from the secretary of the treasury...

STATEMENT OF THE

SECRETARY OF THE TREASURY

The Department of the Treasury is pleased to present these prototype

Consolidated Financial Statements (CFS), an annual effort begun more than

two decades ago to apply the principles of business accounting to the business

of government. The statements for fiscal year 1996 were prepared following

the guidance set forth in OMB Bulletin 97-01 entitled “Form and Content of

Agency Financial Statements.” This will be the last set of unaudited

prototype statements. Next year, the CFS for fiscal year 1997 will be the first

set of audited financial statements for the United States Government in

compliance with the Government Management Reform Act of 1994. This will

move us further in the direction of improving the quality of financial

information in the federal government.

The Government Management Reform Act of 1994 mandated that the 24

major executive agencies produce audited financial statements for fiscal year

1996, and that the Treasury produce the first audited Consolidated Financial

Statements covering fiscal year 1997.

I expect to see continued progress in the area of quality improvement in

financial statements. Decision makers need more useful and reliable

information to evaluate financial and program performance. We intend to

make these consolidated statements more useful to you in the years ahead as

improvements are made in the quality, form and content of agency financial

statements.

Robert E. Rubin

cfs statement 1

 
from the comptroller general...

Comptroller General

of the United States

Washington, D.C. 20548

May 21, 1997

Fiscal year 1996 marked a major milestone for federal management. For the first

time in our nation’s history, the 24 largest departments and agencies prepared

financial statements covering their entire operations, and those statements were

subjected to independent audits. This mandate finally puts the federal government

on a par with the private sector and state and local governments, which for years

have been required to have audited financial statements.

These annual audited financial statements—required by the Government

Management Reform Act (GMRA) of 1994, which expanded the Chief Financial

Officers Act of 1990—are an essential step forward in identifying and addressing

needed improvements in controls and generating critical data to assess the

government’s performance. While certain federal agencies received an unqualified

audit opinion on their fiscal year 1996 statements, this positive certification is still

not the norm. Continued progress will be required for agencies to routinely produce

reliable data and the type of cost and performance information needed to support

broader reforms, such as the Government Performance and Results Act.

Reforms unfolding in coming years will continue to stimulate essential

improvements. GMRA established the requirement that major federal agencies

annually prepare agencywide financial statements and have them audited. It also

required, beginning with fiscal year 1997, that the Department of the Treasury

prepare annual consolidated financial statements for the government and that the

General Accounting Office (GAO) audit this overall scorecard on our national

government’s financial status and stewardship. These audited financial statements

impose management discipline and help produce reliable information for

decisionmakers. Fiscal year 1996 will be the last year for these prototype

statements, which have limited usefulness and reliability. Moreover, full

implementation of reporting concepts and accounting standards developed by the

Federal Accounting Standards Advisory Board—created by the Office of

Management and Budget, Treasury, and GAO—will occur in fiscal years 1997 and

1998. Additionally, fiscal year 1997 will usher in the new requirements of the

Federal Financial Management Improvement Act of 1996, which will help ensure

greater attention to making much needed improvements in underlying financial

management systems.

We are continuing to work with the executive branch and the Congress to make all

these reforms a reality. Only then will there be full accountability to the American

public.

James Hinchman

Acting Comptroller General

2 statement cfs

 
Economic and Budget Results for Fiscal 1996

ECONOMIC GROWTH PICKED UP SLIGHTLY

in fiscal 1996. The rate of growth was in

line with steady long-term trends that are

consistent with low inflation. Job growth

continued through the fiscal year, with 2.4

million new jobs added. The unemployment rate remained within a very low

5.2 percent to 5.7 percent band. Inflation

was well contained, with the underlying

rate of inflation dropping over the fiscal

year to its lowest reading since 1965. The

Federal budget deficit continued to fall, declining by $57 billion in fiscal 1996 for a

total drop of $183 billion over the past 4

fiscal years.

The Economy in Fiscal 1996

Real gross domestic product (GDP)

grew by 2.2 percent across the four quarters of fiscal 1996 (which encompasses the

fourth quarter of calendar 1995 through

the third quarter of calendar 1996). This

was a slight increase from the 2.0 percent

recorded in the previous fiscal year, but below the rapid rate of growth over the four

quarters of fiscal 1994, when GDP expanded by 3.9 percent. That rate of expansion had led to increased concerns about a

possible speed-up in the rate of inflation,

prompting the Federal Reserve Board to

tighten monetary policy during the course

of fiscal 1994 and on into fiscal 1995. As

growth slowed and inflation fears ebbed,

the Federal Reserve Board eased monetary

policy at the end of fiscal 1995 and again

in fiscal 1996. Growth had moderated to

just a 0.3 percent annual rate in the first

quarter of fiscal 1996, but by the third

quarter of the fiscal year was back up to a

4.7 percent pace. Growth over the four

quarters, as noted, was 2.2 percent.

Among the various sectors of the economy, consumer spending (which accounts

for about two-thirds of real GDP) increased at a moderate 2.1 percent rate in

fiscal 1996, a bit slower than the 2.4 percent rise in the prior fiscal year. Business

investment spending rose by 8.7 percent

over the fiscal year, led by continued

strong gains in capital spending on equipment. Residential construction recovered

from a 3.0 decline in the previous fiscal

year, rising by 5.9 percent (in real terms)

over the four quarters of fiscal 1996 as the

housing market improved. Holding growth

down in fiscal 1996 was deterioration in

the real net export balance as accelerating

economic growth drew in imports at a

faster pace than the rate of growth in exports. The real net export deficit widened

by $36 billion over the year, but was a relatively moderate 2.0 percent of GDP.

Employment growth proceeded at a

rapid pace in fiscal 1996, with 2.4 million

new jobs added, a little less than the 2.6

million added in fiscal 1995. Most of the

new jobs were in the private service-producing sector, with especially strong

growth in retail trade and in business,

health, and management services. Employment in manufacturing, in contrast, decfs discussion and analysis 3
clined over the fiscal year. The unemployment rate stayed within a very narrow

range of 5.2 percent to 5.7 percent over the

course of fiscal 1996, the lowest rates of

unemployment in 6 years.

Despite healthy economic growth and

very low rates of unemployment, broad

measures of inflation remained very subdued in fiscal 1996. There was some pick

up in energy prices over the course of the

year, contributing to an acceleration in consumer prices to 3.1 percent from 2.5 percent in fiscal 1995, but excluding the

volatile energy and food components, consumer prices were very well behaved. The

“core” rate of inflation dropped to 2.6 percent in fiscal 1996, down from 3.0 percent

over the twelve months of fiscal 1995 and

the slowest rate of underlying consumer

price inflation since 1965.

Budget Results

The Federal budget deficit narrowed significantly in fiscal 1996. The deficit declined by $56.6 billion to $107.3 billion,

the lowest in 15 years. After reaching an

all-time high of $290.4 billion in fiscal

1992, the deficit has been cut by almost

two-thirds over the past 4 years, or by a total of $183.1 billion. As a share of GDP,

the deficit fell from 4.7 percent in fiscal

1992 to 1.4 percent in fiscal 1996, the lowest share since fiscal 1974.

The large improvement over the last 3

years resulted partly from passage of the

President’s Economic Plan in 1993 (the

Omnibus Budget Reconciliation Act of

1993) and partly from the speed-up in economic growth since 1992. That figure was

about evenly split between revenue increases and curbs on growth of spending.

Largely because the economy has performed even better than expected, however, it is now projected that the plan will

cut the1994 through 1998 deficits by almost twice as much.

In fiscal 1996, growth of outlays was

held to $44.6 billion, or 2.9 percent. That

figure was held down a bit by a timing

quirk in the calendar which resulted in one

less payment date in fiscal 1996 for selected categories of pay. Excluding the timing difference, growth of outlays in fiscal

1996 was closer to 3-1/2 percent, still a

very modest increase by recent standards.

Outlays for defense continued to decline in fiscal 1996, down by $6.3 billion

or 2.3 percent. Along with lower defense

spending, budget balance was also assisted

by slower growth in most other major

spending categories. Net interest payments

only rose by $8.9 billion (3.8 percent) in

fiscal 1996 compared with a jump of over

$29 billion in the previous fiscal year.

Lower interest rates were primarily responsible for the improvement. Growth in Social Security, Medicare, Medicaid grants,

and most other major governmental functions also slowed in fiscal 1996.

Receipts increased by 7.5 percent in fiscal 1996, which was more than 3 percentage points faster than the rise in economic

activity over the fiscal year (as measured

by the nominal value of GDP). Growth of

receipts in 1996 was led by very strong

gains in nonwithheld individual income tax

payments, partly due to special factors and

partly to strong capital gains from the rising stock market. Corporate income tax receipts also grew rapidly as profits

continued to rise.

