Understanding the Primary Components of the Annual Financial
Report of the United States Government (01-OCT-05, GAO-05-958SP).
The U.S. government is the largest, most diverse, most complex,
and arguably the most important entity on earth today. Useful,
timely, and reliable financial and performance information is
needed to make sound decisions on the current results and future
direction of vital federal programs and polices. The Department
of the Treasury, in coordination with the Office of Management
and Budget, annually prepares the Financial Report of the United
States Government, hereafter referred to as the Consolidated
Financial Report (CFR). The CFR is a general-purpose report of
accountability intended internally for members of Congress,
federal executives and federal program managers, and externally
primarily for citizens and citizen intermediaries who are
interested in and have a reasonable understanding of federal
government activities and are willing to study the information
with reasonable diligence. Citizen intermediaries include members
of the news media, analysts, and others who analyze and interpret
for the general public the more complex and detailed information
in the CFR. The goal of the CFR, and the subject of this guide,
is to make available to every American a comprehensive overview
of the federal government's finances. As described in the CFR,
significant issues regarding the reliability and presentation of
the federal government's financial information still need to be
addressed. For example, the Department of Defense's current
financial management problems present a significant impediment to
our being able to express any opinion on the federal government's
consolidated financial statements. Also, additional transparency
is needed in connection with intragovernmental debt, on-budget
deficits, and the large and growing per capita and
intergenerational burden associated with the federal government's
growing liabilities and unfunded commitments. At the same time,
in its current form, the CFR offers certain valuable insights
into the overall financial operations, condition, and financial
outlook of the federal government. This information is becoming
increasingly more useful as the nation's accounting and reporting
issues are resolved. GAO prepared this guide to the CFR to help
those who seek to gain a baseline understanding of the
significant information provided in the primary components that
make up the CFR, especially the financial statements. This guide
explains the purpose of each CFR component and provides
illustrative financial information using actual fiscal year 2004
and 2003 data to focus readers on the kinds of significant
information found in the various parts of the CFR. Because the
illustrative financial information contained in this guide
minimizes detail in order to highlight significant line items, it
does not show all of the items included in the federal
government's actual CFR or explain the less significant ones.
Changes to accounting standards and reporting requirements may
affect the applicability of certain portions of this guide to
future CFRs. Also, this guide is not intended to help people who
are interested in understanding the financial statements of
individual federal agencies, most of which publish their own
financial statements.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-958SP
ACCNO: A39677
TITLE: Understanding the Primary Components of the Annual
Financial Report of the United States Government
DATE: 10/01/2005
SUBJECT: Accountability
Economic analysis
Financial analysis
Financial records
Financial statements
Government information dissemination
Transparency
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GAO-05-958SP
* Preface
* Contents
* The Consolidated Financial Report
* Management's Discussion and Analysis
* Government Accountability Office Report
* Financial Statements
* Statement of Net Cost
* Statement of Operations and Changes in Net Position
* Reconciliation of Net Operating Revenue (or Cost) and Unified Budget
Surplus (or Deficit)
* Statement of Changes in Cash Balance from Unified Budget and Other
Activities
* Balance Sheet
* Statement of Social Insurance (Stewardship Information)
* Other Stewardship Information
* Notes to the Financial Statements
* Supplemental Information
* How the Federal Government's Financial Statements Relate to One
Another
Preface
The U.S. government is the largest, most diverse, most complex, and
arguably the most important entity on earth today. Useful, timely, and
reliable financial and performance information is needed to make sound
decisions on the current results and future direction of vital federal
programs and polices. The Department of the Treasury, in coordination with
the Office of Management and Budget, annually prepares the Financial
Report of the United States Government, hereafter referred to as the
Consolidated Financial Report (CFR). The CFR is a general-purpose report
of accountability intended internally for members of Congress, federal
executives and federal program managers, and externally primarily for
citizens and citizen intermediaries who are interested in and have a
reasonable understanding of federal government activities and are willing
to study the information with reasonable diligence. Citizen intermediaries
include members of the news media, analysts, and others who analyze and
interpret for the general public the more complex and detailed information
in the CFR.
The goal of the CFR, and the subject of this guide, is to make available
to every American a comprehensive overview of the federal government's
finances. As described in the CFR, significant issues regarding the
reliability and presentation of the federal government's financial
information still need to be addressed. For example, the Department of
Defense's current financial management problems present a significant
impediment to our being able to express any opinion on the federal
government's consolidated financial statements. Also, additional
transparency is needed in connection with intragovernmental debt,
on-budget deficits, and the large and growing per capita and
intergenerational burden associated with the federal government's growing
liabilities and unfunded commitments. At the same time, in its current
form, the CFR offers certain valuable insights into the overall financial
operations, condition, and financial outlook of the federal government.
This information is becoming increasingly more useful as the nation's
accounting and reporting issues are resolved.
GAO prepared this guide to the CFR to help those who seek to gain a
baseline understanding of the significant information provided in the
primary components that make up the CFR, especially the financial
statements. This guide explains the purpose of each CFR component and
provides illustrative financial information using actual fiscal year 2004
and 2003 data to focus readers on the kinds of significant information
found in the various parts of the CFR. Because the illustrative financial
information contained in this guide minimizes detail in order to highlight
significant line items, it does not show all of the items included in the
federal government's actual CFR or explain the less significant ones.
Changes to accounting standards and reporting requirements may affect the
applicability of certain portions of this guide to future CFRs. Also, this
guide is not intended to help people who are interested in understanding
the financial statements of individual federal agencies, most of which
publish their own financial statements.
The annual financial reports of the United States Government, for which
this guide was prepared, are available through Treasury's Web site at
www.fms.treas.gov/fr/index.html.
This guide was prepared under the direction of Jeffrey C. Steinhoff,
Managing Director, Financial Management and Assurance Team and Gary T.
Engel, Director, Financial Management and Assurance Team, who may be
reached at (202) 512-8815 or [email protected].
David M. Walker
Comptroller General of the United States
Contents
Page The Consolidated Financial Report 1 and Unified Budget Surplus (or
Deficit) Unified Budget and Other Activities Relate to One Another
Management's Discussion and Analysis 3
Government Accountability Office Report 4
Financial Statements 5
Some Important Financial Statement Concepts 5
Composition of the Financial Statements 7
Statement of Net Cost 9
Statement of Operations and Changes in Net Position 11
Reconciliation of Net Operating Revenue (or Cost) 13
Statement of Changes in Cash Balance from 15
Balance Sheet 17
Statement of Social Insurance (Stewardship Information) 19
Stewardship Information - Other Stewardship Information 21
Notes to the Financial Statements 23
Supplemental Information 25
How the Federal Government's Financial Statements 27
Cover source: PhotoDisc (images).
