accounts payable (Note
9)........................................... 85. 8 Federal debt
securities held by the public (Note 10) ........................
3,631. 6 Federal employee and veteran benefits payable (Note 11)
................... 2,600. 7 Environmental and disposal
liabilities (Note 12)............................ 313. 2 Benefits
due and payable (Note 13) .................................... 73.
8 Loan guarantee liabilities (Note 4)
..................................... 35. 1 Other liabilities
(Note 14) ............................................ 169. 0
Total
liabilities...................................................
6,909. 2 Commitments and Contingencies (Note 18) Net Position
...................................................... (6,026 .2)
Total liabilities and net position
...................................... 883. 0 The ac com pa ny ing
notes are an in te gral part of these fi nan cial state ments. 50
FI NAN CIAL STATE MENTS Intentional Blank Page STEW ARD SHIP IN
FOR MA TION 51 United States Gov ern ment Stew ard ship In for ma
tion for the Year Ended Sep tem ber 30, 1999 (Un au dited) The Fed
eral Gov ern ment holds Stew ard ship as sets for the ben e - fit
of the Na tion. Be cause the Gov ern ment has been en trusted
with, and made ac count able for, these re sources and re spon si
bil i ties, they are rec og nized in the Fi nan cial Re port of
the United States Gov ern - ment. When ac quired, Stew ard ship as
sets are treated as ex penses in the fi nan cial state ments. This
sec tion pro vides more de tailed stew ard ship in for ma tion on
these re sources to high light their long- term ben e fit and to
dem on strate ac count abil ity. This in for ma tion fa cil i
tates the un der stand ing of the op er a tions and fi nan cial
con di tion of the Government. Na tional de fense prop erty, plant
and equip ment con sist of: (1) as sets owned by the De part ment
of De fense in the per for - mance of mil i tary mis sions, such
as com bat op er a tions, peace - keep ing and sup port of ci vil
ian au thor i ties dur ing civil emer gen cies; and (2) ves sels
held in a pres er va tion sta tus by the Maritime Ad min is tra
tion's Na tional De fense Re serve Fleet. Na tional de fense as
sets are de fined in terms of four cat e go ries: Weapons sys tems
equip ment that launches, re leases, car - ries, or fires a par
tic u lar piece of ord nance and/ or car ries weap ons sys tems-
related prop erty, equip ment, ma te ri als, or per son nel. Ex am
ples in clude air craft, ships, tracked com bat ve hi cles and mis
siles.  Weapons sys tems sup port prin ci pal end items items that
are ac quired to sup port weap ons sys tems and may ul ti mately
be in cor po rated in weap ons sys tems. Ex am ples in clude air
craft en gines, tank en gines, air craft ra dars, ship so nar,
uninstalled mis sile mo tors, gun mounts and guid ance sys tems.
Mis sion sup port equip ment de ploy able equip ment that: (1) is
es sen tial to the ef fec tive op er a tion of a weap ons sys tem
or is used by the mil i tary de part ments to ef fec tively per
form their mil i tary mis sions; (2) has an in de ter mi nate or
un pre dict able use ful life due to the man ner in which it is
used; and (3) is at a very high risk of be ing de stroyed dur ing
use or of pre ma ture ob so les cence. National Defense Assets
Stewardship Assets 52 STEW ARD SHIP IN FOR MA TION National
Defense Assets (In number of systems or items) Restated* Balance
as of September 30, 1998 Additions Deletions Balance as of
September 30, 1999 Aircraft: Combat ....................... 8,660
52 351 8,361 Airlift ......................... 6,059 23 148 5,934
Other aircraft ................... 3,740 67 247 3,560 Ships:
Submarines .................... 123 1 7 117 Aircraft carriers
................. 18 - - 18 Surface combatants .............. 269
26 13 282 Amphibious warfare ships .......... 83 - 7 76 Mine
warfare ships ............... 38 1 - 39 Support ships
................... 241 6 33 214 Other ships ....................
3,921 55 229 3,747 Combat Vehicles: Tracked
....................... 44,522 328 684 44,166 Wheeled
...................... 140,376 1,596 - 141,972 Towed
........................ 7,044 - 78 6,966 Other combat vehicles
............ 12,744 829 19 13,554 Guided, Self- propelled
Ordnance: Missiles ....................... 453,056 18,094 6,832
464,318 Torpedoes ..................... 8,486 216 29 8,673 Space
Systems: Satellites ...................... 78 8 1 85 Weapons
Systems Support Real Property: Active ammunition bunkers ........
23,468 398 756 23,110 Active missile silos............... 993 1
158 836 Active satellite ground stations ...... 81 - - 81 Reserve
Fleet Vessels n. a. n. a. n. a. 144 *The bal ances as of Sep tem
ber 30, 1998, have been re stated to re flect changes from pre vi
ous year's re port ing. National Defense Assets, cont. Ex am ples
i nclude: sur veil lance unmanned air ve hi cles, non- tactical ve
hi cles (e. g., fuel tank ers, com bat op er a tions cen ters,
mess ve hi cles), field me te o ro log i cal sys tems, cryp tog ra
phy sys tems, and field se cu rity systems. Weapons sys tems sup
port real prop erty fa cil i ties and struc tures af fixed to the
land that are in te gral to a weap ons sys tem. Ex am ples in
clude am mu ni tion bunk ers in ac tive use and mis sile si los in
ac tive use. The ac com pa ny ing National de fense as set in for
ma tion does not re port quan ti ties of mis sion sup port equip
ment al though the an nual in vest ments in these items are re
ported. The in vest ment amounts in National de fense as sets pre
sented in this re port re flect the sum of an nual in vest ment
amounts re ported by each mil i tary de part ment. DOD does not
cur rently have cost ac count ing sys tems that cap ture the full
costs, as de scribed in State ment of Fed eral Fi nan cial Ac
count ing Stan dards (SFFAS) No. 4 as so ci ated with National de
fense as sets. There fore, the an nual in vest ments shown in this
re port rep re sent an nual dis burse ments for each cat e gory of
National de fense as sets. n. a. = Not available STEW ARD SHIP IN
FOR MA TION 53 Investments in National Defense Assets for the
Period Ended September 30, 1999 (In millions of dollars) Aircraft:
Combat .................................................... 6,901
Airlift ......................................................
4,354 Other aircraft
................................................ 2,662 Aircraft
support principal end items ................................ 1,387
Other aircraft support property, plant and equipment
................... 1,418 Ships: Surface combatants
........................................... 3,591 Submarines
................................................. 1,409 Ship
support principal end items .................................. 852
Aircraft carriers ...............................................
823 Amphibious warfare ships
....................................... 581 Support ships
................................................ 371 Mine warfare
ships ............................................ 73 Other ships
.................................................. 30 Other ship
support property, plant and equipment ..................... 6
Combat Vehicles: Combat vehicle support principal end items
......................... 1,199 Tracked
.................................................... 354
Wheeled.................................................... 261
Other combat vehicles support property, plant and equipment
............ 1 Guided, Self- propelled Ordnance: Missiles
.................................................... 1,299 Guided,
self- propelled support principal end items .....................
815 Guided, self- propelled ordnance support property, plant and
equipment ..... 245 Guided, self- propelled ordnance support
............................ 34 Torpedoes
.................................................. 70 Space
Systems: Satellites
................................................... 1,438 Space
systems support principal end items .......................... 558
Weapons systems support real property: Active ammunition bunkers
..................................... 19 General mission support
property, plant and equipment ................. 5,274 Other: Other
weapons systems ........................................ 115 Other
weapons systems support principal end items ................... 37
Other weapons support property, plant and equipment
.................. 62 Reserve fleet vessels
........................................... 1,905 Total
investments in national defense assets for fiscal year ended
September 30, 1999 ....................... 38,144 54 STEW ARD SHIP
IN FOR MA TION Stewardship Land United States Government
Stewardship Land as of September 30 (In millions of acres)
Predominate Use Acres Percentage Agency: Bureau of Land Management
.... Public land 264. 2 40. 9 U. S. Forest Service ...........
National Forest system 192. 0 29. 8 U. S. Fish and Wildlife
Service .... National Wildlife Refuge system 88. 6 13. 7 National
Park Service .......... National Park system 77. 9 12. 1
Department of Defense......... Defense facilities 16. 7 2. 6
Bureau of Reclamation ......... Water, power and recreation 5. 8
0. 9 Total acres ................ 645. 2 100. 0 The De part ment
of the In te rior's Bu reau of Land Man age ment (BLM) man ages
264.2 mil lion acres of fed er ally owned land. Con gress has
charged the Bu reau with main tain ing this land and its re
sources to best serve the pres ent and fu ture needs of the Amer i
can peo ple. To ward this end, BLM man ages these lands to al low
for a com bi na tion of uses in clud ing min eral de vel op ment,
out door rec re ation and nat u ral hab i tat. Some BLM lands are
pro tected and used for their sce nic, scientific or his tor i cal
value. The fol low ing ta ble de scribes those hold ings. Bureau
of Land Management Bureau of Land Management Public Lands as of
September 30 Number Acreage (in thousands) Miles National wild and
scenic river segments ..... 34 998 2,038 National wilderness areas
............... 136 5,243 Wilderness study areas .................
622 17,298 National conservation areas .............. 8 11,692 -
National scenic areas................... 1 101 National recreation
areas ................ 1 1,000 National historic
trails................... 8 - 3,533 National scenic trails
................... 2 - 568 National recreation trails
................ 26 - 429 Outstanding natural areas
............... 1 - - Herd management areas ................ 200
36,070 National monuments ................... 1 1,880 Areas of
critical environmental concern...... 740 13,112 - Research natural
areas ................. 152 347 National natural landmarks
............... 43 599 National back country byways ............
64 - 3,518 Globally important bird areas ............. 2 57
National "multiple use" lands ............. - 175,775 BLM total
.......................... 2,041 264,172 10,086 Stew ard ship Land
re fers to fed er ally owned land that is not used, or held for
use, in Gen eral Gov ern ment op er a tions. This cat e gory in
cludes land on which mil i tary bases are lo cated. This cat e
gory ex cludes lands ad min is tered by the Bu reau of In dian Af
fairs and held in trust. Most Stew ard ship land is pub lic do
main. Be tween 1781 and 1867, the Gov ern ment ac quired acres of
land equal to 79.4 per cent of the cur rent acre age of the United
States, spend ing a to tal of $85.1 mil lion. STEW ARD SHIP IN FOR
MA TION 55 The U. S. For est Ser vice man ages 192.0 mil lion
acres of fed er ally owned lands for the sus tained use of out
door rec re ation, range, tim ber, wa ter shed, wild life and
fish. For est land con tains 155 named Na tional For ests to tal
ing 153.0 mil lion acres. The For est Ser vice re for ested
267,013 acres pri mar ily with ge net i cally im proved seed lings
in fis cal 1999. Wil der ness land con tains 34.8 mil lion acres
in 38 states and is served by 133,087 miles of trails. The U. S.
For est Ser vice also man ages 20 named grass lands on 3.8 mil
lion acres and about 4,348 miles of the wild and sce nic river sys
tem. The U. S. Fish and Wild life Ser - vice man ages 88.6 mil
lion acres of fed er ally owned lands held pri mar ily for wild
life con ser va tion. It has five goals:  Pre serve, re store and
en hance in their nat ural eco sys tems, all spe cies of an i mals
and plants en dan gered or threat ened.  Per pet u ate the mi gra
tory bird re source.  Pre serve a nat u ral di ver sity and abun
dance of fauna and flora.  Pro vide an un der stand ing and ap pre
ci a tion of fish and wild life ecol ogy.  Pro vide ref uge vis i
tors a safe, whole some and en joy able rec re ational ex pe ri
ence ori ented to ward wild life. The U. S. Fish and Wild life Ser
- vice sub di vides its man age ment re  spon si bil ity into the
fol low ing cat e go ries:  Na tional Wild life Ref uges (521
sites on 87.6 mil lion acres).  Ref uge Co or di na tion ar eas
(50 sites on 197,049 acres).  Wa ter fowl Pro duc tion ar eas (200
sites on 715,200 acres).  Fisheries Re search Cen ters (83 sites
on 16,083 acres).  Wild and Sce nic Rivers (8 rivers to tal ing
1,258 miles in length). U. S. Forest Service National Park Service
The Na tional Park Ser vice man ages 77.9 mil lion acres of fed er
ally owned lands. These lands are set aside to con serve scen ery,
na ture, his toric ob jects and wild life so that cur rent and fu
ture gen er a tions of Amer i cans can en joy them. Other types of
park ar eas in clude: na - tional rivers, park ways, na tional
lake shores, his toric parks, sce nic trails, wild and sce nic
rivers, mil i tary parks, re serves, and bat tle fields. Summary
of Acreage (In millions of acres) Acreage Type of Park Area:
National parks ...................... 49. 6 National preserves
................... 21. 4 National recreation areas ..............
3. 4 National monuments .................. 1. 9 National
seashores................... 0. 5 Other park areas
.................... 1. 1 Total acres ....................... 77.
9 U. S. Fish and Wildlife Service The De part ment of De fense
uses 16.7 mil lion acres of fed er ally owned land for mis sion es
sen tial pur poses in clud ing:  Mil i tary bases  In stal la
tions  Training ranges Department of Defense 56 STEW ARD SHIP IN
FOR MA TION The Fed eral Gov ern m e n t i n v e n t o r i e s , p
r e serves and in ter prets vast num bers of her i tage as sets
for the ben e fit of the Amer i can pub lic. These as sets en com
pass many of the Na tion's most pre cious his toric, nat u ral and
cul tural re sources. Her i t a g e a s s e t s a r e u n i q u e
prop erty, plant and equip ment with:  His toric or nat u ral sig
nif i cance.  Cul tural, ed u ca - tional or ar tis tic im por
tance.  Sig nif i cant ar chi tec tural char ac ter is tics. The
pub lic en trusts the Gov ern ment with these as sets and holds it
ac count able for their pres er va tion. Ex am ples of her i tage
as sets in clude the Wash ing ton Mon u ment, Dec la ra tion of In
de pend ence, Yo sem ite Na tional Park and mu seum ob jects on
dis play at the Smith so nian In sti tu tion. The fol low ing dis
cus sion of the Gov ern ment's her i tage as sets is not all-
inclusive. Rather, it high lights sig nif i cant her i tage as
sets re ported by Fed eral agen cies. The Gov ern ment clas si
fies her i tage as sets into three broad cat e go - ries:  Col lec
tion- type  Nat u ral  Cul tural Col lec tion- type her i tage as
sets in clude ob jects gath ered and main tained for mu seum and
li brary col lec tions. Nat u ral her i tage as sets in  clude na
tional wil der ness ar eas, wild and sce nic rivers, nat u ral
land marks, for ests and grass lands. Cul tural her i tage as sets
in clude his toric places and struc tures, me mo ri als and mon u
ments, na tional cem e ter ies, and ar che o log i cal sites. See
the Stew ard ship Land sec tion for the to tal acre age of some
nat u ral her i tage as sets such as Na tional For ests. Heritage
Assets Federal Stewardship Land Source: Na tional At las of the
United States of Amer ica, U. S. Geo log i cal Sur vey The De part
ment of In te rior's Bu reau of Rec la ma tion (BOR) man ages 5.8
mil lion acres of Stew ard ship land. These lands were with drawn
from the pub lic do main in sup port of BOR's man date to pro vide
ir ri ga tion wa ter, in dus trial wa ter, flood con trol and
power. How ever, if it does not in ter fere with pro ject pur
poses, ac tiv i ties such as boat ing and camp ing, fish and wild
life man age ment or the graz ing of live stock may be au tho
rized. Bureau of Reclamation STEW ARD SHIP IN FOR MA TION 57 Con
gress has des ig nated sev eral wil der ness ar eas to pre serve
their nat u ral con di tions. The De part ment of the In te rior
man ages 255 of these wil der ness ar eas com pris ing 66.5 per
cent of the Na tion's 103.7 mil lion wil der ness acres. The
Cebolla Wil der ness in New Mex ico is one such area. The Na
tional wild and sce nic rivers sys tem in cludes pro tected free-
flowing rivers. The Gov ern ment pro tects these ar eas be cause
of their fish and wild life, or for their sce nic, rec re ational,
geo logic, his toric or cul tural value. The De part ment of the
In te rior man ages 54 per cent of these 10,947 river miles, in
clud ing the Bluestone Na tional Sce nic River in West Vir ginia.
The Gov ern ment also sets aside nat u ral land marks that ex em
plify a re gion's nat u ral char ac ter is tics. The Na tional
Park Ser vice iden ti fies 587 na tional nat u ral land marks,
such as the Gar den of the Gods in Col o rado. The U. S. For est
Ser vice man ages 155 Na tional For ests and 20 na tional grass
lands on over 192.0 mil lion acres. These ar eas en com pass sig
nif i cant her i tage re sources. Ex am ples in clude the White
Moun tain Na tional For est in New Hamp shire and the Thun der Ba
s i n Na tional Grass land in Wy o ming. Natural Heritage Assets
The Na tional Reg is ter of His toric Places lists his toric
places and struc tures. This is Amer ica's of fi cial list of cul
tural re sources wor thy of pres er va tion. Of fi cial prop er
ties in clude dis tricts, sites, build ings, struc tures and ob
jects sig nif i cant to Amer i can his tory. It also in cludes sig
nif i cant ar chi tec tural, ar chae o log i cal en gi neer ing
and cul tural prop er ties. For est Ser vice land en compasses 887
such prop er ties. The Na tion's mon u ments and me mo ri als in
clude the Wash ing ton Mon u ment, the Viet nam Vet erans Me mo
rial and the Jef fer son Me mo rial in Wash ing ton, D. C. The Na
tional Park Ser vice man ages these. Also, the Amer i can Bat tle
Mon u ments Com mis sion man ages 27 me  mo ri als, mon u ments
and mark ers around the world. This in cludes the Belleau Wood Ma
rine Mon u ment in France. Ar che o log i cal sites con tain the
re mains of hu man ac tiv ity. The De part ment of the In te rior
man ages over 290,000 ar che o log i cal sites. The an cient
earthen mounds at the Hopewell Cul ture Na tional His toric Site
in Ohio are no ta ble ex am ples. Na tional cem e ter ies in clude
the Arlington Na tional Cem e tery in Vir ginia and the Fort Lo
gan Na tional Cem e tery in Col o rado. The De part ment of the
Army man ages the Arlington Na tional Cem e tery. The De part ment
of Vet erans Af fairs man ages Fort Lo gan Na tional Cem e tery
and 118 other cem eteries. The Smith so nian In sti tu tion holds
some of the most prom i nent Fed eral mu seum col lec tions. The
Smith so nian ac quires, pro tects and pre serves ap prox i mately
140 mil lion in di vid ual ob jects for pub lic ex hi bi tion, ed
u ca tion and research. Sim i larly, the Li brary of Con gress
holds the world's larg est li - brary col lec tion. That col lec
tion com prises more than 115 mil lion items. The Li brary re
ceives two cop ies of ev ery book, pam phlet, map, print, pho to
graph and piece of mu sic reg is tered for copy right in the
United States. The Na tional Ar chives holds more than 2 mil lion
cu bic feet of re cords. These re cords en sure ready ac cess to
es sen tial in for ma - tion doc u ment ing the rights of cit i
zens, ac tions of Fed eral of fi cials and the ef fects of those
ac tions on the na tional ex pe ri ence. These re cords in clude
text and leg is la tive re cords; car to graphic and ar chi - tec
tural re cords; mo tion pic ture, sound and video re cords; and
still pic tures and graph ics. The Na - tional Ar chives also main
tains his tor i cally im por tant doc u ments such as the U. S.
Con sti tu tion and the Lou i si ana Pur chase Treaty. Collection-
type Heritage Assets Cultural Heritage Assets 58 STEWARDSHIP
INFORMATION Con gress passed the So cial Se curity Act in 1935.