The deficit had been projected to rise in

fiscal 1997 when the Fiscal Year 1998

Budget was prepared in February, but receipts in fiscal 1997 have exceeded projections as jobs and incomes continued their

rapid growth. As a result, the fiscal 1997

deficit will fall below the level of 1996.

The deficit is expected to diminish further

and the budget balance is projected to be

reached in fiscal 2002.

Office of Economic Policy

May 15, 1997

4 discussion and analysis cfs
Exchange and

Non-Exchange

Revenues and Cost

The graphs on this page and on page 6

show categories of revenues by source and the

Government’s cost by function for fiscal 1996

and 1995. Sources of non-exchange revenues

levied under the Government’s sovereign

power are reported on the cash basis. Sources

of exchange revenues and gross cost by function are reported on the accrual basis.

Sources of

Non-Exchange

Revenues

Sources of

Exchange

Revenues

(All graphs are in billions of dollars.)

cfs discussion and analysis 5
Gross Cost by Function

1

 See ‘‘Gross Costs’’ column in the United States Government Consolidated Statement of Net Cost

on page 15.

2

 Does not include interest on investments held by Government agencies.

6 discussion and analysis cfs
Major Categories of

Assets as of

September 30, 1996

Assets are resources owned by or owed to

the Federal Government that are available to

pay liabilities or to provide future public services. The chart below is derived from the

Statement of Financial Position (page 12). It

depicts the major categories of assets as of

September 30, 1996, as a percentage of total

assets. The components for each of these

categories are contained in Notes to Financial

Statements.

Total Assets:

$1,724 billion

cfs discussion and analysis 7
Gross Accounts and

Loans Receivable as of

September 30, 1996

The amounts in these graphs were derived from the agencies’ adjusted trial balances (ATB) as reported on the Federal

Agencies’ Centralized Trial-Balance System (FACTS). These gross amounts, less allowances of $14.4 billion and $62.3 billion

for accounts and loans receivable, respectively, are included in the Statement of Financial Position on page 12.

Gross Accounts

Receivable Total:

$59 billion

Gross Loans

Receivable Total:

$189 billion

8 discussion and analysis cfs
Commitments

and Contingencies

For a breakdown of the figures illustrated in these

charts, see Commitments and Contingencies of the

United States Government for the Years Ended September 30, 1996 and 1995, on pages 32 and 33.

Commitments

Total: $405 billion

Contingencies (at face value)

Total: $5,447 billion

cfs discussion and analysis 9
Federal Debt

The following graphs represent different

facets of the net Federal debt, excluding intragovernmental investments. For a breakdown of the Federal debt, see the tables onpages 22 through 24.

Types of

Securities as of

September 30,

1995-1996

(In billions of dollars)

Federal Debt

Held by the

Public, Fiscal

1992-1996

(In billions of dollars)

Interest Expense

for Federal Debt

Held by the

Public, Fiscal

1992-1996

(In billions of dollars)

10 discussion and analysis cfs
consolidated financial statements

The Consolidated Financial Statements (CFS) report on the financial status and activity of the executive, legislative, and judicial

branches of the Federal Government, and include those Government

corporations that are part of the Federal Government. The Government-sponsored enterprises and the Federal Reserve System are excluded. The fiscal year of the U.S. Government ends on September 30.

The consolidated statements presented include:

The Statement of Financial Position, which shows what the

Government owes and owns. See page 12.

The Statement of Net Cost, which portrays the cost of the

Government operation for the year. See page 15.

The Statement of Changes in Net Position, which shows

non-exchange revenues for the year. See page 17.

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

The Statement of Financial Position remains the same, except for

Environmental Liabilities and Taxes Receivable. These line items

were previously included in Other Liabilities and Accounts

Receivable, respectively. See page 12.

Depreciation previously calculated by Treasury has been replaced

with agencies’ actual figures. See page 20.

The Statement of Operations has been replaced by the Statement of

Net Cost (page 15) and the Statement of Changes in Net Position

(page 17).

Expenditures previously reported on a departmental basis are now

reported by functional classification. See page 15.

A new concept for categorizing revenue has been introduced:

Exchange and non-exchange revenues. See pages 13 and 16.

The Reconciliation of the Change in Net Position to the Deficit has

been introduced in the supplemental tables. See page 34.

cfs consolidated financial statements 11
United States Government Consolidated

Statement of Financial Position as of

September 30 (Unaudited) 

(In billions of dollars)

Assets 1996 1995

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

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

Taxes receivable 1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.8 46.2

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

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

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

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

1,723.9 1,689.4

Liabilities and Net Position

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

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

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

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

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

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

6,073.4 5,841.0

Net position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

-4,349.5 -4,151.6

Statement of Financial

Position

This statement shows the operating assets

of the Government that were acquired under

the reporting year and prior year budgets and

which remain available as resources to supply Government goods or satisfy service

needs in the future. It also shows the Government’s operating liabilities, some of which

have not yet been funded by congressional

appropriations. The net position shown in the

statement reflects debt held by the public

plus liabilities resulting from the application

of accrual accounting standards rather than

budgetary accounting concepts.

The Statement of Financial Position does

not include certain values such as stewardship assets, investments, and responsibilities

(refer to the Statement of Federal Financial

Accounting Standard No. 8). Additional information on some of the aforementioned

can be found in Note 14 on Social Security

and Medicare, and in the supplemental schedules regarded as additions to non-Federal

economic resources.

1

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

12 consolidated financial statements cfs
Statement of Net Cost

This statement shows the annual net cost of

Government operations which is funded by

taxes, borrowing, or other means. The statement reflects the cost incurred to carry out the

priorities determined by appropriation acts and

authorizing legislation. The statement contains

two components: (1) the gross cost of Government operations less (2) revenues earned from

the public for goods and services. (See page

15 for the consolidated statement.)

Gross costs

Gross cost includes the full cost of the functions and consist of the direct costs and all

other costs that can be directly traced, assigned on a cause and effect basis, or reasonably allocated to the function.

Exchange revenues

These are revenues that arise when the U.S.

Government provides goods and services to

the public or to another Government entity for

a price. The full amount of exchange revenues

is to be reported on the Statement of Net Cost.

Net costs

Net cost is the difference between a function’s gross cost and its related exchange revenues. This amount represents the net cost of

operations of a function that is funded by

sources other than exchange revenues. The financing sources for net cost of operations are

reported on the Statement of Changes in Net

Position.

Notes to the Statement of Net

Cost

Functions of Government and their cost

The Government has begun to implement a

law to measure performance and results. In arranging data on a functional basis, costs are

classified according to the primary purpose of

the activity. To the extent feasible, this classification is made without regard to agency or organizational distinctions. Classifying each

activity solely in the function defining its most

important purpose----even though many activities serve more than one purpose----permits

adding the cost of each function to obtain the

total cost. 

The objectives of each of the Government’s functions are described below. For additional information about agencies and

departments responsible for these functions,

see their individual financial statements and

the Budget of the United States Government.

National defense

This function includes those programs directly related to the common defense and security of the United States. Coverage includes

compensation and benefits for civilian and

military personnel, development and utilization of weapons systems, and related programs. The areas falling within national

defense’s responsibilities are: military activities, atomic energy defense activities, and defense-related activities.

Education, training, employment, and

social services 

This function includes expenditures to promote extension of knowledge and skills, enhance employment opportunities and to

provide public services. The programs included are: elementary, secondary and vocational education, higher education, research

and general education aids, training and employment, other labor services, and social services.

Health

This function includes those programs that

have as their basic purpose the promotion of

the physical and mental health of the Nation’s

population and the payments for or to persons

for which no current service is rendered (retirement pay). The programs included are: health

care services, health research, education and

training of the health care workforce, consumer and occupational health and safety.

Medicare

This function includes the programs covered by Medicare: hospital insurance and supplementary medical insurance.

 Income security

This function includes general retirement

and disability insurance, Federal employee retirement and disability, unemployment compensation, housing assistance, food and

nutrition assistance, and other income security.

Social Security

This function includes the programs covered by Social Security: Old-age and survivors

insurance and disability insurance, Federal employees retirement and disability, unemployment compensation, public assistance, and

income supplements.

Veterans benefits and services

This function includes programs providing

benefits and services to eligible individuals

with prior military service. The programs included are: income security for veterans, veterans education, training and rehabilitation,

hospital and medical care for veterans, veterans housing, and other veterans benefits and

services.

cfs consolidated financial statements 13
Energy

This function includes those programs designed to promote an adequate supply and

appropriate use of energy to serve the needs

of the economy. Areas within energy include: energy supply, conservation, sciences, emergency energy preparedness,

energy information, and policy and regulation.

Natural resources and environment

This function includes those programs

whose primary purpose is to develop, manage, and maintain the Nation’s natural resources and environment. Activities within

this area include: water resources, conservation and land management, recreational resources, pollution control and abatement,

and other natural resources.

