Fiscal Sustainability Reporting: SFFAS 36

• Contact: FASAB Staff, fasab@fasab.gov, 202-512-7350

SFFAS 36 – Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government (PDF)

Exposure Draft: Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government (PDF), Comment Letters (PDF)

Project Objective:

The FASAB is considering what information would be most likely to enable readers of federal financial reports to determine whether future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due.  Ultimately, this may enhance the public’s understanding of long-term fiscal issues.

The Board is working with the assistance of a Fiscal Sustainability Reporting Task Force whose members have technical knowledge relevant to the issues and/or communications expertise relevant to the challenge of how to effectively communicate complex information on long-term fiscal issues. The task force members include representatives from several “think tanks” such as the American Enterprise Institute, the Cato Institute, the Brookings Institution, and the Urban Institute; the Chief Actuaries for Social Security and Medicare; technical experts from the Office of Management and Budget (OMB), the Congressional Budget Office (CBO), the Treasury Department, and the Government Accountability Office (GAO); members of Congress; and academics in the areas of public policy and communications.

HISTORY OF BOARD DELIBERATIONS (reverse chronology)

August 26-27, 2009 Board Meeting
On June 25, 2009, proposed Statement of Federal Financial Accounting Standards (SFFAS) 36, Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government, was forwarded to the Secretary of the Treasury, the Director of the Office of Management and Budget (OMB), the Acting Comptroller General, and the Director of the Congressional Budget Office for a 90-day review period. The Director of OMB and the Acting Comptroller General have indicated that they do not object to the issuance of SFFAS 36, which is scheduled to be issued on September 28, 2009.

Issue Paper for August 2009 (PDF)

June 17-18, 2009 Board Meeting
At the June 2009 Board meeting and subsequently, each of the ten board members submitted signed ballots to approve Statement of Federal Financial Accounting Standards (SFFAS) 36, Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government.  On June 25, 2009, proposed SFFAS 36 was forwarded to the Secretary of the Treasury, the Director of the Office of Management and Budget (OMB), the Acting Comptroller General, and the Director of the Congressional Budget Office for a 90-day review period.  Absent an objection from either the Director of OMB or the Acting Comptroller General, SFFAS 36 will be issued as a final standard on September 28, 2009.

Issue Paper for June 2009 (PDF)

April 22-23, 2009 Board Meeting
At the April 2009 Board meeting, members reviewed a preballot draft Statement of Federal Financial Accounting Standards (SFFAS), Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government.   Prior to the June 2009 Board meeting, staff will send members drafts of potential edits that include:

a disclosure requirement requested by GAO regarding major programs that are funded by earmarked receipts, revised language on policy assumptions to emphasize guiding principles, and additional discussion in the Basis for Conclusions to include public comments on the disadvantages of summary amounts and alternative views on federal deficits and debt.

The Board hopes to vote on a final SFFAS prior to the departure of Messrs. Patton and Farrell at the end of their terms on June 30, 2009.

• Issue Paper for April 2009 (PDF)
• May 8, 2009 Follow-Up to Members (PDF)
• May 29, 2009 Follow-Up to Members (PDF)

February 2009 Board Meeting
Comments on the exposure draft (ED), Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government, were requested by January 5, 2009.  A public hearing was held on February 25, 2009.

Public Hearing Transcript – February 25, 2009 (PDF)

On February 26, 2009, the Board discussed significant areas where respondents and/or public hearing speakers expressed disagreement with the Board’s proposals in the ED, as well as the responses to the minority proposals in the ED:

• Areas of Respondents’ Disagreement with Board Proposals
  • Reporting as Required Supplementary Information (RSI) (permanently) may be more appropriate than basic information for the proposed reporting [Question 12c]
  • Time Horizon for Projections [Question 5]
  • Review guidance on alternative scenarios for clarity [Question 9]
  • Clarify that “major programs” are not limited to social insurance programs [Question 7]
  • Illustrative Disclosure for “Fiscal Gap” (Illustration 8 in Appendix B) is unacceptably confusing [Question 4]
  • Clarify whether Treasury is encouraged to include the FAQs in the CFR [Question 11]
  • GAO recommended flexibility regarding consistency of economic and demographic assumptions with Social Security and Medicare in the Statement of Social Insurance [Questions 2 & 3]
  • GAO recommended additional disclosures [Question 3]

