1. The Nation by the Numbers The 2010 Financial Report of the U.S. Government AGA – Richmond May 18, 2011 Scott Bell Senior Staff Accountant Department of the Treasury

2. Key Issues Current Financial Position and Condition Economic Recovery Efforts Social Insurance & Sustainability Citizen’s Guide 2

3. FY 2010 Audit in Review Governmentwide Audit – Disclaimer (14 th consecutive year) –DoD accounting weaknesses –Intragovernmental Balances and Transactions –Consolidation Process –SOSI Disclaimer: Had been unqualified in 2007, 2008, 2009 “…significant uncertainties, primarily related to the achievement of projected reductions in Medicare cost growth reflected in the 2010 Statement of Social Insurance, prevented us from expressing an opinion on that statement.” 28 of 35 significant reporting agencies received clean audit opinions. –The total number of CFO Act material weaknesses decreased from 38 to 31. –15 agencies earned a clean audit opinion with no material weaknesses (including the Departments of Commerce, Education, Energy, HUD, Interior, Justice, State, and Transportation). 3

4. Deficit Decrease, Cost Increase 4

5. $71.3b Other Net Operating Cost vs Budget Deficit 2010 Net Operating Cost $2,080.3 billion $223.8b Increase in estimated veterans benefits liabilities = 2010 Budget Deficit $1,294.1billion + $86.4b TARP Downward Reestimate + $279.3b Increase in estimated military and civilian Benefits - 5 + $268.0b Increase in liabilities for Government- Sponsored Enterprises +

6. What Came In 6 Total revenues remained at about $2.2 trillion. Corporate tax revenue increased 40 percent, after decreasing by more than 50 percent during FY 2009. Slight decrease (2.4 percent or $42.1 billion) in personal income tax revenue.

7. What Went Out Government’s Net Cost (Gross Cost less earned revenues) increased $861.3 billion to $4.3 trillion. Increase in Federal employee and veterans benefit liabilities = $538 billion (62 %) of total change. SFFAS 33 – agencies required to report gains/losses from assumptions changes separately (total $132.9 billion in 2010). ‘Bottom Line’ net operating cost (Net Cost less Taxes & Other Revenues) = $2.1 trillion. 7

8. What We Own & What We Owe 8

9. Economic Recovery Fannie & Freddie Funding advances when liabilities > assets.  $85.1 billion to Fannie  $63.1 billion to Freddie  $359.9 billion combined liability accrued Mortgage-Backed Securities (MBS) 9/30/2010: $225.5 billion.  $75 billion in principal and interest repaid.  Program expired on 12/31/2009 9 $387.7 billion disbursed. $204.1 billion repaid. $27.8 billion generated (interest/dividends). Reduced GM Ownership, AIG Restructuring. HERAEESA

10. Fiscal Sustainability: An Issue Now & in the Future Under current conditions, actuaries estimate that there will be a social insurance shortfall of $31 trillion. –75-year estimate of future benefit expenditures net of contributions. –Decline from 2009 ($46t) due to ACA. 10

11. Fiscal Sustainability: Interest – A compounding problem 11

12. Fiscal Sustainability: Effect on the Debt 12

13. Statement of Social Insurance (SOSI) Disclaimer - “…significant uncertainties…primarily related to the achievement of projected reductions in Medicare cost growth…prevented us from expressing an opinion on that statement.” Projections based on full implementation of Affordable Care Act (ACA), including significant projected Medicare cost decreases related to: –(1) reductions in physician payment rates totaling 30 percent over the next 3 years –(2) productivity improvements for most other categories of Medicare providers. 13

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15. On the Web Has long been available online in ‘static’ form. New interactive version of the Financial Report and the Guide Easily / quickly navigate throughout the document View source data behind charts Access other related online information –Agency reports –Accounting standards –Budget 15 http://www.fms.treas.gov/fr

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22. Find Out More! http://www.fms.treas.gov/fr/index.html http://www.whitehouse.gov/omb/financial/index.html www.gao.gov www.financialstability.gov mark.reger@treasury.gov 22