Commerce and housing credit

This function includes the promotion and

regulation of commerce and the housing

credit and thrift insurance industries. The

programs included are: mortgage credit and

thrift insurance, postal service, Federal Financing Bank, and other advancement and

regulation of commerce.

Transportation 

This function includes all the programs

with the primary aim of providing for the

transportation of the general public and/or

their property. The programs included are:

ground transportation, air transportation,

water transportation and other transportation.

Community and regional development

This function includes all broad-based

community, regional, urban and rural renewal and development programs. The programs included are: community

development, area and regional development and disaster relief and insurance.

Under the Federal Emergency Management Agency (FEMA), the Federal Insurance Administration program Federally

sponsored flood insurance coverage to individuals and businesses.

International affairs 

This function includes programs for the

maintenance of peaceful relations, commerce, and travel between the United States

and the remainder of the world. The areas

falling within international affairs are: foreign economic and financial assistance, military assistance, conduct of foreign affairs,

foreign information and exchange activities,

and international financial programs.

General science, space, and

technology

This function includes programs whose

resources are allocated to general science

and basic research, space flight, space science, applications and technology, and supporting space activity.

Agriculture

This function includes those programs

that promote the economic stability of agriculture and the Nation’s capability to maintain and increase agricultural production.

The programs included are: farm income stabilization, and agricultural research and

services. 

Administration of justice

This function includes those programs

designated to provide judicial services, police protection, law enforcement and the promotion of the general maintenance of

domestic order. The programs included are:

Federal law enforcement activities, Federal

litigative and judicial activities, Federal correction activities, and criminal justice assistance.

Interest

Interest costs are the amounts accrued on

Federal securities held by the public. Interest payments are made by the Treasury’s Bureau of Public Debt.

General Government

This function includes the general overhead costs of the Federal Government, including legislative and executive activities,

personnel, and property activities. The programs included are: legislative functions, executive direction and management, central

fiscal operations, general property and records management, central personnel management, and other general Government.

14 consolidated financial statements cfs
The accompanying notes are an integral part of this statement.

United States Government Consolidated Statement of

Net Cost for the Year Ended September 30

(Unaudited) 

(In billions of dollars)

Gross Costs

Exchange

Revenues Net Costs

Costs of Government

Functions 1996 1995 1996 1995 1996 1995

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

Human resources:

Education, training, employment,

and social services . . . . . . . . . . 54.5 82.5 1.6 3.2 52.9 79.3

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

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

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

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

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

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

Physical resources:

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

Natural resources and

environment . . . . . . . . . . . . . . . 29.8 23.8 3.0 2.9 26.8 20.9

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

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

Community and regional

development . . . . . . . . . . . . . . . 8.1 13.7 .9 1.5 7.2 12.2

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

Net interest:

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

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

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

Other functions:

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

General science, space, and

technology. . . . . . . . . . . . . . . . . 16.5 17.9 - .1 16.5 17.8

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

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

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

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

Total . . . . . . . . . . . . . . . . . . . . 

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

cfs consolidated financial statements 15
Statement of Changes in Net

Position

The Statement of Changes in Net Position reports the beginning net position, the

items which caused net position to change

during the reporting period, and the ending

net position. It shows the revenues generated principally by the Government’s sovereign power to tax, levy duties, and assess

fines and penalties, as well as any prior period adjustments that affect the net position.

Net cost of Government operations

Net cost of Government operations is

the cost of operations reported on the Statement of Net Cost. Financing sources from

non-exchange revenues are taxes and other

non-exchange revenues, including donations, which the Federal Government is

able to demand or receive due to its sovereign powers.

Prior period adjustments

Prior period adjustments are limited to

corrections of errors and accounting

changes with retroactive effects that can

either increase or decrease net position depending upon their nature, including adjustments occasioned by the adoption of new

Federal financial accounting standards. Adjustments are included in the calculation of

the net change in cumulative results of operations, rather than as an element of net results for the period. Prior period statements

should not be restated for prior period adjustments.

Net position-beginning of period

The amount is the net position reported

on the prior year’s balance sheet.

Net position-end of period

This amount shall agree with the

amount reported as net position on the current year’s balance sheet.

16 consolidated financial statements cfs
United States Government Consolidated Statement

of Changes in Net Position for the Year Ended

September 30 (Unaudited)

(In billions of dollars)

1996 1995 

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

Less financing sources from non-exchange revenues:

From income taxes:

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

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

From employment taxes and contributions:

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

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

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

From other taxes and Governmental receipts:

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

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

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

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

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

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

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

 109.7

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

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

Net position, end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

-4,349.5 -4,151.6

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

cfs consolidated financial statements 17
notes to financial statements

1. Summary of significant

accounting policies

Principles of consolidation

The ‘‘Consolidated Financial Statements

of the United States Government, Prototype

1996’’ (CFS) were prepared using Federal

agencies’ financial data. Agencies submit

their pre-closing adjusted trial balances under

the Federal Agencies’ Centralized Trial-Balance System (FACTS) to the Financial Management Service electronically, via the

Government On-Line Accounting Link System (GOALS).

The Consolidated Financial Statements report on the financial activity of the legislative, judicial, and executive branches of the

Federal Government, and those Government

corporations that are part of the Federal Government; the Federal Reserve System and the

Government-sponsored enterprises are excluded. The legislative branch provides limited reports voluntarily. The judicial branch

does not provide financial reports to Treasury. 

All significant intragovernmental transactions were eliminated in consolidation.

Basis of accounting

The Secretary of the Treasury, the Director of the Office of Management and Budget

(OMB), and the Comptroller General of the

United States, principals of the Joint Financial Management Improvement Program

(JFMIP), established the Federal Accounting

Standards Advisory Board (FASAB) in October 1990. FASAB recommends accounting

standards to the JFMIP principals for approval. Upon approval, they become effective

on the date specified in the standards published by OMB and GAO.

In March 1991, the JFMIP principals approved the FASAB’s recommendations governing interim accounting standards used in

preparing financial statements for audit. Until

a sufficient set of comprehensive ‘‘generally

accepted accounting principles’’ have been

published by JFMIP principals, the revised

guidance recommends a hierarchy of ‘‘other

comprehensive basis of accounting’’ to be

used for preparing Federal agency financial

statements. The hierarchy is as follows:

1. Individual standards agreed to and published by the JFMIP principals.

2. Form and content requirements included in OMB bulletin 94-01, dated November 16, 1993.

3. Accounting standards contained in an

agency accounting policy, procedures manuals and/or related guidance as of March 29,

1991, so long as they are prevalent practices.

4. Accounting principles published by

authoritative standard-setting bodies and

other sources (1) in the absence of other guidance in the first three parts of this hierarchy,

and (2) if the use of such accounting standards improves the meaningfulness of the financial statements.

To date, FASAB has recommended eight

statements of accounting standards and two

statements of accounting concepts. However,

the majority were not effective for fiscal

1996.

Principal financial statements

The principal statements are unaudited

and consist of the Statements of Financial Position, Net Cost, and Changes in Net Position, and use the accrual basis of accounting

in their presentation. Revenues levied under

the Government’s sovereign power are reported on the cash basis. 

Fiscal year

The fiscal year of the U.S. Government

ends September 30.

2. Cash and other

monetary assets

Cash

The cash reported in the financial statements represents balances from tax collections, customs duties, other revenues, public

debt receipts, foreign currencies, and various

other receipts maintained in accounts at the

Federal Reserve banks and the U.S. Treasury

tax and loan accounts.

Gold

Gold is valued at market for fiscal 1996

and 1995. The market value represents the

price reported for gold on the London fixing,

and is based on 261,702,958.879 and

261,734,796.787 fine troy ounces as of September 30, 1996 and 1995, respectively (as reported in Treasury’s general ledger). The

statutory price of gold is $42.2222 per troy

ounce.

18 notes to financial statements cfs
Special drawing rights

The value of special drawing rights is

based on a weighted average of exchange

rates for the currencies of selected member

countries. The value of a special drawing

right was $1.4394 and $1.5063 as of September 30, 1996 and 1995, respectively.

3. Accounts and loans

receivable

Summary of accounts and loans

receivable due from the public

The Federal Government is the Nation’s

largest source of credit and underwriter of

risk. The Debt Collection Act of 1982 (31

U.S.C. 3719) requires agencies to prepare

Cash and other monetary assets as of

September 30

(In billions of dollars) 1996 1995 

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

Gold (at market value of $379.00 per troy ounce for 1996 and

$385.00 for 1995). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.2 100.5

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

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

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

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

Total cash and other monetary assets . . . . . . . . . . . . . . . . . . . . 

193.4 193.5

and transmit a report summarizing any outstanding receivables on their books.

Agencies are required to submit those reports to the OMB and the Department of

the Treasury. The Federal Government uses

the data in these reports to improve the quality of its debt collection methods.