The Consolidated Financial Report
Similar to a corporation's annual report, the Consolidated Financial
Report (CFR) is the federal government's general-purpose report of
accountability to the American public on its finances. It is intended to
o provide an overall view of the annual financial results of operations
and the financial position of the federal government, including
long-term commitments and obligations;
o demonstrate accountability for the money the federal government raises
through taxes and for spending money according to the laws and
regulations that govern the federal government's budgets and financial
operations;
o report on the federal government's operating performance, accounting
systems, and internal control; and
o demonstrate the federal government's stewardship over its resources.
The consolidated financial statements (CFS) in the CFR, submitted by the
Department of the Treasury in coordination with the Office of Management
and Budget, present consolidated and summarized financial information from
the various federal government agencies and departments. The federal
government is responsible for
o preparing the annual CFS in conformity with U.S. generally accepted
accounting principles;
o establishing, maintaining, and assessing internal control to provide
reasonable assurance that the control objectives of the Federal
Managers' Financial Integrity Act, 31 U.S.C. 3512 (c), (d) are met;
and
o complying with applicable laws and regulations.
The Federal Accounting Standards Advisory Board (FASAB), after considering
the financial and budgetary information needs of citizens, congressional
oversight groups, executive agencies, and other users, promulgates the
accounting and reporting standards essential for public accountability.
GAO conducts the audit of the federal government's financial information
contained in the financial statements in the CFR, along with the
accompanying notes to the financial statements, with the objective being
to provide an opinion on the fairness of the financial statements taken as
a whole.
The Consolidated Financial Report
The CFR is organized into six major sections
Notes to
Management's Government Financial Stewardship the Supplemental
Discussion Accountability Statements Information Financial Information
and
Analysis Office Report Statements
o Management's Discussion and Analysis provides management's insights
into the information presented in the federal government's financial
statements and the Statement of Social Insurance.
o Government Accountability Office Report presents the results of GAO's
audit of the financial statements.
o Financial Statements consolidate financial information from federal
entities to provide an overall view of the federal government's
financial operations and condition.
o Stewardship Information provides information about the federal
government's resources and responsibilities that are not included on
the federal government's Balance Sheet, the largest of which relate to
social insurance programs such as Social Security and Medicare.
o Notes to the Financial Statements provide important disclosures and
details related to information reported on the statements, and
o Supplemental Information provides additional information about
selected financial operations of the federal government.
This guide discusses the significant content of each section in the CFR,
with a primary emphasis on the federal government's financial statements.
Government Accountability Financial Office Report Statements
Notes to the Stewardship Financial Supplemental Information Statements
Information
Management's Discussion and Analysis
The Management's Discussion and Analysis (MD&A) section of the CFR
provides important insights into the information presented in the federal
government's financial statements and the Statement of Social Insurance.
It presents management's perspective on the financial information and
overall operations of the federal government.
The MD&A is intended to provide readers with a narrative overview and
analysis of the federal government's performance, financial position, and
financial operations. It is also intended to address the federal
goverment's performance measures, financial statements, systems and
controls, compliance with laws and regulations, and actions taken or
planned to address problems. For example, the fiscal year 2004 MD&A
o includes a table under the heading Additional Responsibilities that
shows the federal government's summary of the nation's total
liabilities and responsibilities, including the projected continuing
significant claims that Social Security and Medicare programs have on
the nation's budgetary resources;
o highlights the significant reporting items identified for the year,
such as the estimated long-term (75-year) cost and financial impact of
the new Medicare prescription drug plan and the increased debt
ceiling;
o discusses the federal government's financial results for the year,
including trends in net costs, assets, and liabilities, providing
management's explanations for significant changes; and
o discusses the nation's economic and budget results, the federal
government's organization, and operating performance measures.
Government Accountability Office Report
GAO's report tells readers whether or not, or to what extent, they can
rely on the information provided in the CFS. GAO conducts its audit of the
CFS in accordance with U.S. generally accepted government auditing
standards, obtains and evaluates evidence, and provides a formal written
conclusion on whether the financial statements taken as a whole are
presented fairly, in all material respects, in conformity with U.S.
generally accepted accounting principles. The MD&A, stewardship, and
supplemental information in the CFR are not required to be audited.
The auditor may express an unqualified opinion, a qualified opinion, or an
adverse opinion, or disclaim an opinion on the fairness of the financial
statements taken as a whole. In an unqualified opinion, the auditor states
that the information in the financial statements and accompanying notes is
presented fairly, in all material respects, in conformity with U.S.
generally accepted accounting principles. A qualified opinion discloses
exceptions to an unqualified opinion, such as inadequate disclosures or
selected nonconformities with U.S. generally accepted accounting
principles. However, in a qualified opinion, the exceptions are not
considered material enough to affect the fairness of the statements taken
as a whole. Exceptions considered too serious or pervasive to justify a
qualified opinion result in an adverse opinion, which states that the
financial statements taken as a whole are not presented fairly, in all
material respects, in conformity with U.S. generally accepted accounting
principles. The circumstances related to such exceptions are also
disclosed in the auditor's report. A disclaimer of opinion may result when
the auditor is unable to obtain sufficient information upon which to base
an opinion. The circumstances related to a disclaimer are described in the
auditor's report. For example, GAO disclaimed an opinion on the fiscal
year 2004 CFS because of the effects of persistent material weaknesses in
the federal government's internal control and certain accounting and
reporting practices that limited the scope of work that could be
performed, a major element of which relates to the Department of Defense's
continued inability to undergo an audit of its financial statements.
GAO's report also includes an opinion on whether the federal government
had effective internal control over financial reporting and over
compliance with laws and regulations. It also reports on any identified
significant matters of noncompliance with selected provisions of
applicable laws and regulations.
Financial Statements
Some Important Financial Statement Concepts
Before considering the purpose and content of each of the federal
government's consolidated financial statements, it is important to
understand certain concepts about the nature of the federal government's
financial statements, especially the federal government's (1) use of cash
and accrual accounting and (2) treatment of transactions between federal
entities.
Cash and Accrual Accounting
The federal government generally uses accrual accounting to record and
report financial information contained in its financial statements.
