Monthly Treasury Statement Vs. Daily Treasury Statement

I don’t think this will be a news flash for anyone, but as detailed here the Daily Treasury Statement (DTS) released daily by Treasury is the primary source of data used for all of the US Daily Cash Deficit posts. However, there is another Treasury report, the Monthly Treasury Statement (MTS), that the rest of the world is much more familiar with. Any time you hear an “official” revenue, outlay, or deficit number….odds are it came from the  MTS.

Now, you might be tempted to assume that the MTS is just the sum of the DTS…rolled up into a nice government report. Unfortunately, this simply is not the case. On several occasions, I spent more hours than I care to admit trying to tie the two out, failing miserably each time. After a chat with Treasury staff, I found out why…they are generated from completely independent data sets and simply are not reconcilable. During my attempts…I came across many many examples where the numbers from each report…in categories you would expect to be straight forward like NASA expenditures, were in fact off by 50-70% or more. As a result, as I’ve said before, I don’t like the MTS and I don’t trust the MTS.

Unfortunately, when I started blogging about the daily deficit last year, I made the assumption that for all it’s flaws, the MTS and the DTS were close enough. I based this on a comparison of FY 2011 and FY 2012, which over the twelve month period, despite monthly deltas, on the year was only off by $7B in 2011 and $3B in 2012…close enough for government work right?

Well, a few months ago, I decided to pull the historical MTS data and line it up with the DTS data, and while sure enough the 2011/12 FY are pretty darn close, not much else is. In fact, the average TTM difference over the last 5 years is $79B. At present, the TTM delta is $95B, with the cash deficit being $95B higher than the reported MTS deficit. Lesson learned…2 is not an adequate sample size.  This is likely to impact my world famous CBO vs CBO challenge, but I’ll tackle that another day.

While I can’t tie out the MTS to the DTS (since it’s not possible), I do have a pretty good idea of where at least some of the variance lies. The first thing you will notice about these two series is that DTS revenues are almost always higher than the MTS. The reason for this is that it represents the cash flows in for the entire federal government….and then some. My theory is that some of what ends up on the DTS is ultimately excluded from the MTS with the most prominent example being the US Postal Service. It would seem that USPS runs it’s business through treasury bank accounts, resulting in cash source of about $87B per year. On the outlays side….they have gone out of their way to make it difficult to track. They split out postal service money orders, but apparently not op costs. I assume that payroll gets grouped together with “Federal Salaries”. So as far as I am concerned, I can probably assume that the $87B of cash in is offset by probably $100B or so of outlays, contributing to about $13B of deficit (lot of assumptions there) However, on the MTS, you can probably bet that the revenues and outlays are completely excluded, and somewhere treasury makes an entry indicating a $13B loan…that I’m pretty sure will never be repaid…thus excluding it from the official deficit calculations. I catch it in the cash deficit…they purposely exclude it.

This is just the largest item….I’m sure there are more, plus untold amounts of “modified accrual” shadiness going on that account for the differences. So, I’ll just go ahead and say it….in my opinion the MTS is a bogus report that simply can’t be trusted. When all else fails….all we can rely on is the cash flow statement, and the DTS is the only timely reliable source of that for the time being. As long as government accountants can slice and dice and exclude whatever they want, you simply can’t trust the reports they generate.

So…why do I trust the DTS??? you probably are wondering? Well, I don’t dismiss the possibility for shadiness, but for the most part, the DTS is verifiable. Cash in less cash out damn well better be equal to delta cash and delta debt. Debt is separately verifiable, and cash is just about the last thing you want to lie about because it is the first thing any auditor is going to look for. Finally…these reports are generated daily with a 24 hour turnaround. Creating fraudulent financial statements takes time (I assume 🙂 ) , so the risk here is less than something bureaucrats have a few weeks to fiddle around with.