The Act, as sub sequently amended, includesprograms thatpro
videretirement anddisability benefits. Con gress es tab lished two
trust funds for So cial Se cu rity: The Fed eral Old- Age and Sur
vi vors In sur ance ( OASI) and the Fed eral Dis ability In sur
ance (DI) Trust Funds (OASDI). OASI pays re tire ment and
survivors benefitsand DIpaysbene fits to dis abled work ers. Rev e
nue toOASDI con sists primar ily of taxes on earn ings paid by em
ployees,theirem ployersandthe self- employed. OASDI also re ceives
rev e nue from the in come taxes on some Social Securityand
intereston itsinvest mentsinFederaldebt securities. So cial Se cu
rity rev e nues not needed to pay cur rent ben e fits or ad min is
trativeexpenses areinvestedin special- issueFederaldebt
securities. Thosesecu ritiesareguar anteedasto bothprin cipalandin
terestandbacked by the full faith and credit of the Gov ern ment.
The Board of Trustees of theOASI and DI Trust Funds pro vides in
its An nual Re port to the Pres i dent and Con gress short- range
(10 year) and long- range (75 year) ac tu ar ial es ti mates of
each trust fund. Be cause of theinher entuncertainty inestimates
for 75 years into the fu ture, the Board of Trusteesusesthreeal
ternativesets of eco nomic and de mo graphic assump tions to show
the range of pos sibil ities.Assump tionsaremadeabout many eco
nomic, and de mo graphic fac tors,including grossdomestic prod
uct, earn ings, the Con sumer Price Index(CPI),the unemployment
rate,the fertilityrate, immigration, mortal ity,anddisabil
ityincidence and terminations. Theassumptions usedintheac
companying tablesgener allyreferred toasthein termediate assump
tion,reflectthe bestestimate ofexpected futureexpe rience,under
cur rent law. Thepresentval uesofactu arialesti mates were com
puted as of Jan u ary 1, 1999,thebe ginningofthe valuation
period.The actuarial estimatedcon tri bu tionsequalthesum
ofthepresent value of all es ti mated non- interest income during
theperiod.The actuarial esti matedexpendi turesequalthesum of the
pres ent value of all es ti mated paymentsdur ingthevalu
ationperiod. These estimateswere preparedusing the fi nanc ing
method deemed the most appropriate bybothCongress and the Board of
Trustees. Es ti mates as sumetheprogram willcoverfuture workers
astheyenter thelaborforce. Undercur rentlegisla tionandusing
interme diateassump tions,theDIand OASITrust Funds are pro jected
to be ex hausted in 2020 and 2036 re spectively. Com bined OASDI
expenditures will ex ceed cur rent tax in come beginning
in2014andwill exceedtotal cur rentincome(in cludingcurrent inter
estincome)for calendaryears 2022 and later. Thus, cur rent tax
income plusa portionofan nualinterest income willbeneededto
meetexpendi tures for the years 2014 through 2021.There af ter, in
ad di tion to current tax in come and cur rent in ter est in come,
a por tion of the prin ci pal (com bined OASDI as sets) will be
needed each year un til the trust fund as sets are to tally ex
hausted in 2034. At that point, cur rent tax in come will be suf
fi cient to pay only ap prox imately 71 percentofthe benefitsdue.
Social Security Stewardship Responsibilities -20, 0 00 -15, 0 00 -
10, 0 00 -5, 0 00 0 5, 0 00 2001 20 13 2 025 2037 20 49 2 061 2073
(Inb illions ofd o l la rs) F ederal Old- Age and S urvivors Insu
ran ce Trust Fund Net Ass ets Fe deralDisab ility Ins uranc e
Trust Fu nd Net As sets Fisc alyears Social Security Estimated
Trust Fund Balances StewardshipResponsibilities provides
information on the largest Social Insurance pro grams: So cial
Security,Medicare, RailroadRetire  ment, Black Lung and Unemploy
mentInsur ance.Itspurpose is to as  sist the Ameri c a n peop l e
in evaluatingthefinan cialcondition and sustainability of these
pro grams. STEW ARD SHIP IN FOR MA TION 59 Social Security Present
Value Estimates for the Period of 75 Years into the Future, as of
January 1, 1999 (In billions of dollars) OASI DI O ASDI Present
value of contributions to December 31,
2074.......................... 16,830 2,763 19,593 Present value
of expenditures to December 31, 2074..........................
19,925 3,366 23,291 Present value of future resources needed
............. 3,095 603 3,698 Less: Net assets of Social Security
as of January 1, 1999 . 682 81 763 Present value of additional
resources needed .......... 2,413 522 2,935 Social Security, cont.
Federal Hospital InsuranceTrust Fundrev enueconsists primarilyof
taxes onearningspaid byemployees, their em ploy ers and the
selfemployed. The fund also re ceives revenue frompartofthe
taxationof SocialSecu ritybenefits andfrominter est onitsinvest
mentsinFederal debtse curities.Rev enuesnotneeded topaycur
rentbenefits oftheFederal Hospital Insurance program (Medicare
PartA)orad ministrative expensesarein vestedinspecial issue
Federal debt se curities.These securities beara marketrateof
interestand are guar an teed both as to prin ci pal and
interest.In addition,the securities are backed by the full faith
and credit of the U. S. Gov ern ment. Thepresentval uesofactu
arialesti mates were com puted as of the begin ning of the val u a
tion pe riod, Sep tem ber 30, 1999. The con tri butions con
sistofthesum ofthepresent value of var i ous pro gram in come
itemsexpectedto bereceivedthrough fiscal 2074.Theexpen
ditureconsists of the sum of the pres ent value of esti mated
payments through fis cal 2074, claims in curred through Septem ber
30, 1999, that were un paid as of that date, and ad min is tra
tive expenses re lated to those claims. Un der inter mediateas
sumptionsfromthe 1999 TrusteesReport,and legislation in place at
the time, the fund is pro jected to be ex hausted in the cal en
dar year 2015. Appropria tionsaswellas premi ums paidbymed
icalbene ficiariesfi nance theben efitsandad ministrative expenses
oftheFederal Supplementary Med i cal In sur ance (SMI) program
(Medicare Part B). The Bal anced Bud get Act of 1997 pro vides
that the monthly pre mium be set to cover 25 per cent of the
Medicare Part B pro gram's es ti mated cost of each cal
endaryear'ses timatedFederal Supplemen taryMedical Insurance pro
gram costs. Medicare Part B has a sur plus of $35.2billion.
Thisrepresents theestimated book value amount of the Federal
Supple mentaryMedi calInsurance Trust Fund assetsasof September30,
1999,less unpaidbene fitsandrelated ad ministrative
expensesincurred throughSeptember 30, 1999. Medicare 10 30 50 70
90 1 10 1 30 1 50 20 00 2003 20 06 2009 2012 2 01 5 Calend ar y
ears (In billio ns of dollars ) Estimated Balances of Federal
Hospital Insurance Trust Fund (Medicare Part A) Under Intermediate
Assumptions 60 STEW ARD SHIP IN FOR MA TION Medicare Part A
(Hospital Insurance) Present Value Estimates for the Period of 75
Years into the Future, Beginning September 30, 1999 (In billions
of dollars) Present value of contributions to the year 2074
......................................... 6,538. 6 Present value
of expenditures to the year 2074
......................................... 9,615. 2 Present value
of future resources needed ...................... 3,076. 6 Less:
Net assets in Federal Hospital Insurance Trust Fund as of
September 30 (Note 19) ..................... 141. 4 Present value
of additional resources needed.................... 2,935. 2
Medicare Part B (Supplementary Medical Insurance) Balances as of
September 30, 1999 (In billions of dollars) Total Federal
Supplementary Medical Insurance Trust Fund assets (Note 19)
............... 45. 6 Total unpaid benefits
....................... 10. 4 Excess of trust fund assets over
unpaid benefits ................... 35. 2 Rail road re tire ment
pays full an nu ities when el i gi ble per sons reach age 65 with
10 years of ser vice or age 62 with 30 years of ser vice. It pays
re duced an nu ities to el i gi ble ben e fi cia ries who are age
62 with 10 to 29 years of ser vice, or age 60 with 30 years of ser
vice. The Rail road Re tire ment pro gram pays dis abil ity an nu
ities based on to tal or oc cu pa tional disability. It also pays
an nu ities to di vorced spouses, re mar ried widow( er) s, sur
viv ing di vorced spouses, chil dren and par ents of de ceased
rail road work ers. Medicare cov ers qual i fied rail road re tire
ment ben e fi cia ries in the same way as So - cial Se cu rity ben
e fi cia ries. The Rail road Re tire ment Board (RRB) and So cial
Se cu rity Ad min is tra tion (SSA) share ju ris dic tion over the
pay ment of re tire ment and sur vi vors ben e fits. RRB has ju
ris dic tion over the pay ment of re tire ment ben e fits if the
em ployee had at least 10 years of rail road ser vice. Ad di
tionally, for sur vi vor ben e fits, RRB re quires that the em
ployee's last reg u lar em ploy ment be fore re tire ment or death
was in the rail road in dus try. If a railroad em ployee or his or
her sur vi vors do not qual ify for rail road re tire  ment ben e
fits, the RRB trans fers the em ployee's rail road re tire ment
cred its to SSA. SSA treats them as So cial Se cu rity cred its.
Pay roll taxes paid by rail road em ploy ers and their em ploy ees
pro vide the pri mary source of in come for the Rail road Re tire
ment- Survivor Ben e fit pro gram. By law, rail road re tire ment
taxes are co or di nated with So cial Se cu rity taxes. Em ployees
and em ploy ers pay tier I taxes at the same rate as So cial Se cu
rity taxes. Tier II taxes fi nance rail road re tire ment ben e
fit pay ments that are higher than So cial Se cu rity lev els.
Railroad Retirement STEW ARD SHIP IN FOR MA TION 61 Railroad
Retirement Account Present Value Estimates for the Period of 75
Years into the Future, Beginning September 30, 1999* (In billions
of dollars) Present value of contributions to December 31, 2074
.......................... 66. 5 Present value of expenditures to
December 31, 2074 .......................... 75. 5 Present value
of excess estimated expenditures over estimated contributions
............................................... 9. 0 Assets in the
Railroad Retirement Account as of September 30, 1999.............
21. 9 *These fig ures take into ac count fu ture en trants as well
as for mer and pres ent em ploy ees. 0 10 30 40 50 60 70 2000 2012
2024 20 36 2048 2060 2 072 Annual co ntributions An nual e xpen
diture s Fisc al ye ars (In bil lions o fdollars) Railroad
Retirement Account Estimated Activity Railroad Retirement, cont.
Other sources of pro gram in come include:  Financial
interchangeswith the So cial Se cu rity trust funds.  Intereston
investments.  Reve nueresulting from Fed20 eral in come taxes on
rail road retire mentbenefits.  Appropri ations(provided af - ter
1974 as part of a phase- out of cer tain vested dual ben e fits).
The net book value of as sets in the Railroad RetirementAc
countatSep tember30,1999, was$21.9billion. 62 STEWARDSHIP
INFORMATION The Black Lung Disabil ityBen efitsprogram compensates
eligible coalmin erswhoaredis - abled be cause of employ ment-
related pneumo coni osis(blacklung dis ease).Theprogram provides
bothmedical andsurvi vorbenefits. Un der Part C, the Black Lung
Dis abil ity Trust Fund (BLDTF) pro vides benefitpay mentstoeli gi
ble dis abled min ers when no re spon si ble mineopera torcanbeas
signed theli ability.The De part ment of La bor (La bor) op er
ates Part C of the Black Lung Disabil ityBen efitsprogram. Ex cise
taxes on coal mine op er ators, based on the sale of coal, par -
tially fund the black lung dis abil ity payments andtherelated
administra tive and in ter est costs. Intragovernmen tal ad vances
to the Black Lung Dis abil ity Trust Fund, which must be re paid
with in ter est, fund the short- fall. Under current condi
tions,analysts pro jectthatscheduled reductionin taxes on coal
sales will de crease cash in flowsfortheyear 2014andbeyond. Be
tween the years 2013 and 2015, projectionses timatea49-
percentdecrease in ex cise tax col lec tions. By theyear2040,
theratereduc tionisexpected to de crease cash in flows by a to tal
of more than $12.6 bil lion. To ad dress the Black Lung Dis abil
ity Trust Fund's grow ing def i cit prob lem, the fis cal 2001 bud
get states thatthe Administra tionwillpropose leg islationthat
will re struc ture the BLDTFdebt and ex tend ex cise taxes at cur
rent rates. Theto talliabil ities(netborrowings from Trea sury to
cover ben e fit payments) of the Black Lung Dis abil ity Trust
Fund ex ceed as sets by $6.3 billion. Thisdeficit representsthe
accumu lated shortfallofex cisetaxesneces sary to meet ben e fit
pay ments and inter estexpenses.Intragovernmental ad vances, which
the Trust Fund must repaywith interest,fi nancetheshortfall. Black
Lung Benefits Black Lung Disability Trust Fund Present Value
Estimates for the Period of 41 Years into the Future, Beginning
September 30, 1999 (In billions of dollars) Present value of
contributions to September 30, 2040 .......................... 9.
4 Present value of expenditures to September 30, 2040
.......................... 16. 7 Present value of excess estimated
expenditures over estimated contributions
............................................... 7. 3 Excess of
liabilities over assets in the Black Lung Disability Trust Fund
............. as of September 30, 1999
............................................. (6. 3) Black Lung
Fund Estimated Activity 0 50 0 1, 00 0 1, 50 0 2, 00 0 2, 50 0 20
00 20 10 2020 2030 20 40 Fiscal ye ars Annua le xpenditures Annual
contributions (In millions o fdollars ) STEW ARD SHIP IN FOR MA
TION 63 Congress cre ated the Un employ ment Trust Fund in 1935.
The Fundprovidesin comeassistance to un em ployed work ers who
have lost their jobs through no fault of their own. A unique sys
tem of Fed eral and State part ner shipsad ministersthe Unemploy
mentIn suranceprogram. Althoughestab lishedbyFederal law, State of
fi cials ex e cute the program.La borprovidesbroad pol
icyguidanceand programdirec tion. State unemployment in sur
ancestatuteses tablishlocal pro gram de tails, which they ad min
ister. Fed eral and State un em ployment taxes paid by em ploy ers
fi nance the Un employmentTrust Fund. The Govern mentdeposits
those funds in the Un em ployment Trust Fund and re ports the in
come as Fed eral tax rev e nue. TotalUn employmentTrust Fundas
setsexceededli abilities by $78.9 bil lion. This bal ance ap
proximatesthe accumulated sur plus of tax rev e nues and the
earningonthese revenues.This surplus remainsavailable to sup ple
mentfutureben efitpayments if andwhenannual revenuesbe - come
insufficient. Treasuryinvests the sur plus in Fed eral debt
securities. Unemployment Insurance Unemployment Trust Fund Present
Value Estimates in Nominal Dollars for the Period of 9 Years into
the Future, Beginning September 30, 1999 (In billions of dollars)
Present value of contributions to September 30, 2008
.............. 296. 1 Present value of expenditures to September
30, 2008 .............. 262. 3 Present value of excess estimated
contributions over estimated expenditures ........... 33. 8 Excess
of assets over liabilities in the Unemployment Trust Fund as of
September 30, 1999 (Note 19)..... 78. 9 Unemployment Fund
Estimated Activity 0 10 20 30 40 50 60 1 999 2 001 2003 2005 20 07
Fiscalye ars Annual co ntributions Annuale xpenditure s (In b
illions o f dollars) 64 STEW ARD SHIP IN FOR MA TION Stewardship
Investments The Fed eral Gov ern ment makes grants and pro vides
funds for the pur chase, con struc tion and/ or ma jor ren o va
tion of State and lo cal gov ern ment phys i cal prop er ties. The
Fed eral High way Ad min is tra tion re im burses States for con
struc tion costs on pro jects re lated to the Fed eral High way
sys tem. Im prove ments to na tional high ways, in ter state sys
tems, sur face trans por ta tion as well as con ges tion mit i ga
tion and air qual ity im prove ment are backed by these ef forts.
States con trib ute 10 per cent of the cost for in ter state sys
tem im prove ments and 20 per cent of costs for other con struc
tion. The En vi ron men tal Pro tec tion Agency (EPA) pro vides in
fra struc ture as sis tance to State and tribal gov ern ments.
This as sis tance is in the form of grants for the con struc tion
of wastewater and drink ing wa ter treat ment fa cil i ties and
ground wa ter pro tec tion. Mean while, for mula grants as sist ur
ban and non- urban ar eas. States and lo cal i ties use these
grants for a va ri ety of mass tran sit pur poses in clud ing plan
ning, con  struc tion of fa cil i ties, and pur chases of railcars
and buses. Funding also pays for trans por ta tion for the el
derly and dis abled. The Fed eral Avi a tion Ad min is tra tion's
(FAA's) Air Trans por ta tion pro gram pro vides fund ing to sus
tain the cur rent in fra struc ture and ad vances mod ern iza tion
and im prove ment of the Na tional Air space sys tem. Gen eral
Tran sit Ad min is tra tion discretionary grants pro vide cap i
tal as sis tance to fi nance ac qui si tion, con struc tion, re
con struc tion and im prove ment of fa cil i ties and equip ment.
Dis cre tion ary grants fund the cat e go ries of new starts,
fixed guid ance mod ern iza tion and bus and bus- related ac tiv i
ties. Investments in Non- Federal Physical Property for the Period
Ended September 30 (In billions of dollars) Highway program
.................................................. 22. 9 Water
infrastructure grants, Environmental Protection Agency
................. 2. 2 Formula grants
.................................................... 2. 1 Air
transportation ..................................................
1. 6 General Transit Administration
........................................ 1. 5 Economic Development
Administration .................................. 0. 4 Washington
Metro ................................................. 0. 2
Investments from all other programs
.................................... 0. 3 Fiscal 1999 investments
in non- Federal physical property .................. 31. 2 Non-
Federal Physical Property Stew ard ship Investments fo cus on Gov
ern ment pro grams aimed at pro vid ing long- term ben e fits by
im prov ing the Nation's pro duc tiv ity and en hanc ing eco nomic
growth. These investments can be pro vided through di rect Fed
eral spend ing or grants to State and lo cal gov ern ments for cer
tain ed u ca tion and train ing pro grams, re search and de vel op
ment, and fed er ally fi nanced but not fed er ally owned prop
erty, such as bridges and roads. When in curred, these in vest
ments are in cluded as expenses in de ter min ing the net cost of
op er a tions. STEW ARD SHIP IN FOR MA TION 65 The Fed eral Gov
ern ment runs sev - eral pro grams that in vest in hu man cap i
tal. Those in vest ments go to ward in creas ing and main tain ing
a healthy econ omy by ed u cat ing and train ing the gen eral pub
lic. Costs do not in clude train ing ex penses for Fed eral work
ers. Education Grants and Administrative Pro grams Ed u ca tion
grant ac tiv i ties cover im prove ments of both pub lic and pri
vate pre school and sec ond ary ed u ca tion; as sis tance to
post- secondary ed u ca tional in sti tu tions and stu dents pur
su ing a post- sec ond ary ed u ca tion; pro grams that as sist in
ed u cat ing chil dren and adults with spe cial needs and dis abil
i ties; bi lin gual ed u ca tion; and vo ca tional- technical ed u
ca tion. Employment and Training Administration The De part ment
of La bor pro vides job train ing for the gen eral pub lic to in
crease and main tain na tional eco nomic pro duc tive ca pac ity.