• Respondents’ Reactions to Minority Board Proposals
  • Requirements for RSI should address foreign holdings of U.S. Treasury debt [Question 13]
  • Analysis of potential policy proposals should not be included [Question 14]
  • Majority of respondents advised against developing reporting requirements relating to inter-generational equity [Question 15]

Staff is preparing a draft Statement of Federal Financial Accounting Standards based upon the Board’s decisions on the above issues.

Issue Papers for February 2009

• Tab A – Schedule, Speaker Biographies and Speakers’ Written Comments for February 25, 2009 Public Hearing on Exposure Drafts: “Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government” and “Accounting for Social Insurance, Revised” (PDF)
• Tab B – Reporting Comprehensive Long-Term Projections for the U.S. Government: Comment Letters Received (PDF)
  • Tab B – Attachment 1 – Questions (PDF)
  • Tab B – Attachment 2 – Table of Contents – Comment Letters (PDF)
  • Tab B – Attachment 2 – Comment Letters (PDF)
• Tab D – Reporting Comprehensive Long-Term Projections for the U.S. Government: Staff Analysis and Recommendations (PDF)

December 17-18, 2008 Board Meeting
Comments on the exposure draft (ED), Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government, were requested by January 5, 2009.  A public hearing is scheduled for February 25, 2009. The ED is posted on the FASAB website at /pdffiles/fsr_edfinal.pdf.

Fiscal Sustainability Reporting: SFFAS 36

October 22-23, 2008 Board Meeting
The exposure draft, Reporting Comprehensive Long-Term Projections for the U.S. Government, was issued on September 2, 2008.  A copy of the exposure draft is posted on the FASAB website at /pdffiles/fsr_edfinal.pdf.  Comments are requested by January 5, 2009.

August 20-21, 2008 Board Meeting
At the August Board meeting, the members reviewed a preballot draft exposure draft (ED) Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government, and discussed a proposal from one of the members that the ED should include proposed reporting requirements regarding foreign holdings of U.S. Treasury debt. The Board declined to propose a reporting requirement but agreed that the issue should be discussed in the Basis for Conclusions of the ED and that the Questions for Respondents should include a question designed to elicit public comment on the issue of foreign holdings of U.S. Treasury debt.

Subsequent to the August meeting, the Board voted to approve the ED, which was issued on September 2, 2008. Comments are requested by January 5, 2009. A public hearing will be held on February 25, 2009 in conjunction with the February 2009 Board meeting.

Since the objective of the proposed reporting is not only to provide information that is useful and necessary in assessing fiscal sustainability but also to effectively communicate the information in a way that is meaningful and understandable to readers, FASAB is particularly interested in receiving comments from the general public.

Issue Paper for August 2008 (PDF)

June 18-19, 2008 Board Meeting
At the June 2008 Board meeting, the Board considered a proposal by the Treasury Department to consider developing a broader principle-based or concepts-type statement for fiscal sustainability reporting in lieu of the specific reporting requirements that the Board has been developing in the current draft exposure draft (ED).  The consensus was to continue to develop specific reporting requirements but to be open to consideration of some of the ideas in the Treasury proposal.  For example, the concept of inter-period or inter-generational equity could be “encouraged” in the proposed accounting standard section rather than mentioned only in the objectives section of the draft ED.

The Board also discussed the concepts of “fiscal imbalance” and “fiscal gap” and tentatively decided to omit both measures from the face of the proposed basic financial statement and instead to have a simpler bottom line indicating the difference between projected receipts and projected (noninterest) spending.  The concepts of fiscal imbalance and fiscal gap would be addressed in depth in the required disclosures.

The Board also discussed several edits recommended by members intended to streamline and clarify the draft ED.

The Board will review a revised preballot draft ED at the August 2008 Board meeting.