Accrual accounting, which is also used by private business enterprises, is
the basis for U.S. generally accepted accounting principles for federal
government entities. It is intended to provide a complete picture of the
federal government's financial operations and financial position. The
federal government primarily uses the cash basis of accounting for its
budget, which is the federal government's primary financial planning and
control tool. The budget helps establish national spending priorities and
helps ensure that the federal government spends taxpayers' money in
accordance with applicable appropriations laws. Differences between the
federal government's operating results and its budget results are shown in
the statement called the Reconciliation of Net Operating Revenue (or Cost)
and Unified Budget Surplus (or Deficit). Accordingly, understanding the
basic concepts of the cash basis and accrual basis of accounting is
important to understanding the information included in the federal
government's financial statements.
Cash-Based Accounting
Because it is similar to keeping a checkbook, the cash basis of accounting
(used to account for and report budget results) is perhaps the easier of
the two bases of accounting to understand. The cash basis focus is on cash
receipts, cash disbursements, and the difference between the two amounts.
With relatively few exceptions, budget receipts are recorded when cash is
received and budget outlays are recorded when cash is disbursed. The
difference between cash receipts and cash disbursements at the end of the
fiscal year is reported as the annual budget surplus or budget deficit.
For example, for fiscal year 2004 the federal government reported a
unified budget deficit of about $412 billion (explained in more detail
later in the guide). This deficit was based on reported cash outlays of
about $2,292 billion compared with reported cash receipts of about $1,880
billion. It is important to note here that the federal government's cash
receipts used in determining the unified budget deficit include surplus
funds earmarked for the Social Security trust funds and certain other
trust funds.
Financial Statements
Accrual-Based Accounting
The accrual basis of accounting recognizes revenue when it is earned and
recognizes expenses in the period incurred, without regard to when cash is
received or disbursed. The federal government, which receives most of its
revenue from taxes, nevertheless recognizes tax revenue when it is
collected, under an accepted modified cash basis of accounting.
Expenses are recognized during the period in which they are incurred.
Accrual accounting, for example, recognizes that while the employee is
working, the employee earns not only a salary but also health, pension,
and other benefits that will be paid in the future during the employee's
retirement. Accordingly, each year, on the basis of actuarial calculations
of benefits earned, the federal government records as an expense
(operating cost) an estimated amount for these earned benefits and
increases the related liability-Federal Employee and Veteran Benefits
Payable-for the amount owed to its employees, both civilian and military.
Thus, the accrual basis of accounting is intended to provide a complete
financial picture for the CFR reader of the federal government's annual
employee-related costs.
Also under accrual accounting, the federal government reports physical
assets when they are acquired and records the related expenses only when
the assets are sold or when the federal government benefits from their use
or consumption. Physical assets consist of inventories of goods held for
sale or for future consumption, and long-lived or "fixed" assets such as
land, buildings, and equipment. In the case of assets such as buildings
and equipment, the measure of benefit consumption is known as
depreciation.
Treatment of Transactions between Federal Entities
In the normal course of federal government operations, federal agencies
and departments purchase and sell goods and services among themselves.
These types of activities between federal agencies and departments are
called intragovernmental transactions. They also include amounts the
federal government borrows from the Social Security trust funds.
Intragovernmental transactions are recorded in federal agencies' and
departments' accounts and financial statements along with transactions
conducted with outside entities. These intragovernmental transactions are
to be eliminated from the federal government's consolidated accounts and
financial statements so that the totals for the affected accounts, when
summarized for all federal government agencies and departments, are not
overstated for the federal government as a whole.
Financial Statements
Composition of the Financial Statements
The federal government's consolidated financial statements consist of five
financial statements that are related and a Statement of Social Insurance
(page 27 provides discussion and a simplified overview of how these five
financial statements are related). Each of the five financial statements
presents 2 years of financial data so that readers can compare the federal
government's financial information for the current and prior years. The
financial statements are introduced below in the order in which they
appear in the CFR.
Statement Statement of Reconciliation of Statement of Balance Statement
of Net Operations Net Operating Changes in Sheet of Social
Cost and Changes Revenue (or Cost) Cash Balance Insurance
in Net and Unified Budget from Unified
Position Surplus (or Budget and
Deficit) Other
Activities
o The first statement shows how much it costs on the accrual basis of
accounting to operate the federal government in total, and by major
department and agency. This statement is called the Statement of Net
Cost.
o The second statement shows the accrual-based results of the federal
government's operations-the extent to which the federal government's
tax revenue covers the net cost. It also shows how these results
(called the net operating revenue or net operating cost) affect the
federal government's net financial position-the difference between its
assets (what it owns) and its liabilities (what it owes). This
statement is called the Statement of Operations and Changes in Net
Position.
o The third statement shows the relationship between the accrual-based
operating results and the cash-based budget results. It begins with
the net operating result (revenue or cost) from the Statement of
Operations and Changes in Net Position and shows the items that
explain the difference between that amount and the federal
government's annual cash-based budget surplus or deficit. This
statement is called the Reconciliation of Net Operating Revenue (or
Cost) and Unified Budget Surplus (or Deficit).
o The fourth statement shows the relationship between the cash-based
budget surplus or deficit and the change in the federal government's
operating cash balance. It begins with the cash-based budget surplus
or deficit and shows the items that explain either how the federal
government used a budget surplus or financed a budget deficit. This
statement is called the
Statement of Changes in Cash Balance from Unified Budget and Other Activities.
Financial Statements
o The fifth statement is the federal government's Balance Sheet. It shows
the nature and amount of the federal government's assets (what it owns)
and liabilities (what it owes) and the difference between the two, called
the net position. This net position amount is the same as the net position
amount reported in the Statement of Operations and Changes in Net
Position. Under current federal accounting standards, the federal
government's powers to tax, certain natural resources not used in
operations, and certain long-range commitments such as Social Security and
Medicare are not included on the federal government's Balance Sheet. These
types of resources and responsibilities are discussed in the stewardship
section of the CFR.
The additional statement, titled the Statement of Social Insurance, shows
how much money the federal government estimates it would need today to
cover the projected long-term commitments of its major social insurance
programs, such as Social Security and Medicare. For fiscal year 2004, this
statement is presented in the stewardship section of the CFR. The federal
government will be including a Statement of Social Insurance in the CFR as
a sixth financial statement beginning in fiscal year 2006.
Also, beginning with the fiscal year 2006 CFR, additional information will
be provided for certain revenue. Currently, federal revenue earmarked for
certain funds, such as the Social Security trust funds, is not separately
presented on the face of the federal government's consolidated financial
statements. To improve the transparency of this important source of
revenue, the Federal Accounting Standards Advisory Board (FASAB) has
issued a standard for identifying and reporting earmarked funds. According
to FASAB, an earmarked fund receives specifically identified revenue and
other financing sources that (1) remain available over time, (2) are
required by statute to be used for designated activities, benefits, or
purposes, and (3) must be accounted for separately from the government's
general revenues. At the governmentwide level, earmarked revenue will be
shown separately on the Statement of Operations and Changes in Net
Position. The Balance Sheet will show separately the portion of net
position attributable to earmarked funds. This information is intended to
assist users of financial statements in understanding the federal
government's results of operations and related commitments.