In 1990, the Credit Reform Act was enacted to improve the Government’s budgeting and management of credit programs.

The primary focus of the Act is to provide

an accurate measure of the long-term costs

of both direct loans and loan guarantees,

and to include these costs at the time of

loan origination. Most direct loans obligated and loan guarantees committed after

September 30, 1991, are reported on the

present value basis.

Accounts and loans receivable as of September 30

Accounts

receivable Loans receivable

(In billions of dollars) 1996 1995 31996 1995

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

Less: Allowance for losses 1

. . . . . . . . . . . . . 14.4 12.7 54.3 61.6

Less: Allowance for subsidy 2 

. . . . . . . . . . . iiiiiii- iiiiiii- 8.0 7.2

Net receivables . . . . . . . . . . . . . . . . . . . . . . 

44.6 41.0 127.1 120.8

1 Allowance for losses represents estimated amount of uncollectable receivables.

2

 Allowance for subsidy represents unamortized credit reform subsidy for direct loans and for defaulted guaranteed loans assumed for

collection by the Federal Government.

3

 Accounts receivable for 1995 are reduced by taxes receivable, which are shown on the next page. The fiscal 1995 figures have been

restated to reflect this change.

cfs notes to financial statements 19
4. Taxes

receivable

The mission of the Internal Revenue Service is

to collect the proper

amount of tax revenue at

the least cost and encourage voluntary compliance with the

Internal Revenue Laws.

Taxes receivable are composed

of receivables, net of allowance for

loss, reported by the IRS for Individual and Corporate income taxes

only. Taxes receivable are presented in the table at right.

5. Inventories and

related properties

Inventories and related properties consist of several categories. Inventories held for sale are tangible

personal property that is either (a)

being held for sale, (b) in the process of production for sale, or (c) to

be consumed in the production of

goods for sale or in the provision of

services for a fee. Operating materials and supplies are tangible personal property to be consumed in

normal operation. Stockpiled materials are strategic and critical materials held due to statutory

requirements or for use in national

defense, conservation, or national

emergencies. Other includes forfeited property, foreclosed property, commodities and other. For

amounts see the table at right.

Agencies use a wide variety of

methods to value inventories (e.g.

first-in-first-out, last-in-first-out,

latest acquisition cost, and

weighted or moving averages). The

Department of Defense uses the latest acquisition method to value its inventories. The Department of Energy uses the lower of cost or

market to value its inventories.

6. Property, plant, and

equipment

Property, plant, and equipment include

land, buildings, structures and facilities, ships

and service craft, industrial equipment in

plant, and construction-in-progress. It also includes automated data processing software,

assets under capital lease, and other fixed assets that have been capitalized. 

Land purchased by the Federal Government is valued at historical cost. The land acquired through donation, exchange, bequest,

forfeiture, or judicial process is estimated at

amounts the Government would have paid if

purchased at the date of acquisition. No value

has been assigned to the Outer Continental

Shelf and other offshore lands. More than

677.8 million acres of public domain land

have been assigned a minimal value of $1 per

acre, and are included in the total land

amount. 

The accumulated depreciation reported by

agencies in fiscal 1996 and 1995 was $96.3

billion and $76.5 billion, respectively. Most

agencies use the straight-line method.

Taxes receivable as of September 30

(In billions of dollars) 1996 1995 

Gross taxes receivable . . . . . . . . . . . . 122.4 112.7

Less: allowance for losses. . . . . . . . . . 88.6 66.5

Net taxes receivable . . . . . . . . . . . . . 

33.8 46.2

Inventories and

related properties as

of September 30

(In billions of dollars) 1996 1995 

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

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

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

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

Total inventories . . . . . . . . . . . 

232.1 219.9

Note: Some of the differences between 1995 and 1996 are due to reclassification

of defense inventories.

20 notes to financial statements cfs
Other assets as of September 30

(In billions of dollars) 1996 1995

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

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

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

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

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

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

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

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

123.8 133.6

In the past, Treasury provided estimates

for those agencies that did not report depreciation. However, beginning with this report, the

depreciation will reflect the calculations that

have been provided by the agencies. Thus, a

prior period adjustment of $420.9 billion was

necessary to reinstate the depreciation for

prior years.

The useful lives for each classification of

assets are as follows:

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

Structures and facilities. . . . . 21 yrs.

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

Industrial equipment in plant 13 yrs.

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

The largest ownership of Federal property,

plant, and equipment, except for land, remains within the domain of the Department

of Defense, whose major equipment items

and weapons systems are valued at acquisition cost. When the acquisition cost cannot

be determined, the estimated fair market

value of such equipment and the costs of obtaining the equipment in the form and place

to be put into use are recorded. Real and personal property are also recorded at acquisition cost. For more information see the table

above.

7. Other assets

Other assets are comprised of advances

and prepayments, receivables and other assets from banking assistance and failures, deferred retirement costs from the Postal

Service, and investments held by the agencies and other miscellaneous assets. Other assets are summarized by agency in the table

below.

Property, plant, and equipment as of

September 30

(In billions of dollars) 1996 1995 

Buildings, structures, facilities, and lease-hold

improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265.1 242.3

Military equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587.7 542.7

Equipment, other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.6 110.1

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.4 11.7

Construction in process . . . . . . . . . . . . . . . . . . . . . . . . . . . 56.0 82.1

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.6 22.0

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,065.4 1,010.9

Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . 96.3 76.5

Total property, plant, and equipment . . . . . . . . . . . . . . 

969.1 934.4

cfs notes to financial statements 21
8. Federal debt held by

the public

Total Federal debt held by the public

amounted to $3,730.0 billion and $3,603.3

billion at the end of fiscal 1996 and 1995, respectively. The three debt tables on pages 22

through 24 reflect information on borrowing

to finance Government operations. These tables support the Statement of Financial Position caption, ‘‘Federal debt securities held

by the public,’’ and are shown net of intragovernmental holdings and unamortized

premium or discount. Intragovernmental

holdings represent that portion of the total

Federal debt held as investments by Federal

entities, including major trust funds.

Federal debt held by the public as of September 30

1996 1995

Average

interest

rate

(percent)

Total debt

(in billions

of dollars)

Average

interest

rate

(percent)

Total debt

(in billions

of dollars)

Public debt:

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

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

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

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

Plus premium on public debt

securities. . . . . . . . . . . . . . . . . . . . . 1.5 1.2

Less discount on public debt

securities. . . . . . . . . . . . . . . . . . . . . 79.4 81.2

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

Agency debt:

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

Farm Credit System Financial

Assistance Corporation. . . . . . . . . . . - 1.3

Housing and Urban Development . . . . 3.9 .1

Federal Deposit Insurance Corporation,

FSLIC resolution fund . . . . . . . . . . . . .1 .2

National Archives and Records

Administration . . . . . . . . . . . . . . . . . . .3 .3

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

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

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

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

Less Federal securities held as

investments by Government

accounts . . . . . . . . . . . . . . . . . . . . 1,448.9 1,317.6

Total Federal debt

held by the public. . . . . . . . . . . . 

3,730.0 3,603.3

22 notes to financial statements cfs
Summary of Federal Debt Outstanding Part I

Total Debt Outstanding as of September 30

1996 1995

(In billions of dollars)

Average

interest

rate

(percent) Total debt 

Average

interest

rate

(percent) Total debt 

Marketable:

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

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

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

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

 15.0 8.917 15.0

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

Nonmarketable:

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

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

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

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

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

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

Total interest-bearing debt . . . . . . . . . . . . 

6.479 5,220.8 6.517 4,950.7

Non-interest-bearing debt. . . . . . . . . . . . . 

2

 4.0 23.3

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

Plus premium on public debt securities . . 1.5 1.2

Less discount on public debt securities . . 79.4 81.2

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

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

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

Less Federal securities held as

investments by Government accounts. . 1,448.9 1,317.6

Total Federal debt held by the public . 

3,730.0 3,603.3

1

 These marketable securities were issued to the Civil Service

Retirement Fund and are not currently traded in the market. 

2

 Includes matured debt of $2.5 billion and other various non-interest-bearing debt of $1.5 billion.

Types of marketable securities

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

Notes--Medium-term obligations issued with a term of at least 1 year,

but not more than 10 years.