Issue Paper for June 2008 (PDF)

April 16-17, 2008 Board Meeting
Note: At this agenda session, Mr. Robert B. Anderson, a senior economist at the Office of Management and Budget, responded to technical questions from the Board members.  Mr. Anderson is one of the technical experts serving on the Fiscal Sustainability Reporting Task Force.

Ms. Parlow said that FASAB staff met with participants of the Fiscal Sustainability Task Force on March 31, 2008 for a technical review of the preballot draft ED, and that there were comments on six topics:

1. Factors that drive high/low variance
2. Population characteristics in projecting growth per capita
3. Limitations of showing fiscal imbalance as a ratio of projected receipts or spending
4. Assumptions that depart from current law
5. The concept of “fiscal imbalance”
6. Terminology used for “current levels” and “current policy.”

The Board approved the following edits that were recommended by staff based upon the March 31, 2008 task force meeting.

• add a requirement to identify the major causes of high/low variances that significantly impact the projections;
• add clarifying footnotes:
  • for spending projections that involve per capita, the characteristics of the population should be considered for expenditures that benefit identifiable subgroups; and
  • when displaying ratios of fiscal imbalances to total projected receipts and total projected spending, note that the usefulness of such a display is limited because policy adjustments could alter both the numerator and the denominator of such ratios;
• add a requirement for the narrative to describe significant differences between current law and the policy assumptions upon which the projections are based, such as allowing for exceeding the statutory limit on Federal debt; and
• add additional discussion in the Basis for Conclusions about current level/current policy.

In addition, wording will be added to indicate that factors that drive high/low variances only need to be discussed if they significantly impact the projected fiscal imbalance.

For the June 2008 meeting,

• Staff will develop:
  • the issue of fiscal imbalance versus fiscal gap,
  • how potential fiscal imbalance and fiscal gap measures would be linked to the most appropriate time horizon (finite versus infinite), and
  • for fiscal gap, develop both options discussed at the April meeting: keeping the debt-to-GDP level at the level of the first year of implementation, and resetting it each year.
• In addition, members raising new ideas or concerns agreed to further develop these and provide the Board with any resulting proposals before the June meeting.

Issue Paper for April 2008 (PDF)

February 13-14, 2008 Board Meeting
At the February 2008 Board, the members discussed the following:

1. Proposed format(s) for a primary summary display, including:
   1. Time horizon for projections
   2. Disaggregation of inflows and outflows, especially “other”
   3. Options A, B, C, D and E
2. Proposed requirements for additional specific graphics and narrative for:
   1. Major drivers, such as trends in cost of health care and demographic trends
   2. Trends in deficit spending/debt
   3. Additional information necessary to help readers understand the nature and relevance of the primary summary display
3. Initial placement and audit status of the proposed summary display and the additional graphics and narrative within the CFR.
4. Proposed reporting requirements for significant changes in economic, demographic, or policy assumptions.
5. Proposed guidance on the selection of discount rates and/or valuation dates.

The members did not reach a consensus on a specific time horizon for the primary summary display.  The members agreed to a compromise, that the ED will require that either the primary summary display or a secondary display will reflect a projection period that is consistent with the SoSI, so that amounts displayed for Social Security and Medicare are consistent with the SoSI.

The members also agreed that the bottom-line summary figure(s) should be provided for both a finite and an infinite projection period, with only one projection period for the primary summary display; the other would be in a secondary display or narrative.

A majority of members- Messrs. Farrell, Jackson, Murphy, Schumacher, Steinberg and Allen – agreed that disaggregation beyond Social Security, Medicare and Medicaid be left to the discretion of the preparer.

The members indicated that (a) through (g) below should be included as requirements for the primary summary display, with the format of the elements left to the discretion of the preparer.  The ED will provide an illustrative pro forma in the Appendix.

• a. Total Projected Receipts/Inflows/Resources
• b. Total Projected Costs/Outflows/Responsibilities
• c. “Bottom Line”
• d. Amounts Displayed as both (present value) dollars and percent of Gross Domestic Product (GDP)
• e. Fiscal Imbalance as a percent of projected inflows and total projected outflows
• f. Year-to-Year (e.g., Side-by-Side) Comparison with Prior Year
• g. “Net Change” Column

A majority of the Board decided that the ED should propose that the reporting should be RSI for three years, and then be required as basic information.

