New report shows federal deficit higher under different accounting method

Friday, December 15th 2006, 4:44 pm

By: News On 6

WASHINGTON (AP) The federal deficit for 2006 would have been 81 percent higher than the $247.7 billion that was reported two months ago if the government had to use the same accounting methods as private companies.

That was the finding Friday when the administration released a 166-page "Financial Report of the United States Government" for the 2006 budget year that ended on September 30th.

The report, released by the Treasury Department and the president's Office of Management and Budget, found that under the accrual method of accounting, the deficit for 2006 would have totaled $449.5 billion, not the widely reported $247.7 billion incurred under the cash system of accounting.

Under the accrual method, expenses are recorded when they are incurred rather than when they are paid. That tends to raise costs for liabilities such as pensions and health insurance.

Ten years ago, Congress ordered the government to start issuing annual reports using the accrual method of accounting in an effort to show the finances in a way that was comparable with the private sector.

In this year's report, as in every one that has been issued, Congress' auditing arm, the Government Accountability Office, said that it could not sign off on the books because of problems in the reporting.

Comptroller General David M. Walker, the head of GAO, said in a letter included in the report that 53 percent of the government's total assets were included in agencies that could not be audited properly.

These problems included what Walker described as "serious financial management problems at the Department of Defense," repeating criticism previous reports have made about the Pentagon's bookkeeping.

The report, citing information from the trustees of the Social Security and Medicare programs, said that the shortfall in funding those two programs would total $44 trillion over the next 75 years.

"This report shows we are making progress getting our fiscal house in order in the near term," White House Budget Director Rob Portman said in a statement. "But it also puts in stark terms the necessity of addressing the rapid increase in entitlement spending over time."