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A new report, prepared by Ernst & Young (EY) for the Peter G. Peterson Foundation, examines the government’s current financial situation using information from the Department of Treasury’s Financial Report of the United States Government for fiscal year (FY) 2015.
The U.S. Department of the Treasury (Treasury) releases a report annually on the financial condition of the federal government — Financial Report of the United States Government (Financial Report). The report details key statistics on the financial condition of the federal government: the financial position (assets and liabilities); the net operating cost (revenue and costs); and the unfunded liabilities of major social insurance programs (Social Security and Medicare).
EY confirms and reinforces the findings of the Treasury’s Financial Report — the financial outlook of the federal government is unsustainable. At the end of FY 2015, the net financial position of the federal government was negative $18.2 trillion — $521 billion worse than in 2014. The net financial position measures the extent to which the government’s liabilities exceed its assets.
The net operating costs of the U.S. government totaled $520 billion in 2015, which is the amount by which spending on government operations exceeds its revenues.
The U.S. government’s net operating cost and net financial position do not include the unfunded liabilities of social insurance programs — such as Social Security and Medicare. The unfunded liabilities of those programs are considered separately from the financial statements.
As an audited and publicly available consolidation of financial statements of the U.S. government’s entities, the Financial Report serves as a source of transparency and accountability for how the U.S. government uses its financial resources. Unlike the federal budget, which is mostly prepared using cash-basis accounting, the financial statements in the Financial Report are largely prepared using accrual accounting under U.S. Generally Accepted Accounting Principles (GAAP) — the same principles used by most American businesses. This allows the report to provide a more comprehensive view of the government’s fiscal operations and financial position.
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