During March, staff will prepare a revised exposure draft and meet with the task force. At the April meeting, the Board may consider a pre-ballot draft with the objective of issuing an exposure draft before June 2008.

Issue Paper for February 2008 (PDF)

December 4-5, 2007 Board Meeting
The following members of the Fiscal Sustainability Task Force participated in the December 2007 Board meeting:

Robert Anderson, Senior Economist, Office of Management and Budget (OMB)
Benjamin R. Page, Principal Analyst, Macroeconomic Analysis Division, Congressional Budget Office (CBO)
James Duggan, Senior Economic Advisor for Social Security, Office of Economic Policy, U.S. Department of the Treasury (“Treasury”)
Thomas McCool, Director of the Center for Economics in Applied Research and Methods, Government Accountability Office (GAO)

At the December Board meeting, the Board addressed assumptions, per capita measures and various options for a primary summary display.

Assumptions

The Board confirmed the consensus reached at the September Board meeting that policy assumptions for the primary summary display should be consistent with current levels of federal benefits, services and taxation.  Staff will draft additional language in the draft exposure draft (ED) to clarify this requirement.

Per Capita Measures

The members discussed the objections to per capita measures that were explained by the technical members of the Fiscal Sustainability Task Force:

• A majority of the technical members strongly objected to the use of per capita summary numbers using current-year population for the denominator.  Such values would imply that the current-year population is solely responsible for funding program shortfalls into the distant future.  Those members believe that any changes needed to address the shortfalls projected through, for example, the next 75 years, must be spread across the population throughout that 75-year period, and cannot be handled solely by today’s workers.
• “Per capita” measures for infinite-horizon projection periods present special problems.  It is uncertain how a reasonable “per capita” denominator for the “infinite horizon” ratio would be selected and explained, especially if the denominator includes an estimate of all individuals that enter the population during the projection period.
• Present value per capita amounts can be easily misinterpreted, because the reader will compare the amounts with current salary levels and not understand the role of potential future productivity increases.
• Per capita amounts represent amounts distributed equally among individuals with widely different abilities to pay.

The Board discussed the above objections and concurred that per capita measures should be deleted from the proposed reporting.

Initial discussion of summary displays

The Board discussed the options for summary displays.  Options A, B and C are described in pages 6-12 of the December briefing memorandum (available on the Active Projects page of the FASAB website, www.fasab.gov ) and an Option D that was presented at the meeting by Mr. Dacey of GAO (to be available as an attachment to the December 2007 meeting minutes when they are posted to the FASAB website in early February).

The members discussed the advantages of each of the four displays and noted that it would assist their evaluation if actual projections could be added to the various line items.  Staff plans to ask the Congressional Budget Office for assistance in providing actual projections based upon the Board’s requirements for assumptions.

Issue Paper for December 2007 (PDF)

September 19-20, 2007 Board Meeting
At the September 2007 meeting, the Board discussed objectives for fiscal sustainability reporting and issues relating policy assumptions for revenue and spending projections.  Fiscal Sustainability Task Force Technical Experts with experience making such projections were invited to the meeting to assist in answering members’ questions:

The objectives for fiscal sustainability reporting focus on FASAB’s existing Objective 3,

Stewardship. Objective 3 says that:

Federal financial reporting should assist report users in assessing the impact on the country of the government’s operations and investments for the period and how, as a result, the government’s and the nation’s financial condition has changed and may change in the future.

In particular, sub-objective 3B states that:

Federal financial reporting should provide information that helps the reader to determine whether future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due.

The Board indicated general agreement with the objectives.

The Board also discussed potential guidance for policy and economic assumptions.

Policy assumptions address the level of services provided by the federal government as well as the framework for assessing taxes and fees.  Economic assumptions address the economic factors that are not under the direct control of the Federal government (for example, population demographics, inflation and growth in Gross Domestic Product (GDP)).   The Board indicated that staff should develop broad guidelines for assumptions rather than detailed rules.

