Audit Report OIG-23-007 — Treasury Consolidated Financial Statements, Fiscal Years 2022 and 2021 (November 15, 2022)
Summary
Audit Report OIG-23-007, dated November 15, 2022, is the Treasury Office of Inspector General's audit of the Department of the Treasury's consolidated financial statements for fiscal years 2022 and 2021. In a memorandum to Secretary Yellen, Deputy Inspector General Richard K. Delmar says KPMG LLP, under contract, found the statements fairly presented in all material respects. KPMG reported a significant deficiency in control over cash management systems at the Bureau of the Fiscal Service, and significant deficiencies over unpaid tax assessments and financial reporting systems at the Internal Revenue Service. It also found noncompliance with certain FFMIA systems requirements and no reportable noncompliance with laws, regulations, contracts and grant agreements tested. Treasury's fiscal year 2022 Agency Financial Report is included.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
- Issuer
- Congressional materials
- Document type
- Audit Report
- Case
- 16 Employee Retention Credit Treasury Oig Audit Report Oig 23 007
Cite this document
“Audit Report OIG-23-007 — Treasury Consolidated Financial Statements, Fiscal Years 2022 and 2021 (November 15, 2022).”
Original at oig.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/16-employee-retention-credit-treasury-oig-audit-report-oig-23-007/
, SHA-256 9bc17266bc439239a81bc569be35084a3c647fa8d0d8c8d03b0b8bdc70eb1c9f.Full text
Audit Report
OIG-23-007
FINANCIAL MANAGEMENT
Audit of the Department of the Treasury’s Consolidated
Financial Statements for Fiscal Years 2022 and 2021
November 15, 2022
Office of Inspector General
Department of the Treasury
ACCESSIBILITY NOTICE
The Treasury Department is committed to making its Website accessible to all citizens
and ensuring that it meets or exceeds the requirements of Section 508 of the
Rehabilitation Act.
OMB CIRCULAR A-136 Revised, Section I.5. Submission Deadlines, allows agencies
an additional 15 calendar days after issuance to post a report that is compliant with
Section 508 of the Rehabilitation Act of 1973 1.
To obtain an accessible copy of the Department of the Treasury Agency Financial
Report FY 2022, see its website on November 30, 2022:
https://home.treasury.gov/about/budget-financial-reporting-planning-and-
performance/agency-financial-report
For Treasury's Web Accessibility and Section 508 Compliance policy page, see:
Site Policies and Notices re: Accessibility-Section 508 of the Rehabilitation Act
1
The final report should be posted to the agency website the same day the report is submitted to OMB, Treasury, GAO,
and the Congress. A report that is compliant with Section 508 of the Rehabilitation Act of 1973, as amended,
(29 U.S.C. § 794d) must be posted no later than 15 calendar days after the final report is posted. The report’s location
must be clearly identified on the agency’s homepage.
Contents
Memorandum for the Secretary
Section I – Independent Auditors’ Report and Management’s Response
Section II - Department of the Treasury Agency Financial Report
Fiscal Year 2022
This Page Intentionally Left Blank
DEPARTMENT OF THE TREASURY
WASHINGTON, D. C. 20220
November 15, 2022
OFFICE OF
INSPECTOR GENERAL
INFORMATION MEMORANDUM FOR SECRETARY YELLEN
FROM: Richard K. Delmar /s/
Deputy Inspector General
SUBJECT: Audit of the Department of the Treasury’s Consolidated Financial
Statements for Fiscal Years 2022 and 2021
INTRODUCTION
The Chief Financial Officer’s Act, as amended, requires the Department of the Treasury’s
(Treasury) Inspector General or an independent auditor, as determined by the Inspector General,
to audit Treasury’s consolidated financial statements. We contracted with a certified independent
public accounting firm of KPMG LLP (KPMG) to audit the consolidated financial statements of
Treasury as of September 30, 2022 and 2021, and for the years then ended. The contract required
that the audit be performed in accordance with U.S. generally accepted government auditing
standards and Office of Management and Budget (OMB) Bulletin No. 22-01, Audit
Requirements for Federal Financial Statements.
RESULTS OF INDEPENDENT AUDIT
In its audit of Treasury, KPMG reported
• the consolidated financial statements were fairly presented, in all material respects, in
accordance with U.S. generally accepted accounting principles;
• a significant deficiency in internal control over cash management systems at the Bureau
of the Fiscal Service, representing a significant deficiency for Treasury as a whole;
• a significant deficiency in internal control over unpaid tax assessments and a significant
deficiency in internal control over financial reporting systems at the Internal Revenue
Service, collectively representing a significant deficiency for Treasury as a whole;
• noncompliance with certain requirements of FFMIA related to federal financial
management systems requirements; and
• no instances of reportable noncompliance with laws, regulations, contracts and grant
agreements tested.
Page 2
EVALUATION OF AUDITORS’ PERFORMANCE
In connection with the contract, we reviewed KPMG’s report and related documentation and
inquired of its representatives. Our review, as differentiated from an audit in accordance with
U.S. generally accepted government auditing standards, was not intended to enable us to express,
and we do not express, an opinion on Treasury’s consolidated financial statements; conclusions
about the effectiveness of internal control; whether Treasury’s financial management systems
substantially complied with FFMIA; and compliance with laws, regulations, contracts, and grant
agreements. KPMG is responsible for the attached auditor’s report dated November 15, 2022,
and the conclusions expressed in the report. However, our review disclosed no instances where
KPMG did not comply, in all material respects, with U.S. generally accepted government
auditing standards.
I appreciate the courtesy and cooperation extended to KPMG and my staff during the audit. If
you wish to discuss this report, please contact me at (202) 528-8997 or Deborah L. Harker,
Assistant Inspector General for Audit, at (202) 486-1420.
Attachment
cc: Anna Canfield Roth
Acting Assistant Secretary for Management
Carole Y. Banks
Deputy Chief Financial Officer
SECTION I –
Independent Auditors’ Report
and Management’s Response
This Page Intentionally Left Blank
KPMG LLP
Suite 12000
1801 K Street, NW
Washington, DC 20006
Independent Auditors’ Report
Deputy Inspector General
Department of the Treasury:
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of the Department of the Treasury (Department), which
comprise the consolidated balance sheets as of September 30, 2022 and 2021, and the related consolidated
statements of net costs, consolidated statements of changes in net position, statements of custodial activity,
and combined statements of budgetary resources for the years then ended, and the related notes to the
consolidated financial statements.
In our opinion, based on our audits and the reports of the other auditors, the accompanying consolidated
financial statements present fairly, in all material respects, the financial position of the Department as of
September 30, 2022 and 2021, and its net costs, changes in net position, budgetary resources, and custodial
activity for the years then ended in accordance with U.S. generally accepted accounting principles.
We did not audit the financial statements of the Internal Revenue Service (IRS), a component entity of the
Department, which statements reflect total assets constituting 0.95 percent and 0.98 percent, respectively, of
the Department’s consolidated total assets at September 30, 2022 and 2021; net costs of operations
constituting 7.55 percent and 9.78 percent, respectively, of the Department’s consolidated net costs of
operations for the years then ended; budgetary resources constituting 7.11 percent and 1.07 percent,
respectively, of the Department’s combined budgetary resources for the years then ended; and custodial
revenue constituting 96.93 percent and 95.97 percent, respectively, of the Department’s total custodial revenue
for the years then ended. Those statements were audited by other auditors, whose report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for IRS, is based solely on the report of the
other auditors.
We also did not audit the financial statements of the Office of Financial Stability (OFS) – Troubled Asset Relief
Program (TARP), a component entity of the Department, which statements reflect total assets constituting
0.04 percent and 0.04 percent, respectively, of the Department’s consolidated total assets at September 30,
2022 and 2021; net costs of operations constituting 0.12 percent and 0.28 percent, respectively, of the
Department’s consolidated net costs of operations for the years then ended; and budgetary resources
constituting 0.01 percent and 0.01 percent, respectively, of the Department’s combined budgetary resources for
the years then ended. Those statements were audited by other auditors, whose report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for OFS-TARP, is based solely on the report of
the other auditors.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America (GAAS), the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States, and Office of Management and Budget (OMB) Bulletin
No. 22-01, Audit Requirements for Federal Financial Statements. Our responsibilities under those standards
and OMB Bulletin No. 22-01 are further described in the Auditors’ Responsibilities for the Audit of the
KPMG LLP, a Delaware limited liability partnership and a member firm of
the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee.
Consolidated Financial Statements section of our report. We are required to be independent of the Department
and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to
our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Emphasis of Matter
As discussed in Note 11, the Department is a participant in transactions with certain entities as part of
significant legislation whose purpose is to assist in stabilizing the financial markets. Also as discussed in
Note 1AB, the U.S. government’s interventions with regards to these entities are not expected to be permanent.
Furthermore, as discussed in Notes 1V and 11, the value of certain investments and commitments is based on
estimates. These estimates are inherently subject to substantial uncertainty arising from the likelihood of future
changes in general economic, regulatory, and market conditions. As such, there will likely be differences
between the estimated value of these investments and commitments as of September 30, 2022 and 2021, and
the amounts that may ultimately be realized from these investments or may be required to settle these
commitments. Such differences may be material and will also affect the ultimate cost of these programs. Our
opinion is not modified with respect to these matters.
Other Matter - Interactive Data
Management has elected to reference to information on websites or other forms of interactive data outside the
Agency Financial Report to provide additional information for the users of its consolidated financial statements.
Such information is not a required part of the consolidated financial statements or supplementary information
required by the Federal Accounting Standards Advisory Board. The information on these websites or the other
interactive data has not been subjected to any of our auditing procedures, and accordingly we do not express
an opinion or provide any assurance on it.
Responsibilities of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with U.S. generally accepted accounting principles, and for the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and
therefore is not a guarantee that an audit conducted in accordance with GAAS, Government Auditing
Standards, and OMB Bulletin No. 22-01 will always detect a material misstatement when it exists. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate,
they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with GAAS, Government Auditing Standards, and OMB Bulletin
No. 22-01, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures
include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements.
2
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Department’s internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluate the overall presentation of the consolidated financial
statements.
We are required to communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit, significant audit findings, and certain internal control related matters that
we identified during the audit.
Required Supplementary Information
U.S. generally accepted accounting principles require that the information in the Management’s Discussion and
Analysis and Required Supplementary Information sections be presented to supplement the basic consolidated
financial statements. Such information is the responsibility of management and, although not a part of the basic
consolidated financial statements, is required by the Federal Accounting Standards Advisory Board who
considers it to be an essential part of financial reporting for placing the basic consolidated financial statements
in an appropriate operational, economic, or historical context. We, and the other auditors, have applied certain
limited procedures to the required supplementary information in accordance with GAAS, which consisted of
inquiries of management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our, and the other auditors’ inquiries, the basic consolidated
financial statements, and other knowledge we, and the other auditors, obtained during our audits of the basic
consolidated financial statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any
assurance.
Other Information
Management is responsible for the other information included in the Agency Financial Report. The other
information comprises the Message from the Secretary of the Treasury, the Message from the Acting Assistant
Secretary for Management and Deputy Chief Financial Officer, and the Other Information but does not include
the consolidated financial statements and our auditors’ report thereon. Our opinion on the consolidated financial
statements does not cover the other information, and we do not express an opinion or any form of assurance
thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and consider whether a material inconsistency exists between the other information and the
consolidated financial statements, or the other information otherwise appears to be materially misstated. If,
based on the work performed, we conclude that an uncorrected material misstatement of the other information
exists, we are required to describe it in our report.
Report on Internal Control Over Financial Reporting
This report includes our consideration of the results of the other auditors’ testing of internal control over
financial reporting that are reported on separately by those other auditors. However, this report, insofar as it
relates to the results of the other auditors, is based solely on the reports of the other auditors.