Statement Reconciliation of Changes in
Statement of Net Operating Cash Balance of Operations Revenue (or Cost)
from Unified and Changes and Unified Budget Budget and Statement of in Net
Position Surplus (or Deficit) Other Activities Balance Sheet Social
Insurance
Statement of Net Cost
The Statement of Net Cost is intended to show how much it cost to operate
the federal government by federal agency and department, and in total. It
provides costs on an accrual basis of accounting, which recognizes
expenses when they are incurred, regardless of when cash is disbursed.
Thus, it provides cost information for the accounting period that can be
related to the goods produced, services rendered, and the outcomes of the
programs of the federal government's agencies and departments for the same
period. Since the actuarial calculations for social insurance costs are
not reported as liabilities on the Balance Sheet, the corresponding costs
also are excluded from the cost of government operations. An important
concept of the Statement of Net Cost is that the revenue earned by federal
agencies and departments from their operations, such as admissions to
national parks and fees paid for postal services and stamps, is subtracted
from their cost of operations. The net cost is the amount to be financed
from tax revenue and, as needed, borrowing.
Readers can use information from this statement to identify such things as
o how much the federal government's net cost increased or decreased from
the prior fiscal year,
o which agencies or departments accounted for most of the federal
government's net cost, and
o which agency or department experienced the largest increase and which
experienced the largest decrease in net cost from the previous year.
For example, from fiscal year 2003 to fiscal year 2004, the federal
government's total net cost increased about $36.8 billion. Also, the
Department of Defense, the Department of Health and Human Services, and
the Social Security Administration together accounted for about $1.7
trillion, or about 68 percent, of the approximately $2.5 trillion total
net cost reported for fiscal year 2004. And, for fiscal year 2004, the
Department of Defense reported the largest cost increase, about $100.1
billion, and the Department of Veterans Affairs reported the largest cost
decrease, about $125.7 billion.
It is important to note that agencies that use actuarial projections in
determining their costs and related liabilities may experience large
fluctuations in annual costs due to program benefit changes and changes to
the actuarial assumptions. The MD&A explains that the primary cause of the
Department of Defense's increase was a new law that increased the Military
Retirement Fund's actuarial liability by about $91 billion. The primary
cause of the Department of Veterans Affairs' decrease was changes in
interest rates and other actuarial assumptions. Also, the agencies' costs
shown on the Statement of Net Cost include certain governmentwide
allocated costs. The change in the U.S. Postal Service costs resulted
primarily from a change in how certain long-range pension costs were
allocated to it beginning in fiscal year 2004.
Statement of Net Cost
Illustrative Net Cost Information
Year ended Sept. 30 Year ended Sept. 30
(In billions of dollars) 2004 2003
0M fS UT
Gross Earned Net Gross Earned Net
Cost Revenue Cost Cost Revenue Cost
Department of Defense 672.1 22.3 649.8 562.2 12.5 549.7
Department of Health and 583.9 33.4 550.5 542.3 29.7 512.6
Human Services
Social Security 534.9 2.6 532.3 512.6 0.3 512.3
Administration
Department of Veterans 51.1 3.2 47.9 175.7 2.1 173.6
Affairs
Interest on Treasury _ _
securities held by the 158.3 158.3 156.8 156.8
public
U.S. Postal Service 54.0 68.0 (14.0) 81.5 67.6 13.9
Other components 677.7 77.6 600.1 621.8 52.6 569.2
Total 2,732.0 207.1 2,524.9 2,652.9 164.8 2,488.1
0M Gross Cost is the accrual-based total cost of the federal government's
operations for the year. The statement presents gross cost by federal
agency and department from highest to lowest. Also, it includes the cost
of interest on Treasury securities held by the public, which includes
foreign investors.
fS Earned Revenue comes from fees charged for goods and services. The fees
charged for postal services such as stamps, is a well-known example of
earned revenue. Earned revenue shows how much the federal agencies and
departments earn from their operations to cover their gross costs, as
opposed to relying on taxes and borrowing to cover the costs.
UT Net Cost is the portion of the gross cost left after subtracting earned
revenue. The federal government funds the net cost of government from tax
revenue and, as needed, by borrowing.
Statement of Operations and Changes in Net Position
Similar to the income statement of a corporation, the Statement of
Operations and Changes in Net Position shows the financial results of the
federal government's annual operations (tax revenue less net cost). It
also shows the effect these results have on the federal government's net
position- the difference between its assets and liabilities.
An important concept for this statement is the relationship between the
results of operations and the Balance Sheet. The financial results of the
federal government's operations should be directly reflected in the values
of its assets and liabilities, which determine the federal government's
net financial position. For example, a net operating cost of $500 billion
also reduces the federal government's net position by $500 billion.
However, unexplained differences between the net operating cost and the
changes in net position have been reported in the CFR. The federal
government's Statement of Operations and Changes in Net Position has
included these unexplained differences as "Unreconciled transactions
affecting the change in net position" (a net amount of $3.4 billion for
fiscal year 2004).
Adjustments to beginning balances, shown as a change in accounting
principle and prior period adjustments in the financial statements, may
also affect the federal government's net position. Adjustments result from
corrections of significant errors in the financial statements of prior
years or the effect of using a new or different accounting principle. Such
adjustments are reflected in the beginning net position. The note
explaining adjustments on the fiscal year 2003 Statement of Operations and
Changes in Net Position shows that about $383 billion of the approximately
$394 billion of adjustments was due to a change in accounting principle
that eliminated the category of national defense property, plant, and
equipment as stewardship information, and included such assets on the
Balance Sheet.
Readers can use information from this statement to identify such things as
o how much tax revenue the federal government generated in total and
from its various categories of taxes,
o the extent to which tax revenue covered the federal government's net
cost, and
o whether the financial status of the federal government-its net
position-has improved or deteriorated from the prior year.
For example, about $1.5 trillion (approximately 79 percent) of the federal
government's 2004 reported tax revenue came from individual taxpayers.
Also, the federal government's 2004 reported net cost exceeded its tax
revenue, culminating in a net operating cost for 2004 of about $615.6
billion. Moreover, the reported net operating costs for fiscal years 2004
and 2003-about $615.6 billion and $667.6 billion, respectively-together
decreased the federal government's net position by almost $1.3 trillion.
