(AP) -- The federal budget deficit would have been 69 percent higher than the $162.8 billion reported two months ago if the government had used the same accounting methods as private companies, the Bush administration reported Monday.
The administration, releasing the "Financial Report of the United States Government" for 2007, said that the deficit under the accrual method of accounting would have totaled $275.5 billion for the fiscal year ending Sept. 30.
The report was released by the Treasury Department and the president's Office of Management and Budget. Under the accrual method of accounting, expenses are recorded when they are incurred rather than when they are paid. That raises the costs for liabilities such as pensions and health insurance.
The $275.5 billion deficit under the accrual method of accounting was still down by 38.7 percent from the deficit under this accounting method the previous year, when it totaled $449.5 billion.
The deficit on a cash-flow basis of $162.8 billion represented the lowest imbalance in five years. The administration noted the decline in the deficit under both measurements.
"The 2.6 trillion in record-breaking revenues that flowed into the Treasury this year reflect a healthy economy," Treasury Secretary Henry Paulson said in a statement accompanying the new report.
But officials warned that something must be done to address the significant shortfall in the government's largest benefit programs for Social Security and Medicare.
"Reducing the deficit in the short-term will put us in a better position for dealing with the longer-term entitlement issue, which can only be characterized as an oncoming fiscal train wreck," said OMB Director Jim Nussle.
The new report indicates that funding for Social Security and Medicare will come up $45 trillion short in the next 75 years in paying for projected benefits over that time frame.
Congress ordered the government a decade ago to start issuing annual reports using the accrual method of accounting in an effort to show the finances in a way that was comparable with the private sector.
As it has for every report, the Government Accountability Office, Congress' auditing arm, said it could not sign off on the books because of problems at various agencies, most notably the Defense Department.
In a letter, GAO Comptroller General David M. Walker did note that his agency was able to sign off on the financial statement for the Social Security and Medicare programs.
"The federal government did not maintain effective internal control over financial reporting, including safeguarding assets, and compliance with significant laws and regulations," Walker said in his letter.