In planning and performing our audit of the consolidated financial statements as of and for the year ended
September 30, 2022, we considered the Department’s internal control over financial reporting (internal control)
as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of
expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an
opinion on the effectiveness of the Department’s internal control. Accordingly, we do not express an opinion on
3
the effectiveness of the Department’s internal control. We, and the other auditors, did not test all internal
controls relevant to operating objectives as broadly defined by the Federal Managers’ Financial Integrity Act of
1982.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial
statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not
identified. Given these limitations, during our audit we and the other auditors did not identify any deficiencies in
internal control that we consider to be material weaknesses. We and the other auditors identified certain
deficiencies in internal control, described below, that we consider to be significant deficiencies.
A. Significant Deficiency in Internal Control over Cash Management Systems at the Bureau of the Fiscal
Service
Effective information system controls and security programs over financial systems are essential to
protecting information resources in accordance with OMB Circular No. A-130, Managing Information as a
Strategic Resource. The Bureau of the Fiscal Service (Fiscal Service) relies on many information systems
to manage government-wide cash.
While Fiscal Service remediated several control deficiencies identified in prior audits, Fiscal Service had
unresolved control deficiencies primarily related to its general information technology controls over the
government-wide cash management systems as follows:
Fiscal Service had not fully implemented remediation relative to corrective action plans and, in situations
where Fiscal Service accepted associated risks, did not design and implement compensating controls to
reduce such risks to an acceptable level. The unresolved control deficiencies did not provide reasonable
assurance that: (1) the concept of least privilege is employed to prevent significant security exposures;
(2) accounts were reviewed for compliance with account management requirements and that access to
systems is protected against unauthorized modification, loss, or disclosure; (3) security events are logged,
monitored, investigated and resolved; (4) baseline policies and procedures for security configuration
controls were adequately documented and fully implemented for all platforms; (5) a complete and accurate
inventory of information system components is maintained; and (6) incompatible duties are separated
effectively so that users cannot control entire processes. Fiscal Service continues to prioritize the
remediation of unresolved control deficiencies and until these control deficiencies are fully addressed, there
is an increased risk of inadequate security controls in financial systems; unauthorized access to,
modification of, or disclosure of sensitive financial data and programs; and unauthorized changes to
financial systems.
Recommendation
Separate reports with additional details and recommendations for corrective action will be provided to Fiscal
Service management. We recommend that the Acting Assistant Secretary for Management (Acting ASM) and
Deputy Chief Financial Officer (DCFO) ensure that Fiscal Service implements requisite corrective actions to
resolve control deficiencies over its cash management systems.
4
B. Significant Deficiency in Internal Control Over Financial Reporting at the Internal Revenue Service
IRS continued to take steps to improve internal control over financial reporting to ensure reliable and timely
financial information is obtained, maintained, and reported in accordance with OMB Circular A-123,
Management’s Responsibility for Enterprise Risk Management and Internal Control. However, the other
auditors reported significant deficiencies in internal control over unpaid tax assessments and internal
control over financial reporting systems that we collectively considered as a significant deficiency at the
Department level. IRS internal control deficiencies are summarized as follows:
1. Unpaid Tax Assessments
During fiscal year 2022, the systems IRS uses to account for federal taxes receivable and other unpaid
assessment balances continued to have limitations, as well as other control deficiencies that led to errors in
taxpayer accounts. Because of these deficiencies, IRS’s systems were unable to provide the timely,
reliable, and complete transaction-level financial information necessary to enable IRS to appropriately
classify and report unpaid assessment balances. As in prior years, IRS used a manually driven statistical
estimation process to compensate for the effects of its system limitations and other deficiencies on a
material portion of its federal taxes receivable balance to help ensure that this balance was free of material
misstatement. During Fiscal Year 2022, IRS recorded adjustments totaling about $18.5 billion to correct the
effects of continued errors in its underlying data that IRS identified during its estimation process.
While using this process to determine the material portion of taxes receivable has enabled IRS to produce
reliable related balances for year-end reporting, it does not provide IRS management with readily available,
reliable unpaid assessment information on a daily basis throughout the year for effectively managing
unpaid assessment balances. Further, errors in taxpayer accounts create a burden for those taxpayers
whose accounts were affected.
2. Financial Reporting Systems
IRS continued to have control deficiencies, primarily unresolved control deficiencies identified in prior
audits, related to general controls. IRS mitigated the potential effect of the identified control deficiencies
primarily through compensating controls that management has designed to detect potential misstatements
on the financial statements. Nevertheless, these deficiencies increase the risk of unauthorized access to,
modification of, or disclosure of sensitive financial and taxpayer data and disruption of critical operations
and are therefore important enough to merit the attention of those charged with governance of IRS.
IRS made progress addressing certain information security control deficiencies. For example, IRS
addressed deficiencies in (1) the identification and authentication of user and service accounts, (2) certain
configuration settings, and (3) security management. However, deficiencies continue to exist within
encryption and improper configuration of security settings. While IRS has expressed its intent to address
unresolved deficiencies in fiscal year 2023, continued and consistent management commitment and
attention are essential to addressing existing deficiencies and continually improving IRS’s information
system security controls.
Recommendation
The other auditors separately provided IRS management a report detailing the conditions identified and their
recommendations to address the above significant deficiency. We recommend that the Acting ASM and DCFO
ensure that IRS implements corrective actions to resolve the control deficiencies at IRS.
Report on Compliance and Other Matters
This report includes our consideration of the results of the other auditors’ testing of compliance and other
matters that are reported on separately by those other auditors. However, this report, insofar as it relates to the
results of the other auditors, is based solely on the reports of the other auditors.
5
As part of obtaining reasonable assurance about whether the Department’s consolidated financial statements
as of and for the year ended September 30, 2022 are free from material misstatement, we performed tests of
its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance
with which could have a direct and material effect on the financial statements. However, providing an opinion
on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such
an opinion. The results of our tests and those of the other auditors disclosed no instances of noncompliance or
other matters that are required to be reported under Government Auditing Standards or OMB Bulletin
No. 22-01.
We also performed tests of the Department’s compliance with certain provisions referred to in Section 803(a) of
the Federal Financial Management Improvement Act of 1996 (FFMIA). Providing an opinion on compliance with
FFMIA was not an objective of our audit, and accordingly, we do not express such an opinion. The results of
our tests and those of the other auditors disclosed instances described below, in which the Department’s
financial management systems did not substantially comply with the Federal financial management systems
requirements. The results of our tests and those of the other auditors disclosed no instances in which the
Department’s financial management systems did not substantially comply with applicable Federal accounting
standards, and the United States Government Standard General Ledger at the transaction level.
C. Noncompliance with Federal Financial Management Improvement Act of 1996
The Department’s financial management systems did not substantially comply with the federal financial
management systems requirements. As discussed in finding A and B, the Department had deficiencies in
Fiscal Service’s information systems and IRS’s financial reporting systems. Specifically, the Department did
not consistently design, implement, and operate information system controls and security programs over
these systems in accordance with the federal financial management system requirements.
Recommendation
We, and the other auditors, separately provided IRS and Fiscal Service management with recommendations to
address the above noncompliance with the federal financial management system requirements. We
recommend that the Acting ASM and DCFO ensure that IRS and Fiscal Service develop and implement
remediation plans outlining actions to be taken to resolve noncompliance with the federal financial management
system requirements and the resources and responsible organizational units for such planned actions.
Department’s Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the Department’s
response to the findings identified in our audit and described previously. The Department’s response to the
findings is included in a separate letter immediately following this report. The Department’s response was not
subjected to the other auditing procedures applied in the audit of the consolidated financial statements and,
accordingly, we express no opinion on the response.
Purpose of the Reporting Required by Government Auditing Standards
The purpose of the communication described in the Report on Internal Control Over Financial Reporting and
the Report on Compliance and Other Matters sections is solely to describe the scope of our testing of internal
control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
Department’s internal control or compliance. Accordingly, this communication is not suitable for any other
purpose.
Washington, DC
November 15, 2022
6
MANAGEMENT’S RESPONSE TO INDEPENDENT AUDITORS’ REPORT
November 15, 2022
KPMG LLP
1801 K Street, NW
Washington, DC 20006
To Whom This May Concern:
On behalf of Secretary Yellen, we are responding to your audit report on the Department of the
Treasury's fiscal year 2022 consolidated financial statements. Our bureaus and program offices are
proud of the Department's success in achieving an unmodified audit opinion on the Department's
financial statements for the 23rd consecutive year.
The high level of professionalism, technical expertise, and integrity demonstrated by KPMG LLP in
conducting this year's audit contributed greatly to Treasury's successful fiscal year 2022 results. We also
appreciate the expertise and commitment demonstrated by the other organizations involved in the audit
process - the Office of Inspector General, Government Accountability Office, and the firms that audited
several of our bureaus.
We acknowledge the two significant deficiencies at the Department level, and the one instance of
noncompliance with laws and regulations described in your report. We agree with your
recommendations and will continue our focus on necessary corrective actions to address each of the
issues.
Overall, we have made strong progress in enhancing our internal control environment. This year, we were
successful in downgrading a major component of one of our significant deficiencies related to the Bureau of
the Fiscal Service’s debt management systems. We are very proud of our progress and remain committed to
ensuring high standards of integrity and transparency in reporting our financial performance.
Anna Canfield Roth Carole Y. Banks
Acting Assistant Secretary for Management Deputy Chief Financial Officer
This Page Intentionally Left Blank
SECTION II –
Department of the Treasury
Agency Financial Report
Fiscal Year 2022
This Page Intentionally Left Blank
FY 2022 AGENCY FINANCIAL REPORT
ABOUT THIS REPORT
Our Agency Financial Report the United States (U.S.) government’s finances and
(AFR) for Fiscal Year (FY) 2022 resources. In accordance with the Office of Management
presents the Department of the and Budget’s (OMB) Circular A-136, Financial Reporting
Treasury’s (Treasury, Requirements, we produce the following reports: (i) an
Department, or our) financial AFR issued on November 15, 2022, and (ii) an Annual
information in relation to our Performance Report (APR) submitted with Treasury’s
mission and the resources congressional budget justification, to be issued by
entrusted to us. The AFR also February 1, 2023. The AFR will be available online at
highlights our priorities, https://home.treasury.gov/about/budget-financial-reporting-
accomplishments, and challenges implementing programs planning-and-performance/agency-financial-report. The APR
that promote conditions for sustaining economic growth will be available online at
and stability at home and abroad, protecting the integrity https://www.treasury.gov/about/budget-performance/Pages/cj-
of our nation’s financial system, and effectively managing index.aspx.
HOW THIS REPORT IS ORGANIZED
Our AFR provides financial and performance information Congress and the American people. This report presents
for the FY beginning October 1, 2021, and ending on Treasury’s operations, accomplishments, and challenges.
September 30, 2022, with comparative prior year data, The AFR begins with a message from the Secretary of the
where appropriate. The AFR demonstrates our Treasury, Janet L. Yellen. This introduction is followed
commitment to our mission and accountability to by three main sections.
Part 1: Management’s Part 2: Financial Section Part 3: Other Information
Discussion and Analysis
Provides a high-level overview of Begins with a message from the Contains various information
our organizational structure, Acting Assistant Secretary for including Management and
strategic framework, Management and Acting Chief Performance Challenges
programmatic and financial Financial Officer, followed by identified by the Inspectors
performance, and management the Independent Auditors’ General and Management’s
assurances related to Treasury’s Report, audited financial response, along with
internal controls. statements and notes, and information related to tax gap
supplementary information. and tax burden, improper
payments, and other relevant
information.