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

cfs notes to financial statements 23
Summary of Federal Debt

Outstanding Part II

Intragovernmental Holdings----Federal Securities

Held as Investments by Government Accounts as of September 30

(In billions of dollars) 1996 1995

Intragovernmental holdings

Federal

Funds 1

Trust

Funds 2

Total

Federal

Funds

Trust

Funds Total

Legislative branch . . . . . . . . . . . . . . . . . . .6 .1 .7 .4 .1 .5

Judicial branch . . . . . . . . . . . . . . . . . . . . - .3 .3 - .3 .3

Executive branch:

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

Departments:

Agriculture . . . . . . . . . . . . . . . . . . . . . - - - - .3 .3

Defense . . . . . . . . . . . . . . . . . . . . . . . -

3

 119.6 119.6 - 115.2 115.2

Energy . . . . . . . . . . . . . . . . . . . . . . . . 5.8 - 5.8 5.0 - 5.0

Health and Human Services . . . . . . . -

4

 154.1 154.1 - 144.4 144.4

Housing and Urban Development . . . 12.7 - 12.7 11.1 - 11.1

Interior. . . . . . . . . . . . . . . . . . . . . . . . . 3.6 .3 3.9 3.4 .3 3.7

Justice . . . . . . . . . . . . . . . . . . . . . . . . .4 - .4 .5 - .5

Labor. . . . . . . . . . . . . . . . . . . . . . . . . . 6.6 5

 54.0 60.6 5.8 47.2 53.0

State . . . . . . . . . . . . . . . . . . . . . . . . . . - 8.4 8.4 - 7.8 7.8

Transportation . . . . . . . . . . . . . . . . . . .1 6

 30.9 31.0 .5 31.6 32.1

Treasury . . . . . . . . . . . . . . . . . . . . . . . 12.1 .2 12.3 3.1 .2 3.3

Veterans Affairs . . . . . . . . . . . . . . . . . .6 13.7 14.3 - 13.6 13.6

Independent agencies:

Environmental Protection Agency . . . . - 7.5 7.5 - 7.3 7.3

Office of Personnel Management . . . . . -

7

418.2 418.2 - 389.9 389.9

Export-Import Bank. . . . . . . . . . . . . . . . .5 - .5 .1 - .1

Farm Credit System Insurance

Corporation. . . . . . . . . . . . . . . . . . . . . 1.9 .1 2.0 1.4 .2 1.6

Federal Deposit Insurance

Corporation. . . . . . . . . . . . . . . . . . . . . 27.6 - 27.6 25.2 - 25.2

National Credit Union Administration . . 3.5 - 3.5 3.3 - 3.3

U.S. Postal Service. . . . . . . . . . . . . . . . .9 - .9 1.3 - 1.3

Railroad Retirement Board . . . . . . . . . . - 17.1 17.1 - 14.4 14.4

Social Security Administration . . . . . . . - 549.5 549.5 - 483.2 483.2

Tennessee Valley Authority . . . . . . . . . 1.0 - 1.0 1.2 - 1.2

Various scholarship funds. . . . . . . . . . . - .4 .4 - .4 .4

Subtotal . . . . . . . . . . . . . . . . . . . . . . . 80.2 1,374.4 1,454.6 64.4 1,256.4 1,320.8

Less discount on Federal securities

held as investments by Government

accounts . . . . . . . . . . . . . . . . . . . . . . . 5.7 - 5.7 3.2 - 3.2

Total . . . . . . . . . . . . . . . . . . . . . . . . . 

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

1

 Federal funds are monies held by Government accounts that are

not trust funds.

2

 Trust funds are monies held by the Government in accounts

established by law or by trust agreement for specific purposes and

designated by law as being trust funds.

3

 Includes military retirement fund of $116.9 billion.

4

 Includes medicare trust funds of $153.0 billion.

5

 Unemployment Trust Fund.

6

 Includes Highway Trust Fund of $21.2 billion and Airport and

Airway Trust Fund of $7.7 billion.

7

 Includes civil service retirement and disability fund of $394.0 billion

and employee life insurance fund of $17.0 billion.

24 notes to financial statements cfs
9. Pensions and other

actuarial liabilities

The Federal Government administers more

than 40 pension plans. The largest are administered by the Office of Personnel Management (OPM) for civilian employees and by

the Department of Defense (DOD) for military personnel. The majority of the pension

plans are defined benefit plans.

The accounting for accrued pension, retirement, disability plans, and annuities is subject

to several different assumptions, definitions,

and methods of calculation. Each of the major

plans is summarized in the table at the bottom

of the page, and the actuarial liability is included on the Statement of Financial Position.

Civilian employees and military

personnel

Pension expense for the various Federal

pension plans is calculated for budgetary purposes by a variety of methods. For financial

reporting purposes, Federal pension plans report their accumulated benefit obligation

(ABO) pursuant to directions under the provisions of Public Law Number 95-595. The

ABO is calculated with the ‘‘unit credit’’ actuarial cost method. The ABO is recognized as

a liability in the Consolidated Statement of Financial Position. An expense is recognized

equal to the annual change in the ABO. Most

Federal pension plans are funded with obligations issued by the Treasury pursuant to the

actuarial method and funding requirements

specified by the governing law. These plan assets (Treasury bonds or other debt), being obligations of the United States, were eliminated from the consolidated statements.

Civilian

The Federal Government has both defined benefit and defined contribution pension plans.

Defined benefit

The principal plan is administered by

OPM and covers approximately 90.0 percent of all Federal civilian employees. It

includes two components of defined benefits, the Civil Service Retirement System

(CSRS) and the Federal Employee’s Retirement System (FERS). The basic benefit components of the CSRS and the FERS

are financed and operated through the

Civil Service Retirement and Disability

Fund (CSRDF), and all disbursements for

both are made from the CSRDF. Most employees covered by CSRS contribute 7.0

percent of their basic pay, an amount fixed

by statute. The FERS employees contribution is 0.8 percent in fiscal 1996. The valuation of the Retirement Program has been

prepared by OPM in accordance with Financial Accounting Standard (FAS) 35.

Defined contribution

The Federal Retirement Thrift Investment Board is a Federal agency that operates the Thrift Savings Plan. The fund’s

assets are owned by Federal employees

and retirees, who have individual accounts. For this reason, the fund is excluded from the CFS and the fund’s

Pensions and other actuarial liabilities as of September 301

Actuarial liabilities Plan assets

Unfunded

liabilities

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

Civilian retirement-OPM 2

. 774.4 722.4 398.8 344.3 375.6 378.1

Military retirement-Defense 547.5 547.7 148.0 148.6 399.5 399.1

Veterans’ compensation

and benefits . . . . . . . . . . 240.0 266.6 - - 240.0 266.6

Compensation programs. . 17.9 20.3 - - 17.9 20.3

Other pension programs . . 35.6 30.8 17.3 16.2 18.4 14.6

Other benefits . . . . . . . . . . 36.1 40.4 38.7 35.9 -2.7 4.5

Total . . . . . . . . . . . . . . . . 

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

1

 Does not include actuarial liability for future costs of post-retirement health benefits.

2

 OPM’s accumulated benefit obligation is presented as of the beginning of the year, under FAS 35. To make the unfunded liabilities more

meaningful, plan assets are also presented at the same valuation date.

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

cfs notes to financial statements 25
holdings of Federal debt are considered part of

the debt held by the public rather than debt held

by the Government.

The Thrift Savings Plan is a defined contribution plan for eligible employees covered under the Civil Service Retirement System

(CSRS) and the Federal Employees’ Retirement System (FERS).

FERS employees may contribute up to 10.0

percent of base pay to the plan, which is

matched by the Government up to 5.0 percent.

CSRS employees may contribute up to 5.0 percent of base pay with no Government match.

An individual’s total annual contribution could

not exceed $9,500 in 1996.

The plan was started in April 1987 and as of

September 30, 1996, the total invested was

$42.0 billion. Investments include U.S. Government nonmarketable certificates of $23.2 billion, which are included in ‘‘Federal debt held

by public’’ in the Statement of Financial Position. In addition, $16.3 billion and $2.5 billion

have been invested in the Common Stock Index

and the Fixed Income Funds, respectively.

Military

The Department of Defense Military Retirement Fund was authorized in Public Law Number 98-94 for the accumulation of funds in

order to finance liabilities of the Department of

Defense under military retirement and survivor

benefit programs. The fund provides retirement

benefits for military personnel and their survivors.

Veterans’ compensation and pension

benefits

Veterans or their dependents receive compensation benefits if the veteran was disabled

or died from military service- connected

causes. War veterans or their dependents receive pension benefits, based on annual eligibility review, if the veterans were disabled or

died from nonservice-connected causes. Certain pension benefits are subject to specific income limitations.

VA has a liability for benefits expected to

be paid in future fiscal years to veterans and,

if applicable, their survivors who have met or

are expected to meet defined eligibility criteria. The liability of the Compensation and

Pension Programs (C&P) is not currently

funded, nor is there any intent to do so.

Rather, payments for benefits that become

due in a particular year are financed from that

year’s appropriation, in effect, on a pay-asyou-go basis.

The actuarial present value of the liability

of C&P benefits as determined by VA on September 30, 1996 and 1995, is shown in the table above.

Compensation programs

This amount represents the estimated future costs for injuries incurred to date for approved Federal Employees’ Compensation

Act cases and Black Lung cases. 