Statement of Operations and Changes in Net Position
Illustrative Information on Operations and Changes in Net Position
(In billions of dollars)
(Operations)
fS Revenue
Individual income tax and tax withholdings Corporate and other taxes and
miscellaneous revenuesTotal Revenue
UT Net Cost of Government Operations
Unreconciled transactions affecting the change in net position
0M Net Operating Cost (Results of Operations)
(Changes in Net Position)
Db Net Position, Beginning of Period
Adjustments to beginning balances Results of Operations
Db Net Position, End of Period
Years ended Sept. 30
2004 2003
1,512.3 1,481.3
400.4 314.7
1,912.7 1,796.0
(2,524.9) (2,488.1)
(3.4) 24.5
(615.6) (667.6)
(7,094.2) (6,820.2)
_ 393.6
(615.6) (667.6)
(7,709.8) (7,094.2)
fS Revenue primarily comes from federal income tax collections, which
includes taxes earmarked for Social Security and Medicare.
UT Net Cost of Government Operations is the net cost from the Statement of
Net Cost.
0M Net Operating Cost is the financial Results of Operations-the
difference between the tax revenue and the net cost of government
operations plus the net amount of any unreconciled transactions affecting
the change in net position.
Db Net Position is the difference between the assets and liabilities
reported on the Balance Sheet.
Reconciliation of Net Operating Revenue (or Cost) and Unified Budget Surplus (or
Deficit)
This statement is intended to demonstrate the federal government's
accountability to the budget by reconciling its accrual-based net
operating results to its cash-based "unified budget" results. The term
unified budget refers to the budget compilation that includes the full
range of federal activities, both "on-budget" and "off-budget" amounts. By
law, Social Security's and the Postal Service's activities are considered
off-budget. On-budget programs and costs are those not excluded from the
budget by law. The approximate $412 billion fiscal year 2004 unified
budget deficit shown on this statement consists of about $567 billion
on-budget deficit and approximately $155 billion off-budget surplus. The
off-budget surplus consists mostly of surplus revenue that the federal
government borrowed from the Social Security trust funds (about $151
billion for fiscal year 2004) to finance the federal government's current
operations. Of the Social Security trust funds' $151 billion fiscal year
2004 surplus, about $65 billion came from cash receipts and about $86
billion came from intragovernmental interest.
Readers can use information from this statement to identify such things as
o major differences between the net operating cost and unified budget
deficit,
o how much of the federal government's operating cost was attributable
to the depreciation of its assets, and
o how much the federal government spent on capitalized fixed assets.
A major difference between the two bases of accounting for fiscal year
2004 is that changes in accrued expenses related to employee and veteran
benefits, which totaled about $182 billion, are included in the net
operating cost but not in the budget. In this statement, accrued benefit
expenses are shown as an increase in liabilities for employee and veteran
benefits. Also, the federal government reported about $89.9 billion for
depreciation expense for fiscal year 2004, which is included in the net
operating cost but not in the budget. In addition, the amount identified
on this statement for the purchase of capitalized fixed assets for fiscal
year 2004 totaled about $112.1 billion, consisting of approximately $83.2
billion for the Department of Defense and about $28.9 billion for civilian
agencies.
Reconciliation of Net Operating Revenue (or Cost) and Unified Budget Surplus (or
Deficit)
Illustrative Reconciliation of Net Operating Cost and Unified Budget
Deficit
Years ended Sept. 30
(In billions of dollars)
2004 2003
0M Net Operating Cost (Results of Operations) (615.6) (667.6)
fS Components of Net Operating Cost Not Part of the Budget Deficit
Increase in liabilities for employee and veteran benefits 182.1 290.6
Decrease in environmental liabilities (0.7) (23.1) Depreciation expense
89.9 71.2
Other 34.2 47.1
UT Components of the Budget Deficit Not Part of the Net Operating Cost
Cash outlays for capitalized fixed assets (112.1) (102.0) Other 9.9 9.0
The Unified Budget Deficit (412.3) (374.8)
0M The Net Operating Cost comes from the Statement of Operations and
Changes in Net Position. It primarily represents the difference between
the federal government's tax revenue and expenses.
fS Components of Net Operating Cost Not Part of the Budget Deficit are
mostly current-year expenses under accrual accounting that do not involve
current-year cash outlays. Increases in liabilities such as employee and
veteran benefits and depreciation expense are recognized as current-year
operating expenses under accrual accounting, but not in the budget.
UT Components of the Budget Deficit Not Part of Net Operating Cost consist
mostly of current-year cash outlays for transactions that do not involve
current-year expenses, such as outlays to purchase buildings and equipment
that the federal government capitalizes (records on its Balance Sheet as
assets) and depreciates (expenses) as they are used in operations. The
outlays to purchase these assets increase the unified budget deficit but
not the current net operating cost.
The Unified Budget Deficit represents the difference between cash
receipts (primarily from taxes) and cash outlays for the year for all
programs, on- and off-budget. As previously noted, it includes the surplus
cash receipts earmarked for the Social Security trust funds, about $65
billion for fiscal year 2004.
Statement of Changes in Cash Balance from Unified Budget and Other Activities
Since the federal government operates its budget principally on a cash
basis, the primary purpose of the Statement of Changes in Cash Balance
from Unified Budget and Other Activities is to report how the annual
unified budget surplus or deficit relates to the federal government's
borrowing (debt held by the public) and changes in operating cash. It
explains why a unified budget surplus or deficit normally would not result
in an equal change in the government's operating cash balance.
Readers can use the information provided in this statement to identify
o increases in federal borrowing as a result of the federal government
spending more than it collected in taxes,
o decreases in federal borrowing as a result of a budget surplus,
o changes in the government's operating cash balance, and
o how much cash the federal government spent to pay interest on debt
held by the public.
For example, for fiscal year 2004, the federal government reported that it
increased its net borrowings from the public by about $379.7 billion to
help finance the approximately $412.3 billion fiscal year 2004 unified
budget deficit. It did this by borrowing about $4,759.2 billion from the
public and paying off debts of approximately $4,379.5 billion. The federal
government also reported that it used about $144.7 billion of its cash to
pay interest on debt held by the public.