FY 2022 AGENCY FINANCIAL REPORT
TABLE OF CONTENTS
MESSAGE FROM THE SECRETARY OF THE TREASURY ..................................................................................................................................... 4
PART 1: MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
TREASURY AT A GLANCE............................................................................................................................................................................... 9
ORGANIZATION ........................................................................................................................................................................................... 11
TREASURY STRATEGIC MANAGEMENT.................................................................................................................................................... 14
PERFORMANCE OVERVIEW ....................................................................................................................................................................... 17
ENTERPRISE RISK MANAGEMENT............................................................................................................................................................ 34
CLIMATE-RELATED RISKS AND CHALLENGES ........................................................................................................................................ 35
FY 2023 STRATEGIC OUTLOOK .............................................................................................................................................................. 36
FINANCIAL HIGHLIGHTS – FINANCIAL OVERVIEW ................................................................................................................................ 37
MANAGEMENT ASSURANCES .................................................................................................................................................................... 44
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE .................................................................................................................................... 45
PART 2: FINANCIAL SECTION
MESSAGE FROM THE ACTING ASSISTANT SECRETARY FOR MANAGEMENT AND ACTING CHIEF FINANCIAL OFFICER .............. 51
INSPECTOR GENERAL’S TRANSMITTAL LETTER .................................................................................................................................... 53
INDEPENDENT AUDITORS’ REPORT ......................................................................................................................................................... 55
MANAGEMENT’S RESPONSE TO INDEPENDENT AUDITORS’ REPORT ................................................................................................. 61
FINANCIAL STATEMENTS........................................................................................................................................................................... 62
NOTES TO THE FINANCIAL STATEMENTS ............................................................................................................................................... 70
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) .............................................................................................................173
PART 3: OTHER INFORMATION (UNAUDITED)
SECTION A: SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES ..................................................183
SECTION B: TAX GAP AND TAX BURDEN .............................................................................................................................................185
SECTION C: MANAGEMENT AND PERFORMANCE CHALLENGES AND TREASURY RESPONSE .......................................................197
SECTION D: PAYMENT INTEGRITY ........................................................................................................................................................245
SECTION E: CIVIL MONETARY PENALTIES INFLATION ADJUSTMENT .............................................................................................252
SECTION F: GRANTS PROGRAMS ...........................................................................................................................................................259
SECTION G: CLIMATE-RELATED FINANCIAL RISK .............................................................................................................................. 260
APPENDIX: GLOSSARY OF ACRONYMS ..................................................................................................................................................261
FY 2022 AGENCY FINANCIAL REPORT | MESSAGE FROM THE SECRETARY OF THE TREASURY
MESSAGE FROM THE SECRETARY OF THE TREASURY
MISSION STATEMENT
Maintain a strong economy and create economic and job opportunities by promoting conditions
that enable economic growth and stability at home and abroad; strengthen national security by
combating threats and protecting the integrity of the financial system; and manage the U.S.
government’s finances and resources effectively.
This year’s Agency Financial Report provides an
opportunity to reflect upon the Department’s progress in
achieving our mission as we look forward to the work
ahead in Fiscal Year 2023 and beyond.
In last year’s report, I detailed the swift and effective
policy actions this Administration took in response to
COVID-19 to rescue our economy from the pandemic,
including the American Rescue Plan. This year I’m
pleased to discuss the forward-looking economic agenda
that this Administration has signed into law.
The pandemic highlighted longstanding structural issues
that were weighing our economy down: sluggish
productivity growth; soaring inequality, with profound
disparities by race and geography; vulnerabilities to
supply chain shocks; and the growing impacts of climate
change.
Over the past year, the Biden Administration has
advanced an ambitious economic plan to tackle these
structural issues.
The CHIPS and Science Act is strengthening our
resilience to global shocks by investing in semiconductor
The Bipartisan Infrastructure Law is boosting our
research and development, chip fabrication, and
productive capacity by providing a historic surge in
workforce training. We are already seeing an impact—in
funding for America’s transportation system that will
October 2022, two large chip manufacturers announced
have reverberating economic benefits throughout our
up to $120 billion in investment in chip production and
economy. More efficient movement of goods means fewer
other advanced technologies in New York.
costly supply-chain disruptions. Better transportation
can connect workers to more training opportunities and
The Inflation Reduction Act is tackling the climate crisis
higher-productivity jobs.
head-on while also creating greater fairness in the
economy. The law incentivizes businesses to invest in
4 DEPARTMENT OF THE TREASURY
MESSAGE FROM THE SECRETARY OF THE TREASURY | FY 2022 AGENCY FINANCIAL REPORT
low-income communities and historic energy As for our financial performance, I’m very pleased to
communities, like those dependent on coal, and is report that Treasury has received an unmodified audit
expected to create more than one million good-paying, opinion of its consolidated financial statements for
high-quality jobs with strong labor protections. Fiscal Year 2022. Based on our internal evaluation, our
financial and performance data have been validated as
At the same time, it’s providing much-needed funding for
complete and reliable.
the IRS to deliver tangible improvements to the taxpayer
experience and to help tackle the tax gap—the amount of We know there are serious challenges ahead. Inflation is
money that is owed but not paid to the IRS. This gap is too high and it remains our Administration’s top priority
estimated at $7 trillion over the next decade and is to rein it in. But our progress thus far shows the
disproportionately concentrated among high earners. resilience of the American people and our economy. We
Current resource constraints have meant these high- have experienced among the strongest recoveries of any
earning evaders are rarely audited—increasing the major economy. And we’ve made a generational
burden of government funding and economic investment investment to expand our economic capacity and build an
on working and middle-class families who are doing inclusive economy. I believe that we can navigate
everything right. Combined with the corporate tax through this current moment as well.
reforms in the law, this IRS funding also represents some
of the most significant steps we’ve taken in recent years
to build a fairer and more effective tax system.
Taken collectively, this trifecta of legislation that the
President has signed into law over the past year—the
Bipartisan Infrastructure Law, the CHIPS and Science Janet L. Yellen
Act, and the Inflation Reduction Act—constitute among Secretary of the Treasury
the most important economic investments we’ve ever November 15, 2022
made in putting working families on surer footing and
building a fairer and more inclusive economy.
DEPARTMENT OF THE TREASURY 5
[Page intentionally left blank]
Treasury at a Glance................................................................ 9
Organization.......................................................................... 11
Treasury Strategic Management ........................................... 14
Performance Overview ......................................................... 17
Enterprise Risk Management ................................................ 34
Climate-Related Risks and Challenges ................................. 35
FY 2023 Strategic Outlook .................................................... 36
Financial Highlights – Financial Overview.......................... 37
Management Assurances ....................................................... 44
Systems, Controls and Legal Compliance ............................. 45
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
TREASURY AT A GLANCE
FOUNDATION
After the American Revolution, Congress realized that
funding a war without proper infrastructure and financial
discipline presented an enormous challenge to our
country’s economic stability. Out of the necessity to levy
and collect taxes and manage the U.S. government’s
finances, Congress established the Department of the
Treasury on September 2, 1789. President George
Washington appointed Alexander Hamilton as Treasury’s
first Secretary. Since then, more than 70 Secretaries
have led the Department.
Throughout its history, Treasury served as the foundation
for other federal agencies. For example, the U.S. Postal
Service, U.S. Customs Service, Secret Service, Federal
Law Enforcement Training Center, and U.S. Coast Guard
were all, at one time, under our jurisdiction.
U.S. Department of the Treasury building, Washington, D.C.
TODAY’S TREASURY AND HOW WE SERVE THE
NATION
Treasury is responsible for the nation’s debt
management, cash production, disbursement of Social
Security benefit payments, tax collection, and federal
agency financing. We are a trusted policy advisor to the
President, formulating and recommending domestic and
international financial, economic, and tax policies. Our
contributions to policy development shape America’s
economic health and security.
We also perform a critical and far-reaching role in
The Treasury building in the late 1800s. The Treasury
building colonnade from the southeast side shows the bustle enhancing national security by targeting rogue regimes,
of traffic on 15th Street as bicyclists passed in front of the terrorist networks, and other illicit actors. We do this by
Treasury building.
deploying our national security tools and authorities—
including sanctions—to identify, disrupt, and dismantle
national security and foreign policy threats, while also
protecting the U.S. and international financial system
from abuse by illicit actors.
DEPARTMENT OF THE TREASURY 9
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
We also leverage our relationships with our federal While Treasury adapts to meet the changing needs of our
partners and work closely with the private sector to nation, our core mission remains unchanged since 1789.
develop strategies to identify, detect, and prevent threats Today, with approximately 100,000 employees, we remain
to our economic stability. steadfast in our commitment to promote conditions that
enable economic growth and stability at home and abroad,
Furthermore, we work to increase opportunities for small
to protect the integrity of the financial system, and to
businesses, which are the backbone of our economy.
effectively manage the U.S. government’s finances and
Through our efforts to enhance economic growth and
resources. We remain the principal steward of the U.S.
promote access to credit, we support job creation to
economy by collecting revenue, meeting financial
improve the well-being of U.S. citizens and to safeguard
obligations, and financing government operations.
and grow our national economy. We also continue to play
a key and influential role in the government’s service to
the American people, adapting to meet the nation’s needs.
Globally, Treasury represents the U.S. in important
economic forums and international financial institutions,
including the Group of Seven (G7) and the Group of
Twenty, which hold annual summits with heads of state
to discuss global economic and foreign policy issues. We
hold significant responsibility promoting stability and
growth in the global economy via our leadership roles in
the International Monetary Fund, the World Bank,
regional development banks, and other multilateral
organizations, such as the Financial Stability Board and
the Financial Action Task Force.
10 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
ORGANIZATION
Treasury is organized into the Departmental Offices, seven bureaus, and four offices of the Inspectors General. The
Departmental Offices are primarily responsible for headquarters operations and formulating policy, while the bureaus are
the operating units of the organization.
DEPARTMENT OF THE TREASURY 11
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
DEPARTMENTAL OFFICES
The Treasurer of the United States serves as a principal
Domestic Finance works to support equitable and advisor to the Secretary, including coordinating Tribal
sustainable economic growth and financial stability relations across the Department, directly overseeing the
through policies that increase the resilience of financial U.S. Mint, the Bureau of Engraving and Printing, and
institutions and markets, and which increase access to liaising with the Federal Reserve.
credit for small businesses and low-to-moderate income
communities. It focuses on Treasury Department activities
in the areas of financial institutions, federal and municipal
The Office of Management and Chief Financial Officer
debt finance, financial regulation, and capital markets.
manages the Department’s financial resources and
oversees Treasury-wide programs, including human
capital, organizational performance, enterprise risk
Terrorism and Financial Intelligence uses unique policy, management, information technology, acquisition, and
intelligence, enforcement, and regulatory tools and data.
authorities to disrupt and disable terrorists, criminals,
and other national security threats while also
safeguarding the financial system against abuse by illicit
actors.
The Office of Recovery Programs principally focuses on
efficiently administering Treasury’s programs to support
an equitable and swift recovery from the economic
challenges precipitated by the COVID-19 pandemic.
International Affairs protects economic prosperity and
national security by working to foster a most favorable
external environment for sustained jobs and economic
growth.
The Office of Diversity, Equity, Inclusion, and Accessibility
serves as a center of excellence to modernize the
Department's overall diversity, equity, inclusion, and
Tax Policy develops and implements tax policies and
accessibility (DEIA) strategy, and drives cohesive
programs, reviews regulations and rulings to administer
implementation and accountability across the
the Internal Revenue Code, and provides revenue
Department.
estimates for proposals and receipt estimates for the
President’s Budget.
Economic Policy reports on economic developments and Other offices within Departmental Offices include
assists in the determination of appropriate economic General Counsel, Legislative Affairs, and Public Affairs.
policies. It also reviews and analyzes domestic economic
issues and financial market developments.