Other pension programs

Other annual pension reports received

from plans covered by Public Law Number

95-595 are reported in the same manner as

those for military personnel and civilian employees (described earlier).

Other benefits

Other benefits consist of various items for

which the Government is responsible, such as

life insurance benefits for veterans and Federal employees. VA insurance includes the following programs: United States Government

Life Insurance; National Service Life Insurance; Veterans Insurance and Indemnities; Veterans Special Life Insurance; Veterans

Veterans’ compensation and benefits as of September 30

(In billions of dollars) 1996 1995

Compensation:

Veterans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167.0 169.3

Survivors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.6 59.7

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

Pension and burial benefits:

Veterans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.9 23.7

Survivors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 10.3

Burial benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 3.6

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

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

240.0 266.6

26 notes to financial statements cfs
Reopened Insurance; Service Disabled Veterans Insurance; and Servicemen’s Group Life

Insurance.

The Federal insurance program is the Federal Employees Government Life Insurance.

These other benefits do not include the actuarial liability for the future costs of post-retirement health benefits for retirees.

Post employment benefits other

than pensions

The Federal Government operates a pay-asyou-go system for health benefits for both civilian and military retirees. The actuarial

estimates on retirees’ health care costs are

summarized below.

Civilian employees retiree health

benefits

Generally, employees are eligible for postretirement health benefits if they participated

in the Program for the 5 years immediately

preceding their retirement. As a condition of

participation, retirees must make contributions

toward their premiums, which, for the vast majority, are deducted directly from their

monthly annuity payments. Contributions for

future post-retirement health benefit premiums are required neither of active employees

nor their employers.

The Federal Accounting Standards Advisory Board (FASAB) has recommended standards for the calculation and reporting of a

retirement health benefits obligation. These

standards were promulgated in the Statement

of Federal Financial Accounting Standards

Number 5, (SFFAS No. 5), Accounting for Liabilities of the Federal Government, issued in

December 1995.

When it is effective, the standard will require the use of the accrual method of accounting to recognize the cost of retirement health

benefits over the active years of employee

service. Upon the implementation of SFFAS

No. 5, the Program will recognize a retirement obligation (RO), which is the future cost

of retirement benefits for future retirees relating to active service rendered up to the date of

implementation. The Program plans to adopt

the standard for fiscal 1997, as required by

SFFAS No. 5.

In computing the Program’s RO, an actuary

will apply actuarial assumptions to historical

health benefit cost information to estimate the

future cost of retirement benefits for current

and future retirees. This estimate will be adjusted for the time value of money (through

discounts for interest) and the probability of

having to pay (by means of decrements, such

as those for death and withdrawal).

Although the standard has not yet been implemented by the Program, the initial (or transition) RO, has been calculated in accordance

with methodology prescribed to be $134.0 billion on October 1, 1995, and $113.4 billion on

October 1, 1994. [Note: Due to the time-frame

under which these statements must be prepared

and audited, all of the information needed to

compute the RO as of the end of the year is not

available. Therefore, the RO is presented as of

the beginning of the year.] The program’s RO

expense in 1996 was $14.4 billion and $12.3

billion for 1995, rather than the $4.9 billion for

1996 and $4.2 billion for 1995 recognized as

contributions expense (deductions from plan

assets) under current accounting practice.

Based on this calculation, employing agencies

were required to recognize a 1996 retirement

health benefit expense of $2,093 per enrolled

employee for 1996 and $1,844 for 1995.

In these calculations, an annual rate of increase in health benefits costs and a discount

rate of 7.0 percent were assumed. Demographic assumptions are based on the experience of the Retirement Program, with

adjustments based on recent Health Benefits

Program trends and experience. For more information, see OPM’s financial statements.

Military retiree health plans

Military retirees and their dependents are

entitled to health care in military medical facilities if the facility can provide the needed care.

Until they reach age 65, military retirees and

their dependents also are entitled to health care

financed by the Civilian Health and Medical

Programs of the Uniformed Services (CHAMPUS). No premium is charged for CHAMPUSRetiree health care costs as of September 30

Actuarial estimates (unfunded)

(In billions of dollars) 1996 1995 

Military health programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210.2 210.2

Federal Employees Health Benefits Program. . . . . . . . . . . . . . . . . . . 134.0 113.4

Total unfunded retiree health care costs . . . . . . . . . . . . . . . . . . . . . 

344.2 323.6

cfs notes to financial statements 27
financed care, but there are deductible and

copayment requirements.

After they reach 65 years of age, military

retirees are entitled to Medicare. The Department of Defense costs for retiree health care

include costs of buildings, equipment, education and training, staffing, operations, and

maintenance of military medical treatment

facilities. They also consist of claims paid

by CHAMPUS and the administration of that program.

Costs are funded annually by direct appropriations in the year services are rendered, except for

CHAMPUS. CHAMPUS is funded

when services are billed. The 1995

cost for CHAMPUS was $3.3 billion, which included both benefit

and administrative costs. The

funded cost totaled $3.3 billion.

The estimate of the actuarial liability for CHAMPUS is $48.6 billion

for fiscal 1997.

10. Other liabilities

Other reported liabilities are summarized

by agency in the table above. Included in

other liabilities are liabilities arising from

loan guarantees, capital leases, and contingencies. They also include checks outstanding, the liabilities incurred from bank

resolution and litigation losses, and other

miscellaneous accrued liabilities.

11. Environmental

liabilities

Since environmental liabilities comprise a significant portion of Other Liabilities, a separate disclosure is provided. The

Departments of Defense and Energy contain a significant portion of environmental

liabilities as indicated below.

Other liabilities as of September 30

(In billions of dollars) 1996 1995

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

Departments:

Treasury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.7 34.9

Health and Human Services . . . . . . . . . . . . . . . . . . . . . . . . . 36.4 22.4

Social Security Administration. . . . . . . . . . . . . . . . . . . . . . . . 35.6 34.4

Tennessee Valley Authority. . . . . . . . . . . . . . . . . . . . . . . . . . 24.5 24.4

Energy 1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.4 17.5

Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.0 17.8

Housing and Urban Development . . . . . . . . . . . . . . . . . . . . . 14.2 13.7

Defense 2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.8 .9

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.6 10.5

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.2 45.3

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

283.6 228.7

1

 Shown net of environmental cleanup liabilities of $228.9 billion in 1996 and $227.2 billion in 1995.

2

 Shown net of environmental cleanup liabilities of $17.6 billion in 1996 and $.2 billion in 1995.

Environmental liabilities as of

September 30

(In billions of dollars) 1996 1995 

Department of Defense:

Air Force . . . . . . . . . . . . . 4.2

Army . . . . . . . . . . . . . . . . 13.4

Subtotal . . . . . . . . . . . . . 17.6

Department of Energy . . . . 228.9 227.2

Total. . . . . . . . . . . . . . . . . 

246.5 227.2

12. Net position

The net position, as presented in the table

on the following page, represents the excess

of liabilities over assets. It does not, however,

reflect the range of the Government’s resources, such as the sovereign power to tax,

beyond the conventional assets, nor does it reflect the range of the Government’s responsibilities.

28 notes to financial statements cfs
13. Leases

Federal agencies were first required to

provide financial information about lease

commitments in 1986. Agencies are attempting to accumulate the lease information required. The future aggregate minimum

rental commitments for noncancelable capital and operating leases as of September 30,

1996, are detailed in the chart at right.

The majority of these lease commitments

relate to buildings, equipment, and office

space rental. The current portions of lease

costs are included in accounts payable. The

long term portion of capital leases is reported as ‘‘other liabilities.’’ Data for intragovernmental leasing transactions were

not available at the time of publication.

14. Social Security and

Medicare

Social Security

Two trust funds have been established by

law to finance the Social Security Federal

Old-age Survivors Insurance (OASI) and the

Federal Disability (DI) programs (OASDI).

OASI pays retirement and survivors’ benefits, and DI pays benefits after a worker becomes disabled.

Revenue to OASDI consists of taxes on

earnings that are paid by employees, their

employers, and the self-employed. OASDI

also receives revenue from the taxation of

Social Security benefits and interest on its

holdings of Government securities. Revenues not needed to pay current benefits or

administrative expenses are invested in special issue Government securities guaranteed

as to both principal and interest and backed

by the full faith and credit of the United

States Government.

The Board of Trustees of the OASI and

DI Trust Funds provides the President and

the Congress with short-range (10-year) and

Leases for fiscal 1997

and beyond

(In billions of

dollars)

Operating

leases

Capital

leases

1997. . . . . . . . . 2.0 .2

1998. . . . . . . . . 1.7 .1

1999. . . . . . . . . 1.5 .1

2000. . . . . . . . . 1.3 .1

Thereafter . . . . 5.6 1.9

Total . . . . . . . 

12.1 2.4

Net position as of September 30

(In billions of dollars) 1996 1995 

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

Prior period adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -

1

 109.7

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

Net position at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . 