Pro grams in clude: adult em ploy ment and train ing; dis lo cated
worker em ploy ment and train ing; youth train ing; school- to-
work op por - tu ni ties; Job Corps; train ing pro grams for Na
tive Amer i cans and mi grant and seasonal farm work ers. Federal
Fam ily Ed ucation Loan Pro gram The Fed eral Fam ily Ed u ca tion
Loan pro gram op er ates with State and pri vate non profit guar
anty agen cies to pro vide loan guar an tees and in ter est sup
ple ments on loans by pri vate lend ers to el i gi ble stu dents
at tend ing par tic i pat ing post- secondary schools. Veterans
Ben efits Administration This agency pro vides train ing to as
sist dis abled vet er ans to be come em  ploy able. Ed u ca tional
as sis tance also is pro vided to vet er ans un der the GI bill.
National In stitute of Health (NIH) The NIH Re search and Training
and Ca reer De vel op ment pro gram ad dresses the need for
trained per son nel to con duct med i cal re search. The pri mary
goal is to pro duce highly trained in ves ti ga tors who are
likely to per form re search that will ben e fit the Na tion's
health. Veterans Health Administration This agency pro vides ed u
ca tion and train ing ef forts for health pro fes sion stu dents
and res i dents through part ner - ships with af fil i ated ac a
demic in sti tu tions. Bureau of In dian Af fairs This agency pro
vides ed u ca tion and Job Corps pro grams. Investments in Human
Capital for the Period Ended September 30 (In billions of dollars)
Education grants and administrative programs
............................. 31. 5 Employment and training
administration .................................. 5. 5 Federal
family education loans program ..................................
3. 1 Veterans Benefits Administration
....................................... 1. 6 National Institutes
of Health ........................................... 0. 8
Veterans Health
Administration......................................... 0. 7
Bureau of Indian
Affairs.............................................. 0. 5
Investments from all other
programs..................................... 1. 3 Fiscal 1999
investments in human capital ............................... 45. 0
Fed eral in vest ments in re search and de vel op ment com prise
those ex - penses for ba sic re search, ap plied re search and de
vel op ment that are in tended to in crease or main tain na tional
eco nomic pro duc tive ca pac ity or yield other fu ture ben e
fits. In vest ments in ba sic re search are a sys tem atic study
to gain knowl edge or un der stand ing of the fun da men tal as
pects of phe nom ena and of ob serv - able facts with out spe
cific ap pli ca tions to ward pro cesses or prod ucts in mind. In
vest ments in ap plied re search are a sys tem atic study to gain
knowl edge or un der stand ing nec es sary for de ter  min ing the
means by which a rec og nized and spe cific need may be met. In
vest ments in de vel op ment are sys tem atic use of the knowl
edge and un der stand ing gained from re search for the pro duc
tion of use ful ma te ri als, devices, sys tems, or meth ods, in
clud ing the de sign and de vel op ment of pro to types and pro
cesses. Human Capital Research and Development 66 STEW ARD SHIP IN
FOR MA TION Investments in Development for the Period Ended
September 30 (In billions of dollars) Department of
Defense.............................................. 31. 9
Science, Aeronautics and Technology
................................... 2. 7 Human Space Flight
................................................ 2. 5 Department
of Energy ............................................... 2. 2
National Institutes of Health
.......................................... 1. 7 Investments from
all other programs .................................... 0. 4
Fiscal 1999 investments in
development................................ 41. 4 Investments in
Basic Research for the Period Ended September 30 (In billions of
dollars) National Institutes of Health
.......................................... 7. 9 Department of
Energy............................................... 2. 5
Science, Aeronautics and Technology
................................... 1. 8 Department of
Defense.............................................. 1. 1
Environmental Protection Agency
...................................... 0. 6 Agricultural
Research............................................... 0. 4
Cooperative State Research, Education and Extension Service
................ 0. 2 Investments from all other programs
.................................... 1. 1 Fiscal 1999 investments
in basic research .............................. 15. 6 Investments
in Applied Research for the Period Ended September 30 (In billions
of dollars) National Institute of Health
........................................... 3. 9 Department of
Defense.............................................. 3. 0
Science, Aeronautics and Technology
................................... 2. 6 Department of Energy
............................................... 2. 0 National
Oceanic and Atmospheric Administration ..........................
1. 0 U. S. Geological
Survey.............................................. 0. 7
Investments from all other programs
.................................... 3. 0 Fiscal 1999 investments
in applied research............................. 16. 2 Research
and Development, cont. STEW ARD SHIP IN FOR MA TION 67 The Cur
rent Ser vices As sess ment ta ble shows the Of fice of Man age
ment and Bud get's (OMB's) es ti mated re ceipts, out lays, and
sur plus or def i cit in the bud get if no changes are made to
laws that are al ready en acted. Re ceipts and man da tory out
lays, such as So cial Se cu rity ben e fits and net in ter est, in
volve on go ing ac tiv i ties that gen er ally op er ate un der
per ma nent le gal au thor ity au tho rized by leg is la tion. The
cur rent ser vices es ti mates of re ceipts and man da tory spend
ing as sume that re ceipts and man da tory spend ing con tinue in
the fu ture as spec i fied by cur - rent laws. The cur rent ser
vices es ti mates for dis cre tion ary spend ing as sume dis cre
tion ary fund ing for fis  cal 2000 equals ap pro pri a tions en
acted by Con gress. It also as sumes that dis cre tion ary fund
ing for sub se quent years holds con stant in real terms. Be -
cause laws al ready en acted pro vide the bases for cur rent ser
vices es ti mates, they do not con sti tute a pro posed bud - get,
nor do they pre dict the most likely budget out comes. The cur
rent ser vices es ti mates may be used to as sess the
sustainability of pro grams un der cur rent law. That is, they may
be used to pro ject if fu ture re sources can sus tain pub lic ser
vices and meet ob li ga tions as they come due. In this way, they
can warn of fu ture prob lems in her ent in cur rent law. They
also can pro vide a bench mark against which tax and spend ing pro
pos als can be com pared. Cur rent ser vices es ti mates are use
ful in as sess ing the mag ni tude of pro posed changes. Also,
they can pro vide an an a lyt i cal per spec tive of Gov ern ment
by show - ing the short- and me dium- term di rec tion of cur rent
pro grams. The fol low ing sched ule pres ents the ac tual bud get
re sults for fis cal 1999 and the cur rent ser vices es ti mates
for all Fed eral taxes and spend ing pro grams for the sub se
quent 6 years. It shows re ceipts by source and out lays by func
tion. The es ti mates for these years are iden ti cal to the cur
rent ser - vices es ti mates in the Pres i dent's bud get for fis
cal 2001. The fol low ing es ti mates are based on the same eco
nomic, pro gram matic and other tech ni cal as sump tions as the
cur rent ser vices es ti mates doc u ment. Current Services
Assessment Current Services Assessment Receipt and Outlay
Estimates as Presented in the President's Budget (In billions of
dollars) Base Fiscal Year 1999 2000 2001 2002 2003 2004 2005
Receipts: Individual income taxes ........... 879 952 978 1,006
1,040 1,086 1,143 Corporate income taxes ........... 185 192 190
190 192 196 205 Social Insurance and retirement receipts . 612 650
683 713 742 771 814 Excise taxes ....... 70 68 69 71 72 74 76
Other receipts ...... 81 94 90 100 105 111 11 2 Total receipts
..... 1,827 1,956 2,010 2,080 2,151 2,238 2,350 Outlays: National
defense .... 275 284 295 300 309 318 326 Social Security...... 390
407 426 446 469 493 520 Medicare .......... 190 203 221 227 245
259 281 Income Security ..... 238 249 261 274 286 297 310 Health
............ 141 154 166 179 191 205 220 Veteran benefits and
services ......... 43 45 48 49 52 54 58 Education, training,
employment and social services .... 56 63 69 70 72 74 76
Transportation...... 43 47 48 50 51 53 55 Other programmatic
functions ......... 137 148 143 139 141 143 145 Net interest
........ 230 220 208 198 189 176 161 Undistributed offsetting
receipts ......... (40) (43) (46) (49) (47) (47) (4 9) Total
outlays...... 1,703 1,777 1,839 1,883 1,958 2,025 2,103 Unified
surplus... 124 179 171 197 193 213 247 68 STEW ARD SHIP IN FOR MA
TION Intentional Blank Page NOTES TO THE FI NAN CIAL STATEMENTS 69
United States Gov ern ment Notes to the Fi nan cial State ments
for the Year Ended Sep tem ber 30, 1999 Note 1. Summary of Sig
nificant Ac count ing Pol icies A. Reporting Entity This Fi nan
cial Re port in cludes the fi nan cial sta tus and ac tiv i ties
of the ex ec u tive branch and por tions of the leg is la tive and
ju di cial branches of the Gov ern ment. This in cludes those Gov
ern ment cor po ra tions that are part of the Fed eral Gov ern
ment. The Ap pen dix con tains a list of sig nif i cant Gov ern
ment en ti ties in cluded in these fi nan cial state ments and
also con tains a par tial list of en ti ties ex  cluded. For the
pur poses of this doc u ment, Gov ern ment re fers to the U. S.
Gov ern ment. The fi nan cial re port ing pe riod is the same used
for the an nual bud get. It is based on the Gov ern ment's fis cal
year, which ends Sep tem ber 30. Ma te rial intragovernmental
trans ac tions were elim i nated in con sol i da tion, ex cept as
de scribed in Note 16. The Fi nan cial Re port was gen er ally
based on gen er ally ac cepted ac count ing prin ci ples. These
prin ci ples typ i cally rec og nize:  Ex penses when in curred.
Non- exchange rev e nues on a mod i fied cash ba sis of ac count
ing.  Ex change (earned) rev e nues when earned. This ba sis of ac
count ing dif fers from that used for bud get ary re port ing.
This fis cal year, new ac count ing stan dards be came ef fec tive
per tain ing to de ferred main te nance. B. Basis of Accounting C.
Revenue Recognition Gov ern ment rev e nue co mes from two
sources: non- exchange trans ac tions and ex change trans ac
tions. Non- exchange rev e nues arise pri mar ily from ex er cise
of the Gov ern ment's power to tax and levy du ties, fines and pen
al ties. Ex change (earned) rev e nues arise when a Gov ern ment
en tity pro vides goods and ser vices to the pub lic for a price.
Re mit tances of non- exchange rev e nue are rec og nized when re
ceived. Re lated re ceiv ables are rec og nized when mea sur  able
and le gally col lect ible. Re funds and other off sets are rec og
nized when mea sur able and le gally pay able and net ted against
non- exchange rev e nue. Earned rev e nue rep re sents rev e nue
earned from user charges such as ad mis sion fees to Fed eral
parks, in sur ance pre mi ums, and fees on Fed eral hous ing and
loan pro grams. It is rec og nized when the Gov ern ment pro vides
the goods or ser vices. 70 NOTES TO THE FI NAN CIAL STATE MENTS Di
rect loans ob li gated and loan guar an tees com mit ted af ter
fis cal 1991 are re ported based on the pres ent value of the net
cash- flows es ti mated over the life of the loan or guar an tee.
The dif fer ence be tween the out stand ing prin ci pal of the
loans and the pres ent value of their net cash inflows is rec og
nized as a sub sidy cost al low ance; the pres ent value of es ti
mated net cash out flows of the loan guar an tees is rec og nized
as a li a bil ity for loan guar an tees. The sub sidy ex pense for
di rect or guar an teed loans dis bursed dur ing a year is the
pres ent value of es ti mated net cash out flows for those loans
or guar an tees. A sub sidy ex pense also is rec og nized for mod
i fi ca tions made dur ing the year to loans and guar an - tees
out stand ing and for reestimates made as of the end of the year
to the sub sidy al low ances or loan guar an tee li a bil ity for
loans and guar an tees out stand ing. Di rect loans ob li gated
and loan guar an tees com mit ted be fore fis cal 1992 may be re
ported un der the al low ance- for- loss method or the pres ent-
value method. Un der the al low ance- for- loss method, the out
stand ing prin ci pal of di rect loans is re duced by an al low
ance for uncollectible amounts; and the li a bil ity for loan guar
an tees is the amount the agency es ti mates would more likely
than not re quire a fu ture cash out flow to pay de fault claims.
Under the pres ent- value method, the out stand ing prin ci pal of
di rect loans is re duced by an al low ance equal to the dif fer
ence be tween the out stand ing prin ci pal and the pres ent value
of the ex pected net cash- flows; and the li a bil ity for loan
guar an tees is the pres ent value of ex pected net cash out flows
due to the loan guar an tees. Taxes re ceiv able pri mar ily con
sist of un col lected tax as sess ments, pen al ties and in ter
est when tax pay ers have agreed the amounts are owed, or a court
has de ter mined the as sess ments are owed. The Bal ance Sheet
does not in clude un paid as sess ments when nei ther tax pay ers
nor a court has agreed that the amounts are owed (com pli ance as
sess ments) or the Gov ern ment does not ex pect fur ther col lec
tions due to fac tors such as the tax payer's death, bank ruptcy
or in s o l v e n c y (writeoffs). Taxes re ceiv able are re
ported net of an al low ance for the es ti mated por tion deemed
to be uncollectible. E. Taxes Receivable Prop erty, plant and
equip ment used in Gov ern ment op er a tions are car ried at
cost. De pre ci a tion and am or ti za tion ex pense ap plies to
prop erty, plant and equip ment re ported in the Bal ance Sheet ex
cept land, un lim ited du ra tion land rights, and con struc tion
in prog ress. De pre ci a tion is rec og nized us ing the
straight- line method over the as sets es ti mated use ful lives.
Pen sion and post- retirement health ben e fit ex penses are re
corded dur ing the time em ployee ser vices are ren dered. The re
lated li a bil i ties for de fined ben e fit pen sion plans and
post- retirement health ben e fits are re - corded at es ti mated
pres ent value of fu ture ben e fits, less the es ti mated pres
ent value of fu ture nor mal cost con tri bu tions. Nor mal cost
is the por tion of the ac tu ar ial pres ent value of pro jected
ben e fits al lo cated as ex pense for em ployee ser vices ren
dered in the cur rent year. Ac tu ar ial gains and losses (and
prior and past ser vice cost, if any) are rec og nized im me di
ately in the year they oc cur, with out am or ti za tion. H.
Pension and Post- Retirement Health Benefits Programs F.
Inventories and Related Property In ven tories are val ued at his
tor i cal cost. His tor i cal cost meth ods in - clude first- in-
first- out, weighted av er age and mov i n g av e r a g e . Es ti
mated re pair costs re duce the value of in ven tory held for re
pair. Ex cess, ob so lete and un ser vice able in ven to ries are
val ued at es ti mated net re al iz able val ues. D. Direct Loans
and Loan Guarantees G. Property, Plant and Equipment NOTES TO THE
FI NAN CIAL STATEMENTS 71 En vi ron men tal li a bil i ties are re
corded at the es ti mated cur rent cost to remediate haz ard ous
waste and en vi ron men tal con tam i na tion, as sum ing the use
of cur rent tech nol ogy. Remediation con sists of re moval, treat
ment and/ or safe con tain ment. Where tech nol ogy does not ex
ist to cleanup haz ard ous waste, only the es ti ma ble por tion
of the li a bil ity, typ i cally safe con tain ment, is re corded.
I. Environmental Liabilities De ferred main te nance is main te
nance that was not per formed when it should have been or was
sched uled to be per formed and, there fore, is put off or de
layed for a fu ture pe riod. Main te nance is the act of keep ing
fixed as sets in ac cept able con di tion in clud ing pre ven ta
tive main te nance, nor mal re pairs, and other ac tiv i ties
needed to pre serve the as set so that it con tin ues to pro vide
ac cept able ser vices and achieves its ex pected life. Main te
nance ex cludes ac tiv i ties aimed at ex pand ing the ca pac ity
of an as set or oth er wise up grad ing it to serve needs dif fer
ent from those orig i nally in tended. De ferred main te nance in
for ma tion is dis closed in the Sup ple men tal In for ma tion to
the Fi nan cial State ments. De ferred main te nance ex penses are
not ac crued in the State ment of Net Cost, or rec og nized as li
a bil i ties on the Bal ance Sheet. Li a bil i ties for con tin
gen cies are rec og nized on the Bal ance Sheet when both:  A past
trans ac tion or event has oc curred.  A fu ture out flow or other
sac ri fice of re - sources is prob a ble and mea sur able. The es
ti mated con tin gent li a bility may be a spe cific amount or a
range of amounts. If some amount within the range is a better es
ti mate than any other amount within the range, then that amount
is rec og nized. If no a mount within the range is a better es ti
mate than any other amount, then the min i mum amount in the range
is rec og nized. Con tin gent li a bil i ties that do not meet the
above cri te ria for rec og ni tion, but for which there is at
least a rea son able pos si bil ity that a loss has been in curred
are dis closed in Note 18 Com mit ments and Con tin gencies. K.
Contingencies A li a bil ity for so cial in sur ance pro grams (So
cial Se cu rity, Medicare, rail road re tire ment, black lung and
un em ploy ment) is rec og nized for any un paid amounts due as of
the re port ing date. No li a bil ity is rec og nized for fu ture
ben e fit pay ments not yet due. For fur ther in for ma tion, see
the Stew ard ship In for ma tion sec tion on Stew ard ship Re spon
si bil ities and Note 19 on Dedicated Collections. L. Social
Insurance Fed eral Re serve Banks (FRBs), which are not part of
the re port ing en tity, serve as the Gov ern ment's de pos i tary
and fis cal agent. They pro cess Fed eral pay ments and de pos its
to Trea sury's ac count and ser vice Fed eral debt se cu ri ties.
FRBs owned $488.9 bil lion of Fed eral debt se cu - ri ties held
by the pub lic as of Sep tem ber 30, 1999. FRB earn ings that ex
ceed stat u tory amounts of sur plus es tab lished for FRBs are
paid to the Gov ern ment and are rec og nized as non- exchange rev
e nue. Those earn ings to taled $26.0 bil lion for the year ended
Sep tem ber 30, 1999. The pri mary source of these earn ings is
from in ter est earned on Fed eral debt se cu ri ties held by the
FRBs. FRBs is sue Fed eral Re serve notes, the cir cu lat ing cur
rency of the United States. These notes are col lat er al ized by
spe cific as sets owned by FRBs, typ i cally Fed eral debt se cu
ri ties. Fed eral Re serve notes are backed by the full faith and
credit of the U. S. Gov ern ment. The Gov ern ment does not guar
an tee pay ment of Gov ern ment- sponsored en ter prises li a bil
i ties such as the Fed eral Na tional Mort gage As so ci a tion or
the Fed eral Home Loan Mort gage Cor po ra tion, which are pri
vately owned. These en ter prises also are ex cluded from the re
port ing en tity. M. Related Party Transactions J. Deferred
Maintenance 72 NOTES TO THE FI NAN CIAL STATE MENTS Note 2. Cash
and Other Mon etary As sets Cash, in the amount of $60.4 bil lion,
con sists of:  Trea sury bal ances held at the FRBs, net of out
stand ing checks.  Trea sury bal ances in spe cial depositaries ,
known as the U. S. Trea sury Tax and Loan Note ac counts.  Funds
held out side of Trea sury and the FRBs by au tho - rized fis cal
of fi cers or agents.  Mon ies held by Gov ern ment col lec tion
and dis burs ing of fi - cers, agen cies' undeposited col lec
tions, un con firmed de pos its, and cash trans fers.  Time de pos
its at fi nan cial in sti tu tions. The Gov ern ment main tains
for mal ar range ments with nu mer ous banks to main tain time de
pos its known as com pen sat ing bal ances. These bal ances com
pen sate the banks for ser - vices pro vided to the Gov ern ment,
such as main tain ing zero- balance ac counts for the col lec tion
of pub lic mon ies. Cash Gold is val ued at the stat u tory price
of $42.2222 per fine troy ounce. As of Sep tem ber 30, 1999, the
num ber of fine troy ounces was 261,571,005. The mar ket value of
gold on the Lon don Fixing as of the re port ing date was $299.00
per fine troy ounce. Gold was pledged as col lat eral for gold cer
tif i cates is sued to the FRBs to tal ing $11.0 bil lion. See
Note 14 Other Li a bil i ties. Gold Cash and Other Monetary Assets
as of September 30 (In billions of dollars) Cash
............................... 60. 4 Gold
................................ 11. 0 Domestic monetary assets
................ 1. 7 International monetary assets ..............