12 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
INSPECTORS GENERAL
The Bureau of the Fiscal Service (Fiscal Service) promotes
financial integrity and operational efficiency by operating
Four Inspectors General—the Office of Inspector General the U.S. government’s collections and deposit systems and
(OIG), the Treasury Inspector General for Tax Administration providing central payment services to the American public
(TIGTA), the Special Inspector General for the Troubled Asset on behalf of federal agencies. It also manages the
Relief Program (SIGTARP), and the Special Inspector General collection of delinquent debt, borrows funds needed to
for Pandemic Recovery—provide independent audits, operate the U.S. government through the sale of
investigations, and oversight of Treasury and our marketable and special-purpose U.S. Treasury securities,
programs. and accounts for the resulting debt. Additionally, it
delivers administrative shared services to federal agencies
and conducts government-wide accounting and reporting.
BUREAUS
The Internal Revenue Service (IRS) determines, assesses,
The Alcohol and Tobacco Tax and Trade Bureau (TTB) and collects U.S. tax revenue and helps taxpayers
collects federal excise taxes on alcohol, tobacco, firearms, understand their tax responsibilities, while aiming to
and ammunition, while enforcing and administering laws prevent tax-related fraud.
covering the production, use, and distribution of alcohol
and tobacco products.
The United States Mint (U.S. Mint) designs, mints, and
The Bureau of Engraving and Printing (BEP) develops and
issues U.S. circulating coins, as well as numismatic and
produces U.S. currency notes, as well as secure
bullion coins and strikes, Congressional gold medals and
documents for government use.
other medals of national significance. It maintains
physical custody and protection of most of the nation’s
gold and silver assets.
The Financial Crimes Enforcement Network (FinCEN)
safeguards the financial system from illicit use, combats
money laundering and its related crimes—including
terrorism—and promotes national security through the The Office of the Comptroller of the Currency (OCC)
strategic use of financial authorities and the collection, charters, regulates, and supervises national banks and
analysis, and dissemination of financial intelligence. federal savings associations, as well as federal branches
and agencies of foreign banks, to ensure that they operate
in a safe and sound manner, provide fair access to
financial services, treat customers fairly, and comply with
applicable laws and regulations.
DEPARTMENT OF THE TREASURY 13
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
TREASURY STRATEGIC MANAGEMENT
portfolio reviews of programs within our performance
FRAMEWORK
review cycle activities. Through our Strategic Objective
The Government Performance and Results Act (GPRA) Annual Review (SOAR) process, we conduct an annual
and the GPRA Modernization Act of 2010 require exercise to validate our supporting objectives as well as
agencies to identify goals, report progress against targets, analyze performance results across Treasury components
and conduct data-driven reviews. These practices allow to identify a set of strategic objectives as priority focus
stakeholders within and outside the organization to areas for the following year. In 2019, the Foundation for
assess the organization’s health and impact, while Evidence-Based Policy Act was signed into law to further
promoting effective decision-making, and improving the advance the U.S. government’s evidence-building
execution of its strategies and resource allocations. In functions. In this past fiscal year, we continue to
this spirit, we developed a framework using best-in-class implement the evidence-building requirements by
organizational performance practices to help achieve our leveraging our strategic management framework,
strategic goals and objectives. including the SOAR, and to discuss the agency’s evidence
building efforts and learning agenda.
ORGANIZATIONAL PERFORMANCE REVIEW CYCLE
At designated points throughout the fiscal year, we assess
Our organizational performance reviews provide a regular
annual priorities, evaluate progress against goals and
forum for open dialogue and coordination between the
objectives, discuss new strategies to improve program
bureaus and the Departmental Offices’ management and
outcomes, and align our available funding to maximize
leadership. We bring together different perspectives to
results for the agency. We describe our process and
set and align priorities, identify and solve problems,
framework for managing to our strategic objectives and
review agency performance, and drive results. We review
performance outcomes in Table 1 on the following page.
agency results quarterly to measure progress on our
goals. Also, as required by the Program Management
Improvement Accountability Act (PMIAA), we integrate
14 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
TABLE 1: TREASURY ANNUAL ORGANIZATIONAL PERFORMANCE REVIEW CYCLE
Sessions
Fall Winter Spring Summer
(October – November) (February – March) (April – May) (June – July)
Bureau Organizational Strategic Objective Annual Cross‐cutting Risks/Challenges; Budget; “Vitals” Check
Focus Health & Priorities Review (SOAR) Critical Programs/Projects for Critical Program
and Projects
Deputy Secretary, Assistant Strategic Goal Leads ASM/PIO ASM/PIO and Budget
Secretary for Officer, Strategic Goal
Chair
Management/Performance Leads
Improvement Officer
(ASM/PIO); Strategic Goal
Leads
Review prior year’s Evaluate cross‐agency Issue‐based sessions: Dive Align funding to
performance at the progress toward deep on cross‐cutting performance
bureau/office level strategic objectives issues identified in the impacts and risk
Recognize successes (including progress of SOAR, identify near‐term mitigation
Set priorities for year critical programs and improvement strategies Strengthen IT
ahead
projects) Program‐based sessions: acquisition,
Goals/Outcomes
Identify/validate check in on critical
Identify shortfalls/risks; budgeting, and
Treasury priorities programs/projects accountability,
accountability;
and/or strategic shifts identified in the SOAR that
Assess organizational budgeting, and
Outline potential topics need Treasury Leadership accountability
health
for annual review with attention Check in (vitals
OMB check) on critical
program/project
health and update
list of critical
programs/projects
DEPARTMENT OF THE TREASURY 15
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
FY 2022 – 2026 STRATEGIC FRAMEWORK
The strategic framework provides the foundation for the Department’s FY 2022 – 2026 strategic goals and objectives and
FY 2022 – 2023 Agency Priority Goals (APGs), which align to specific objectives. All bureaus and offices align their
programs and performance within this framework. Our updated goals and objectives are reflected below.
Contributing
Strategic Goals Strategic Objectives/APGs Bureaus/Offices
Goal 1: Promote 1.1: Tax Administration and Policy IRS
Equitable Economic 1.2: Global Economic Leadership Tax Policy
Growth and TTB
Recovery 1.3: Economically Resilient Communities Economic Policy
1.4: Resilient Housing Market International Affairs
Office of Small and
Disadvantaged
Business Utilization
Office of
Management
ORP
Domestic Finance
Goal 2: Enhance 2.1: Cyber Resiliency of Financial Systems and Institutions Office of
National Security 2.2: Economic Measures to Advance National Security Management
All Bureaus/Offices
2.3: Modernize Sanctions Regime
2.4: Transparency in the Financial System
Aligned APG: Promoting Transparency in the Financial System
Goal 3: Protect 3.1: Financial System Vulnerabilities Domestic Finance
Financial Stability 3.2: Resilient Treasury and Municipal Securities Markets International Affairs
and Resiliency Economic Policy
3.3: Financial Innovation OCC
Aligned APG: Improving the Payment Experience TFI
FinCEN
Fiscal Service
U. S. Mint
BEP
IRS
Tax Policy
Goal 4: Combat 4.1: Global Climate Commitment and Leadership Office of
Climate Change 4.2: Climate Incentives and Investment Management
OCC
4.3: Climate‐Related Financial Risks All Bureaus/Offices
4.4: Sustainable Treasury Operations
Aligned APG: Increasing Treasury Sustainability
Goal 5: Modernize 5.1: Recruit and Retain a Diverse and Inclusive Workforce All Office and
Treasury Operations 5.2: Future Work Routines Bureaus, led by the
Office of
5.3: Better Use of Data Management
5.4: Customer Experience Practices
16 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
PERFORMANCE OVERVIEW
We carry great responsibility for fostering prosperity and security for the American people. We play a critical role both in
the U.S. economy and globally to meet the needs of the nation. The Treasury Strategic Plan 2022 – 2026 charts a course to
guide our responsibilities to the public. The following performance overview reflects our accomplishments and challenges in
the goal areas of strengthening equitable economic growth, enhancing national security, protecting financial stability,
combatting climate change, and modernizing our operations in service to the country.
Goal 1: Promote Equitable Economic Growth and Recovery
Treasury plays a central role in addressing systemic guidance implementing the No Surprises Act,
issues in the financial system and strengthening economic providing important protections for health plan
resiliency for all Americans, while taking the lead in participants from surprise medical bills;
partnering with foreign countries to promote global
proposed regulations addressing the “family glitch” to
recovery and sustainable growth. We have four strategic
extend eligibility to families for the Affordable Care
objectives under the goal of promoting equitable economic
Act’s premium tax credit; and
growth and recovery.
finalized regulations and a sub-regulatory guidance
Our first strategic objective—assessed as an area of providing needed certainty for taxpayers regarding
noteworthy progress and focus area for improvement in the availability of foreign tax credits for certain
our FY 2022 SOAR process—concentrates on the fair and Puerto Rico taxes.
impartial administration of the tax code through a more
From July 2021 to December 2021, the OTP worked with
efficient tax system. Our second strategic objective under
IRS colleagues to disburse more than $94 billion in
this goal relates to global economic leadership, aiming to
monthly Child Tax Credit payments to families, with over
restore U.S. leadership in multilateral forums and foster
61 million children receiving the benefit. In addition to
cooperation with our international partners to strengthen
helping implement the American Rescue Plan Act of 2021
the global economy, while promoting sustainable and
(ARP), the OTP staff collaborated with OMB and
inclusive growth. Our third strategic objective—assessed
Congress to influence passage of the Inflation Reduction
as an area of noteworthy progress in our FY 2022 SOAR
Act (IRA).
process—focuses on promoting equitable financial
recovery and addressing systemic inequities to prepare The IRS recognizes the importance of identifying and
the country to be more resilient for future challenges. addressing the most egregious non-compliant taxpayers.
Lastly, our fourth strategic objective under this goal During FY 2022, the IRS continued to detect and pursue
relates to our partnership with the Department of high-income nonfilers to maintain confidence in the tax
Housing and Urban Development (HUD) and other system.
federal agencies to develop a stable and resilient housing
market.
TAX ADMINISTRATION AND POLICY
In FY 2022, the Office of Tax Policy (OTP) published
guidance and regulations to clarify the U.S. tax code and
improve taxpayer compliance. Notable regulation
changes include:
DEPARTMENT OF THE TREASURY 17
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
The IRS has begun implementing requirements under the
IRA, which gives the IRS the resources to ensure that it
enforces tax laws fairly and delivers quality level of
taxpayer services.
Further, in support of fair and impartial administration
of the tax code, the TTB continues to modernize tax
administration to improve taxpayer compliance by
incorporating data analytics to quickly detect and address
missed filings to ensure fair competition. In FY 2022, the
TTB implemented a new import claims refund program to
Source: Adobe Stock
ensure U.S. importers have access to the tax benefits
provided under the new Craft Beverage Modernization
IRS Electronic Filing
Act provisions taking effect on January 1, 2023. This new
During the 2022 filing season, the IRS received 139 program will be the first major release associated with
million individual returns, of which 133 million (96 the IT modernization effort—called myTTB—which aims
percent) were filed electronically. This is a 22 to create an integrated online filing experience for TTB
percent increase in electronically filed returns
taxpayers.
compared to the 2021 filing season. Of the total
individual refunds, 94.6 percent were issued via
direct deposit, which is an increase of 16.9 percent GLOBAL ECONOMIC LEADERSHIP
compared to the same time last year. Over the past two years, the global economy faced two
major disruptions related to the Coronavirus Disease of
In FY 2022, the IRS further enabled customer callback
2019 (COVID-19) pandemic and Russia’s ongoing war in
technology on 15 additional phone applications for a total
Ukraine. The Office of International Affairs (IA) is
of 31 deployments in its call centers. The IRS also
leading work with our partners to mitigate the impact
expanded its Taxpayer Digital Communications
from Russia’s war in Ukraine on energy and food security.
functionality, which allows taxpayers to securely
exchange information and messages with the IRS. In The IA bolstered our role in the global community to
FY 2022, the IRS made large strides to provide quality tackle urgent challenges—including global shortages in
and accessible services by enhancing the taxpayer key goods, as well as volatility in food, fuel, and fertilizer
experience through developing and deploying artificial prices—working to improve the overall global economy.
intelligence powered voice and chat bots, as well as new In FY 2022, we also took efforts to position multilateral
online account features allowing individual taxpayers to development banks to better address a growing number of
view their personalized tax information and transact with global challenges, including climate change, pandemics,
the IRS via self-service. and international conflict.