-4,349.5 -4,151.6

1

 See page 17.

long-range (75-year) actuarial estimates of

each trust fund balance in its annual report.

Because the future cannot be predicted with

certainty, SSA trustees use three alternative

sets of economic and demographic assumptions to show a range of possibilities. Assumptions are made about many economic,

demographic, and programmatic factors including gross domestic product, earnings,

the consumer price index, unemployment,

fertility, immigration, mortality, and disability incidents and termination. The intermediate assumptions, used in the table on page

30, reflect the trustees’ best estimate of what

the future experience will be. The low-cost

assumption is more optimistic than the highcost assumption. They show how the trust

funds would operate if economic and demographic conditions are better or worse than

the best estimate.

The present values of actuarial estimates

have been computed as of the beginning of

the valuation period, September 30, 1996.

The expenditures consist of the sum of the

present value of all estimated payments during the valuation period, and the contributions consist of the sum of the present value

of all estimated income during the period.

The estimates have been prepared on the bacfs notes to financial statements 29
sis of the financing method regarded by both

the Congress and the trustees of the trust

funds as the appropriate one to use for social

insurance programs, namely that future

workers will be covered by the program as

they enter the labor force.

Under current legislation and using intermediate assumptions, the DI Trust Fund and

the OASI Trust Fund are projected to be exhausted in 2016 and 2031 respectively. Combined OASDI expenditures will exceed

current tax income beginning in 2012, and

they will exceed total current income (including current interest income) for calendar

year 2019 and later. Thus, current tax income plus a portion of annual interest income will be needed to meet expenditures

for years 2012 through 2018. Thereafter, in

addition to current tax income and current interest income, a portion of the principal (i.e.,

combined OASDI assets) will be needed

each year until the combined trust funds are

totally depleted in 2029.

Medicare

Revenue to the Federal Hospital Insurance Trust Fund (HI-Medicare Part A) consists of taxes on earnings that are paid by

employees, their employers, and the self-employed. HI also receives revenue from the

taxation of Social Security benefits and interest on its holdings of Government securities.

Revenues that are not needed to pay current

benefits or administrative expenses are invested in special issue U.S. Government securities guaranteed as to both principal and

interest, and backed by the full faith and

credit of the U.S. Government.

The HI (Medicare Part A) has an actuarial deficit of $1,689.7 billion as computed 25

years into the future to fiscal 2021. It includes the book value of assets as of SeptemSocial Security present value estimates (P.V.) for the period

of 75 years into the future, beginning September 30, 1996

(In trillions of dollars) OASI DI OASDI 

P.V. of actuarial contributions to the year 2071 . . 16.7 2.8 19.5

P.V. of actuarial expenditures to the year 2071. . 19.8 3.3 23.1

P.V. of future resources needed . . . . . . . . . . . . . -3.1 -.5 -3.6

Net assets of Social Security

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

Medicare Part A present value (P.V.) estimates for the

period of 25 years into the future, beginning

September 30, 1996

(In billions of dollars)

P.V. of actuarial contributions to the year 2021 . . . . . . . . . . . . . . . . . . . . 2,442.7

P.V. of actuarial expenditures to the year 2021 . . . . . . . . . . . . . . . . . . . . 4,257.6

P.V. of future resources needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1,814.9

Assets of HI Trust Fund as of September 30, 1996 . . . . . . . . . . . . . . . . . 125.3

Medicare Part B Estimates as of September 30, 1996

(In billions of dollars)

Total trust fund assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.0

Total unpaid benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3

Excess of trust fund assets over unpaid benefits . . . . . . . . . . . . . . . . . . . 24.7

30 notes to financial statements cfs
ber 30, 1996, and the present value of various program income items expected to be received through the year 2021, less: (a) the

present value of outlays through the year

2021, (b) claims incurred to October 1,

1996, but unpaid as of that date, and (c) any

administrative expenses related to those

claims. See the table on the previous page

for a summary.

The Federal Supplementary Medical Insurance Trust Fund (SMI-Medicare Part B)

benefits and administrative expenses are financed by monthly premiums paid by Medicare beneficiaries and additional

contributions by the Federal Government.

The Omnibus Budget Reconciliation Act of

1990 set specific monthly premium levels

for 5 calendar years beginning in 1991. The

monthly premium in calendar year 1996 covered 27 percent of the SMI program’s estimated 1996 costs.

The Federal Supplementary Medical Insurance Trust Fund (SMI-Medicare Part B)

has a surplus of $24.7 billion. This represents the amount of the estimated book value

of the Trust Fund’s assets as of September

30, 1996, less unpaid benefits and related administrative expenses, as summarized on the

previous page.

15. Commitments and

contingencies

Commitments are long-term contracts entered into by the Federal Government, such

as leases and undelivered orders, which represent obligations. 

Contingencies involve uncertainty as to a

possible loss to the Federal Government that

will be resolved when one or more future

events occur. Contingencies of the Federal

Government include loan and credit guarantees, insurance, and unadjudicated claims.

In accordance with OMB Bulletin 94-01,

‘‘Form and Content of Agency Financial

Statements,’’ estimated losses for commitments and contingencies, namely, insurance,

indemnity agreements, unadjudicated

claims, and commitments to international institutions are reported if the amounts can be

reasonably estimated and the losses are probable. OMB Bulletin 94-01 establishes guidelines for the reporting of liabilities for loan

guarantees and capital leases.

OMB Bulletin 94-01 states that contingencies that do not meet all the conditions

for liability recognition should be disclosed.

The table on the following pages shows the

face value of commitments and contingencies reported by Federal agencies. The

amounts reported in the commitments and

contingencies table are presented without regard to the probability of occurrence and

without deduction for existing and contingent assets that might be available to offset

potential losses.

‘‘Long-term leases’’ includes both operating and capital leases. ‘‘Government loan

and credit guarantees’’ includes guarantees

in force as well as contracts to guarantee.

‘‘Insurance’’ includes insurance in force,

contracts to insure, and indemnity agreements.

The Department of Energy manages one

of the largest environmental programs in the

world. The primary focus of the program is

to reduce health and safety risks from radioactive waste and contamination resulting

from production, development and testing of

nuclear weapons. The Department of Energy

issued in fiscal 1995 its first annual Baseline

Environmental Management Report

(BEMR).

The estimate of life cycle costs for the environmental management program ranges

from $189 billion to $265 billion in constant

1996 dollars. The estimate begins in fiscal

1996 and ends in approximately 2071, when

environmental activities are expected to be

substantially completed. In fiscal 1996, the

Department of Energy recorded a BEMR liability of $202.1 billion. For more information, see the Department of Energy’s

financial statements.

The Federal Government, in 1996, continued to be the Nation’s largest source of

credit and underwriter of risk. Large portions of all non-Federal credit outstanding

have been assisted by Federal credit programs, Government-sponsored enterprises,

or deposit insurance. In particular, most

credit for housing, agriculture, and education is Federally guaranteed. For more information on commitments and contingencies,

refer to the tables on the following pages.

cfs notes to financial statements 31
Commitments and Contingencies

of the United States Government

for Years Ended September 30

(In billions of dollars)

Commitments 1996 1995 

Long-term leases:

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

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

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

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

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

Undelivered orders, public:

Defense 1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77.3 94.8

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

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

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

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

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

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

Total commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

405.1 438.0

See footnotes on the following page.

32 notes to financial statements cfs
Commitments and Contingencies, continued

(In billions of dollars) 

Face value of contingencies 1996 1995

Insurance:

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

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

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

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

Pension Benefit Guaranty Corp. 2

. . . . . . . . . . . . . . . . . . . . . . . . . . - 853.0

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

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

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

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

Government loan and credit guarantees:

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

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

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

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

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

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

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

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

Unadjudicated claims:

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

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

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

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

Other contingencies:

Defense 3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 26.8

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

Multilateral Development Banks 4

. . . . . . . . . . . . . . . . . . . . . . . . . . 53.3 6.5

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

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

Total contingencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

5,447.2 5,419.5

1

 Includes Army, Air Force and Defense agencies. 

2

 Data not available. 

3

 Decrease is due to recognition as a liability.

4

 Increase is due to disclosure of appropriated and program limitation

amounts.

cfs notes to financial statements 33
supplemental tables

Reconciliation of the

change in net position

to the deficit for the

year

This statement reconciles the budget

deficit to the change in net position, identifying the key elements that cause the

difference. The Federal Government uses

budgetary accounting to control the use of

funds and for fiscal planning by recording

obligations (orders placed, contracts

awarded, services received, and similar actions requiring payments) and cash

outlays. With few exceptions, outlays and

receipts are measured on a cash rather than

an accrual basis, and a largely cash basis

thus becomes the yardstick by which the

budget deficit is measured. In financial accounting, the focus is on the cost of

operations, which dictates the use of accrual accounting. The differences between

the two bases of accounting are primarily

explained by their timing differences in

the recognition of revenue and costs. The

budget deficit for the year, with minor exceptions, is financed by and reflected in

the Federal debt.