42. 1 Total cash and other monetary assets ..... 115. 2 Domestic
Monetary Assets Do mes tic mon e tary as sets con sist of liq uid
as sets, other than cash that are based on the U. S. dol lar, in -
clud ing coins, sil ver bul lion and other coin age met als. These
items to taled $1.7 bil lion. International Monetary Assets As
sets val ued on a ba sis other than the U. S. dol lar com prise In
ter na tional mon e tary as sets. The U. S. re serve po si tion in
the In ter na tional Mon e tary Fund (IMF) rep re sents an in vest
ment in the IMF. The IMF pro vides fi nan cial as sis tance to
about 180 coun tries. It seeks to pro mote cur rency ex change sta
bil ity. Only a por tion of the re quired pay ment to the IMF was
paid in cash, with the re main der treated as a sub  scrip tion.
The re corded bal ance is shown net of the sub scrip tion por
tion, which rep re sents a let ter of credit pay able to the IMF.
As of Sep tem ber 30, 1999, the re main ing avail able bal ance un
der the let ter of credit to taled $31.4 bil lion. The U. S. re
serve po si tion in the IMF has a U. S. dol lar equiv a lent of
$19.2 bil lion as of that date. Spe cial Draw ing Rights (SDRs)
are in ter est- bearing as sets ob tained through ei ther IMF al
lo ca tions, trans  ac tions with IMF mem ber coun tries or in ter
est earn ings on SDR hold ings. Trea sury's Ex change Sta bi li za
tion Fund held SDRs to tal ing $10.3 bil lion at the end of fis
cal 1999. Those hold ings are sim i lar to an in vest ment in the
IMF. On Sep tem ber 30, 1999, Other li a bil i ties in cluded an
$6.8 bil lion in ter est- bearing li a bil ity to the IMF. This li
a bil ity con sisted of SDRs ob tained through IMF al locations.
NOTES TO THE FI NAN CIAL STATEMENTS 73 Ac counts re ceiv able in
clud ing re lated in ter est re ceiv able, rep re sent claims to
cash or other as sets from en ti ties out side the Fed eral Gov
ern ment that arise from the sale of goods or ser vices, du ties,
fines, cer tain li cense fees, re cov er ies, or other pro vi
sions of the law. An al low ance for es ti mated losses due to
uncollectible amounts is es tab lished when it is more likely than
not that the receivables will not be to tally col lected. Ac
counts re ceiv able are net of an al low ance for uncollectible
amounts of $12.5 bil lion as of Sep tem ber 30, 1999. The SDR Act
of 1968 au tho rized the Sec re tary of the Trea sury to is sue
SDR cer tif i cates to FRBs i n e x change for cash. The value of
these certificates can not ex ceed the value of the SDR hold ings.
The Sec re tary of the Trea sury de ter mines when the FRBs can re
deem the SDR cer tif i cates. The li a bil ity for such re demp
tions, which to taled $7.2 bil lion at the end of the fis cal
year, is in cluded in Note 14 Other Li a bil i ties. Each SDR was
val ued at $1.38769 as of Sep tem ber 30, 1999. In ter na tional
mon e tary as sets also in clude for eign cur rency and other mon
e tary as sets de nom i nated in for eign cur rency. Note 3. Ac
counts Receivable International Monetary Assets, cont. Accounts
Receivable as of September 30 (In billions of dollars) Agency or
Program Name: Department of Energy
........................................ 4. 1 Bureau of
Reclamation ........................................ 3. 5 Foreign
military sales ......................................... 2. 4
Federal family education loan program ............................
1. 8 Operations and maintenance
................................... 1. 6 Multi- Peril Crop
Insurance Fund ................................. 0. 8 Tennessee
Valley Authority power program ......................... 0. 7
Hazardous Substance Superfund ................................ 0.
6 Minerals Management Service ..................................
0. 5 Mail delivery service
.......................................... 0. 5 Veterans Health
Administration .................................. 0. 4 Veterans
Benefits Administration................................. 0. 2 All
other programs ........................................... 17. 9
Total accounts receivable, net ................................
35. 0 74 NOTES TO THE FI NAN CIAL STATE MENTS Note 4. Loan and
Loan Guar antee Programs The Fed eral Gov ern ment uses two meth
ods, di rect loans and loan guar an tee pro grams, to ac com plish
the same goals. These goals are to pro mote the Na tion's wel fare
by mak ing di rect loans and guar an tee ing non- Federal loans to
seg ments of the pop u la tion not ad e quately served by non-
Federal in sti tu tions. For those un able to af ford credit at
the mar ket rate, Fed eral credit pro grams pro vide sub si dies
in the form of di rect loans of fered at an in ter est rate lower
than the mar ket rate. For those to whom non- Federal fi nan cial
in sti tu tions are re luc tant to grant credit be cause of the
high risk in volved, Fed eral credit pro grams guar an tee the pay
ment of these non- Federal loans and ab sorb the cost of de
faults. The long- term cost of loans and guar an tees out stand
ing for loans ob li gated or guar an tees com mit ted af ter fis
cal 1991 is the sub sidy cost al low ance for di rect loans out
stand ing and the li a bil ity for loan guar an tees out stand ing
as of the end of fis cal 1999. The long- term cost for loans ob li
gated or guar an tees com mit ted be fore fis cal 1992 is the al
low ance for uncollectible amounts (or pres ent value al low ance)
for di rect loans out stand ing and the li a bil ity for loan guar
an tees out s t a n d i n g . The long- term cost is based on all
di rect loans and guar an teed loans dis bursed in fis cal 1999
and pre vi ous years that are out stand ing as of the end of fis
cal 1999. It in cludes the sub sidy cost of these loans and guar
an tees es ti mated as of the time of loan dis burse ment and sub
se quent ad just ments such as mod i fi ca tions, reestimates, am
or ti za tion and write- offs. Net Loans Re ceiv able in clude re
lated in ter est and fore closed prop erty. They are in cluded in
the as sets sec tion of the Bal ance Sheet. The to tal sub sidy ex
pense is the cost of di rect loans and loan guar an tees rec og
nized dur ing fis cal 1999. It con sists of the sub sidy ex pense
in curred for di rect and guar an teed loans dis bursed dur ing
fis cal 1999, for mod i fi ca tions made dur ing fis cal 1999 of
loans and guar an tees out stand ing, and for reestimates as of
the end of fis cal 1999 of the cost of loans and guar an tees out
stand ing. This ex pense is in cluded in the State ment of Net
Cost. The Di rect Stu dent Loan pro gram, es tab lished in fis cal
1994, of fers four types of ed u ca tion loans: Stafford,
Unsubsidized Stafford, PLUS for par ents and con sol i da tion
loans. Ev i dence of fi nan cial need is re quired for a stu dent
to re ceive a sub si dized Stafford loan. The other three loan pro
grams are avail able to bor row ers at all in come lev els. These
loans usu ally ma ture 9 to13 years af ter the stu dent is no lon
ger en rolled. They are un se cured. Ru ral Elec tri fi ca tion
and Tele com mu ni ca tions loans are for the con struc tion and
op er a tion of gen er at ing plants, elec tric trans mis sion,
and dis tri bu tion lines or sys tems. These loans carry an av er
age ma tu rity of greater than 20 years and are usu ally se cured.
The ma jor ru ral pro grams are funded through the Ru ral Housing
In sur ance Fund pro gram ac count, which includes:  Very low and
low- to- mod er ate in come home own er ship loans and guar an
tees.  Very low- income hous ing re pair loans.  Multifamily hous
ing loans and guar an tees.  Do mes tic farm la bor hous ing
loans.  Housing site loans.  Credit sales of ac quired prop erty.
Loan pro grams are lim ited to ru ral ar eas that in clude towns,
vil lages and other places not part of an ur ban area. The ma jor
ity of these loans ma ture in ex cess of 25 years and are se cured
by the prop erty of the bor rower. The Fed eral Fam ily Ed u ca
tion Loan pro gram, for merly known as the Guar an teed Stu dent
Loan pro gram, was es tab lished in fis cal 1965. Like the Di rect
Stu dent Loan pro gram, it of fers four types of loans: Stafford,
Unsubsidized Stafford, PLUS for par ents and con sol i da tion
loans. The Agency for In ter na tional De vel op ment pro vides
eco nomic as sis tance to se lected coun tries in sup port of U.
S. ef forts to pro mote sta bil ity and se cu rity in ter ests in
stra te gic re gions of the world. Ex port- Import Bank aids in fi
nanc ing and pro mot ing U. S. ex ports. To ac com plish its ob
jec tives, the bank's au thor ity and re sources are used to:  As
sume com mer cial and po lit i cal risk that ex port ers or pri
vate in sti tu tions are un will ing or are un able to un der
take.  Over come ma tu rity and other lim i ta tions in pri vate
sec tor fi nanc ing.  Assist U. S. ex ports to meet for eign of fi
cially spon sored ex port credit com pe ti tion.  Pro vide lead er
ship and guid ance in ex port fi nanc ing to the U. S. ex port ing
and bank ing com mu ni ties and to for eign bor row ers. Re pay
ment terms for these loans are usu ally 1 to 7 years. The Fed eral
Housing Ad min is tra tion (FHA) pro vides mort gage in sur ance
en cour ag ing lend ers to make credit avail able to ex pand home
own er ship. FHA pre dom i nately serves borrowers that the con
ven tional mar ket does not ad e quately serve such as first- time
home buy ers, mi nor i ties, lower- income fam i lies and res i
dents of un der served ar eas. Vet eran Housing Ben e fits pro
vide par tial guar anty of res i den tial mort gage loans is sued
to el i gi ble vet er ans re serv ists and ser vice mem bers by
pri vate lend ers. This guar an tee al lows vet er ans, re serv
ists and ser vice mem bers to pur chase a home with out a sub stan
tial down pay ment. Other loan guar an tees in clude: Small Busi
ness Ad min is tra tion loans to mi nor ity busi nesses; and the
Farm Ser vice Agency for farm own er ship, emer gency and di sas
ter loans. NOTES TO THE FI NAN CIAL STATEMENTS 75 Loan and Loan
Guarantee Programs as of September 30 (In billions of dollars)
Loans and Loan Guarantees Outstanding Long- term Cost of Loans and
Loan Guarantees Outstanding Net Loans Receivable Amount Guaranteed
by the Federal Government Subsidy Expense for the Fiscal Year
ended September 30, 1999 Di rect Loans: Federal direct student
loans ........ 46. 5 0. 4 46. 1 0. 4 Rural development ...... 68.
9 13. 1 55. 8 Federal family education loan programs........ 23. 7
14. 5 9. 2 Assistance for states of the former Soviet Union
......... 11. 0 4. 4 6. 6 Food for progress credits .............
10. 6 7. 2 3. 4 0. 5 HUD, all other ......... 10. 3 0. 6 9. 7
Direct loans for spectrum auction sales ......... 8. 3 (0. 4) 8. 7
1. 2 Export credit guarantees.......... 6. 9 3. 9 3. 0 All other
direct loan programs ........... 49. 9 8. 7 41. 2 1. 7 Total
.............. 236. 1 52. 4 183. 7 3. 8 Guaranteed Loans: Federal
Housing Administration........ 551. 4 5. 9 508. 1 (5. 2) Veterans
housing benefit program....... 213. 5 5. 8 84. 0 1. 1 Federal
family education loan programs........ 127. 6 12. 2 121. 2 3. 1
Small business loans .... 39. 6 1. 4 31. 9 (0. 1) Financing
account guarantees and insurance ........... 24. 2 5. 6 24. 2 1. 9
Rural Housing Service..... 10. 0 0. 2 9. 0 All other guaranteed
loan programs........ 38. 6 4. 0 36. 9 1. 0 Total...............
1,004. 9 35. 1 815. 3 1. 8 76 NOTES TO THE FI NAN CIAL STATE MENTS
Note 6. In ventories and Re lated Property In ven tories and re
lated prop erty con sist of the cat e go ries listed be low, net
of al low ance for ob so lete and un ser vice able in ven tory, as
of Sep tem ber 30, 1999. In ven tory held for sale in cludes tan
gi ble per sonal prop erty held for sale, net of al low ances. Op
er ating Ma te rials and Sup - plies are com prised of tan gi ble
per sonal prop erty pur chased for use in nor mal op er a tions.
Ma te rials and sup plies held for fu ture use in clude tan gi ble
per sonal prop erty not readily avail able in the mar ket or held
be cause there is more than a re mote chance that they will even
tu ally be needed. Stock pile ma te ri als are stra te gic and
crit i cal ma te ri als held for use in na tional de fense, con
ser va tion or na tional emer gen cies due to stat u tory re quire
ments; for ex am ple, co balt, tin and nickel. Com mod i ties in
clude items of com merce or trade that have an ex change value
used to sta bi lize or sup port mar ket prices. Seized mon e tary
in stru ments com prise only mon e tary in stru ments. These mon e
tary in stru ments are await ing judge ment to de ter mine own er
ship. The re lated li a bil ity is in cluded in Other li a bil i
ties. Other prop erty seized by the Gov ern ment, such as real
prop erty and tan gi ble per sonal prop erty, is not in cluded as
a Gov ern ment as set. It is ac counted for in agency prop erty-
management re cords un til the prop erty is for feited, re turned
or oth er wise liq ui dated. For feited prop erty is com prised of
mon e tary in stru ments, in tan gi ble prop erty, real prop erty
and tan gi ble per sonal prop erty ac quired through for fei ture
pro ceed ings; prop erty ac quired by the Gov ern ment to sat isfy
a tax li a bil ity; and un claimed and aban doned mer chan dise.
Inventories and Related Property as of September 30 (In bil lions
of dol lars) De fense All Oth ers Total Inventory held for sale
................. 67. 0 1. 1 68. 1 Operating materials and
supplies ......... 40. 9 5. 5 46. 4 Materials and supplies held
for future use... 17. 8 0. 1 17. 9 Stockpile materials
................... 2. 8 37. 5 40. 3 Commodities
........................ - 0. 4 0. 4 Seized monetary instruments
............ - 0. 1 0. 1 Forfeited property .................... -
0. 1 0. 1 Total inventories and related property ... 128. 5 44. 8
173. 3 Taxes Receivable as of September 30 (In billions of
dollars) Gross taxes receivable .............. 79. 2 Allowance for
doubtful accounts ....... (56. 5) Taxes receivable, net
............. 22. 7 Note 5. Taxes Re ceiv able Taxes re ceiv able
are the gross tax re ceiv ables net of al low ance for doubt ful
ac counts. NOTES TO THE FI NAN CIAL STATEMENTS 77 Note 7.
Property, Plant and Equipment Prop erty, plant and equip ment con
sist of tan gi ble as sets, in clud ing land, build ings, struc
tures and other as sets used to pro vide goods and ser vices. Cer
tain types of tan gi ble as sets, col lec tively re ferred to as
Stew ard ship As sets, are not re ported as prop erty, plant and
equipment or else where on the Bal ance Sheet. This is based on ac
count ing stan dards that be came ef fec tive for fis cal 1998.
Stew ard ship as sets in clude Na tional de fense as sets, Her i
tage as sets and Stew ard ship land. These as sets are pre sented
in the Stew ard ship In for ma tion sec tion. Property, Plant and
Equipment as of September 30 (In bil lions of dol lars) Cost Ac cu
mu lated De pre ci a tion/ Am or ti za tion Net Buildings,
structures and facilities .......... 284. 8 135. 3 149. 5
Furniture, fixtures and equipment .......... 151. 0 75. 0 76. 0
Construction in progress................. 49. 3 - 49. 3 Land and
land improvements ............. 25. 4 5. 5 19. 9 Automated data
processing software........ 3. 8 2. 0 1. 8 Assets under capital
lease ............... 1. 5 0. 5 1. 0 Leasehold improvements
................ 2. 0 0. 7 1. 3 Total property, plant and
equipment ...... 517. 8 219. 0 298. 8 Note 8. Other As sets The
cat e gory of Other as sets con sists of ad - vances and pre pay
ments, se cu ri ties and in vest ments, and other Gov ern ment as
sets not oth er wise clas si fied. This fig ure pres ents se cu ri
ties at cost, net of un am or - tized pre mi ums and dis counts.
Other Assets as of September 30 (In billions of dollars)
Securities and investments ....... 17. 2 Advances and
prepayments....... 13. 0 Other ....................... 24. 1 T
otal other assets ............ 54. 3 78 NOTES TO THE FI NAN CIAL
STATE MENTS Note 9. Accounts Payable Accounts Payable as of
September 30 (In billions of dollars) Agency: Interest on Federal
debt securities held by the public ....................... 42. 6
DOD .................................. 16. 7 OPM
.................................. 1. 2 U. S. Postal Service
....................... 4. 0 NASA
................................. 2. 9
Agriculture.............................. 2. 7 VA
.................................... 2. 3 HUD
.................................. 1. 8 Justice
................................. 1. 6 AID
................................... 1. 4 General Services
Administration .............. 1. 2 Transportation
........................... 1. 0 Energy
................................. 1. 0 Executive Office of the
President ............. 1. 0 All other departments
...................... 4. 4 Total accounts
payable.................. 85. 8 The fig ure un der Ac counts pay
able in cludes In ter est on Fed eral debt se cu ri ties held by
the pub lic. This re flects un paid in ter est ac crued on Federal
debt se cu ri ties held by the pub lic (see Note 10) as of Sep tem
ber 30, 1999. Other ac counts pay able are for goods and prop erty
or dered and re ceived, and for ser vices ren dered by other than
em ploy ees. Fed eral debt held by the pub lic to taled $3,631.6
bil lion at the end of fis cal 1999. The ac com pa ny ing Fed eral
Debt Se cu ri ties ta ble de tails Gov ern ment bor row ing to fi
nance op er a tions. This ta ble shows debt at face value. Un am
or tized pre mi ums are added and un am or tized dis counts sub
tracted.  Intragovernmental hold ings rep re sent the por tion of
the gross Fed eral debt held as in vest ments by Gov ern ment en
ti ties. This in cludes ma jor trust funds. F o r m o r e i n f o
r m a t i o n o n t r u s t funds, see Note 19 Ded i cated Col lec
tions. This re port elim i nates intragovernmental hold ings in
con - solidation. Se cu ri ties that rep re sent debt held by the
pub lic are pri mar ily is sued by the Trea sury and in clude:  In
ter est- bearing mar ket able se cu ri ties (bills, notes and
bonds).  In ter est- bearing non mar ket able se cu ri ties (for
eign se ries, State and lo cal gov ern ment se  ries, do mes tic
se ries, and sav ings bonds).  Non- interest bear ing debt (ma
tured and other). As of Sep tem ber 30, 1999, $5,568 bil lion of
Fed eral debt was sub ject t o a s t a t u t o r y l i m i t (3 1
U .S .C . 3101). That limit was $5,950 bil lion. The debt sub ject
to the limit in cludes:  Debt held by the pub lic and
intragovernmental hold ings, Definitions of Debt  Gross Fed eral
Debt - All Gov ern ment debt, whether is sued by Trea sury (Trea
sury se cu ri ties) or by other agen cies (agency se curities).
Gross Fed eral debt is ei ther held by the pub lic or by Fed eral
Gov ern ment en ti ties.  Debt Held by the Pub lic - Fed eral debt
held out side the Gov ern ment by in di vid u als, cor po ra
tions, State or lo cal gov ern ments, the Fed eral Re serve Sys
tem, and for eign gov ern ments and cen tral banks.
Intragovernmental hold ings - Fed eral debt held by Gov ern ment
trust funds, re volv ing funds and spe cial funds. Note 10.
