Budget Issues:

1991 Budget Estimates: What Went Wrong

OCG-92-1: Published: Jan 15, 1992. Publicly Released: Jan 15, 1992.

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GAO reviewed the factors contributing to the Office of Management and Budget's (OMB) large misestimate for the fiscal year (FY) 1991 budget deficit.

GAO found that: (1) the FY 1991 OMB baseline deficit estimate varied from $100.5 billion in January 1990 to $310.3 billion in February 1991, with an actual deficit of $268.7 billion; (2) the $168.2-billion increase was the result of changes in estimated receipts from a number of sources and changes in estimated outlays in a number of programs; (3) decisions to reduce Department of Defense (DOD) funding below the baseline level and allied contributions to Operation Desert Shield/Storm caused the decrease in estimated DOD outlays; (4) $70.4 billion of the increase was due to the deteriorating economy; (5) deposit insurance estimates were the most volatile component of the FY 1991 budget; (6) virtually all the variation in the deposit insurance estimates appeared in the Resolution Trust Corporation, Federal Deposit Insurance Corporation Bank Insurance Fund, and the Federal Savings and Loan Insurance Corporation Resolution Fund; (7) tax receipt estimates were consistently reduced from the initial forecast of $1.125 billion to $1.068 trillion; (8) new legislation and regulations produced $30.7 billion in budgetary savings; (9) reestimates that are not directly attributed to legislation, regulations, or explicit changes in economic assumptions accounted for $94.4 billion of the increase; and (10) Medicaid outlays increased from $45 billion to actual outlays of $52.5 billion.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Treasury's response reaffirms the previous practice of providing detailed analysis in February, not in October as GAO recommended. GAO anticipates followup of this issue in its audit work of fiscal year 1992 budget estimates.

    Recommendation: The Secretary of the Treasury and the Director, OMB, should agree on a procedure to ensure the prompt reporting of an analysis of the causes of changes in budget estimates for the most recently completed fiscal year. Ideally, this information and analysis would be made available when the final Monthly Treasury Statement for the year is released.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Implemented

    Comments: The OMB response reaffirms the previous practice of providing detailed analysis in February, no in October, as GAO recommended. GAO anticipates further followup of this issue in its audit work of fiscal year 1992 budget estimates.

    Recommendation: The Secretary of the Treasury and the Director, OMB, should agree on a procedure to ensure the prompt reporting of an analysis of the causes of changes in budget estimates for the most recently completed fiscal year. Ideally, this information and analysis would be made available when the final Monthly Treasury Statement for the year is released.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  3. Status: Closed - Implemented

    Comments: The OMB response assures that steps will be taken to improve its estimation record. GAO anticipates followup of OMB efforts and progress in its audit work of fiscal year 1992 budget estimates.

    Recommendation: The Director, OMB, should review OMB procedures for assessing the accuracy of its budget estimates and the underlying estimating practices in order to better identify means of improving the accuracy of the budget estimates. This assesment should start with a systematic identification of areas in the budget in which the actual results departed materially from the original estimates. Each of these areas should then be examined in detail to determine the reasons for the variances and to identify improvements in the estimating procedures that would yield more reliable estimates in the future.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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