The IRS’s Integrated Modernization Business Plan, As part of an overall global effort to tackle food insecurity,
released in 2019 and revised in 2022, builds on significant the U.S. committed around $10 billion in FY 2022 to
achievements and reflects an expanded view of deliver food to those who are facing starvation and to
requirements needed to modernize the IRS technology build long-term resilience to food shortages. In May 2022,
environment. The IRS made considerable progress in we worked closely with International Financial
executing on deliverables throughout the first three years Institutions (IFI) to issue and commit to implementing
of the modernization plan, delivering more than 50 the IFI Action Plan to Address Food Insecurity.
capabilities in FY 2022.
18 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
In FY 2022, we continued to modernize our trade
relationships and supply chains to make them more
resilient to global shocks, including impacts from the
weaponization of trade as a tool of geopolitical coercion.
Strengthening trade relationships with U.S. allies via
“friend-shoring” is our approach to advancing trade that
is free, fair, and secure.
Separately, in the spirit of global economic leadership, we
generated a historic agreement among 137 countries to
Source: Adobe Stock
restabilize the international tax system by reallocating
taxing rights and establishing a global minimum tax. We
also successfully completed the first U.S. tax treaty
Supporting Tribal Government Communities
negotiations since the Tax Cuts and Jobs Act by The SLFRF program also provided funding for over
concluding negotiations with Croatia on a new tax treaty. 3,000 projects and services in Tribal government
communities. Tribes utilized SLFRF funds to
ECONOMICALLY RESILIENT COMMUNITIES expand the system of healthcare in Indian Country,
to create innovative programs to recover the tribal
We are not only addressing the impact of COVID-19, but economy, and to find resilient solutions for
also addressing systemic inequities to strengthen the inadequate infrastructure.
economy and prepare the country to be more resilient for
future challenges. The Office of Recovery Programs TTB facilitated small business growth and innovation by
(ORP) significantly increased capacity over the past year delivering timely service to U.S. breweries, wineries, and
to fulfill its mission to lead our implementation of distilleries, and issued more than 90 percent of new
economic recovery programs, including nearly $420 billion permits and alcohol beverage formula and label approvals
from the ARP. Over multiple fiscal years, ORP has built within targeted service standards.
a strong foundation to serve over 35,000 recipients across
Fiscal Service’s Financial Management Quality Service
the nation, through ten programs that support
Management Office (FM QSMO) made significant strides
economically disadvantaged small businesses,
toward establishing its Marketplace for use by federal
households, communities, and individuals.
agencies. Fiscal Service is supporting diversity and
We deployed more than $18 billion to support mission- equity in the marketplace by being inclusive in vendor
driven lending and investments for low- and moderate- outreach, offering consultations to interested vendors, and
income borrowers, small businesses, communities of color, collaborating with agencies to support equitable selection
and rural areas. We supported pandemic response from diverse providers in the marketplace. The QSMO
through the $350 billion State and Local Fiscal Recovery Marketplace will include standards-based solutions and
Fund (SLFRF)—the first program in federal history to services from commercial vendors, federal shared service
provide fiscal relief to states, localities, and tribes providers, and Fiscal Service centralized services.
regardless of size. As of FY 2022, recipients reported
committing $16 billion to address water, sewer, and RESILIENT HOUSING MARKET
broadband infrastructure, and $4.8 billion to assist small
In FY 2022, we deployed a range of tools to support the
businesses.
housing stability of millions of households, including
implementing dedicated programs for struggling renters
and homeowners, while supporting flexibility in how state
and local governments use funds to increase housing
supply.
DEPARTMENT OF THE TREASURY 19
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
In FY 2022, the $46 billion Emergency Rental Assistance practices—is using lessons from the Great Recession
Program (ERA) made more than seven million unique mortgage crisis to target assistance for borrowers in
household payments to renters at risk of eviction, keeping greatest need, including the leveraging of human-
eviction rates on average below pre-pandemic levels. We centered design and partnering with other agencies to
developed innovative approaches to achieve these goals, urge servicers to pause foreclosure on HAF applicants.
including developing a reallocation program to increase
Through March 31, 2022, recipients committed more than
utilization of funds, removing potential barriers to eligible
$12 billion from SLFRF to meet housing needs, including
individuals receiving rental support, and encouraging
more than $4 billion to support affordable housing
ERA grantees to use best practices for eviction
development and preservation. We also made targeted
prevention.
enhancements to regulatory flexibility in SLFRF and the
The $10 billion Homeowner Assistance Fund (HAF) — Low-Income Housing Tax Credit to support housing
through a plan review process that prioritized best production and affordability.
20 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
GOAL 1: KEY PERFORMANCE DATA HIGHLIGHTS
Measure
FY 22
FY 19 FY 20 FY 21 FY 22 Result vs Target
Target
(Responsible Bureau/Office)
Customer Service Representative Level of
65.4% 53.1% 18.5% 17.4% 30% Unmet
Service (CSR LOS) (IRS)1
Timeliness of Critical Individual Filing Season
92.6% 78.4% 92% 96.4% 89% Exceeded
Tax Products (IRS)2
Percentage of Permit Applications Processed
57.6% 84.1% 92.2% 91.2% 85.0% Exceeded
within Service Standards (TTB)3
Engagement of Partner Countries in
Programs – 5 point scale (International 3.6 3.3 3.6 3.5 3.6 Unmet
Affairs) 4
Enterprise Self‐Assistance Participation Rate
85.4% 90.6% 92.3% 93.9% 91.0% Exceeded
(ESAPR) (IRS)5
Percent of Procurement Dollars Spent on
40.4% 45.0% 39.9% 37.6% 39% Unmet
Small Business (Management)6
Explanation of Results
1CSR LOS was 17.4 percent which was 41.9 percent below plan of 30 percent. IRS reduced the campus phone staffing to a minimal
amount to focus on reducing the paper inventory. Phone Demand through September of 81.3 million was 32 percent lower than
prior year of 119.9 million. The Primary Abandoned Call Rate of 18.2 percent is 21 percent lower compared to last year during
the same time frame. The IRS will continue to monitor demand in real time and the resources allocated down to the half hour
enabling us to regularly shift staff between telephones and paper processing to address demand. With the receipt of funding
from the IRA, the IRS plans to deliver a higher level of service in FY 2023.
2Timeliness of Critical Individual Filing Season (CIFS) Tax Products to the Public of 96.4 percent is 8.3 percent above the plan of 89
percent. 81 of 84 CIFS tax products were available to the public timely. Critical tax product timeliness is regarded as tax products
that are made available to the public seven calendar days before the official IRS start of the (individual) filing season. To achieve
and exceed the target, the IRS prioritized work on the release of critical products, especially forms and instructions, approved
overtime, credit, and compensatory time during workdays, weekends, and holidays; and monitored workload planning.
3This measure represents the overall rate at which TTB is meeting its annual service standard (75 days for FYs 2019 – 2022) for all
original permit applications and registrations. The measure reflects the efficiency and consistency of TTB’s permitting process
and supports effective communication with industry members regarding TTB’s level of service. In FY 2022, TTB issued more than
91 percent of applications within its 75‐day service standard, surpassing its 85 percent target. To sustain these improvements,
TTB is undertaking process and system enhancements, including an effort to streamline permit application requirements.
4Measures the degree to which foreign counterparts are engaging proactively and constructively with OTA advisors, at the
working and policy levels. Counterpart engagement is both a key outcome of OTA efforts to structure and execute effective
technical assistance projects that support host country ownership. The result for FY 2022 is 3.5, a reduction of 0.1 from FY 2022
target of 3.6.
5The Enterprise Self‐Assistance Participation Rate of 93.9 percent was 3.2 percent higher than plan of 91.0 percent. In FY 2022
total self‐assisted services 1.5 billion was around 29 percent higher than FY 2021 of 1.2 billion, total assisted services of 97.5
million was 0.1 percent lower than FY 2021 of 97.6 million, and total services were 1.6 billion which is around 27 percent higher
than prior year of 1.3 billion. Beginning in 2022, ESAPR included Business Masterfile numbers in the installment agreements,
OPAs, electronic payments and paper payments for a more inclusive metric.
6This goal measures the percentage of procurement dollars obligated toward small businesses (or Treasury’s overall small
business goal) and highlights Treasury’s efforts to ensure that small businesses have the maximum practicable opportunity to
provide goods and services to the federal government. Treasury fell short of meeting its FY 2022 small business goal of 39
percent. However, Treasury overperformed and exceeded the socio‐economic small business goals.
DEPARTMENT OF THE TREASURY 21
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
Goal 2: Enhance National Security
We must continue to apply national security tools and incident coordination processes to quickly inform our
strengthen bilateral and multilateral partnerships to leadership of cybersecurity impacts to our networks and
confront the expanding array of transnational threats, to the financial sector. We also continued to perform
issues contributing to the instability of weak states, and routine vulnerability and security architecture
the malicious use of emerging technologies by assessments to identify cyber deficiencies and develop
adversaries. corrective measures for our critical assets that provide
underlying mission-essential support for financial-related
Under this goal, our first strategic objective centers on
systems.
hardening the U.S. and global financial system and our
infrastructure against cyber incidents. Our second We made significant strides in FY 2022 to strengthen our
strategic objective—assessed as an area of noteworthy assets and systems against cyber incidents, while
progress and focus area for improvement in our FY 2022 reviewing resiliency and contingency plans, which
SOAR process—is to strengthen U.S. national security ultimately underscores a more proactive and resilient
through a secure economy, by applying our authorities enterprise security posture at Treasury. Similarly, in
and tools to ensure that we address threats to U.S. December 2021, we orchestrated response efforts to
national security and strategic interests posed by criminal strategically and comprehensively address the Apache
elements, foreign adversaries, and certain foreign Log4J vulnerability in our systems, which involved
investments. coordinating short- and long-term approaches to address
the vulnerability across multiple technology components
The third strategic objective focuses on modernizing
and varied technology environments.
sanctions as a policy tool to effectively address emerging
threats, strengthening use of sanctions across the We and our component bureaus also instituted
Department, and deploying the most updated analytic communication channels with the broader financial
and collaborative tools. Our fourth strategic objective— services sector to collaborate and identify opportunities to
assessed as a focus area for improvement in our FY 2022 streamline processes, and raise situational awareness of
SOAR process—emphasizes the integrity of markets and the continuously evolving threat landscape.
the global financial framework through increased
transparency in domestic and international financial ECONOMIC MEASURES TO ADVANCE NATIONAL
systems to aid the detection of illicit financial activity. SECURITY
Terrorism and Financial Intelligence (TFI) counters the
CYBER RESILIENCY OF FINANCIAL SYSTEMS AND ability of financial networks that support terrorists,
INSTITUTIONS transnational organized crime, weapons of mass
As declared in Presidential Policy Directive 21, Critical destruction proliferators, and other threats to
Infrastructure Security and Resilience, Treasury is the international security through intelligence analysis,
Sector Risk Management Agency for the financial services sanctions, and international private-sector cooperation.
sector and is responsible for advancing coordinated
TFI’s authorities, such as economic sanctions, are key
national efforts to strengthen and maintain secure,
tools in implementing U.S. foreign policy to pressure
functioning, and resilient critical infrastructure.
foreign countries and regimes, such as Russia. TFI also
In FY 2022, we took steps to strengthen cyber resiliency, continues to maintain similar efforts that target malign
including communicating to the sector indicators of: (1) activity emanating from China, North Korea, Syria, and
compromise, (2) activities of malicious cyber actors, (3) other countries that threaten national security.
third-party risks, and (4) possible mitigation and
remediation efforts. Furthermore, we streamlined our
22 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
effectiveness of sanctions. This includes providing firm-
and industry-specific analyses of potential collateral
effects of proposed sanctions to identify issues that may
be appropriate to mitigate, including issues related to
U.S. persons, in connection with our sanction actions.