Statement of Changes in Cash Balance from Unified Budget and Other Activities
Illustrative Information on Changes in Cash Balance from Unified Budget
and Other Activities
Years ended Sept. 30
(In billions of dollars)
2004 2003 Unified Budget Deficit (412.3) (374.8) Adjustments for Noncash
Outlays Included
in the Budget
fS Interest accrued by Treasury on debt held by the public 145.6 143.3
Subsidy expense (6.6) (11.8)
Subtotal 139.0 131.5
Items Affecting the Cash Balance Not Included in the Budget
Net transactions from financing activity
UT
Borrowings from the public 4,759.2 4,289.1
UT
Repayment of debt held by the public (4,379.5) (3,914.7)
Subtotal 379.7 374.4 Net transactions from monetary and other activity
fS Interest paid by Treasury on debt held by the public
Other Subtotal
(144.7) (144.4)
18.5 3.2 (126.2) (141.2)
Decrease in Operating Cash Balance (19.8) (10.1) Operating Cash Balance,
Beginning of Period 50.8 60.9
Operating Cash Balance, End of Period 31.0 50.8
fS An exception to the cash-based budget is the reporting of accrued
interest on debt held by the public. To calculate the change in operating
cash balance, interest for the unified budget results is adjusted to
include only the cash outlays. Specifically, the amount reported for
interest accrued by Treasury on debt held by the public is added to the
unified budget results and the amount reported for interest paid by
Treasury on debt held by the public is subtracted from the unified budget
results.
UT The major financing activities include borrowings from the public and
repayment of debt held by the public. Net borrowings provide operating
cash needed to finance the budget deficit.
Balance Sheet
The Balance Sheet shows an end-of-year view of the federal government's
overall financial position, its assets (what it owns), its liabilities
(what it owes), and the difference between the two (its net position). It
is important to note that the Balance Sheet excludes the sovereign powers
of the federal government to tax, regulate commerce, and set monetary
policy, as well as certain nonoperational resources, including national
parks and natural resources, over which the federal government is a
steward. In addition, the federal government's responsibilities are much
broader than the liabilities reported on the Balance Sheet, including the
potential commitments related to and the impact of social insurance
programs such as Social Security and Medicare over the long term. These
resources and responsibilities are described in the Stewardship section of
the CFR.
Readers can use information from this statement to identify such things as
o the makeup of the federal government's assets and liabilities,
o which liabilities increased the most, and
o whether the federal government has a positive net position-more assets
than liabilities- or a negative net position-more liabilities than
assets.
For example, the two largest liabilities are (1) about $4.3 trillion of
debt held by the public, from whom the federal government borrowed money
to pay for past deficits, and (2) about $4.1 trillion of pension and
benefits owed to civilian employees and military personnel. These two
items also account for the largest increases in liabilities for fiscal
year 2004: federal debt held by the public and accrued interest increased
by about $384.5 billion, and federal employee and veteran benefits payable
increased by approximately $182.1 billion. Also, for fiscal year 2004, the
federal government's negative net position was about $7.7 trillion.
Other Considerations
Certain federal trust funds, such as the Social Security trust funds, have
been running surpluses, which are loaned to the Treasury and reduce the
current need for the federal government to borrow from the public to
finance current operations. The transactions relating to the use of such
surpluses are eliminated from the federal government's Balance Sheet
because, in effect, they represent loans from one part of the government
to another. Importantly, these intragovernmental debt holdings, which are
not shown on the Balance Sheet, also constitute future obligations of the
Treasury because the Treasury must provide cash to redeem these securities
in order for the trust funds to pay benefits or other obligations as they
come due.
Balance Sheet
Illustrative Balance Sheet Information
(In billions of dollars)
Assets
fS
Cash and other monetary assets
Loans receivable, net Inventories and related property, net Property,
plant, and equipment, net Other assets
Total assets
UT Liabilities
Federal debt securities held by the public and accrued interest Federal
employee and veteran benefits payable Environmental and disposal
liabilities Other liabilities
Total liabilities
0M Commitments and Contingencies
Db Net Position
Total liabilities and net position
As of Sept. 30
2004 2003
97.0 119.6
220.9 221.1
261.5 252.7
652.7 658.2
165.2 153.8
1,397.3 1,405.4
4,329.4 3,944.9
4,062.1 3,880.0
249.2 249.9
466.4 424.8
9,107.1 8,499.6
(7,709.8) (7,094.2)
1,397.3 1,405.4
fS Assets are the operational resources the federal government has
available as of the end of the fiscal year. The largest category-property,
plant, and equipment, net-includes land and buildings and the federal
government's military equipment, such as ships, aircraft, and tanks, after
subtracting accumulated depreciation.
UT Liabilities are the financial responsibilities of the federal
government as of the end of the fiscal year. In addition to federal debt
securities, liabilities include federal employee and veteran benefits
payable-the amount the federal government estimates that it owes its
military and civilian employees and veterans under its life and health
insurance and pension plans.
0M Not all Commitments and Contingencies of the federal government require
recognition as liabilities on the Balance Sheet. Commitments that require
the future use of resources, such as long-term leases, as well as loss
contingencies that are assessed to be at least reasonably possible, are
disclosed in the notes to the financial statements.
Db Net Position is the difference between the federal government's assets
and liabilities.
Statement
Reconciliation of Changes in
Statement of of Net Operating Cash Balance
Operations Revenue(or Cost) from Unified Statement
and Changes and Unified Budget and of Social
Statement in Net Budget Surplus Other Balance Insurance
of Net Cost Position (or Deficit) Activities Sheet
Statement of Social Insurance (Stewardship Information)
The Statement of Social Insurance shows how much more money would be
needed, in today's dollars, for the federal government's social insurance
programs to continue to operate over the long term as they are structured
today. The estimates presented in these statements, while unaudited, are
based on actuarial projections of persons who are or will be participants
in these programs. Also, the estimates exclude related trust fund
balances, primarily the special U.S. Treasury securities held by the trust
funds. These securities are guaranteed for principal and interest by the
full faith and credit of the U.S. government and, as of September 30,
2004, totaled about $1.9 trillion, of which the Social Security trust
funds held about $1.6 trillion.
Readers can use information from this statement to identify such things as
o the total amount of projected additional resources needed today to
fully fund the major social insurance programs over the projected
period,
o which social insurance programs project the largest need for
additional resources, and
o how much the projected needs for additional resources have changed
from prior years.
For example, at the beginning of 2004, the projected amounts needed for
the next 75 years, the sum of the lines called the present value of
resources needed, totaled about $33.4 trillion. The largest projected need
was about $11.4 trillion to sustain Federal Supplementary Medical
Insurance, Medicare Part B. Also, the present value of the projected
long-term resources needed for Social Security and Medicare Parts A and B
have almost doubled over the past 5 years from about $13.0 trillion for
2000 to about $25.2 trillion for 2004. In addition, the present value of
the projected long-term resources needed for the next 75 years for the
federal government's new commitments for prescription drug benefits is
about $8.1 trillion.
Estimated amounts shown as needed over an infinite period, while not shown
on the Statement of Social Insurance, are also presented in the
Stewardship section of the CFR. The present value of the resources needed
for programs noted above totaled about $74 trillion based on an infinite
time period.