Federal Debt Securities Held by the Pub lic NOTES TO THE FI NAN
CIAL STATEMENTS 79 Federal Debt Securities Held by the Public as
of September 30 (In bil lions of dol lars) Be gin ning Balance
Sept. 30, 1998 Net Change Dur ing Fiscal 1999 End ing Balance
Sept. 30, 1999 Av er age Interest Rate Dur ing Fis cal 1999
Treasury Securities: Marketable securities ...................
3,331. 0 (98. 0) 3,233. 0 6.341% Non- marketable securities
................ 2,187. 7 226. 6 2,414. 3 6.674% Non- interest
bearing debt ................ 7. 5 1. 5 9. 0 Total Treasury
securities ............... 5,526. 2 130. 1 5,656. 3 Plus:
Unamortized premium on Treasury securities................ 16. 9
(0. 9) 16. 0 Less: Unamortized discount on Treasury
securities................ 78. 9 1. 5 80. 4 Total Treasury
securities, net of unamortized premiums and
discounts.................... 5,464. 2 127. 7 5,591. 9 Agency
Securities: Tennessee Valley Authority ............... 26. 7 (0.
8) 25. 9 All other agencies ...................... 2. 3 (0. 2) 2.
1 Total agency securities, net of unamortized premiums and
discounts ............ 29. 0 (1. 0) 28. 0 Total Federal debt
................ 5,493. 2 126. 7 5,619. 9 Less: Intragovernmental
holdings, net of unamortized premiums and discounts
.................. 1,775. 5 212. 8 1,988. 3 Total Federal debt
securities held by the public .............. 3,717. 7 (86. 1)
3,631. 6 Types of mar ket able se cu ri ties: Bills Short- term ob
li ga tions is sued with a term of 1 year or less. Notes Me dium-
term ob li ga tions is sued with a term of at least 1 year, but
not more than 10 years. Bonds Long- term ob li ga tions of more
than 10 years. less most agency securities, Fed eral Fi nancing
Bank debt, mis cel la neous debt, and un re al ized dis count on
Gov ern ment ac count se ries se cu ri ties.  Un am or tized net
dis counts on pub lic is sues of Trea sury notes and bonds (other
than zero- coupon bonds). Note 10. Federal Debt, cont. 80 NOTES TO
THE FI NAN CIAL STATE MENTS Intragovernmental Holdings: Federal
Debt Securities Held as Investments by Government Accounts as of
September 30 (In billions of dollars) Be gin ning Balance Sept.
30, 1998 Net Change Dur ing Fis cal 1999 End ing Bal ance Sept.
30, 1999 SSA, Old- Age and Survivors Insurance .............. 653.
3 108. 9 762. 2 OPM, civil service retirement and disability
............ 451. 3 30. 0 481. 3 DOD, military retirement
......................... 133. 8 7. 5 141. 3 HHS, Hospital
Insurance Fund..................... 118. 3 35. 4 153. 7 SSA,
disability insurance......................... 77. 0 15. 7 92. 7
Labor, unemployment............................ 70. 6 6. 8 77. 4
HHS, supplementary medical insurance .............. 39. 5 (13. 0)
26. 5 FDIC funds ................................... 39. 1 1. 7
40. 8 Railroad Retirement Board........................ 21. 8 2. 6
24. 4 OPM, Employees Life Insurance ................... 19. 4 1. 3
20. 7 Transportation, Highway Trust Fund ................. 17. 9
10. 2 28. 1 Energy, nuclear waste disposal ....................
11. 2 4. 0 15. 2 All other programs and funds
...................... 117. 6 8. 0 125. 6 Subtotal
................................... 1,770. 8 219. 1 1,989. 9 Plus:
Unamortized net premiums (discounts) .......... 4. 7 (6. 3) (1. 6)
Total intragovernmental holdings, net ............. 1,775. 5 212.
8 1,988. 3 NOTES TO THE FI NAN CIAL STATE MENTS 81 The Gov ern
ment of fers its em ploy ees life and health in sur ance, as well
as re tire ment and other ben e fits. These ben e fits ap ply to
ci vil ian and mil i tary em ploy ees. The Fed eral Gov ern ment
ad min is ters more than 40 pen sion plans. The Of fice of Per son
nel Man age ment (OPM) ad min is ters the larg est ci vil ian
plan. De part ment of De fense (DOD), mean while, ad min is ters
the larg est mil i tary plan. The Gov ern ment of fers both de
fined ben e fit and de fined con tri bu tion pen sion plans. The
larg est are de fined ben e fit plans. The change in ac tu ar ial
ac crued post- retirement health ben e fits li a bil ity and com
po nents of re lated ex pense for fis cal 1999 are pre - sented be
low. Federal Employee and Veteran Benefits Payable as of September
30 (In billions of dollars) Civilian Military Total
Pensions.................................. 1,025. 2 661. 8 1,687.
0 Post- retirement health benefits ................. 179. 7 196. 2
375. 9 Veterans compensation and burial benefits
......................... - 483. 2 483. 2 Liability for other
benefits...................... 49. 0 5. 6 54. 6 Total Federal
employee and veteran benefits payable ................... 1,253. 9
1,346. 8 2,600. 7 Note 11. Federal Em ployee and Vet eran Benefits
Payable Change in Actuarial Accrued Pension Liability and
Components of Related Expenses (In billions of dollars) Civilian 1
Military To tal Actuarial accrued pension liability, as of
September 30, 1998.................... 990. 3 650. 5 1,640. 8 Pen
sion ex pense: Normal costs ............................. 22. 2
10. 4 32. 6 Interest on liability .......................... 72. 0
33. 7 105. 7 Plan amendments and assumption changes ...... - 5. 7
5. 7 Actuarial (gains)/ losses ...................... (13. 2) (6.
5) (19. 7) Total pension expense ..................... 81. 0 43. 3
124. 3 Benefits paid ............................. (46. 1) (32. 0)
(78. 1) Actuarial accrued pension liability, as of September 30,
1999 ................ 1,025. 2 661. 8 1,687. 0 1 Does not in clude
U. S. Tax Court and ju di cial branch Significant Assumptions Used
in Determining Pension Liability and the Related Expense (In
percentages) Civilian Military Rate of interest
............................. 7. 00% 6. 25% Rate of inflation
............................. 4. 00% 3. 00% Projected salary
increases ..................... 4.25% 3.50% 82 NOTES TO THE FI NAN
CIAL STATE MENTS Pensions The larg est ci vil ian pen sion plan is
ad min is tered by OPM and cov ers ap prox i mately 90 per cent of
all Fed eral ci vil ian em ploy ees. This plan in cludes two com
po nents of de fined ben e fits. Those are the Civil Ser vice Re
tire ment Sys tem ( CSRS) and the Fed eral Em ployees' Re tire
ment Sys tem (FERS ). The ba sic ben e fit com po nents of the
CSRS and the FERS are fi nanced and op er ated through the Civil
Ser vice Re tire ment and Dis abil ity Fund (CSRDF). CSRDF mon eys
are gen er ated pri mar ily from em ploy ees, agency con tri bu
tions, pay ments from the gen eral fund and in ter est on in vest
ments in Fed eral debt se cu ri ties. See Note 19 Ded i cated Col
lec tions, Civil Ser vice Re tire ment and Dis abil ity Fund. The
Fed eral Re tire ment Thrift In vest ment Board, an in de pend ent
Gov ern ment agency, op er ates the Thrift Sav ings Plan. Fed eral
em ploy ees and re tir ees cov ered by CSRS and FERS own the
fund's as sets. This Fi nan cial Re port ex cludes this fund be
cause the em ploy ees own its as sets. Fed eral debt held by the
fund is in cluded and clas si fied as Fed eral debt held by the
pub lic. FERS em ploy ees may con trib ute up to 10 per cent of
base pay to the plan, which the Gov - ern ment matches up to 5 per
cent. CSRS em ploy ees may con trib ute up to 5 per cent of base
pay with no Gov - ern ment match. The Thrift Sav ings Plan held
$29.4 bil lion in non mar ket able Trea sury se  cu ri ties as of
Sep tem ber 30, 1999. The Fed eral Gov ern ment's re lated li a
bil ity is in cluded in To tal Fed eral debt se cu ri ties held by
the pub lic in the Bal ance Sheet. Health Benefits Ci vil ian re
tir ees pay the same in sur ance pre mium as ac tive em ploy ees
un der the Fed eral Em ployee Health Ben e fits Pro gram (FEHBP).
These pre mi ums cover only a por tion of the costs. Other
Benefits Em ployee and an nu itant con tri bu tions and in ter est
on in vest ments fund a por tion of the Fed eral Em ployees Group
Life In sur ance pro gram. This in sur ance pro gram pays pri vate
in sur ance com pa nies for Fed eral em ploy ees' group life in
sur ance. The Of fice of Per son nel Man age ment ad min is ters
this pro gram. Civilian Employees Significant Assumptions Used in
Determining Post- Retirement Health Benefits and the Related
Expense (In percentages) Ci vil ian Mil i tary Rate of interest
.............................. 7. 0% 6. 5% Rate of health care
cost inflation ................. 7. 0% 4.5- 10.4% Change in
Actuarial Accrued Post- Retirement Health Benefits Liability and
Components of Related Expenses (In billions of dollars) Civilian
Military To tal Actuarial accrued post- retirement health benefits
liability, as of September 30, 1998 ........................ 181.
8 223. 4 405. 2 Prior period adjustments
........................... - (37. 5) (37. 5) Corrected beginning
post- retirement health benefits liability
................................ 181. 8 185. 9 367. 7 Post-
retirement health ben e fits ex pense: Normal costs
................................. 6. 0 4. 7 10. 7 Interest on
liability .............................. 11. 8 12. 0 23. 8
Actuarial (gains)/ losses .......................... (13. 5) -
(13. 5) Total post- retirement health benefits expense
...................... 4. 3 16. 7 21. 0 Claims paid
.................................... (6. 4) (6. 4) (12. 8)
Actuarial accrued post- retirement health benefits liability, as
of September 30, 1999 ... 179. 7 196. 2 375. 9 NOTES TO THE FI NAN
CIAL STATE MENTS 83 Pensions The De part ment of De f e n s e
(DOD) Mil i tary Re tire ment Fund fi nances mil i tary re tire
ment and sur - vi vor ben e fit pro grams. The mil i tary re tire
ment sys tem c o n s i s t s o f a f u n d e d , noncontributory,
de fined ben e fit plan. It ap plies to the Army, Navy, Ma rine
Corps and Air Force. This sys tem in cludes non- disability re
tire ment pay, dis abil ity re tire ment pay and re tire ment pay
for re serve ser vice and sur vi vor an nu ity pro grams. Health
Benefits Mil i tary ben e fits en ti tle re tir ees and their de
pend ents to health care in mil i tary med i cal fa cil i ties if
a fa - cil ity can pro vide the needed care. Un til they reach age
65, mil i tary re tir ees and their de pend ents also are en ti
tled to be re im bursed for the cost of health care from ci vil
ian pro vid ers. A pre mium is charged to en - roll in DOD's ci
vil ian care pro gram. In ad di tion, there are de duct ible and
copayment re quire ments for ci vil - ian care. Af ter they reach
65 years of age, Medicare cov ers mil i tary re - tir ees. Mil i
tary re tiree health care fig - ures in clude the cost of ed u ca
tion and train ing, staff ing, build ings and equip ment, as well
as the op er a tions and main te nance of med i cal fa cil i ties.
They also in clude claims paid to ci vil ian pro vid ers and the
cost of ad min is ter ing the pro gram. Compensation and Burial
Benefits The Gov ern ment com pen sates dis abled vet er ans and
their sur vi - vors. Vet erans com pen sa tion is pay able as a
dis abil ity ben e fit or a sur - v i v o r ' s b e n e f i t . E
n t i t l e m e n t t o com pen sa tion de pends on: the vet
eran's dis abil i ties hav ing been in - curred in, or ag gra
vated dur ing, ac tive mil i tary ser vice; death while on duty,
or death re sult ing from ser - vice- connected dis abil i ties,
if not in ac tive duty. Burial ben e fits in clude a burial and
plot or in ter ment al low ance pay able for a vet eran, who at
the time of death, qual i fied to re ceive c o m p e n s a t i o n
o r a p e n s i o n , o r whose death oc curred in a VA fa cil
ity. The li a bil ity for vet er ans com pen sa tion and burial
ben e fits pay able de creased in fis cal 1999 by $97.8 bil lion.
The pri mary fac tor con trib - ut ing to this de crease was a
change in in ter est rate as sump tions. Due to this change, the
State ment of Net Cost item ti tled Vet erans ben e fits and ser
vices de creased by $204.8 bil lion. Other Benefits Vet erans in
sur ance in cludes the fol low ing pro grams:  United States Gov
ern ment Life In sur ance es tab lished in 1919 to han dle new is
sues and the con ver sion of World War I Risk Term In sur ance.
Na tional Ser vice Life In sur ance es tab lished in 1940 to meet
the needs of World War II ser vice per son nel.  Vet erans Spe
cial Life In sur ance es tab lished in 1951 for Ko rean vet er ans
who did not have ser vice- connected dis abil i ties.  Ser vice-
Disabled Vet erans In sur ance es tab lished in 1951 for vet er
ans with ser vice- connected dis abil i ties.  Vet erans Re opened
In sur ance es tab lished a 1- year re open ing in 1965 of Na
tional Ser vice Life In sur ance for cer tain dis abled World War
II and Ko rean vet er ans. Military Employees (Including Veterans)
Veterans Compensation and Burial Benefits Payable as of September
30 (In billions of dollars) Veterans
................................................... 397. 5
Survivors ................................................... 82.
8 Burial benefits ...............................................
2. 9 Total compensation and burial benefits payable
..................... 483. 2 84 NOTES TO THE FI NAN CIAL STATE
MENTS Dur ing World War II and the Cold War, the United States de
vel oped a mas sive in dus trial com plex to re search, pro duce
and test nu clear weap ons. This in cluded nu clear re ac tors,
chem i cal pro cess ing build ings, metal ma chin ing plants, lab
o ra to ries and main te nance fa cil i ties. These ac tiv i ties
left an en vi ron men tal leg acy of con tam i nated ar eas and
build ings. Vol umes of waste and spe cial nu clear ma te ri als
re quire treat ment, sta bi li za tion and dis posal. The re sult
ing en vi ron men tal li a bil i ties con sist of the costs as so
ci ated with re mov ing, con tain ing and/ or dis pos ing of this
haz ard ous waste. Of those en vi ron men tal li a bil i ties,
this re port pres ents only cleanup c o s t s f r o m F e d e r a
l o p e r a t i o n s known to re sult in haz ard ous waste that
the Fed eral Gov ern ment is re quired to clean up by Fed eral,
State, or lo cal stat utes and/ or reg u la tions. The De part
ment of En ergy in curred op er at ing and cap i tal ex pen di
tures to tal ing $5.8 bil lion in fis cal 1999. It used these
funds to remediate leg acy waste. This in cludes nu clear ma te ri
als and fa cil i ties sta bi li za tion, and waste treat ment,
stor age and dis posal ac tiv i ties at each in stal la tion. En
vi ron men tal man age ment fa - cil i ties and sites in clude
costs for en vi ron men tal res to ra tion; nu clear ma te rial
and fa cil ity sta bi li za tion; and waste treat ment, stor age
and dis posal ac tiv i ties at each in stal la tion. It also in
cludes cost for re lated ac tiv i ties such as land lord re spon
si bil i ties, pro gram man age ment and le - gally pre scribed
grants for par tic i pa tion and over sight by Na tive Amer i can
tribes and reg u la tory agen cies. Ac tive and sur plus fa cil i
ties rep re sent an tic i pated remediation cost for those fa cil
i ties that are con duct ing on go ing op er a tions but ul ti
mately will re quire sta bi li za tion, de ac ti va tion and de
commissioning. High- level waste and spent nu - clear fuel in
clude the full cost to pro vide for per ma nent dis posal of the
Na tion's high- level ra dio ac tive waste and spent nu clear
fuel. Pro jects with no cur rent fea si bil ity remediation ap
proach are ex cluded from the es ti mate. Sig nif i cant pro jects
not in cluded are:  Nu clear ex plo sion test ar eas (e. g., Ne
vada test site).  Large sur face wa ter bod ies (e. g., Clinch and
Co lum bia Rivers).  Most ground wa ter (even with treat ment, fu
ture use will be re stricted).  Some spe cial nu clear ma te rial
(e. g., ura nium hexafluoride). The De p a r t m e n t of De f e n
s e (DOD) is re spon si ble for the cleanup of fa cil i ties it op
er ates or has op er ated, in clud ing res to ra tion of ac tive
and Base Re align ment and Clo sure in stal la tions and for merly
used de fense sites; dis posal of chem i cal weap ons; en vi ron
men tal costs as so ci ated with the dis posal of weap ons sys
tems (pri mar ily nu clear pow ered air craft car ri ers and sub
ma rines); and for train ing range cleanup. Environmental and
Disposal Liabilities as of September 30 (In billions of dollars)
Department of Energy: Environmental management facilities and
sites .................... 183. 7 Active and surplus facilities
................................... 25. 4 High- level waste and
spent nuclear fuel .......................... 14. 9 Other
................................................... 6. 7 Total
Energy ............................................ 230. 7 DOD:
Training ranges............................................ 34. 0
Active installations ......................................... 15.
4 Nuclear powered aircraft carriers and submarines
.................. 10. 8 Chemical weapons disposal
.................................. 8. 9 Other
................................................... 10. 6 Total
DOD.............................................. 79. 7 All other
agencies ........................................ 2. 8 Total
environmental and disposal liabilities..................... 313. 2
Note 12. En vironmental and Dis posal Li abilities NOTES TO THE FI
NAN CIAL STATE MENTS 85 Benefits Due and Payable as of September
30 (In billions of dollars) Federal Old- Age and Survivors
Insurance.... 29. 0 Federal Hospital Insurance (Medicare Part A) .
13. 3 Grants to States for Medicaid ............. 11. 6 Federal
Supplemental Medical Insurance (Medicare Part B)
.................... 10. 4 Federal Disability Insurance
.............. 6. 8 Supplemental security income ............ 1. 0
Railroad retirement..................... 0. 7 Unemployment
insurance ................ 0. 4 Other benefits
........................ 0. 6 Total benefits due and payable
.......... 73. 8 Note 13. Ben e fits Due These amounts are the ben
e fits owed to pro gram re cip i ents or med i cal ser vice pro
vid ers as of the fis cal year end that have not yet been paid.
For a de scrip tion of the pro grams, see the Stew ard ship Re
spon si bil ities sec tion un der Stew ard ship In for ma tion.
Note 14. Other Li abilities In sur ance pro grams in clude bank de
posit in sur ance, guar an tees of pen sion ben e fits, life and
med i cal in sur ance. They also in clude in sur - ance against
dam age to prop erty (home, crops and air planes) caused by per
ils such as flood ing and other nat u ral di sas ters, risk of
war, and in solvency. Ac crued wages and ben e fits con sist of
the es ti mated li a bil ity for ci vil ian and com mis sioned of
fi cers' sal a ries and wages earned but un  paid. They also in
clude funded an nual leave and other em ployee ben e fits that
have been earned but are un paid. Amounts re ceived for goods and
ser vices to be pro vided com prise Advances from oth ers. Ex
change Sta bi li za tion Fund in cludes Spe cial Draw ing Rights
(SDRs) cer tif i cates is sued to the Fed eral Re serve Banks and
al lo ca tions from the In ter na tional Mon e tary Fund. Other
debt in cludes Gov ern ment ob li ga tions, whether se cured or un
se cured, not in cluded in pub lic debt. Gold cer tif i cates are
monetarized por tions of gold and the cer tif i cates are de pos
ited in the Fed eral Re serve Bank. De ferred rev e nue re fers to
rev e nue re ceived but not yet earned. Other mis cel la neous li
a bil i ties in clude amounts ac crued for con tin gent
liabilities. Other Liabilities as of September 30 (In billions of
dollars) Insurance programs
........................................ 21. 2 Accrued wages and
benefits ................................. 18. 5 Advances from
others ...................................... 16. 0 Exchange
Stabilization Fund ................................. 14. 0 Other
debt............................................... 11. 3 Gold
certificates .......................................... 11. 0
Deferred revenue ......................................... 9. 5
Unclassified deposited funds ................................. 7.