Change in net position is reported on

the Statement of Changes in Net Position.

Increase or decrease in net position is due

to timing differences in the recognition of

revenue. This amount is derived by comparing the amount of exchange and

nonexchange revenue reported on the statement of net cost and changes in net

position with the receipts reported in the

budget for similar items. Increase or decrease in net position due to timing

differences in the recognition of costs is

derived by comparing the costs reported

on the Statement of Net Cost with outlays

for corresponding categories in the budget.

The increase or decrease in net position as

a result of nonrecurring items is reported

separately from other differences.

United States Government Reconciliation of the Change

in Net Position to the Deficit for the Year Ended

September 30 (Unaudited)

(In billions of dollars)

1996 1995 

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

Increase (decrease) in net position due to timing differences in

the recognition of revenue:

Accrued exchange revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -115.0 -106.5

Accrued non-exchange revenue . . . . . . . . . . . . . . . . . . . . . . . . . . -.6 .6

Increase (decrease) in net position due to timing differences in

the recognition of costs:

National defense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35.5 -77.5

Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.7 133.1

Physical resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131.9 100.8

Net interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.2

Other functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.4 38.4

Increase (decrease) in net position as a result of nonrecurring

items:

Prior period adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iiiiiiiiiii- -109.7

Budget deficit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

-107.3 -164.0

34 supplemental tables cfs
Additions to

non-Federal economic

resources, fiscal 1996

The Government uses its resources to

add to the physical and human resources

of the Nation without acquiring physical

assets. The table on page 36, compiled

from the fiscal 1998 and 1997 ‘‘Budget of

the United States Government,’’ shows the

amounts of these expenditures.

Some of these investment-type expenditures, while not adding to Federal assets,

add to the assets of State and local governments or private institutions. All are

intended to enhance the future productivity of the Nation.

Additions to State and local assets include construction grants for highways,

community development, airports, and

mass transit. Other developmental expenditures include outlays for education and

training, and research and development.

(See the chart below.)

Fiscal 1996

Total: $146 billion

cfs supplemental tables 35
Additions to Non-Federal Economic Resources

for the Year Ended September 30

(In billions of dollars)

Additions to State and local government assets 1996 1995

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

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

Transportation: 

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

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

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

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

Other developmental expenditures

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

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

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

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

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

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

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

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

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

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

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

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

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

146.3 148.1

36 supplemental tables cfs
Estimates for tax

expenditures in

the income tax

This table shows tax expenditures that

are considered revenue losses because of

Federal tax law provisions that allow special exclusions, exemptions, deductions

from gross income, or that provide for special credits, tax rates, and deferrals.

Revenue loss estimates do not take into

account any additional resources required

to provide the same after-tax incentives if

the expenditure program was administered

as a direct outlay rather than through the

tax system. 

Revenue loss estimates are not necessarily equivalent to the increase in Federal

receipts, or the reduction in budget deficits,

that would result from the repeal of the special provision.

For more information about estimates

for 1996 and 1995 see table 5-1, ‘‘Total

Revenue Loss Estimates for Tax Expenditures in the Income Tax,’’ in the fiscal 1998

and 1997 ‘‘Budget of the United States,

Analytical Perspectives.’’

Estimates for Tax Expenditures in the Income Tax

for the Year Ended September 30

(In billions of dollars) Estimated amount of

revenue loss

Income exclusions 1996 1995 

Disability and retirement benefits (private) . . . . . . . . . . . . . . . . . 75.0 71.0

Medical care and insurance (employer premiums paid) . . . . . . 64.7 59.6

Interest and dividends (State and local bonds and debt, and

life insurance) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.0 30.3

Capital gains at death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.5 28.3

Social Security benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.5 21.6

Payroll benefits and allowances

(group life, accident, and unemployment) . . . . . . . . . . . . . . . . 5.1 4.9

Foreign earnings and investment incentives (income earned

abroad) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8 4.4

Education allowances (scholarships and GI benefits) . . . . . . . . .9 .9

Other (e.g., age 55 or over credit on home sales) . . . . . . . . . . . 5.9 5.2

Income deferrals

Real estate (home sales) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.6 14.2

Interest on U.S. savings bonds. . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 1.1

Deductions and credits

Interest (mortgage and consumer) . . . . . . . . . . . . . . . . . . . . . . . 50.6 48.1

State and local property tax and other taxes . . . . . . . . . . . . . . . 50.3 43.0

Accelerated depreciation (rental housing, buildings other than

rental housing, machinery, and equipment) . . . . . . . . . . . . . . . . 35.1 32.9

Contributions (charitable and political) . . . . . . . . . . . . . . . . . . . . 24.8 23.6

Earned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7 4.9

Foreign earnings (corporations doing business in U.S.

possessions). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 2.7

Medical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8 3.5

Work incentives (employment credits under work programs)

and dependent care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9 2.7

Investments (commercial capital gains, credits, other

investment incentives, construction period interest, and

expensing developmental costs) . . . . . . . . . . . . . . . . . . . . . . . . 3.3 2.9

Old-age, disability, and other personal exemptions . . . . . . . . . . 2.2 2.2

Employee stock ownership plans (funded through investment

and tax credits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7 2.2

Property damages and losses (casualty losses) . . . . . . . . . . . . .4 .8

Exemptions (credit unions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 .6

cfs supplemental tables 37
Outlays for mandatory

and related programs

The Government commits itself to provide benefits and services by passing laws

that make spending mandatory. Outlays for

mandatory programs consist of spending

for programs whose budget authority is

controlled by means other than appropriation acts or by entitlement authority and

budget authority for the food and stamp

program.

For further information on fiscal 1996,

refer to table 14-3, ‘‘Outlays for Mandatory

and Related Programs under Current Law,’’

in the ‘‘Budget of the United States Government, Analytical Perspectives, Fiscal Year

1998,’’ pages 242-243. For fiscal 1995, see

table 13-3, ‘‘Outlays for Mandatory and Related Programs under Current Law’’ in the

‘‘Budget of the United States Government,

Analytical Perspectives, Fiscal Year 1997,’’

pages 211-212.

Outlays for Mandatory and Related Programs

for the Year Ended September 30

(In billions of dollars)

Human resources programs 1996 1995 

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

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

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

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

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

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

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

Other

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

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

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

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

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

1,026.0 973.5

38 supplemental tables cfs
Federal obligations

‘‘Obligations’’ are binding agreements

that will result in Government outlays,

either immediately or in the future. Before

obligations can be incurred legally, budgetary resources must be available,

comprising either new budget authority or

unobligated balances of budget authority

provided in earlier years. Obligations are

recorded at the point at which the Government makes a binding agreement to acquire

goods and services or makes other arrangements requiring the payment of money. In

the case of acquiring goods and services,

obligations are the first of the key elements

that characterize the acquisition and use of

resources--order, delivery, payment, and

consumption.

In general, obligations consist of orders

placed, contracts awarded, services received, and similar transactions requiring

the disbursement of money.

The obligational stage of Government

transactions is a strategic point in gauging

the impact of the Government’s operations

on the national economy. Obligations frequently stimulate business investment,

including inventory purchases and employment of labor, to fulfill those Government

orders.

Disbursements may not occur for

months after the Government places its order, but the order itself usually places

immediate pressure on the private economy.

For more detail, see ‘‘Object Class

Analysis, Budget of the United States Government,’’ for fiscal years 1998 and 1997.

Obligations by Object Class

for the Year Ended September 30

(In billions of dollars)

Personal services and benefits 1996 1995

Personnel compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 113.9 113.2

Personnel benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.9 42.1

Benefits for former personnel. . . . . . . . . . . . . . . . . . . . . . . 28.5 29.8

Contractual services and supplies

Supplies and materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.9 26.5

Rent, communications, and utilities . . . . . . . . . . . . . . . . . . 13.0 15.1

Travel and transportation of persons . . . . . . . . . . . . . . . . . 6.3 6.5

Transportation of things . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8 4.6

Printing and reproduction. . . . . . . . . . . . . . . . . . . . . . . . . . .7 .9

Other services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153.0 175.8

Acquisition of capital assets

Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.5 47.6

Investments and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 16.2

Lands and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 9.4

Grants and fixed charges

Insurance claims and indemnities . . . . . . . . . . . . . . . . . . . 672.7 633.3

Grants, subsidies, and contributions . . . . . . . . . . . . . . . . . 405.7 395.6

Interest and dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358.1 355.3

Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.9 15.8

Other 

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

Total direct obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,918.2 1,912.3

Reimbursable and below reporting threshold obligations . 263.8 232.5

Total gross obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 

2,182.0 2,144.8

cfs supplemental tables 39