Statement of Social Insurance (Stewardship Information)
Illustrative Social Insurance Information
Present Value of Long-Range (75 Years, As of January 1 Except Black Lung)
Actuarial Projections
(In billions of dollars) 2004 2003 2002 2001 2000
0M Federal Old-Age, Survivors and Disability Insurance (Social Security)
Contributions and earmarked taxes Benefit payments Present Value of
Resources Needed
27,699 26,148 25,289 23,693 21,689 32,928 31,075 29,851 27,900 25,534
5,229 4,927 4,562 4,207 3,845
fS Federal Hospital Insurance (Medicare Part A)
Contributions and earmarked taxes Benefit payments Present Value of
Resources Needed
8,976 8,411 8,286 7,756 7,033 17,468 14,577 13,412 12,486 9,732 8,492
6,166 5,126 4,730 2,699
UT Federal Supplementary Medical Insurance (Medicare Part B)
Premiums Benefit payments Present Value of Resources Needed
3,889 3,120 2,708 2,696 2,165 15,329 12,773 10,833 10,780 8,659 11,440
9,653 8,125 8,084 6,494
UT Federal Supplementary Medical Insurance (Medicare Part D)
Premiums Benefit payments Present Value of Resources Needed
Other - Present Value of Resources Needed
2,651 10,770 8,119
83 79 7473(4)
Total 33,363 20,825 17,887 17,094 13,034
0M Social Security provides Federal Old-Age and Survivors Insurance and
Disability Insurance. Both programs are financed by taxes on employees and
employers, including the self-employed, and are administered by the Social
Security Administration.
fS Federal Hospital Insurance (Medicare Part A) covers inpatient hospital
and related care. It is financed primarily by a payroll tax on employers
and employees, including the self-employed, and a portion of the income
taxes paid on Social Security benefits. Federal Hospital Insurance is
administered by the Department of Health and Human Services.
UT
Federal Supplementary Medical Insurance, which also is
administered by the Department of Health and Human Services,
consists of two parts, called Medicare Part B and Medicare Part
D.
Medicare Part B covers hospital outpatient services, physicians'
services, and other assorted products and services. Part D covers
the federal government's prescription drug program. Both parts are
financed primarily by transfers from the general fund of the
Treasury and premiums from participants.
Other Stewardship Information
The stewardship section of the CFR also provides the reader with unaudited
information about assets that the federal government holds for the benefit
of the nation, called stewardship assets. Stewardship assets are not used
in federal government operations and, therefore, are not included on the
Balance Sheet. These assets include
o natural heritage assets, such as national parks, national forests, and
wilderness areas;
o collection-type heritage assets, including museums, archives, and
libraries such as the Smithsonian Institution, National Archives, and
Library of Congress; and
o cultural heritage assets, including monuments and memorials such as
the Washington Monument and Jefferson Memorial in Washington, D.C.
The CFR provides information about these assets in terms of physical
quantities, such as millions of acres of land; miles of rivers; numbers of
buildings, monuments, memorials, and archeological and historical sites;
and items in national library and museum collections.
The stewardship section also describes how much the federal government
spent for programs that provide long-term benefits to the public. These
programs include grants for construction and major renovation of state and
local government property, such as bridges and roads, and grants for
education and training. The stewardship section also describes the
expenses the federal government has incurred in its basic and applied
research and in development programs.
Readers can use information from this section to identify such things as
o how many acres of stewardship land the federal government owns and
whether the number of acres has increased or decreased in total and by
category;
o how much the federal government spent on nonfederal physical property
such as state and local bridges and roads, and whether such spending
has increased or decreased; and
o how much the federal government spent on educating and training the
public and whether such spending has increased or decreased.
For example, the illustrative table below on stewardship land reports the
number of acres of stewardship land held by the federal government in
various categories for fiscal years 2003 and 2004. It shows, for instance,
that the Bureau of Land Management, with about 261.8 million acres, is
responsible for approximately 40 percent of the federal government's
stewardship land. The table on stewardship investments reports annual
expenditures from fiscal year 2000 through fiscal year 2004. It includes
things that the government considers investments in the future of the
nation, such as public education and training, under investments in human
capital, and various categories of research and development.
Other Stewardship Information
Illustrative Stewardship Information
Stewardship Land as of September 30
Agency Predominant use Millions of Acres Percentage
2004 2003 2004 2003
Bureau of Land Management Public land 261.8 262.0 40.5 39.9
U.S. Forest Service National forest 192.9 192.5 29.8 29.3
system
U.S. Fish and Wildlife Service National 90.3 95.9 14.0 14.6
wildlife refuge system
National Park Service National park 79.0 84.2 12.2 12.8
system
Department of Defense Defense facilities 16.7 16.7 2.6 2.5
Bureau of Reclamation Water, power, and 5.7 5.9 646.4 657.2 0.9 0.9 100.0
recreationTotal acres 100.0
Stewardship Investments for the Years Ended September 30
Restated Restated Restated Restated
Fiscal Fiscal Fiscal Fiscal Fiscal
Year Year Year Year Year
(In billions of dollars) 2004 2003 2002 2001 2000
Investments in nonfederal 45.3 46.8 47.6 37.9 38.9
physical property
Investments in human capital 77.1 71.3 54.7 44.3 36.8
Research and development
Investments in basic research 32.9 24.6 22.8 18.9 18.2
Investments in applied research 23.9 21.5 21.6 17.5 16.3
Investments in development 60.2 48.3 44.4 39.4 38.1
Total investments 239.4 212.5 191.1 158.0 148.3
Notes to the Financial Statements
The notes to the financial statements are an important source of
information about the financial operations and condition of the federal
government. As stated on the bottom of each of the statements, notes are
considered an integral part of the financial statements. Moreover, most of
the consolidated financial statements contain references to one or more
notes.
The 21 notes to the federal government's fiscal year 2004 consolidated
financial statements provided 36 pages of important and required
disclosures. The notes addressed the following topics:
1. Significant Accounting Policies
2. Cash
3. Accounts Receivable
4. Loans Receivable and Loan Guarantees
5. Taxes Receivable
6. Inventories and Related Property
7. Property, Plant, and Equipment
1. Other Assets
2. Accounts Payable
3. Debt Held by the Public
4. Federal Employee and Veteran Benefits Payable
5. Environmental and Disposal Liabilities
6. Benefits Due and Payable
7. Other Liabilities
1. Collections and Refunds of Federal Revenue
2. Unreconciled Transactions Affecting the Change in Net Position
3. Change in Accounting Principle and Prior Period Adjustments
4. Contingencies
5. Commitments
6. Dedicated Collections
7. Indian Trust Funds
The first note to the federal government's consolidated statements
summarizes the significant accounting policies used in accounting for and
reporting on the federal government's consolidated financial information.
