Fiscal Exposures:
Federal Insurance and Other Activities That Transfer Risk or Losses to the Government
GAO-19-353: Published: Mar 27, 2019. Publicly Released: Mar 27, 2019.
Additional Materials:
- Highlights Page:
- Full Report:
- Accessible Version:
Contact:
(202) 512-8678
cackleya@gao.gov
Office of Public Affairs
(202) 512-4800
youngc1@gao.gov
Many federal activities—like loan guarantees or flood insurance—are intended to protect people from the effects of adverse events. We found 148 activities like these, which carry a risk of future financial commitments for the federal government.
For some activities, such as pension and life insurance, the federal commitment occurs years before payments are reflected in the budget.
This analysis supports our 2007 recommendation that Congress consider improving recognition of these fiscal risks in budget documents. For example, Congress could expand the use of information on expected future spending arising from commitments made today.
Photo of the U.S. Capitol
Additional Materials:
- Highlights Page:
- Full Report:
- Accessible Version:
Contact:
(202) 512-8678
cackleya@gao.gov
Office of Public Affairs
(202) 512-4800
youngc1@gao.gov
What GAO Found
Through analysis of sources containing government-wide information on federal activities, GAO identified 148 federal insurance and other activities that transfer risk or losses from adverse events to the government (see fig.). Unlike private insurance, the activities do not necessarily have a contract or charge premiums or fees in exchange for assuming risk. Even when premiums or fees exist they may not cover all costs, as federal expenditures can be driven by policy goals or agency missions rather than the aim of fiscal solvency. GAO generally was able to provide financial or budget information for the activities.
Federal Programs or Activities That Transfer Risk or Losses to the Government, as of September 30, 2017
Category |
Number of activities |
Federal insurance programs |
5 |
Federal loan guarantee programs |
33 |
Senior preferred stock purchase agreements with Fannie Mae and Freddie Mac |
2 |
Certain large federal employee and veteran benefitsa |
13 |
Other activities that (1) provide property damage or financial loss compensation, or (2) offer life, health, or disability benefits to nonfederal employees. |
95 |
Total |
148 |
Source: GAO . | GAO-19-353
Note: GAO's results are based solely on the criteria GAO developed for this report and the sources and methodology it used. Other criteria, sources, or methodologies might yield lists that differ from GAO's in number and composition of activities.
aGAO identified 13 Treasury accounts that accounted for 99 percent of all federal employee and veterans benefits liabilities to the federal government as of September 30, 2017. These include accounts that fund retirement benefits, disability insurance, health insurance, and life insurance programs for civilian and military employees.
The government's primarily cash-based budget generally does not record the full cost of commitments incurred until corresponding payments are made in the future. Therefore, the budget may not accurately reflect federal costs or the likely claim on federal resources for such activities. For some claims, such as pension and life insurance, the federal commitment occurs years before payments are reflected in the budget. Additionally, payments the government may be expected to make based on policies or past practices (but is not legally required to make) may not be evident in the budget. For example, the Commercial Space Launch Insurance Program created a potential liability to the government of up to $3.1 billion per licensed space launch in 2017 but never has been included in the budget. GAO previously recommended (GAO-08-206, and reiterated in GAO-14-28) that Congress consider expanding the use of accrual-based information in the budget documents submitted to Congress. However, this recommendation has not been implemented. Accrual measurement would provide enhanced control over future spending by recognizing long-term costs when decisions are made.
Why GAO Did This Study
The federal government conducts many activities that protect parties from the effects of adverse events—for instance, by providing flood insurance, guaranteeing mortgage loans, or making payments to beneficiaries of deceased military personnel. Identifying these activities and understanding the fiscal exposures they create can be a challenge, making it difficult for Congress to oversee them through the budget and appropriation processes.
GAO was asked to update information on federal insurance activities it created in 2005 (GAO-05-265R) and identify opportunities for improving budgeting for such activities. This report (1) identifies and provides cost- and exposure-related information on federal activities that transfer risk or losses to the government, and (2) illustrates challenges GAO identified in past reports with measuring and reporting fiscal exposures in budget documents. GAO primarily reviewed government-wide financial and budget data, the Catalog of Federal Domestic Assistance, and the U.S. Code. GAO also drew on previous work, conducted interviews with the Office of Management and Budget, Department of the Treasury, and other agencies, and reviewed agency financial and budget documents.
What GAO Recommends
This analysis provides additional support for GAO's 2007 recommendation that Congress consider improving recognition of fiscal exposures in budget documents such as by expanding use of information on expected future spending arising from present-day commitments.
For more information, contact Alicia Puente Cackley at (202) 512-8678 or cackleya@gao.gov.
Dec 15, 2020
-
The Nation's Fiscal Health:
Information on the Spending and Revenue Implications of Potential Debt TargetsGAO-21-211: Published: Dec 15, 2020. Publicly Released: Dec 15, 2020.
Oct 7, 2020
-
The Nation's Fiscal Health:
A Long-Term Plan Is Needed for Fiscal SustainabilityGAO-21-161T: Published: Oct 7, 2020. Publicly Released: Oct 7, 2020.
Sep 23, 2020
-
The Nation's Fiscal Health:
Effective Use of Fiscal Rules and TargetsGAO-20-561: Published: Sep 23, 2020. Publicly Released: Sep 23, 2020.
Jan 23, 2020
-
Federal Trust Funds and Other Dedicated Funds:
Fiscal Sustainability Is a Growing Concern for Some Key FundsGAO-20-156: Published: Jan 16, 2020. Publicly Released: Jan 23, 2020.
Dec 19, 2019
-
State and Local Governments' Fiscal Outlook:
2019 UpdateGAO-20-269SP: Published: Dec 19, 2019. Publicly Released: Dec 19, 2019.
Nov 14, 2019
-
Certificated Expenditures:
Executive Office of the President FY 2018 Certificated Expenditures Were Spent for Authorized PurposesGAO-20-139R: Published: Nov 14, 2019. Publicly Released: Nov 14, 2019.
Oct 16, 2019
-
Civilian Personnel:
Additional Guidance and Consistent Data Reporting Could Help Improve the Marine Corps' Budget ManagementGAO-20-148: Published: Oct 16, 2019. Publicly Released: Oct 16, 2019.
Jun 26, 2019
-
The Nation's Fiscal Health:
Actions Needed to Achieve Long-Term Fiscal SustainabilityGAO-19-611T: Published: Jun 26, 2019. Publicly Released: Jun 26, 2019.
Apr 10, 2019
-
The Nation's Fiscal Health:
Action Is Needed to Address the Federal Government's Fiscal FutureGAO-19-314SP: Published: Apr 10, 2019. Publicly Released: Apr 10, 2019.
Mar 22, 2019
-
Data Act:
OMB Needs to Formalize Data Governance for Reporting Federal SpendingGAO-19-284: Published: Mar 22, 2019. Publicly Released: Mar 22, 2019.
Looking for more? Browse all our products here