For the December 2007 meeting, the briefing materials will contain numerous alternatives for fiscal sustainability reporting in addition to revised objectives and guidance on assumptions.  The briefing materials will be presented in the format of a draft exposure draft (ED).

Issue Paper for September 2007 (PDF)

July 25-26, 2007
The Board discussed the distinction between budget policy, including targets and budget rules, and financial reporting, and agreed that FASAB’s role is to set the standards for what information needs to be reported so that readers of the Financial Report of the U.S. Government (FR) can assess long-term fiscal sustainability, as described in the Board’s objectives for financial reporting- specifically, “whether future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due.”1. This is distinct from a definition of fiscal sustainability, which might involve or imply setting budget policy or rules. The Board did not rule out the possibility that a definition might emerge during the course of the project, but agreed with staff that at this point in the project, objectives for fiscal sustainability reporting would be the optimal foundation for the development of reporting requirements.

It was noted that, based upon research and discussions with a representative from the International Public Sector Accounting Standards Board (IPSASB), the FASAB is on the leading edge among developed nations in exploring the potential for including reporting on fiscal sustainability in the national government’s general purpose financial reports. The IPSASB is planning a project on this issue and expects that this project will be on its agenda for the first time in November, 2007.

For the September Board meeting, staff will draft recommended objectives for fiscal sustainability reporting, which will be based upon existing objectives for “Stewardship” in Statement of Federal Financial Accounting Concepts 1.

The Board discussed a recommendation from the Communications members of the Fiscal Sustainability Reporting Task Force that emphasized the importance of obtaining feedback from representatives of different audience segments in order to evaluate whether the proposed reporting is understandable and useful. It was agreed that FASAB staff will contact several academics in the field of communications who have expressed an interest in this project, to explore whether perhaps their students might be available to comment on proposed reporting as it is being developed. Staff will also explore any other potential avenues that might arise for obtaining feedback from members of the public, including discussions with IPSASB representatives.

Handouts – July 2007 Board Meeting

• Transmittal (PDF)
• Task Force (PDF)
• Survey File (PDF)
• Project Plan and Milestones (PDF)

¹Statement of Federal Financial Accounting Concepts (SFFAC) 1, paragraph 139.

Discussion of interim results of the task force efforts with the objective of identifying any additional research areas and any member concerns

Fiscal Sustainability Reporting (pdf 1.7MB)

Attachment- Fiscal Sustainability Reporting (pdf 1.7 MB)

Separate Binder- International survey: Fiscal Sustainability Reporting (pdf 361KB)

May 23-24, 2007
Although time constraints did not permit discussion of Fiscal Sustainability Reporting at the May 2007 Board meeting, staff provided a brief written summary of the April 2007 meeting of the “technical expert” members of the Fiscal Sustainability Task Force.  The “financial statement users/communications experts” members, as well as several of the “technical experts” members, will meet in June 2007 to discuss how to communicate information to the public in an understandable and meaningful way. At the July 2007 Board meeting, staff will present a brief summary of the June 2007 Task Force meeting, as well as a survey of several other countries’ reporting on long-term fiscal sustainability.

Handout- May 2007 Board Meeting (PDF)

March 21-22, 2007
Update on correspondence and meetings with the “technical experts” members of the Fiscal Sustainability Reporting Task Force. The memo to the Board is posted below.

Issue Paper for the March 2007 Board Meeting (PDF)

January 17-18, 2007 At the January 2007 Board meeting, the Board reviewed a draft briefing package for the fiscal sustainability reporting task force members.

Issue Paper for January 2007 (PDF)

July 26-27, 2006
At the July meeting, FASAB staff presented a proposed list of task force members for Sustainability Reporting and a draft outline of a briefing package for task force members. The Board approved the outline briefing package and discussed additions to the proposed list of task force members.

Staff plans to draft the full briefing package and begin to contact potential task force members.

The July 2006 issue paper is available for review at the FASAB office.