TRANSPARENCY IN THE FINANCIAL SYSTEM
One of the most effective ways to deter criminals and to
stem the harms that flow from their actions—including
harm to American citizens and our financial system—is to
Source: Adobe Stock
follow the criminals’ money, expose criminal activity, and
prevent networks from benefiting from the enormous
Increased Sanctions Against Russia power of our economy and the financial system. Through
TFI has significantly increased sanctions against the Promoting Transparency in the Financial System
Russia related to its actions against Ukraine over APG, we are working to establish a robust regulatory
the past year and continues to economically framework to ensure we receive timely information on the
sanction Russia.
highest priority threats and combat criminals’ misuse of
companies.
The IA, in its role as chair of the Committee on Foreign To combat these illicit efforts, TFI, through FinCEN,
Investment in the United States (CFIUS), reviewed a undertook efforts to modernize the Bank Secrecy Act and
record number of transactions in FY 2022, and took develop new beneficial ownership related regulations and
important and necessary measures to safeguard national guidance to better safeguard the U.S. financial system
security. CFIUS also continues to proactively identify a and protect the pocketbooks of Americans.
growing number of potential non-notified transactions,
The Beneficial Ownership Information (BOI) is a key
while handling increasingly complex transactions,
component of our broader efforts to protect the U.S.
particularly those involving data firms.
financial system from abuse by criminals and illicit
actors. The rollout of the final BOI reporting rule is a key
MODERNIZE SANCTIONS REGIME
milestone in our efforts to implement the Corporate
As part of modernizing the use of sanctions as a policy Transparency Act (CTA), which advances the U.S.
tool, TFI is implementing a new Sanctions Economic Strategy on Countering Corruption, and prevents the
Analysis Unit under a newly designated Chief Sanctions proceeds of corruption and illicit finance from
Economist. The unit is charged with developing economic compromising the integrity of the U.S. financial system.
and financial policy analyses to inform the design and The final BOI reporting rule and the CTA more broadly
implementation of sanctions policy and targeting options will help ensure that money launderers, tax evaders,
under existing or proposed authorities. criminals, and other illicit actors cannot hide their ill-
gotten gains in the U.S. with anonymity and impunity.
In addition, the unit will provide a globally consistent
approach to economic and financial policy analyses to
better inform how we design and implement sanctions
and develop as a center of excellence for analyses on the
DEPARTMENT OF THE TREASURY 23
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
GOAL 2: KEY PERFORMANCE DATA HIGHLIGHTS
Measure
FY 22
FY 19 FY 20 FY 21 FY 22 Result vs Target
Target
(Responsible Bureau/Office)
Percentage of CFIUS Cases Reviewed within
Statutory Timeframes, reported by calendar 100% 100% 100% TBD 100% TBD
year (International Affairs)1
Number of New or Modified Sanctions
Programs Established by Executive Order or 7 6 7 7 N/A N/A
Congressional Mandate (TFI)2
Explanation of Results
1This measure tracks compliance with statutory deadlines for completing national security reviews of transactions notified to the
CFIUS to ensure that the CFIUS process is timely and efficient. We report results on a calendar year basis, at which time the
comparison can be made of actual results verses target.
2This indicator tracks the number of new or modified sanctions programs that we must be implemented and enforced. However,
the indicator does not capture the levels of relative complexity for each sanction program or the complexity of individual national
security objectives that sanctions attempt to achieve. We do not set targets for new or modified sanctions programs since the
existence of a sanctions program is not itself a measure of success.
24 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
Goal 3: Protect Financial Stability and Resiliency
We continued to promote a more resilient financial the financial system through its monthly interagency
system through coordination with U.S. financial staff-level Systemic Risk Committee meetings, as well as
regulators and international partners. The Financial through recommendations to address those vulnerabilities
Stability Oversight Council (FSOC) is chaired by published in December 2021 in its annual report.
Secretary Yellen and charged with identifying risks to the
Through our participation at the Financial Stability
financial stability of the U.S. The FSOC advanced its
Board (FSB), we advanced work to address these
four priority policy areas, deepening its capacity to
vulnerabilities internationally, including by shaping
monitor risks to the financial system: (1) nonbank
policy proposals to enhance money market fund
financial intermediation, (2) Treasury market resilience,
resilience, promoting progress under the FSB Roadmap
(3) climate-related financial risk, and (4) digital assets.
for Addressing Climate-related Financial Risks, and
We also advanced efforts to enhance the resilience of the
contributing to a proposed framework for the
Treasury market and to facilitate the climate transition
international regulation of digital asset activities.
with state and local governments.
The Office of Financial Research (OFR)—which is charged
We play a critical role in improving financial resiliency
with looking across the financial system to collect and
and addressing vulnerabilities in core financial markets.
standardize financial data, monitor and analyze risks,
The first strategic objective—assessed as an area of
and perform research and analysis related to financial
noteworthy progress in our FY 2022 SOAR process—
stability—supported the FSOC’s assessment of financial
focuses on our role in monitoring and addressing domestic
stability risks and advanced long-term research towards
and international financial risks. The second objective is
the goal of promoting and maintaining financial stability.
to improve the resilience of critical government securities
to markets to minimize borrowing costs over time and
RESILIENT TREASURY AND MUNICIPAL
support the critical roles that these safe assets play in a
SECURITIES MARKETS
global financial system. The third strategic objective—
assessed as a focus area for improvement in our FY 2022 In FY 2022, the Office of Debt Management, along with
SOAR process—centers on promoting a financial system the Office of State and Local Finance, have been
that delivers inclusive financial services, by way of instrumental in enhancing the resilience of the debt
expanding access to digital financial services, and market. The Office of Debt Management continued to
encouraging the responsible use of innovative financial work in collaboration with the Inter-Agency Working
technology. Group (IAWG) on Treasury Market Surveillance—
comprised of staff from Treasury, the Board of Governors
FINANCIAL SYSTEM VULNERABILITIES of the Federal Reserve System, the Federal Reserve Bank
As part of the FSOC’s efforts to address risks posed by of New York, the U.S. Securities and Exchange
nonbank financial intermediaries, we and other FSOC Commission, and the Commodity Futures Trading
members evaluated risks hedge funds, open-end funds, Commission—on various workstreams. The IAWG
and money market funds pose. The FSOC began work to published a staff progress report and hosted the annual
establish an interagency risk monitoring system for hedge Treasury Market Conference in November 2021, and
funds and considered potential options to mitigate IAWG member agencies continued to make progress on
associated risks. On climate-related financial risk, the these objectives throughout the year. In September 2022,
FSOC published its Report on Climate-Related Financial we published a fact sheet highlighting 12 key
Risk in FY 2022, which identified climate change as an accomplishments from this year and will issue another
emerging risk to financial stability. The FSOC continued staff progress report before the next annual conference in
its work to identify emerging broader vulnerabilities to November 2022.
DEPARTMENT OF THE TREASURY 25
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
In March 2022, the Office of State and Local Finance
convened a roundtable on climate transition among
Treasury, federal and regulatory partners, and state and
local government representatives. The participants
considered policy issues and best practices for funding
and financing the transition to a net-zero economy,
including disclosure of climate-related financial risks to
investors.
FINANCIAL INNOVATION
Source: Adobe Stock
In November 2021, the President’s Working Group on
Financial Markets, joined by the Federal Deposit
Digital Currency
Insurance Corporation and the Office of the Comptroller
of the Currency, published a report on stablecoins, which In FY 2022, we participated in the development of
are a type of digital asset with the potential to become the G7’s Public Policy Principles for Retail Central
Bank Digital Currencies (CBDC) report, which set
widely used for payments. The report identified potential
out a common set of considerations on the public
risks of continued growth in stablecoin markets and policy implications of CBDC, reflecting the shared
usage, absent appropriate regulation, and contained and enduring values of the G7 on transparency,
recommendations related to digital assets, which the rule of law, and sound economic governance.
similarly built upon on our work in international forums,
including the FSB.
reinforce U.S. leadership in the global financial system
We collaborated with FSB members on two reports and in technological and economic competitiveness,
related to digital assets regulation, including (1) the including through the responsible development of
FSB’s revised High-Level Principles on the Regulation, payment innovations and digital assets; (5) promote
Oversight, and Supervision of Global Stablecoin access to safe and affordable financial services; and (6)
Arrangements, and (2) the report on the Regulation, support technological advances that promote responsible
Supervision and Oversight of Crypto-Asset Activities and development and use of digital assets.
Markets. Recommendations from these reports are
In July 2022, we and the interagency partners delivered
intended to be flexible, so that they can be easily
to the President the Framework for International
incorporated into a wide variety of regulatory frameworks
Engagement on Digital Assets, which outlines a U.S.
and for any type of crypto-asset activities that may pose
government-wide approach to promoting the responsible
risks to financial stability.
development of digital assets globally. The framework is
In March 2022, President Biden convened experts from intended to ensure that, with respect to the development
across the Administration to ensure a coordinated and of digital assets, we: (1) respect America’s core democratic
comprehensive approach to digital assets policy, and values; (2) protect consumers, investors, and businesses;
charged us with a leadership role in this work. In March (3) preserve appropriate global financial system
2022, Executive Order (EO) 14067, Ensuring Responsible connectivity and platform and architecture
Development of Digital Assets, established the following interoperability; and (4) maintain the safety and
policy objectives with respect to digital assets: (1) protect soundness of the global financial system and
consumers, investors, and businesses in the U.S.; (2) international monetary system. The framework calls for
protect U.S. and global financial stability and mitigate us to amplify and expand international work on digital
systemic risk; (3) mitigate the illicit finance and national assets through forums and international financial
security risks posed by misuse of digital assets; (4) institutions, including at the G7 and FSB. The
framework also encourages the U.S. to identify where it
26 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
can strengthen existing regional and bilateral registration for coins using surface morphology, which
engagements and, where appropriate, ramp up could potentially be used for validating U.S. Mint coinage.
engagement with new partners to achieve our objectives
Related to financial innovation and in support of the
with respect to digital assets.