1 Other miscellaneous liabilities ................................
60. 4 Total other liabilities
...................................... 169. 0 86 NOTES TO THE FI
NAN CIAL STATE MENTS Note 15. Col lections and Re funds of Fed
eral Revenue Trea sury is the Fed eral Gov ern ment's prin ci pal
rev e nue- collecting agency. Col lec tions of In di vid ual
income and tax with hold ings in clude es ti mated in come tax pay
ments by in di vid u als, So cial Se cu rity and Medicare taxes,
rail road re tire - ment taxes and in di vid ual in come tax with
hold ings. Re funds of In di vid ual in come and tax with hold
ings in clude re funds from the Earned In come Tax Credit (EITC).
The EITC is a re fund able credit for tax pay ers who work and
whose earn ings fall be low the es tab lished ceil ing. A re fund
able credit is first used to off set any in di vid ual taxes owed;
any re main ing amounts are is sued to the tax payer. Amounts re
ported for cor po rate in come taxes in tax year 1999 in clude cor
po rate taxes of $8 bil lion for tax year 2000. In fis cal 1999,
the IRS is sued $25.6 bil lion in EITC re funds. An ad di tional
$4.9 bil lion of the EITC cred its were ap plied to re duce tax
payer li a bil ity. These EITC amounts are in cluded in Gross Cost
in the Statement of Net Costs as a com po nent of the in come se
cu rity func tion. Collections of Federal Revenue for the Fiscal
Year Ended September 30 Tax year to which collections relate (In
billions of dollars) Federal Revenue Collections 1999 1998 1997
Prior years Individual income and tax withholdings ... 1,588. 2
1,020. 4 547. 4 11. 4 9. 0 Corporate income taxes ..............
216. 0 142. 8 62. 5 1. 1 9. 6 Unemployment taxes .................
26. 5 24. 6 1. 9 - Excise taxes ....................... 72. 0 48.
4 23. 5 - 0. 1 Estate and gift taxes ................. 28. 4 - 25.
0 1. 0 2. 4 Customs duties..................... 19. 1 19. 1 - -
Federal Reserve Bank earnings......... 26. 0 18. 6 7. 4 - Fees and
licenses................... 1. 6 1. 6 - - Fines, penalties,
interest and other taxes.. 6. 7 4. 4 2. 3 - Total
........................... 1,984. 5 1,279. 9 670. 0 13. 5 21. 1
NOTES TO THE FI NAN CIAL STATE MENTS 87 Federal Tax Refunds
Disbursed for the Fiscal Year Ended September 30 Tax year to which
the refunds relate (In billions of dollars) Refunds Dispersed 1999
1998 1997 Prior years Individual income and tax withholdings
.............. 149. 2 0. 6 138. 9 7. 2 2. 5 Corporate income taxes
............. 33. 8 1. 5 14. 2 6. 3 11. 8 Unemployment taxes
............... 0. 1 - 0. 1 - Excise taxes .....................
1. 3 0. 2 0. 4 - 0. 7 Customs duties ................... 1. 2 0. 4
0. 3 0. 1 0. 4 Estate and gift taxes ............... 0. 7 - 0. 2
0. 3 0. 2 Total ......................... 186. 3 2. 7 154. 1 13. 9
15. 6 Note 16. Un reconciled Trans actions Af fecting the Change
in Net Po sition The rec on cil i a tion of the Change in Net Po
si tion re quires that the dif fer ence be tween end ing and be
gin ning net po si tion equals the ex cess of rev e nues over
cost, plus or mi nus prior pe riod ad just ments. The un rec on
ciled trans ac tions needed to bring the change in net po si tion
into bal ance net to $24.4 bil lion. The three pri mary fac tors
af fect ing this out- of- balance sit u a tion are:  Im proper re
cord ing of intragovernmental trans ac tions by agen cies.  Trans
ac tions af fect ing Bal ance Sheet as sets and li a bil i ties
not prop erly iden ti fied by agen cies as prior pe riod ad just
ments.  Tim ing dif fer ences and er rors in the re port ing of
trans ac tions. The Fed eral fi nan cial com mu nity con sid ers
the iden ti fi ca tion and re port ing of these un rec on ciled
trans ac tions a pri or ity. 88 NOTES TO THE FI NAN CIAL STATE
MENTS The Gov ern ment has en tered into con trac tual com mit
ments that re quire fu ture use of fi nan cial re sources. It has
sig nif i cant amounts of long- term lease ob li - ga tions as
shown in the ta ble be low. Un de liv ered or ders rep re - sent
the value of goods and ser vices or dered that have not yet been
re ceived. Con tin gent li a bil i ties re lated to the loan guar
an tee pro grams are de scribed in Note 4. A con tin gency is an
ex ist ing con di tion or sit u a tion in volv ing un cer tainty
as to a pos si ble loss. A loss is con sid ered rea son ably pos
si ble if the fu ture con firm ing event or events are more than
re - mote, but less than prob a ble. These con tin gen cies do not
in - clude ex ist ing con di tions or sit u - a tions where the fu
ture oc cur ring event is only con sid ered re mote, nor do they
in clude con tin gen cies that would re sult in a gain. The Gov
ern ment also is sub ject to con tin gen cies, in clud ing lit i
ga tion, that arise in the nor mal course of op er a tions. The ul
ti mate dis po si tion of these mat ters is un known. Based on in
for ma - tion cur rently avail able, how ever, it is man age
ment's opin ion that the ex pected out come of these mat ters, in
di vid u ally or in the ag gre gate, will not have a ma te rial ad
verse ef fect on the fi nan cial state ments, ex cept for lit i ga
tion de scribed in the next para graph. Nu mer ous cases are pend
ing in volv ing su per vi sory good will at sav - ings and loan in
sti tu tions, Medicare cost re port set tle ments, har bor main te
nance fees and cer tain other mat - ters. While it is likely that
the United States will have to pay some amount of dam ages on the
claims, the ul ti - mate costs can not be rea son ably es ti mated
at this time. The Gov ern ment also has un used stat u tory lines
of credit to Gov ern ment spon sored en ter prises to tal ing $10
bil lion. Financial Treatment of Loss Contingencies Probability of
Loss Probable Reasonably Possible, more than remote but less than
probable Remote, chance of occurrence slight Financial Treatment
Balance Sheet Footnote Disclosure No disclosure Prior pe riod ad
just ments con sist of a net $6.9 bil lion ad just ment to the
open ing net po si tion, to cor rect er rors in prior pe ri ods.
Sig nif i cant com po nents of this net ad just ment in clude:  A
$37.5 bil lion de crease of the be gin ning post- re tire ment
health ben e fits li a bil ity for mil i tary per son nel (see
Note 11 Fed eral Em ployee and Vet eran Ben e fits Pay able), and
A $28.5 bil lion in crease of the en vi ron men tal li a bil i
ties for long- term sur veil lance and main te nance, and de con
tam i na tion and de com mis sion ing costs. Note 17. Prior Pe
riod Ad justments Note 18. Com mitments and Con tin gencies NOTES
TO THE FI NAN CIAL STATE MENTS 89 Commitments as of September 30
(In billions of dollars) Capital Leases Operating Leases Long-
term Leases: General Services Administration (GSA)
................ 0. 3 15. 7 U. S. Postal Service
............................... 0. 6 8. 5 Department of Justice
............................. - 3. 9 National Institutes of
Health......................... - 0. 6 Other long- term leases
............................ 0. 9 2. 3 Total long- term leases
........................... 1. 8 31. 0 Undelivered Orders: HUD
.......................................... 104. 3 Navy
.......................................... 28. 0 Education
...................................... 21. 5 HHS
.......................................... 19. 7 Executive Office
of the President ..................... 16. 4 Defense agencies
................................ 14. 1 Rural development
............................... 13. 9 Other undelivered
orders........................... 187. 1 Total undelivered orders
.......................... 405. 0 Other Commitments: National
Oceanic and Atmospheric Administration satellites and weather
systems ..................... 5. 6 Transportation
................................... 3. 0 GSA
.......................................... 1. 5 Navy
.......................................... 0. 4 Commodity Credit
Corporation ....................... 0. 3 Total other commitments
......................... 10. 8 90 NOTES TO THE FI NAN CIAL STATE
MENTS Contingencies as of September 30 (In billions of dollars)
Insurance: Export- Import Bank................................ 40.
9 Pension Benefit Guaranty Corporation .................. 19. 0
Overseas Private Investment Corporation ............... 0. 2 Bank
Insurance Fund .............................. 0. 2 Other insurance
programs........................... 0. 2 Total insurance programs
.......................... 60. 5 Unadjudicated Claims: Air Force
....................................... 0. 8 Interior
......................................... 0. 4 GSA
........................................... 0. 2 Federal Savings
and Loan Insurance Corporation Resolution Fund
................................ 0. 1 Bank Insurance Fund
.............................. 0. 1 Army
.......................................... 0. 1 Other
unadjudicated claims .......................... 0. 6 Total
unadjudicated claims ......................... 2. 3 Other
Contingencies: Multi- lateral development
banks....................... 67. 4 Production flexibility
program......................... 5. 1 Conservation reserve program
........................ 1. 3 Environmental cleanup
............................. 1. 1 Contingent liabilities
............................... 0. 5 Nuclear waste
fund................................ 0. 5 Real property activities
............................. 0. 4 Other contingencies
............................... 1. 4 Total other
contingencies........................... 77. 7 NOTES TO THE FI NAN
CIAL STATE MENTS 91 The term trust fund, as used in this re port
and in Fed eral bud get ac count ing, is fre quently mis un der
stood. In the pri vate sec tor, trust fund re fers to funds of one
party held by a sec ond party (the trustee) in a fi du ciary ca
pac ity. In the Fed eral bud get, the term trust fund means only
that the law re quires the funds be ac counted for sep a rately,
used only for spec i fied pur poses and des ig nated as a trust
fund. A change in law may change the fu ture re ceipts and the
terms un der which the fund's re sources are spent. Trust fund as
sets rep re sent the un ex pended bal ance from all sources of re
ceipts and amounts due the trust fund, re gard less of source.
This in cludes re lated gov ern men tal trans ac tions. These are
trans ac tions be tween two dif fer ent en ti ties within the Fed
eral Gov ern ment (for ex am ple, mon ies re ceived by one en tity
of the Gov ern ment from an other en tity of the Government).
Intragovernmental net as sets are com prised of in vest ments in
Fed eral debt se cu ri ties, re lated ac crued in ter est and fund
bal ance with Trea sury. These amounts were elim i nated in
preparing this Fi nan cial Re port. Consolidated as sets rep re
sent only the amounts due from in di vid u  als and other en ti
ties out side the Gov ern ment. This means that all re lated gov
ern men tal trans ac tions are re moved to pres ent the Gov ern
ment's po si tion as a whole. The ma jor ity of trust fund as sets
is in vested in intragovernmental Fed eral debt se cu ri ties.
These se cu ri ties re quire re demp tion if a fund's dis burse
ments ex ceed its re ceipts. Re deeming these se cu ri ties will
in crease the Gov ern ment's fi nanc ing needs and re quire more
bor row ing from the pub lic (or less re pay ment of debt prior to
ma tu rity) or will re sult in higher taxes than oth er wise would
have been needed. Note 19. Ded icated Col lections Dedicated
Collections as of September 30* As sets (In billions of dollars)
Receipts Disbursements Trust Fund Net Assets Less Intragovern-
mental Net Assets Consolidated Assets Fund Name Federal Old- Age
and Survivors Insurance Trust Fund .......... 444. 7 334. 4 745. 9
745. 9 Federal Disability Insurance Trust Fund .. 67. 9 52. 0 87.
1 87. 1 Medicare Part A........ 150. 5 132. 4 141. 4 141. 4 -
Medicare Part B ....... 85. 1 79. 6 45. 6 45. 6 Unemployment Trust
Fund .......... 31. 8 25. 0 78. 9 78. 9 - Hazardous Substance
Superfund .......... 0. 9 1. 5 4. 4 4. 4 Highway Trust Fund.....
39. 3 29. 3 28. 0 28. 0 - Airport and Airway Trust Fund ..........
11. 1 7. 7 12. 7 12. 7 Civil Service Retirement and Disability
Fund .... 73. 9 43. 9 490. 4 490. 1 0.3 Military Retirement Fund .
38. 0 32. 0 156. 0 156. 0 - Railroad Retirement Board Trust Fund
.......... 5. 1 8. 2 21. 9 21. 9 - *By law, cer tain ex penses
(costs) re lated to the ad min is tra tion of the above funds are
not c harged to the funds and are fi nanced by other sources. 92
NOTES TO THE FI NAN CIAL STATE MENTS The Fed eral Hos pi tal In
sur ance Trust Fund fi nances the Hos pi tal In sur ance pro gram
(Medicare Part A). This pro - gram funds the cost of hos pi tal
and re lated care for in di vid u als age 65 or older, who meet
cer tain in sured sta tus re - quire ments, and for el i gi ble
dis abled peo ple. The De part ment of Health and Hu man Ser vices
(HHS) ad min is ters the pro gram. The Fed eral Hos pi tal In sur
ance Trust Fund is fi nanced pri mar ily by pay roll taxes, in
clud ing those paid by Fed eral agen cies. It also re ceives in
come from in ter est earn ings on Fed eral debt se cu ri ties and
a por tion of in come taxes paid on So cial Se cu rity ben e fits.
This trust fund pro vides as sis tance and pro tec tion against
the loss of earn ings due to re tire ment or death. The as sis
tance is in the form of money pay ments. The Fed eral Old- Age and
Sur vi vors In sur ance Trust Fund is ad min is  tered by the So
cial Se cu rity Ad min is tra tion (SSA). Pay roll and self-
employment taxes pri mar ily fund the Fed eral Old- Age and Sur vi
vors In sur ance Trust Fund. In ter est earn ings on Fed eral debt
se cu ri ties, Fed eral agen cies' pay ments for the So cial Se
curity ben e fits earned by mil i tary and Fed eral ci vil ian em
ploy ees, and Trea sury pay ments for a por tion of in come taxes
paid on So cial Se cu rity ben e fits pro vide the fund with ad di
tional in come. Federal Disability Insurance Trust Fund The Fed
eral Sup ple men tary Med i cal In sur ance Trust Fund fi nances
the Sup ple men tal Med i cal In sur ance pro gram (Medicare Part
B), which pro vides sup ple men tary med i cal in sur ance for el
i gi ble par  tic i pants to cover med i cal ex penses not cov
ered by Medicare Part A. The De part ment of Health and Hu man Ser
vices ad min is ters the pro gram. A p p r o p r i a t i o n s , p
r e m i u m s charged to en rollees and in ter est earned on in
vest ments in Fed eral debt se cu ri ties fund the Fed eral Sup
ple men tary Med i cal In sur ance Trust Fund. Federal Hospital
Insurance Trust Fund Federal Supplementary Medical Insurance Trust
Fund (Medicare Part B) The Fed eral Dis abil ity In sur ance Trust
Fund pro vides as sis tance and pro tec tion against the loss of
earn ings due to a wage earner's dis abil ity. The as sis tance is
in the form of money pay ments. SSA ad min is ters the Fed eral
Dis abil ity In sur ance Trust Fund. Like the Fed eral Old- Age
and Sur vi vors In sur ance Trust Fund, pay roll taxes pri mar ily
fund the Fed eral Dis abil ity In - sur ance Trust Fund. The Fund
also re ceives in come from in ter est earn ings on Fed eral debt
se cu ri ties, Fed eral agen cies' pay ments for the So cial Se cu
rity ben e fits earned by mil i tary and Fed eral ci vil ian em
ploy ees, and a por tion of in come taxes paid on So cial Se cu
rity ben e fits. Federal Old- Age and Survivors Insurance Trust
Fund The Un em ploy ment Trust Fund pro tects work ers who lose
their jobs through no fault of their own. The Un em ploy ment In
sur ance pro gram is a unique Fed eral and State part ner ship
based on Fed eral law, but ex e cuted through State law by State
of fi cials. The De part ment of La bor ad min is ters the Fed
eral op er a tions of the pro gram. Taxes on em ploy ers pri mar
ily fund the Un em ploy ment Trust Fund. How ever, in ter est
earned on in vest ments in Fed eral debt se cu ri ties also pro
vides in come to the fund. Ap pro pri a tions have sup ple mented
its in come dur ing pe ri ods of high and ex tended un em ploy
ment. Unemployment Trust Fund NOTES TO THE FI NAN CIAL STATE MENTS
93 The Haz ard ous Sub stance Superfund was au tho rized to ad
dress pub lic health and en vi ron men tal threats from spills of
haz ard ous ma te ri als and from sites con tam i nated with haz
ard ous sub stances. The En vi ron men tal Pro tec tion Agency
(EPA) ad min is ters the fund. The fol low ing fi nance the Haz
ard ous Sub stance Superfund:  Ex cise taxes col lected on pe tro
leum, chem i cals and im - ported sub stances (ex pired in 1995).
En vi ron men tal taxes from cor po ra tions with al ter na tive
min i mum tax able in come in ex cess of $2 mil lion (ex pired in
1995).  Fi nes and pen al ties and cost re cov er ies from re spon
si ble par ties.  Ap pro pri a tions.  In ter est earned on in
vest - ments in Fed eral debt se cu ri ties. Hazardous Substance
Superfund Highway Trust Fund The Air port and Air way Trust Fund
pro vides for air port im prove ment, main te nance of air port fa
cil i ties and equip - ment, re search, and a por tion of op er a
tions. Trans por ta tion ad min is ters the Air port and Air way
Trust Fund. The fol low ing pro vide fund ing for the Air port and
Air way Trust Fund:  Taxes re ceived from trans por ta tion of per
sons and prop erty in the air and fuel used in non- commercial air
craft.  In ter na tional de par ture taxes.  In ter est earned on
in vest ments in Fed eral debt se cu ri ties. Airport and Airway
Trust Fund Military Retirement Fund The Mil i tary Re tire ment
Fund pro vides re tire ment ben e fits for Army, Navy, Ma rine
Corps and Air Force per son nel and their sur vi vors. The fund is
fi nanced by DOD con tri bu tions, ap pro pri a tions and in ter
est earned on in vest ments in Fed eral debt se cu ri ties. The
High way Trust Fund was es tab lished to pro mote do mes tic in
ter state trans por ta tion, and mov ing peo ple and goods. The
fund pro vides Fed eral grants to States for high way con struc
tion and re lated trans por ta tion pur poses. Trans por ta tion
ad min is ters the High way Trust Fund. The fol low ing pro vide
all fi nanc ing for the High way Trust Fund:  Ear marked taxes on
gas o line and other fu els, cer tain tires, ve hi cle and truck
use.  In ter est earned on in vest ments in Fed eral debt se cu ri
ties. The Civil Ser vice Re tire ment and Dis abil ity Fund cov
ers two Fed eral ci vil ian re tire ment sys tems: the Civil Ser
vice Re tire ment Sys tem (CSRS) for em ploy ees hired be fore
1984 and the Fed eral Em ployee Re tire ment Sys tem (FERS), for
em ploy ees hired af ter 1983. The CSRS is fi nanced by:  Fed eral
ci vil ian em ploy ees' con tri bu tions.  Agencies' con tri bu
tions on be half of the em ploy ees.  Ap pro pri a tions.  In ter
est earned on in vest - ments in Fed eral debt se cu ri ties.
