Capital Budgeting for the Federal Government

GAO: (1) discussed the usefulness of the capital budgeting concept in federal budgetary decisionmaking; and (2) explained its capital budgeting proposal approach for improving the budget structure. GAO noted that, although the federal government's use of a unified cash-based budget provides a comprehensive report of its cash receipts and outlays, it does not systematically distinguish between capital investment and current operations outlays. GAO also noted that a capital budget component within the unified budget could: (1) provide more deficit control options; (2) eliminate disincentives to capital investment; (3) more accurately report the costs of federal direct loans; (4) provide a link to financial statements; and (5) focus attention on the nation's physical infrastructure needs. In addition, GAO noted that its capital budgeting proposal: (1) involves maintenance of the unified budget, with separate reporting on capital and operating amounts; (2) would help simplify budget debate and actions by providing a more meaningful breakdown of budget totals; and (3) would require changes in how information is presented in the budget.