Improving the Payment Experience APG, Fiscal Service
Also as charged by EO 14067, in September 2022, we collaborated with top check-producing federal agencies
published a report on the future of the U.S. money and (such as the Social Security Administration and the IRS)
payments systems, in which Treasury encourages to improve the payment experience, reduce the number of
continued work on innovations to promote a system that check payments, and promote the benefits of increasing
is more competitive, efficient, and inclusive, and that also electronic payments. To promote inclusion, Fiscal Service
helps maintain and build on the U.S.’ global financial is leveraging the Treasury-sponsored Direct Express debit
leadership. The report recommends advancing policy and card program to deliver payments to unbanked and
technical work on a potential U.S. CBDC, so that the U.S. underserved Americans. Additionally, Fiscal Service
is prepared if a CBDC is determined to be in the nation’s initiated an evaluation to understand how we can
interest. We also published a report on the implications improve the delivery of government payments to hard-to-
of digital assets for consumers, investors and businesses, reach populations.
and laid out a detailed action plan to prevent digital
Moreover, in FY 2022, Fiscal Service developed a working
assets from being used for financial crimes, such as
blockchain prototype to explore how blockchain
money laundering and terrorism financing. In October
technology can improve the transparency and reporting of
2022, the FSOC released a report on potential financial
federal grant payments. Under the Joint Financial
stability risks, and recommended steps to address gaps in
Management Improvement Program, Fiscal Service and
the regulation of digital assets in the United States.
the Government Accountability Office collaborated to
Separately, financial innovation can be seen with our successfully connect the first multi-agency blockchain in
focus on addressing counterfeiting. As of FY 2022, the federal government. Learnings from this
counterfeiting is an increasingly important issue for the collaboration will help other agencies understand the
Bureau of Engraving and Printing (BEP) and the U.S. benefits and impacts of a multi-agency blockchain for
Mint. To combat increasingly sophisticated counterfeiting various use cases.
threats, related to U.S. currency notes, the BEP, the
Lastly, with the announcement of new Series I United
Federal Reserve Board, and the U.S. Secret Service
States Savings Bond interest rates, Fiscal Service
continue to collaborate extensively on redesigning notes
witnessed unprecedented demand for Series I savings
to make counterfeiting more difficult. In FY 2022, the
bonds and a surge in call and case volumes. Fiscal
BEP successfully executed the first of many large-scale
Service executed a number of steps to respond to
testing activities, which included security features
customers and focused on providing a positive customer
approved by the Secretary and a new tactile feature for
experience, including: (1) adding resources to the call
the visually impaired. Extensive, ongoing testing and
center, (2) updating to the website and phone menus to
factory trials will lead to a planned rollout of redesigned
provide answers to common questions, and (3) developing
U.S. currency notes beginning in 2026 with the targeted
system enhancements to better enable customers to
issuance of the new $10 design.
complete transactions without requiring customer service
Similarly, the Anti Counterfeit Division at the U.S. Mint support.
is actively working on characterizing coins in circulation
and evaluating scanning methods for high-speed detection
of counterfeit coins. We are also exploring image
DEPARTMENT OF THE TREASURY 27
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
GOAL 3: KEY PERFORMANCE DATA HIGHLIGHTS
Measure
FY 22
FY 19 FY 20 FY 21 FY 22 Result vs Target
Target
(Responsible Bureau/Office)
Dollar Amount (in billions) of Delinquent
Debt Collected through All Tools (Fiscal $9.65 $10.68 $5.04 $5.52 $5.26 Exceeded
Service)1
Percentage of Treasury Payments Made
95.6% 96.0% 96.2% 96.4% 96.4% Pending
Electronically (Fiscal Service)2
Percentage of Total Federal Government
Receipts Settled Electronically (Fiscal 98.4% 99.0% 99.6% 99.8% 99.0% Exceeded
Service)3
Number of Paper Checks Printed Fiscal Year
54.2 50.5 48.8 45.7 45.7 Pending
to Date (millions) (Fiscal Service)4
Explanation of Results
1This measure provides the total amount of delinquent debt collected, in billions, through debt collection tools Fiscal Service
operates. FY 2020 totals include collection of $3.4 billion from Economic Impact Payments to satisfy delinquent child support.
Several state and federal creditor agencies suspended collection activity beginning in April 2020 due to economic concerns
around COVID‐19.
2This measure provides the portion of the total volume of electronic payments. FY 2020, FY 2021, and FY 2022 data does not
include pandemic‐related relief payments such as economic impact payments and advance child tax credit payments. The FY
2022 final actual is pending.
3This measure provides the percentage of total federal government revenue collection dollars settled electronically.
4This measure provides the number of payments made via paper checks. This measure provides the number of payments made
via paper checks. FY 2020, FY 2021, and FY 2022 data does not include pandemic‐related relief payments such as economic
impact payments and advance child tax credit payments. The FY 2022 final actual is pending.
28 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
Goal 4: Combat Climate Change
We work ambitiously with domestic and international
partners to emphatically respond to the challenges of
climate change, including taking action to adapt to an
already changing climate. With our partners, we work on
mitigating risks associated with climate change and
strive toward positioning the global economy for a clean
and sustainable future. Our work in this area will
strengthen the country’s energy security and enhance the
country’s competitiveness in the clean energy economy.
Of the four strategic objectives for achieving this goal, the Source: Adobe Stock
first is to demonstrate global leadership through re-
engagement with international partners to put the world
Inflation Reduction Act (IRA)
on a sustainable climate pathway. The second strategic
objective—assessed as a focus area of improvement in our In August 2022, Congress passed, and the
FY 2022 SOAR process—aims to promote the flow of President signed into law the IRA, which makes the
largest investment in addressing climate change in
capital towards clean and renewable investments,
our nation’s history. Of the IRA’s total $369 billion
creating a more resilient and climate-forward economy. climate investment, $270 billion will be delivered
via tax incentives, putting us at the forefront of
The third strategic objective focuses on identifying and implementing this historic legislation.
mitigating climate-related financial risks through
improved approaches to measure, monitor, and address CLIMATE INCENTIVES AND INVESTMENT
climate impacts. The fourth strategic objective focuses on
In FY 2022, we worked with stakeholders, Congress and
our efforts to reduce greenhouse gas emissions, increase
other agencies to develop proposals to use tax incentives
resiliency of our facilities and operations, and increase
to encourage individuals and businesses to invest in
climate change knowledge and expertise within Treasury.
renewable energy and transmission, expand usage of
GLOBAL CLIMATE COMMITMENT AND household clean energy and energy efficient technologies,
and drive meaningful reductions in carbon emissions.
LEADERSHIP
We elevated U.S. leadership in global climate action
CLIMATE-RELATED FINANCIAL RISKS
through leadership roles in multilateral forums. We are
pressing the World Bank and other development banks to The FSOC and its members made considerable progress
raise their climate ambitions while pursuing existing in advancing the recommendations identified in its
development priorities. October 2021 Report on Climate-Related Financial Risk,
including significant actions members took to address
In October 2022, we signed a loan agreement for the climate related capacity building, disclosures, data, and
Clean Technology Fund (CTF)—a multilateral trust fund risk assessments. The FSOC also established a new staff-
that helps to scale up low carbon technologies in level interagency committee to serve as a coordinating
developing countries. This contribution made good on the body to share information, facilitate the development of
U.S.’s pledge to support the CTF’s Accelerating Coal common approaches and standards, and foster
Transition Investment Program made at the 2021 G7 communication across the FSOC members. Lastly, the
Summit alongside G7 partners. CTF will use the loan to OFR conducted a data and analytics hub pilot to help the
support U.S. climate commitments, including Just Energy FSOC assess climate-related risks to financial stability.
Transition Partnerships.
DEPARTMENT OF THE TREASURY 29
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
SUSTAINABLE TREASURY OPERATIONS Other major projects to strengthen climate resiliency
include:
Executive Order 14008, Tackling the Climate Crisis at
Home and Abroad directs federal agencies to develop a expanding the IRS’s presence in Puerto Rico, which
Climate Action Plan (CAP) to assess and combat climate- will not only mitigate service disruptions from
related vulnerabilities. In collaboration with the National extreme weather, but also create jobs and allow for
Oceanic and Atmospheric Administration, we are increased taxpayer access to bilingual services;
developing a climate literacy curriculum that will provide
constructing a new, weather-resilient production
basic education on the causes and effects of climate
facility in Maryland for BEP, which will greatly
change, alongside strategies for building Departmentwide
reduce operational risks associated with the current
resiliency. Through the Increasing Treasury
older Washington, D.C., facility; and
Sustainability APG, we are working to model best practices
in sustainable operations, supporting the Department’s key weatherizing and updating the Main Treasury
role in the whole-of-government effort to manage climate- building’s exterior façade, deterring water damage
related risks and enable the transition to a net-zero emissions through extensive repair and restoration work.
economy. To provide more quantitative strategic planning support
for adapting to and building resilience against climate-
Resilience-building efforts are focused on the main
related concerns, we considered our growing need for
priority action areas identified in the CAP, such as
ready access to a central repository of climate data
financial investment, real property weatherization, and
(quantitative, machine-readable information) in multiple
procurement. Activities in the CAP action areas include
formats (shapefiles, excel tables, csv files), as well as data
the incorporation of climate risk considerations in our
analysts and subject matter experts who can understand
retrofitting and new construction efforts, as well as
and use the data to better propose and support policy
purchasing of renewable energy credits and energy-
decisions.
savings performance contracts, which are critical to
meeting the Administration’s requirements to convert our
operations to cleaner sources of electricity.
GOAL 4: KEY PERFORMANCE DATA HIGHLIGHTS
Measure
FY 22
FY 19 FY 20 FY 21 FY 22 Result vs Target
Target
(Responsible Bureau/Office)
Treasury‐wide Footprint (Thousands of
33,209 32,517 32,006 TBD 31,948 TBD
Square Feet) (Management)1
Explanation of Results
1The actual FY 2022 square footage of Treasury‐wide real property is not available until December 2022, at which time the
comparison can be made of actual results versus target.
30 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
Goal 5: Modernize Treasury Operations
Modernizing our operations is critical to achieving our developing a workforce that reflects the diversity of
mission and accomplishing our strategic priorities, which the nation;
begins with making enterprise-wide improvements. Our
ensuring fair and equitable business utilization; and
first strategic objective under this goal—assessed as a
focus area for improvement in our FY 2022 SOAR
guaranteeing compliance with civil rights laws and
regulations.
process—is intended to help us become a more diverse
and inclusive workforce. The second strategic objective We made a few changes to improve our ability to
focuses on modernizing our workplace infrastructure and modernize our approach to DEIA. First, we developed a
work routines to increase our agility, flexibility, and Treasury-wide expansion of the Office of Minority and
resilience. The third strategic objective—assessed as a Women Inclusion (OMWI) (that does not duplicate or
focus area for improvement in our FY 2022 SOAR override the efforts of the Office of the Comptroller of the
process—centers on improving Treasury’s data maturity Currency's OMWI). We combined the OMWI with the
and capacity for evidence building. Our fourth strategic Office of Civil Rights and Equal Employment
objective is to create a customer-focused culture, Opportunity, formerly known as the Departmental
leveraging approaches to improving customer experience Office's Office of Civil Rights and Diversity. Additionally,
and simultaneously our overall capabilities and practices. ODEIA is adding a new component – the Equity Hub.
This new office will focus on economic analysis and public
RECRUIT AND RETAIN A DIVERSE AND INCLUSIVE policy as it relates to how we ensure DEIA is a focal point
WORKFORCE for reaching and providing services and resources to the
In FY 2022, we established the Office of Diversity, Equity, public.
Inclusion, and Accessibility (ODEIA), which will serve as
We implemented an internal DEIA Issuance System,
a center of excellence to modernize our overall DEIA
through which we issue Equal Employment Opportunity,
strategy and drive cohesive implementation and
civil rights, diversity and inclusion, and equity guidance
accountability across the departmental offices and
or policies to our workforce. We also published the first
bureaus. The new structure allows for a more significant,
DEIA Strategic Plan to guide our work into the future.
more concentrated, and dedicated focus on civil rights
compliance and mitigation, as well as DEIA-related Furthermore, ODEIA has implemented a number of new
accountability, competencies, and transparency. initiatives to improve our focus on diversity and inclusion
in hiring and recruitment including contracting with the
In addition, ODEIA is championing organizational
Professional Diversity Network to specifically target a
cultural change to move the agency into a more equitable
more diverse applicant pool for our vacancies. We rolled
organization through developing policy and innovative
out the new DEI Learning Journey in Integrated Talent
approaches. These policies are designed to ensure that
Management System to help managers and employees
families, businesses, and neighborhoods historically
better understand what it means to embrace diversity
excluded from economic opportunities or that experienced
and inclusion. We also obtained support and resources to
persistent poverty are fully included in the nation's
establish a recruitment program and developed a
economic recovery and future growth.
retention program to identify ways to retain current
The ODEIA centralizes four essential functions: employees, which we will implement across Treasury.
Finally, we incorporated new performance standards into
carrying out policy analysis on how we can unlock the all Senior Executive Service performance plan to focus
unrealized potential of marginalized communities; leadership on their role in this expanded vision for
DEIA.