Civil Service Retirement and Disability Fund Railroad Retirement
Trust Fund The Rail road Re tire ment Trust Fund pro vides an nu
ities and sur vi vor ben e fits to el i gi ble rail road em - ploy
ees and their sur vi vors. The fund also pays dis abil ity an nu
ities based on to tal or oc cu pa tional dis - abil ity. Pay roll
taxes paid by rail road em ploy ers and their em ploy ees pro vide
the pri mary source of in - come for the Rail road Re tire ment
Sur vi vor Ben e fit pro gram. By law, rail road taxes are co or
di nated with So cial Se cu rity taxes. 94 NOTES TO THE FI NAN
CIAL STATE MENTS Note 20. In dian Trust Funds The In dian Trust
Funds dif fer from other ded i cated col lec tions re ported in
Note 19. The De part ment of the In te rior (In te rior) has re
spon si bil ity for the as sets held in trust on be half of Amer i
can In dian tribes and in di vid u als. The trust funds are held
in ac counts for ap prox i mately 315 tribes, 317,000 in di vid
ual In dian ac counts and other funds, in clud ing the Alaska Na
tive Es crow Fund. The as sets held in trust for Na tive Amer i
cans are owned by the trust ben e fi cia ries and are not the Fed
eral Gov ern - ment's as sets. There fore, these amounts are not
re flected in the Bal ance Sheet or State ment of Op er a tions
and Changes in Net Po si tion ex cept for their hold ings of non
mar ket able Trea sury se cu ri ties, for which the Gov ern ment's
li a bil ity is in - cluded in Fed eral debt se cu ri ties held by
the pub lic. U. S. Government as Trustee for Indian Trust Funds
Held for Indian Tribes and Other Special Trust Funds Statement of
Changes in Trust Fund Balances as of September 30 (Unaudited) (In
millions of dollars) Receipts
............................................... 873. 0
Disbursements .......................................... (736. 7)
Receipts in excess of disbursements ..........................
136. 3 Trust fund balances, beginning of year
........................ 2,460. 0 Adjustment
............................................. (0. 5) Trust fund
balances, end of year ........................... 2,595. 8 U. S.
Government as Trustee for Indian Trust Funds Held for Individual
Indian Monies Trust Funds Statement of Changes in Trust Fund
Balances as of September 30 (Unaudited) (In millions of dollars)
Receipts ............................................... 306. 7
Disbursements .......................................... (336. 6)
Receipts in excess of disbursements ..........................
(29. 9) Trust fund balances, beginning of year
......................... 479. 2 Trust fund balances, end of
year............................ 449. 3 SUP PLE MEN TAL IN FOR MA
TION 95 Education, Training, Employment and Social Services (In
bil lions of dol lars) Gross Cost Earned Revenue Net Cost
Subfunctions : Elementary, secondary and vocational education.....
17. 6 - 17. 6 Higher education ........ 14. 5 1. 4 13. 1 Research
and general education aids......... 2. 5 - 2. 5 Training and
employment .. 5. 7 - 5. 7 Other labor services ...... 1. 0 - 1. 0
Social services.......... 16. 6 - 16. 6 Total education, training,
employment and social services ... 57. 9 1. 4 56. 5 Human
Resources United States Gov ern ment Sup ple men tal In for ma
tion for the Year Ended Sep tem ber 30, 1999 (Un au dited)
Education, Training, Employment and Social Services The Ed u ca
tion, train ing, em ploy ment and so cial ser vices func tion
serves to ex tend knowl edge and skills, en hance em p l o y m e n
t and em ploy ment op por tu ni ties, pro tect work place stan
dards and pro vide ser vices to the needy. The State ment of Net
Cost pres ents the cost of the Gov ern ment's ma jor func tions.
The ob jec tives of each of the func tions are de scribed be low.
Also, the state ment con tains the def i ni tions of Gross cost,
Earned rev e nue and Net cost. Amounts listed un der this func
tion in clude the cost to pro vide mil i tary forces to de ter
war; to be pre pared to en gage in war; and to pre serve the peace
and se cu rity of the United States, the Ter ri tories, Com mon
wealth, its pos ses sions and any area oc cu pied by the United
States. Na tional de fense also in cludes the cost to train,
equip, com  pen sate and pro vide re tire ment ben efits for the
armed forces; de velop, ac quire, uti lize and dis pose of weapon
sys tems; con duct re search and de vel op ment to main tain tech
no log i cal su pe ri or ity, cut costs and im prove per for mance
of weapon sys tems; and carry out other de fense re lated ac tiv i
ties. Net Cost Detail National Defense 96 SUPPLEMENTAL IN FOR MA
TION Human Resources, cont. Health (In bil lions of dol lars)
Gross Cost Earned Revenue Net Cost Subfunctions: Health care
services ........ 123. 4 0. 5 122. 9 Health research and
training............. 14. 7 0. 1 14. 6 Consumer and occupational
health and safety ......... 2. 5 0. 1 2. 4 Total health
........... 140. 6 0. 7 139. 9 Income Security The cost of pro vid
ing pay ments to per sons un re lated to any cur rent ser vice com
prises the In come se cu rity func tion. In cluded are dis abil
ity, rail road re tire ment ben e fits, tem po rary as sis tance
to needy fam i lies and sim i lar pro grams, other than amounts re
lated to So cial Se cu rity and vet er ans. Also in cluded are
food stamps, spe cial milk and child nu tri tion pro grams; un em
ploy ment com pen sa tion; and work ers' com pen sa tion earned in
come tax credit re funds and re duc tion of tax payer liabilities;
pub lic as sis tance cash pay ments; ben e fits paid to the el
derly and coal min ers; and low- and mod er ate- income hous ing
as sis tance. The cost of Fed eral pen sions and re tiree health
ben e fits are al lo cated to other func tions. Income Security
(In bil lions of dol lars) Gross Cost Earned Revenue Net Cost
Subfunctions: Unemployment compensation......... 24. 5 0. 7 23. 8
Housing assistance...... 27. 8 - 27. 8 Food and nutritional
assistance ... 34. 1 0. 1 34. 0 Other income security .... 89. 8
3. 7 86. 1 Cost not allocated to subfunctions........ 11. 8 1. 7
10. 1 Total income security ............ 188. 0 6. 2 181. 8 Health
Listed un der the Health func tion are the costs to pro mote phys
i cal and men tal health, in clud ing the pre ven - tion of ill
ness and ac ci dents and the Medicaid pro gram. Al though the
Medicare pro gram is the larg est Fed eral health pro gram, by law
it is in a sep a rate func tion for bud get pur poses. Also ex
cluded from the Health subfunction is Fed eral health care for mil
i tary per son nel and vet er ans. Medicare Fed eral Hos pi tal In
sur ance (Medicare Part A) and Fed eral Sup ple men tary Med i cal
In sur ance (Medicare Part B) pro grams make up Medicare. This
func tion is not fur ther sub di vided. For more in for ma tion on
Medicare, see the note in the Stew ard ship Re spon si bil ities
sec tion of Stew ard ship In for ma tion, and Note 19 Ded i cated
Col lec tions. Social Security So cial Se cu rity costs in - clude
pay ments to el i gi ble ben e fi cia ries of the Old- Age and Sur
vi vors In sur ance (OASI ) and Dis abil ity In sur ance (DI) pro
grams. These are col lec - tively re ferred to as So cial Se - cu
rity. The So cial Se cu rity pro gram is the sin gle larg est Fed
eral pro gram and is funded pri mar ily by pay roll taxes. For
more in for ma tion on So cial Se cu rity, re fer to the Stew ard
ship In for ma tion sec tion on Stew ard ship Re spon si bil ities
and Note 19 Ded i cated Col lec tions. SUP PLE MEN TAL IN FOR MA
TION 97 Human Resources, cont. Veterans Benefits and Services The
amounts listed un der this func tion in clude spe cific ben e fits
and ser vices paid to those with prior mil i tary ser vice or
their spouse, de pend ents and sur vi vors. In cluded are vet er
ans com pen sa tion, life in sur ance, pen sions, burial ben e
fits, ed u ca tion, train ing, med i cal care, vet er ans hous ing
and ad min is tra tive ex penses of the De part ment of Vet erans
Af fairs. The net cost line ti tled Veterans ben e fits and ser
vice de creased this fis cal year by $204.8 bil lion pri mar ily
due to a change in in ter est rate as sump tions in the cal cu
lation of the re lated li a bil ity for vet er ans com pen sa
tion. Veterans Benefits and Services (In bil lions of dol lars)
Gross Cost Earned Revenue Net Cost Subfunctions: Income security
for veterans .............. (65. 5) - (65. 5) Veterans education,
training and rehabilitation ............... 1. 7 0. 2 1. 5
Hospital and medical care for veterans ....... 18. 2 1. 8 16. 4
Veterans housing....................... 1. 3 0. 5 0. 8 Other
veterans benefits and services ........ 1. 1 0. 2 0. 9 Total
veterans benefits and services ....... (43. 2) 2. 7 (45. 9)
Physical Resources Energy The En ergy function in cludes the cost
of pro mot ing an ad e quate sup ply and ap pro pri ate use of en
ergy to serve the needs of the Na tion. Energy (In bil lions of
dol lars) Gross Cost Earned Rev e nue Net Cost Subfunctions:
Energy supply........... 11. 3 11. 9 (0. 6) Energy conservation
...... 0. 6 - 0. 6 Emergency energy preparedness ......... 0. 2 -
0. 2 Energy information, policy and regulation... 0. 8 0. 5 0. 3
Total energy .......... 12. 9 12. 4 0. 5 Natural Resources and
Environment This func tion is com prised of costs in curred to de
velop, man age and main tain the Na tion's nat u ral re sources
and en vi ron ment. Ex cluded are fund ing for com mu nity wa ter
sup - ply pro grams, ba sic sewer sys tems and waste treat ment
plants that are part of com mu nity or re gional de vel - op ment
pro grams. Natural Resources and Environment (In bil lions of dol
lars) Gross Cost Earned Revenue Net Cost Subfunctions: Water
resources................................ 5. 5 0. 5 5. 0
Conservation and land management ................. 6. 2 0. 9 5. 3
Recreational resources........................... 3. 0 0. 3 2. 7
Pollution control and abatement .................... 8. 6 0. 6 8.
0 Other natural resources .......................... 3. 8 0. 6 3.
2 Total natural resources and environment ............ 27. 1 2. 9
24. 2 98 SUPPLEMENTAL IN FOR MA TION Physical Resources, cont.
Commerce and Housing Credit (In bil lions of dol lars) Gross Cost
Earned Rev e nue Net Cost Subfunctions: Mortgage credit ..........
(3. 4) 3. 7 (7. 1) Postal Service ........... 80. 0 61. 9 18. 1
Deposit insurance ........ 4. 3 1. 4 2. 9 Other advancement of
commerce .......... 8. 3 6. 9 1. 4 Total commerce and housing
credit..... 89. 2 73. 9 15. 3 Commerce and Housing Credit This
func tion en com passes the pro mo tion and reg u la tion of the
com merce, hous ing and de posit in sur ance in dus tries. In
cluded un der Com merce and hous ing credit are costs to col lect
and dis sem i nate so cial and eco nomic data; pro vide gen eral
pur pose sub si dies to busi ness and in di vid u als, in clud ing
credit sub si dies for hous ing; and sup port the Postal Ser vice
fund. Transportation (In bil lions of dol lars) Gross Cost Earned
Revenue Net Cost Subfunctions: Ground transportation .... 29. 2 -
29. 2 Air transportation ........ 9. 6 0. 4 9. 2 Water
transportation ..... 5. 1 0. 7 4. 4 Other transportation...... 0.
2 - 0. 2 Total transportation..... 44. 1 1. 1 43. 0 Transportation
Grants to States and oth ers for lo cal or na tional trans por ta
tion of pas sen gers and prop erty make up the bulk of the cost as
so ci ated with this func tion. In cluded are costs to con struct
fa cil i ties; pur chase equip ment; do re search, test ing and
eval u a tion; and pro vide op er at ing sub si dies to
transportation fa cil i ties (such as air ports and rail roads).
The costs of pro mot ing vi a ble com mu nity econ o mies by de
vel op ing phys i cal fa cil i ties or fi nan cial in fra struc
tures com prise this func tion. Also in cluded are the costs of de
vel op ing trans por ta tion fa cil i ties that are in te gral
parts of com mu nity de vel op ment pro grams. Aids to busi nesses
is usu ally ex cluded from this func tion un less it pro  motes
the eco nomic de vel op ment of de pressed ar eas and is not de
signed to pro mote par tic u lar lines of busi - ness for their
own sake. Community and Regional Development Community and
Regional Development (In bil lions of dol lars) Gross Cost Earned
Rev e nue Net Cost Subfunctions: Community development
.................... 5. 1 - 5. 1 Area and regional development
............... 4. 2 1. 1 3. 1 Disaster relief and insurance
................. 5. 6 1. 7 3. 9 Total community and regional
development ................ 14. 9 2. 8 12. 1 SUP PLE MEN TAL IN
FOR MA TION 99 International Affairs (In bil lions of dol lars)
Gross Cost Earned Rev e nue Net Cost Subfunctions: International
development and humanitarian assistance .................... 9. 8
0. 4 9. 4 International security assistance .....................
5. 8 0. 8 5. 0 Conduct of foreign affairs
.......................... 6. 1 1. 0 5. 1 Foreign information and
exchange activities ............ 1. 2 - 1. 2 International
financial programs ..................... 6. 7 7. 4 (0. 7) Total
international affairs......................... 29. 6 9. 6 20. 0 In
ter est costs are pri mar ily amounts on Fed eral debt se cu ri
ties held by the pub lic. In ter est pay ments on these se cu ri
ties are made by Trea sury's Bu reau of the Pub lic Debt. Interest
International Affairs This func tion in cludes the cost of main
tain ing peace ful re la tions, sup port ing com merce and travel
be tween the United States and the rest of the world, and pro mot
ing in ter na tional se cu rity and eco nomic de vel op ment
abroad. General Science, Space and Technology This func tion cov
ers the cost of Na tional Sci ence Foun da tion re search, NASA
space pro grams and De part  ment of En ergy gen eral sci ence re
search. Agriculture Costs as so ci ated with pro mot ing ag ri cul
tural eco nomic sta bil ity and main tain ing and in creas ing ag
ri cul tural pro duc tion are found un der the Ag ri cul ture func
tion. Other Functions General Science, Space and Technology (In
bil lions of dol lars) Gross Cost Earned Rev e nue Net Cost
Subfunctions: General science and basic research .................
5. 6 - 5. 6 Space flight, research and supporting activities
......... 11. 9 0. 1 11. 8 Total general science, space and
technology ......... 17. 5 0. 1 17. 4 Agriculture (In bil lions of
dol lars) Gross Cost Earned Revenue Net Cost Subfunctions: Farm
income stabilization ......................... 23. 7 1. 9 21. 8
Agriculture research and service .................... 3. 5 0. 5 3.
0 Total agriculture............................... 27. 2 2. 4 24.
8 100 SUPPLEMENTAL IN FOR MA TION Administration of Justice The
cost of ju di cial ser vices in cludes po lice pro tec tion, law
en force ment (in clud ing civil rights), re ha bil i ta tion and
in car cer a tion of crim i nals, and the gen eral main te nance
of do mes tic or der. It also in cludes the cost of pro vid ing
court- appointed coun sel or other le gal ser vices for in di vid
u als. Not found un der Ad min is tra tion of jus tice are the
costs of the leg is la tive branch and po lice and guard ac tiv i
ties that pro tect Fed eral prop erty. Also, the cost of Na tional
Guard per son nel and mil i tary per son nel who are called upon
oc ca sion ally to main tain pub lic safety and the cost of mil i
tary po lice are in cluded un der the na tional de fense func
tion. General Government Gen eral Gov ern ment cov ers gen eral
over head costs of the Fed eral Gov ern ment. This in cludes leg
is la tive and ex ec u tive ac tiv i ties as well as cen tral fis
cal, per son nel and prop erty ac tiv i ties. All ac tiv i ties
rea son ably or closely as so ci ated with other func tions are in
cluded in those func tions rather than Gen eral Gov ern ment.
General Government (In bil lions of dol lars) Gross Cost Earned
Rev e nue Net Cost Subfunctions: Legislative functions
........................... 1. 9 - 1. 9 Executive direction and
management ............... 0. 7 - 0. 7 Central fiscal operations
........................ 13. 1 0. 5 12. 6 General property and
records management .......... 0. 1 0. 1 - Central personnel
management................... 0. 3 - 0. 3 General purpose fiscal
assistance ................. 1. 1 - 1. 1 Other general Government
...................... 7. 9 4. 0 3. 9 Total general Government
.................... 25. 1 4. 6 20. 5 Administration of Justice
(In bil lions of dol lars) Gross Cost Earned Rev e nue Net Cost
Subfunctions: Federal law enforcement activities .................
14. 8 0. 8 14. 0 Federal litigative and judicial activities
............... 7. 8 0. 3 7. 5 Federal correctional activities
..................... 3. 6 0. 1 3. 5 Criminal justice activities
........................ 5. 0 0. 4 4. 6 Total administration of
justice.................. 31. 2 1. 6 29. 6 Other Functions, cont.
SUP PLE MEN TAL IN FOR MA TION 101 De ferred main te nance is the
es ti mated cost to bring Gov ern ment owned prop erty to an ac
cept able con di tion. This re sults from not per form ing main te
nance on a timely ba sis. De ferred main te nance ex cludes the
cost of ex pand ing the ca pac ity of as sets or up grad ing them
to serve needs dif fer ent from those orig i nally in tended. The
con se quences of not per form ing reg u lar main te nance could
in clude in creased safety haz ards, poor ser vice to the pub lic,
higher cost in the fu ture and in ef fi  cient op er a tions. Es
ti mated de ferred main te nance costs are not ac crued in the
State ment of Net Cost or rec og nized as a li a bil ity on the
Bal ance Sheet. The amounts dis closed for de ferred main te nance
have been mea sured us ing the fol low ing two meth ods:  Con di
tion as sess ment sur veys are pe ri odic in spec tions of the Gov
ern ment owned prop erty to de ter mine the cur rent con di tion
and es ti mated cost to bring the prop erty to an ac cept able con
di tion.  Life- cycle cost fore cast is an ac qui si tion or pro
cure ment tech nique that con sid ers op er at ing, main te nance
and other costs in ad di tion to the ac qui si tion cost of as
sets. Some de ferred main te nance has been deemed to be crit i
cal. Such amounts and con di tions are de fined by the in di vid
ual agen cies with re spon si bil ity for the safe keep ing for
these as sets. Deferred Maintenance Deferred Maintenance as of
September 30 Deferred Maintenance Cost Range (In bil lions of dol
lars) Low Estimate High Estimate Crit i cal Maintenance Asset
Category: Buildings, structures and facilities .................
44. 3 52. 5 43. 8 Furniture, fixtures and
equipment.................. .4 .8 Other general property, plant
and equipment ......... .2 .3 Total general property, plant and
equipment .......... 44. 9 53. 6 43. 8 Heritage assets
............................... .3 1. 0 1. 0 National defense
assets ........................ 2. 7 2. 7 Total stewardship assets
........................ 3. 0 3. 7 1. 0 Total deferred maintenance
................... 47. 9 57. 3 44. 8 102 SUPPLEMENTAL IN FOR MA
TION For fis cal 1999, the uni fied bud get re ported a sur plus
of $124.4 bil lion. For the same pe riod, the Fi nan cial Re port
re ports an ex cess of rev e nue over cost of $76.9 bil lion. The
dif fer ence be tween these two amounts oc curs be cause they are
pre pared pri mar ily on dif fer ent mea sure ment bases to carry
out their dif fer ent ob jec tives. The Fi nan cial Re port gen er
ally is based on gen er ally ac cepted ac count ing prin ci ples.
