Understanding Similarities and Differences between Accrual and Cash Deficits: Update for Fiscal Year 2006, an E-supplement to GAO-07-117SP Page: 2 of 4
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Und e rstanding Simnila ritie s
Accrual and Cash Deficits
Update for Fiscal Year 2006
What Drove the Change in Cash and
Accrual Deficits in Fiscal Year 2006?
The decline in 2006 in both cash and accrual deficits was primarily driven by an increase
in federal revenue by almost 12 percent-or about $255 billion. Because revenue is
measured similarly in the budget and financial statements, the increase in revenue
reduced both the cash and accrual deficits.
However, cash outlays and accrual-based expenses are measured differently and moved
in different directions.3 Cash outlays increased in 2006 whereas accrual-based expenses
declined.4 This decline was primarily driven by changes in assumptions that are the basis
for actuarial estimates for certain accrued long-term liabilities. These changes are discussed
Veteran and military employee benefits
. Veterans compensation: Veterans compensation expenses (in excess of cash
outlays) declined by over $160 billion. The large change is due primarily to changes
in the Department of Veterans Affairs' (VA) interest rate assumptions, which are used
to discount future benefit payments. In 2006, market-based interest rates used by VA
increased. Higher interest rates reduce the present value estimate of future benefit
payments and related expenses.
. Military employee benefits: Military employee benefit expenses (in excess of cash
outlays) declined by about $95 billion in 2006. This was primarily the result of changes
in assumptions underlying the military health benefit liability. In 2005, the military
retiree health expense included a larger increase due to changes in assumptions for
drug and other costs than in 2006. Additionally in 2006, the military retiree health
expense declined because actual experience was better than assumed.
Insura nc e
. The $50 billion change in insurance expenses (in relation to cash outlays) is primarily
attributable to the National Flood Insurance Program. In 2005, insurance costs increased
primarily due to expenses accrued for Hurricanes Katrina and Rita, which were paid in
. Expenses (in excess of cash outlays) related to the Pension Benefit Guaranty
Corporation also declined in part because the airline relief provision in the Pension
Protection Act of 20065 caused some large plans that were previously classified as
3 The nature of these differences is discussed in GAO-07-117SP beginning on page 12.
4 While accrual-based expenses declined, in many areas liabilities still increased as seen in figure 2. The change in the liability is generally equal to accrued
expenses less cash payments made to cover expenses.
5 Pub. L. No. 109-280.
GAO-07-341SP Accrual and Cash Deficits, Fiscal Year 2006
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United States. Government Accountability Office. Understanding Similarities and Differences between Accrual and Cash Deficits: Update for Fiscal Year 2006, an E-supplement to GAO-07-117SP, text, January 22, 2007; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc292477/m1/2/: accessed December 15, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.