Other notes provide important disclosures and details about the items on
the statements. For example, the Federal Employee and Veteran Benefits
Payable note provides details about the composition of benefits payable to
federal civilian employees, military personnel, and disabled veterans,
which exceeded $4 trillion for fiscal year 2004. Because this estimated
amount is based on actuarial calculations, the note also identifies the
significant long-term assumptions used in determining these liabilities
and related expenses. In addition, the note discloses that the Department
of Veterans Affairs (VA) provides medical care to veterans on an "as
available" basis,
Notes to the Financial Statements
subject to the limits of the annual appropriations. VA does not report an
accrued long-term actuarial liability for this medical care, but
recognizes the medical care expenses in the period the services are
provided. For the time period 2000 through 2004, the note states that the
average medical cost per year was $22 billion. Further, the note discloses
that VA provides pension benefits to certain veterans and their dependents
based on annual eligibility reviews. Although VA does not recognize a
long-term actuarial liability for these pension benefits, VA discloses the
projected amounts of future payments for pension benefits, $102.2 billion
as of September 30, 2004, and $102.7 billion as of September 30, 2003.
Readers can use this information to learn which benefit programs are
primarily responsible for changes in the federal government's liability to
its civilian employees, military personnel, and veterans and thus to
better understand factors likely to drive future federal disbursements.
The table below is the summary table from the fiscal year 2004 note for
Federal Employee and Veteran Benefits Payable, which shows how much the
federal government estimates it owes civilian and military employees in
various categories of benefits. The full note also provides additional
tables depicting the details of the changes in the pension and
post-retirement health benefits categories from fiscal year 2003 to fiscal
year 2004 for both civilian and military employees, and discusses the
various categories.
Illustrative Note Information
Federal Employee and Veteran Benefits Payable as of
September 30
Civilian Military Total
(In billions of dollars) 2004 2003 2004 2003 2004 2003
Pension and accrued benefits 1,230.2 1,190.4 837.7 739.0 2,067.9 1,929.4
Post-retirement health benefits 266.1 244.4 725.3 683.0 991.4 927.4
Veteran compensation N/A N/A 924.8 954.8 924.8 954.8
and burial benefits
Liability for other benefits 54.4 47.2 23.6 21.2 78.0 68.4
Total 1,550.7 1,482.0 2,511.4 2,398.0 4,062.1 3,880.0
Management's Government Notes to the Discussion and Accountability
Financial Stewardship Financial Analysis Office Report Statements
Information Statements
Supplemental Information
The supplemental information section, the final section of the CFR, is
intended to provide additional information about the federal government's
finances that may affect future operations or help taxpayers better
understand how the federal tax burden is distributed. The supplemental
information is not required to be audited.
Readers can use information from this section to identify such things as
o the estimated costs of maintenance needed to bring property owned by
the federal government to an acceptable condition, called deferred
maintenance (e.g., for fiscal year 2004, the estimated cost of
deferred maintenance on such property ranged from about $13.4 billion
to approximately $25.4 billion);
o the amount of funds authorized by Congress that have not been spent or
committed for the year, called unexpended budget authority;
o the estimated amount of income tax refunds that may be paid on
taxpayers' claims against the federal government (e.g., the federal
government reported for fiscal year 2004, that it estimated $8.4
billion may be paid on taxpayers' claims); and
o the amount of federal taxes paid by groups of individuals by income
level (e.g., individuals with adjusted gross incomes over $200,000
paid about 40 percent of the individual federal income taxes collected
for fiscal year 2002).
The following table is taken from the supplemental information section of
the CFR. It is intended to provide additional information about individual
taxable income and taxes paid. Although the data are from the 2002 tax
year, the information nonetheless helps readers understand how the federal
tax burden is distributed based on adjusted gross income.
Supplemental Information
Illustrative Supplemental Information
Individual Income Tax Returns for Tax Year
2002
Income
Number Average Average tax as a
Adjusted gross of taxable Total AGI per income tax percentage
income (AGI) returns AGI income tax return per return of AGI
(in thousands) (dollars in (dollars in (in whole (in whole
millions) millions) dollars) dollars)
Under $15,000 38,133 211,417 3,942 5,544 103 1.9%
$15,000 to under $30,000 29,964 657,946 21,958 922 4.2%
27,621
$30,000 to under $50,000 24,556 959,677 39,081 2,882 7.4%
70,761
$50,000 to under $100,000 26,687 1,864,379 69,862 7,345 10.5%
196,005
$100,000 to under $200,000 8,442 1,112,924 131,834 20,837 15.8%
175,904
$200,000 or more 2,419 1,233,062 323,558 509,695 133,745 26.2%
Total 130,201 6,039,405 797,791
How the Federal Government's Financial Statements Relate to One Another
The federal government's consolidated financial statements consist of five
interrelated statements. The chart on the next page provides an overview
of the five statements and how selected components of those statements are
related.
UT The total operating expense, called Net Cost, presented in the
Statement of Net Cost is used in the Statement of Operations and Changes
in Net Position to determine whether the federal government's financial
operations (revenue less expenses) resulted in net operating cost or net
operating revenue for the year.
0M The operating result from the Statement of Operations and Changes in
Net Position explains the change in the federal government's net position.
It is also the beginning balance in the Reconciliation of Net Operating
Revenue (or Cost) and Unified Budget Surplus (or Deficit).
Db The Net Position from the Statement of Operations and Changes in Net
Position agrees to the Net Position on the Balance Sheet, which is based
on the difference between the federal government's reported assets and
liabilities.
The unified budget result is used in the Reconciliation of Net
Operating Revenue (or Cost) and Unified Budget Surplus (or Deficit) and
the Statement of Changes in Cash Balance from Unified Budget and Other
Activities to show how the federal government's financial operations and
changes in operating cash are connected to the unified budget results.
fS The federal government's ending operating cash balance from the
Statement of Changes in Cash Balance from Unified Budget and Other
Activities is the same as the operating cash component of the "Cash and
other monetary assets" line on the Balance Sheet. The operating cash
amount can be found in the Balance Sheet note for Cash and other monetary
assets.
How the Federal Government's FinancialStatements Relate to One Another
A Statement ofSocial Insurancewill be included in the basic set offi
nancial statements beginning in fiscal year 2006.
Balance Sheet
Total Assets (-) Total Liabilities
Source: GAO.
*** End of document. ***