Thus, ex penses and ex change rev e nue are gen er ally rec og
nized when the events giv ing rise to the trans ac tions oc cur
rather than when the cash is re ceived or paid. Non- exchange rev
e nues are rec og nized on a mod i fied cash ba sis of ac count
ing. By con trast, the uni fied bud get is com puted pri mar ily
on the cash ba sis, ac cord ing to ac cepted bud get con cepts and
pol i cies. The most sig nif i cant dif fer ences be tween these
two bases in volve the tim ing of rec og ni tion and mea sure ment
of rev e nue and costs. The dif fer ences be tween these two bases
of ac count ing can be di vided into four pri mary cat e go ries.
1. Re ceipts rec og nized in the bud get that are not rec og nized
as revenue in the Fi nan cial Re port, such as:  Col lec tions of
pre- credit re form loans.  Col lec tions of taxes re ceiv able.
Col lec tions of ac counts re ceiv able.  Pro ceeds from the sale
of cap i tal as sets rep re sent - ing book value. 2. Rev e nues
rec og nized in the Fi nan cial Re port that are not rec og nized
as re ceipts in the bud - get, such as:  In creases in taxes re
ceiv able.  In creases in ac counts re ceiv able. 3. Out lays rec
og nized in the bud get that are not rec og nized as costs in the
Fi nan cial Re port, such as:  Pur chases of in ven tory and gen
eral prop erty, plant and equip ment.  Payments of ac counts pay
able.  Pay ments of em ployee pen sions and other ben e fits that
re duce prior re lated li a bil i ties.  Pay ments of en vi ron -
men tal cleanup and dis posal costs that re duce prior re lated li
a bil i ties. 4. Costs rec og nized in the Fi nan cial Re port
that are not rec og nized as out lays in the bud get, such as:  De
pre ci a tion on gen eral property, plant and equip ment.  In
creases in li a bil i ties for em ployee pen sions and other ben e
fits.  In creases in es ti mated en vi ron men tal li a bil i
ties.  De faults on pre- credit re form loans.  De creases in in
ven tory.  In creases in ac counts payable. The re main ing un
iden ti fied dif fer ence is a net of $30.5 bil lion. Since some
of the dif fer ences may be off set ting, the gross dif fer ence
is larger than the $30.5 bil lion and may in clude trans ac tions
in all four cat e go ries listed above. It also in cludes the ef
fect of misclassifying intragov ern men tal trans ac tions and rel
a tively small dif fer ences in en tity cov er age. Reconciliation
of Excess of Revenue over Net Cost SUP PLE MEN TAL IN FOR MA TION
103 Reconciliation of the Excess of Revenue over Net Cost to the
Unified Budget Surplus for the Year Ended September 30 (Unaudited)
(In billions of dollars) Excess of revenue over net
cost........................... 76. 9 Decrease in veteran
compensation and burial benefits: Decrease in liability for
veterans ........................... (64. 8) Decrease in liability
for survivors........................... (29. 3) Decrease in
liability for burial benefits ....................... (0. 8)
Decrease in liability for veterans ......................... (94.
9) Increase in environmental liabilities: Increase in Energy's
environmental liabilities .................. 44. 3 Increase in
Defense's environmental liabilities ................. 45. 7
Decrease in all others environmental liabilities .................
(1. 3) Increase in environmental liabilities
....................... 88. 7 Capitalized fixed assets: Department
of Defense.................................. (23. 5) Civilian
agencies ...................................... (18. 0) Total
capitalized fixed assets ............................ (41. 5)
Increase in liability for civilian employee benefits: Increase in
civilian pension liabilities........................ 28. 8
Decrease in civilian health liabilities ........................
(2. 1) Increase in other civilian benefits liabilities
................... 14. 9 Increase in liability for civilian
employee benefits liabilities ...... 41. 6 Decrease in liability
for military employee benefits: Increase in military pension
liabilities........................ 11. 3 Decrease in military
health liabilities ........................ (27. 2) Decrease in
other military benefits ......................... (15. 2) Decrease
in liability for military employee benefits ............ (31. 1)
Depreciation expense 1999 ................................ 17. 3
Decrease in benefits due and payable ........................ (3.
8) Increase in inventory ..................................... (6.
5) Decrease in taxes receivable ............................... 4.
4 Increase in other liabilities .................................
14. 4 Seigniorage and sale of gold ...............................
(1. 0) Decrease in accounts payable ..............................
(4. 2) Decrease in accounts receivable
............................ 1. 2 Principal repayments of pre-
credit reform loans ................. 32. 4 Net amount of all
other differences......................... 30. 5 Unified budget
surplus ............................... 124. 4 104 SUPPLEMENTAL IN
FOR MA TION Unexpended Budget Authority as of September 30, 1999
(Unaudited) (In bil lions of dol lars) Unobligated Bud get Au thor
ity Ob li gated Bud get Au thor ity Social Security
Administration...................... 819. 6 36. 1 Office of
Personnel Management ................... 502. 8 5. 9 Department of
Health and Human Services ............ 198. 8 55. 8 Department of
Defense- Military ..................... 60. 6 152. 7 Other Defense
Civil Programs ...................... 149. 9 2. 8 Department of
Housing and Urban Development ........ 36. 8 107. 0 Department of
Transportation ...................... 58. 9 52. 5 Department of
the Treasury........................ 21. 6 18. 4 International
Assistance Program ................... 36. 0 65. 2 Department of
Labor ............................. 90. 4 8. 4 Independent
agencies ............................ 74. 1 5. 9 Department of
Agriculture ......................... 23. 2 15. 1 Department of
Education ......................... 10. 2 24. 4 Department of
Veterans Affairs ..................... 16. 1 7. 1 Department of
Energy ........................... 12. 5 7. 8 Department of
Justice............................ 4. 7 13. 8 Environmental
Protection Agency ................... 8. 0 8. 5 Department of
State ............................. 12. 7 3. 0 Federal Emergency
Management Agency ............. 0. 8 8. 3 Department of the
Interior ......................... 5. 3 2. 9 National Aeronautics
and Space Administration ......... 0. 9 5. 3 Department of
Commerce ......................... 0. 8 3. 7 Corps of Engineers
.............................. 4. 0 0. 4 National Science
Foundation ....................... 0. 2 4. 2 General Services
Administration .................... 3. 8 0. 5 Legislative Branch
.............................. 1. 7 0. 4 Small Business
Administration ..................... 0. 7 1. 0 Judicial Branch
................................. 0. 7 0. 5 Executive Office of
the President.................... 0. 3 0. 1 Total
....................................... 2,156. 1 617. 7 Un ex
pended Bud get Au thor ity is the sum of the ob li gated, but un
liq ui dated, and unobligated bud get au thor ity. Unobligated bud
get au thor ity, in clud ing trust fund bal ances, is the cu mu la
tive amount of bud get au thor ity that is not ob li gated and
that re mains avail able for ob li ga - tion. In 1- year ac counts
the unobligated bal ance is not avail able af ter the end of the
fis cal year. In multi- year ac counts the ob li gated bal ance
may be car ried for ward and re mains avail able for ob li ga tion
for the pe riod spec i fied. In no year ac counts the unobligated
bal ance is car ried for ward un til spe cif i cally re scinded by
law, or un til the pur poses for which it was pro vided have been
ac com plished. Ob li gated bud get au thor ity is the cu mu la
tive amount of bud get au thor ity that has been ob li gated but
not yet liquidated. This bal ance can be car ried for ward for a
max i mum of 5 years af ter the ap pro pri a - tion has ex pired.
Unexpended Budget Authority SUP PLE MEN TAL IN FOR MA TION 105 The
In ter nal Rev e nue Code pro vides for pro gres sive rates of
tax, whereby higher in comes are gen er ally sub ject to higher
rates of tax. The ta bles pres ent the lat est avail able in for
ma tion on in come tax and on re lated in come, de duc tions and
credit for in di vid u als by in come level and for cor po ra
tions by size of as sets. Tax Burden Individual Income Tax Returns
for Tax Year 1997 Size of Adjusted Gross Income (In mil lions of
dol lars un less oth er wise noted) Un der $15,000 $15,000 un der
$30,000 $30,000 un der $50,000 $50,000 un der $100,000 $100,000 un
der $200,000 Greater than $200,000 Total number of returns
.......... 41.4 29.4 22.8 21.6 5.4 1.8 Gross income ...... 251.9
649.1 895.2 1,490.0 717.3 1,013.4 Adjusted gross income ..........
247.9 642.9 887.9 1,478.9 707.8 1,004.5 Tax .............. 9.1
47.4 90.6 191.6 126.7 274.0 Tax burden, percentage of gross total
receipts ......... 3.60% 7.30% 10.13% 12.86% 17.67% 27.04% Average
tax dollars per return........ 219 1,612 3,983 8,858 23,562
151,565 Deductions on taxable income: Standard deduction .. 175. 4
137. 2 82. 6 42. 1 3. 6 0. 9 Medical and dental expense.........
5. 2 8. 6 6. 6 6. 2 2. 0 0. 6 Interest ........... 5. 3 18. 4 45.
5 100. 0 46. 5 34. 9 Charitable contributions ..... 1. 2 5. 5 12.
3 29. 9 16. 9 33. 4 Other itemized deductions....... 3. 5 14. 0
35. 9 91. 1 50. 5 46. 7 Total itemized deductions ..... 15. 2 46.
5 100. 3 227. 2 115. 9 115. 6 Total deductions ... 190. 6 183. 7
182. 9 269. 3 119. 5 116. 5 Total expenditures, deductions.......
6. 9 13. 4 18. 5 34. 6 21. 1 31. 5 Credit against tax liability:
Child care credit .... - 0. 6 0. 7 0. 9 0. 2 Credit for elderly
and disabled ......... - - - - - Foreign tax credit.... - - 0. 1
0. 3 0. 6 3. 0 EITC, offset tax liability....... 0. 4 3. 5 - - -
Other credits....... - - 0. 1 0. 3 0. 3 1. 0 Total credits.......
0. 4 4. 1 0. 9 1. 5 1. 1 4. 2 Total expenditures and credits,
individual ....... 7. 3 17. 5 19. 4 36. 1 22. 2 35. 7 106
SUPPLEMENTAL IN FOR MA TION Corporate Income Tax Returns for Tax
Year 1996 Size of Total Assets (in thousands) (In mil lions of dol
lars un less oth er wise noted) Under $1,000 $1,000 un der $10,000
$10,000 un der $50,000 $50,000 un der $100,000 $100,000 un der
$250,000 Greater than $250,000 Total returns (in thousands)
....... 4,193. 3 370. 9 42. 9 8. 5 7. 6 8. 2 Total receipts
.......... 2,103. 7 2,204. 3 1,357. 3 505. 4 741. 0 8,614. 1
Taxable income ........ 24. 0 26. 2 25. 8 16. 3 28. 9 518. 6 Total
tax .............. 5. 6 8. 1 8. 4 5. 2 9. 0 134. 2 Tax burden,
percent of gross total receipts .. 0.27% 0.37% 0.62% 1.04% 1.22%
1.56% Average tax per return (in thousands) ...... 1. 3 21. 8 196.
1 618. 5 1,187. 2 16,346 .4 Deductions on taxable income: Net
operating loss ..... 10. 2 5. 6 4. 4 2. 5 4. 2 28. 2 Dividends
received .... 0. 4 0. 5 0. 6 0. 4 0. 9 16. 9 Public utility
dividends paid ...... - - - - - 0. 1 Total deductions ........
2,064. 5 2,163. 3 1,326. 2 486. 7 703. 4 7,984. 1 Total
expenditures, deductions .......... 5. 5 7. 9 8. 2 5. 0 8. 6 124.
4 Credits against tax liability: Foreign tax credit ..... 0. 1 -
0. 1 0. 2 0. 6 39. 2 U. S. Possessions tax credit .......... - -
0. 2 0. 2 0. 3 2. 4 Nonconventional source fuel credit .... - - -
- - 0. 8 General business credit ...... 0. 2 0. 1 0. 1 0. 1 0. 1
3. 6 Other credits......... 0. 1 0. 2 0. 2 0. 1 0. 1 4. 1 Total
credits......... 0. 4 0. 3 0. 6 0. 6 1. 1 50. 1 Total
expenditures, corporation ........ 5. 9 8. 2 8. 8 5. 6 9. 7 174. 5
OTHER IN FOR MA TION 107 Federal Taxes Receivable Net Man age ment
has es ti mated amounts that may be paid out as other claims for
tax re funds. This es ti mate rep re sents an amount (prin ci pal
and in ter est) that may be paid for claims pend ing ju di cial re
view by the Fed eral courts or, in ter nally, by Ap peals. The to
tal es ti mated pay out (in clud ing prin ci pal and in ter est)
for claims pend ing ju di cial re view by the Fed eral courts is
$7.6 bil lion and by Ap peals is $11.4 bil lion. Al though these
re fund claims have been deemed to be prob a ble, they do not meet
the cri te ria in SFFAS No. 5 for re port ing the amounts in the
bal ance sheet or for dis clo sure in the notes to the fi nan cial
state ments. How ever, they meet the cri te ria in SFFAS No. 7 for
in clu sion as sup ple men tal in for ma tion. In ac cor dance
with SFFAS No. 7, some un paid as sess ments do not meet the cri
te ria for fi nan cial state ment rec og ni tion as dis cussed in
Note 1 to the fi nan cial state ments. Al though com pli ance as
sess ments and write- offs are not con sid ered re ceiv ables un
der Fed eral ac count ing stan dards, they rep re sent le gally en
force able claims of the IRS act ing on be half of the Fed eral
Gov ern ment. There is, how ever, a sig nif i cant dif fer ence in
the col lec tion po ten tial of these cat e go ries. The com po
nents of the to tal un paid as sess ments and der i va tion of net
Fed eral taxes re ceiv able at Sep tem ber 30, 1999, were as fol
lows: Federal Taxes Receivable as of September 30 (In billions of
dollars) Total unpaid assessments ................. $233. 2 Less:
Compliance assessments............. (27. 0) Write- Offs
........................ (127. 0) Gross Federal Taxes Receivable
............ 79. 2 Less: Allowance for doubtful accounts ........
(56. 5) Federal Taxes Receivable, Net ............. 22. 7 Other
Information (Unaudited) The Gov ern ment can not rea son - ably es
ti mate the amount of al low - ance for doubt ful ac counts per
tain ing to its com pli ance as sess ments, and thus can not de
ter mine their net re al iz able value or the value of the pre- as
sess ment work- in- prog ress. To elim i nate dou ble- count ing,
the com pli ance as sess ments re ported above ex clude trust fund
re cov ery pen al ties, to tal ing $15 bil lion, as sessed against
of fi cers and di rec tors of busi nesses who were in volved in
the non re mit tance of Fed eral taxes withheld from their em ploy
ees. The re lated un paid as sess ments of those busi nesses are
re ported as taxes re ceiv able or write- offs, but the Gov ern
ment also may re cover por tions of those busi nesses' un - paid
as sess ments from any and all in di vid ual of fi cers and di rec
tors against whom a trust fund re cov ery pen alty is as sessed.
Other Claims for Refund 108 APPENDIX This Fi nan cial Re port in
cludes the ex ec u tive, leg is la tive and ju di cial branches of
the Gov ern ment. Ex cluded are pri vately owned Gov ern ment-
sponsored en ter prises such as the Fed eral Home Loan Banks and
the Fed eral Na tional Mort gage As so ci a tion. The Fed eral Re
serve Sys tem also is ex cluded be cause or ga ni za tions and
func tions per tain ing to mon e tary pol icy are tra di tion ally
sep a rate from, and in de pend ent of, other cen tral Gov ern
ment or ga ni za tions and func tions. Significant Entities
Included in these Statements: Appendix: List of Significant
Government Entities Included and Excluded Department of Ag
riculture (Ag ri cul ture) www. usda. gov Department of Com merce
(Com merce) www. doc. gov Department of De fense (DOD) www.
defenselink. mil Department of Ed u ca tion (Ed u ca tion) www.
ed. gov Department of En ergy (En ergy) www. doe. gov De part ment
of Health and Hu man Ser vices (HHS) www. hhs. gov De part ment of
Housing and Ur ban De vel op ment (HUD) www. hud. gov Department
of In te rior (In te rior) www. doi. gov Department of Jus tice
(Jus tice) www. usdoj. gov Department of La bor (La bor) www. dol.
gov Department of State (State) www. state. gov Department of the
Air Force (Air Force) www. af. mil Department of the Army (Army)
www. army. mil Army Corps of En gi neers www. usace. gov
Department of the Navy (Navy) www. navy. mil Department of Trans
por ta tion (Trans por ta tion) www. dot. gov Department of the
Trea sury (Trea sury) www. ustreas .gov Department of Vet erans Af
fairs (VA) www. va. gov Agency for In ter na tional De vel op ment
(AID) www. info. usaid. gov Cen tral In tel li gence Agency (CIA)
www. odci. gov/ cia/ ciahome. html Con gres sio nal Bud get Of
fice (CBO) www. cbo. gov Commodity Credit Cor po ra tion Com mod
ity Fu tures Trading Com mis sion En vi ron men tal Pro tec tion
Agency (EPA) www. epa .gov Ex ec u tive Of fice of the Pres ident
Ex port- Import Bank of the United States www. exim. gov Farm
Credit Ad min is tra tion (FCA) www. fca. gov Fed eral Com mu ni
ca tions Com mis sion (FCC) www. fcc. gov Fed eral De posit In sur
ance Cor po ra tion (FDIC) www. fdic. gov Fed eral Emer gency Man
age ment Agency (FEMA) www.fema. gov Fed eral Trade Com mis sion
(FTC) www. ftc. gov Gen eral Ac count ing Of fice (GAO) www. gao.
gov Gen eral Ser vices Ad min is tra tion (GSA) www. gsa .gov Gov
ern ment Print ing Of fice (GPO) www. gpo. gov Li brary of Con
gress (LOC) www. loc. gov Na tional Aero nau tics and Space Ad min
is tra tion (NASA) www. nasa. gov Na tional Ar chives and Re cords
Ad min is tra tion www. nara. gov Na tional Credit Un ion Ad min
is tra tion (NCUA) www. ncua. gov Na tional Sci ence Foun da tion
(NSF) www. nsf. gov Na tional Trans por ta tion Safety Board (
NTSB) www. ntsb. gov Nu clear Reg u la tory Com mis sion (NRC)
www. nrc .gov Of fice of Man age ment and Bud get (OMB) www.
whitehouse. gov/ wh/ eop/ omb/ html/ omb home. html Of fice of Per
son nel Man age ment (OPM) www. opm. gov AP PEN DIX 109 Army and
Air Force Ex change Ser vice Board of Gov er nors of the Fed eral
Re serve Sys tem Fan nie Mae Farm Credit Sys tem Fed eral Home
Loan Banks Fed eral Re serve Banks (FRBs) Fed eral Re tire ment
Thrift In vest ment Board Significant Entities Excluded from these
Statements: Entities Included, cont. Fi nancing Cor po ra tion
Freddie Mac Ma rine Corps Ex change Navy Ex change Ser vice Com
mand Res o lu tion Funding Cor po ra tion Sal lie Mae Thrift Sav
ings Fund Other boards and commissions Other leg is la tive and ju
di cial Pen sion Ben e fit Guar anty Cor po ra tion www. pbgc. gov
Rail road Re tire ment Board (RRB) www. rrb. gov Se cu ri ties and
Ex change Com mis sion (SEC) www. sec. gov Small Busi ness Ad min
is tra tion (SBA) www. sba. gov Smith so nian In sti tu tion www.
si. edu So cial Se cu rity Ad min is tra tion (SSA) www. ssa. gov
Ten nes see Val ley Au thor ity (TVA) www. tva. gov U. S. In for
ma tion Agency www. usia. gov U. S. Postal Ser vice www.usps. gov

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