DEPARTMENT OF THE TREASURY 31
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
FUTURE WORK ROUTINES
We displayed outstanding engagement across leadership
and with the workforce to protect employee health and
safety during the pandemic, while navigating re-entry of
employees to the physical workplace. The Treasury
COVID-19 Coordination Team, established in response to
Executive Order 13991, Protecting the Federal Workforce
and Requiring Mask-Wearing, continues to oversee the
implementation of a comprehensive, science-based
Source: Adobe Stock COVID-19 workplace safety plan.
We leveraged information technology tools to: (1) simplify
Professional Diversity Network
vaccination status reporting, (2) centralize information
Our new partnership with the Professional resources regarding re-entry, (3) enable staff to reserve
Diversity Network strengthens our focus on "hoteling" spaces for remote workers, and (4) provide
diversity hiring by intentionally matching Treasury
access to training and Human Resources forms required
job announcements with a broad range of diverse
groups including People of Color, LGBTQ+, for remote work. We began planning for the gradual
Veterans, People with Disabilities and many increase in employees reporting to the physical workplace
others. This combined with the new DEIA Learning in early FY 2022, and successfully completed our re-entry
Journey, provides managers with training to
by August 2022. To support the workforce post re-entry,
promote hiring from a more diverse candidate
pool. This training also supports managers and we offered new flexible work arrangements and remote
employee awareness about inclusion to ensure we work, deployed improved collaboration technologies for
are cultivating a culture that embraces the hybrid teams, and tested new approaches to space
diversity of new and current Treasury employees.
configurations and sharing.
BETTER USE OF DATA
In addition to ODEIA efforts, the IRS also obtained Direct
We made good progress in formulating an initial data
Hire Authority (DHA) through the Office of Personnel
infrastructure strategy designed to maximize the value of
Management (OPM) and the Consolidated Appropriations
Act of 2022 to reach a broader applicant pool and reduce data for delivering improved business outcomes. This
the number of days to hire. Through these authorities, strategy leverages the Foundations for Evidence-Based
the IRS can hire tax examiners, clerks, customer service
Policymaking Act of 2018 (Evidence Act) and key
elements of the Federal Data Strategy to promote data
representatives and critical operations support personnel.
sharing and use, further enabling enterprise investments
The OPM DHA allows 10,000 new hires through
in evidence building activities. Through this work, we are
December 2023 and is limited to the Submission
better positioned to leverage our newly created data
Processing and Accounts Management functions in the
inventory to improve enterprise visibility into our key
IRS’s Wage & Investment organization. The DHA
data assets, which accelerates opportunities to turn data
granted under the Consolidated Appropriations Act of
2022 allowed unlimited hires through September 30, into insights for addressing Administration and Treasury
2022, in support of backlog reduction. leadership priorities. Enterprise-wide engagement has
enabled us to reach consensus on several key multi-year
priorities aligned to critical management initiatives in our
Strategic Plan.
32 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
Similarly, Fiscal Service is committed to modernizing the In May 2022, we launched a customer experience (CX)
publication of Fiscal Service data. Fiscal Service Community of Practice that brings together CX leaders
continued to make progress on FiscalData.treasury.gov, and practitioners from across Treasury to build a
migrating a total of 39 datasets to the site and customer-centric culture, foster collaboration, and share
establishing continuous data feeds with eight existing CX best practices and knowledge. Several of our offices
datasets. have established dedicated CX teams, including a
Taxpayer Experience Office at the IRS and the Office of
CUSTOMER EXPERIENCE PRACTICES the Chief Customer Officer at Fiscal Service.
We have a responsibility to manage customer experience
and improve service delivery using leading practices and
a human centered approach. Due to the large customer
base and high impact of those served by our programs, in
FY 2022, OMB identified Treasury as a High Impact
Service Provider (HISP), designating the Community
Development Financial Institutions Fund and Fiscal
Service’s Direct Express programs as High Impact
Services. In addition, the IRS continues to be designated
as an HISP.
GOAL 5: KEY PERFORMANCE DATA HIGHLIGHTS
Measure
FY 22
FY 19 FY 20 FY 21 FY 22 Result vs Target
Target
(Responsible Bureau/Office)
Percentage of Aged Hardware (IRS)1 31.0% 16.0% 9.3% 7.1% 20% Exceeds
Treasury‐wide EVS Satisfaction Index
65% 71% 67% 65% 67% Unmet
(Management)2
Explanation of Results
1The percent of aged hardware was 7.1 percent which exceeded the 20 percent target for FY 2022. The major driver in
exceeding this goal was the focus on hardware selections and timely refresh implementations. For FY 2023, IRS will continue
with standard operations and review options for process improvements.
2The Federal Employee Viewpoint Survey (FEVS) is the primary tool that agencies use to measure employee sentiment. Each
year, we track and report on the FEVS Overall Satisfaction Index which comprises three FEVS satisfaction questions.
DEPARTMENT OF THE TREASURY 33
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
ENTERPRISE RISK MANAGEMENT
Evolving Cyber Climate: We and the financial services
FRAMEWORK
sector face increasing attacks from criminal and nation-
OMB Circular No. A-123, Management’s Responsibility state threat actors attempting to disrupt operations or
for Enterprise Risk Management and Internal Control, steal data from sensitive systems. The tactics,
provides guidance to federal managers to effectively techniques, and procedures that these threat actors
manage risks to achieve strategic objectives. employ are constantly evolving.
Management, together with the Chief Risk Officer (CRO),
is responsible for establishing a governance structure to Human Resources: Our mission capability and capacity
implement a robust process of risk management and may be eroded due to operational challenges in human
internal control, as well as an enterprise-wide risk profile. resources, such as in the areas of recruitment, training
Successful implementation requires us to establish and and development, personnel security, and diversity and
foster an open and transparent culture that encourages inclusion. These challenges may be intensified when
personnel to communicate information about potential paired with changing mission and skill requirements.
risks and other concerns that impact our programs and
Prioritizing Objectives to Effectively Leverage Limited
operations.
Resources: We have many extremely important ongoing
The CRO meets regularly with senior leaders to discuss missions and are also at the forefront of several new
top risks to critical programs, systems, projects, and initiatives to improve our economy and return it to a
priorities, including response strategies. The Office of stable footing. Due to uncertain funding amounts and
Risk Management (ORM) also established an Enterprise timing, new or changing legislative requirements, and
Risk Management (ERM) Council, chaired by the Deputy reduced capacity, we may not be agile enough to
CRO, which brings together risk managers from each of sufficiently balance new initiatives with existing
our bureaus and policy offices on a bi-monthly basis to requirements or projects. Due to lack of administrative
share best practices and discuss risks. ORM works with funding for the ORP programs, we were forced to curtail
the bureaus and policy offices across Treasury to monitor the operations of our contact center, which provided vital
and annually update our risk profile. support to recovery program recipients.
Beyond its work at Treasury, ORM leads an interagency Data and Evidence: Infrastructure, Analytics
ERM community of practice including officials from more Capabilities, and Sharing: Insufficient or aging IT
than 50 federal agencies. This group originated from infrastructure, lack of data accessibility and reliability, or
ORM’s efforts to support agencies in their implementation inability to successfully use and interpret data may
of ERM, including the July 2016 publication of the deteriorate our decision-making ability in critical mission
Playbook: Enterprise Risk Management for the U.S. areas.
Federal Government. This government-wide working
Significant Disruptions to Operations: We may face
group meets bimonthly to discuss common risks and
significant disruptions to operations, due to climate
various methods of implementing the guidelines of the
change, natural disasters, terrorist events, pandemics, or
circular.
a lapse in appropriations. This may impact our ability to
RISKS AND CHALLENGES successfully deliver on our mission, constrain our progress
in critical work areas, and create challenges for
Through the FY 2022 SOAR and enterprise risk
employees, contractors, customers, and taxpayers.
management process, we identified the following cross-
cutting operational risks.
34 DEPARTMENT OF THE TREASURY
MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2022 AGENCY FINANCIAL REPORT
Procurement, Acquisition, and Vendors: Our ability to
achieve mission outcomes through procuring high-quality
goods and services may be negatively affected by the ever-
increasing complex burden layered on the procurement
environment and the decline of available acquisition
program management skillsets.
CLIMATE-RELATED RISKS AND CHALLENGES
We issue broad guidelines rather than overly restrictive
instructions for conducting climate risk assessments as
we have diverse missions and operations. These
guidelines included, but were not limited to, key factors
such as flooding, heat, and extreme weather (e.g.,
hurricanes). Additionally, climate change presents
challenges through supply chain disruptions, since
extreme weather events in other areas of the world may
affect production of critical materials that we need to
complete our mission. Such disruptions may be similar to
the supply chain shortage experienced during the COVID-
19 pandemic. While we have several efforts under way to
address these risks across the Department, a significant
gap exists in the need for a central repository of climate,
data, as well as data analysts and subject matter experts
who can understand and use the data to propose and
support policy decisions.
DEPARTMENT OF THE TREASURY 35
FY 2022 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS
FY 2023 STRATEGIC OUTLOOK
In March 2022, we published our FY 2022 – 2026 implement the Equity Action Plan, consistent with
Strategic Plan, which describes the long-term goals and Executive Order 13985: Advancing Racial Equity and
objectives we aim to achieve during this Administration, Support for Underserved Communities through the
building from the progress we made and the challenges Federal Government, which outlines how we are
we identified. building the infrastructure necessary to identify and
reduce barriers to equal opportunity and to help
Our FY 2022 SOAR outlined several critical leadership
ensure that our programs and services better reach
actions in the following priority areas for the coming year:
historically underserved communities. The standing-
(1) transparency in the financial system; (2) financial
up of the ODEIA helped develop and drive DEIA
innovation; (3) climate incentives and investment; (4)
strategy across Treasury (Goal 5: Modernize
diverse and inclusive workforce; and (5) better use of
Treasury Operations); and
data.
prioritize recommended actions in our Evidence-
Looking ahead, we will make progress in these areas and Building Capacity Assessment to help inform
other key priorities through several targeted initiatives: investment and resource alignment decisions and
determine how we can best coordinate to address
implement the Transparency in the Financial System
gaps in evidence building and use (Goal 5: Modernize
APG, establishing a robust regulatory framework to
Treasury Operations).
ensure timely information on the highest priority
In addition, we will work diligently to support
threats to combat criminals’ misuse of companies
implementation of the IRA, legislation that takes a
(Goal 2: Enhance National Security);
critical step toward correcting the two-tiered tax system
support legislative proposals that advance payment
to ensure large corporations and high-income earners
integrity and financial management innovation
cannot avoid paying the taxes they owe, as well as
programs (Goal 3: Protect Financial Stability and
making operational improvements to enhance taxpayer
Resiliency);
experience.
implement tax incentives for climate-friendly
The IRA also addresses climate change, putting Treasury
investments and energy security tax credits for
at the forefront of implementing this historic legislation.
manufacturing as authorized by the IRA (Goal 4:
We have begun work on implementation, which will be a
Combat Climate Change);
priority over the coming year as many of the law’s
provisions take effect in FY 2023.
36 DEPARTMENT OF THE TREASURY
FY 2022 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
FINANCIAL HIGHLIGHTS – FINANCIAL OVERVIEW
The financial highlights below are an analysis of the The consolidated financial statements are in addition to
information included in our consolidated financial the financial reports used to monitor and control
statements that appear within Part 2, “Financial Section” budgetary resources, which are prepared from the same
of this report. Our principal financial statements have books and records. The financial statements are for a
been prepared to report the agency’s financial position, component of the U.S. government, a sovereign entity.
and results of operations, pursuant to the requirements of
The chart below presents changes in key financial
31 USC 3515(b). These consolidated financial statements
statement line items as of and for the fiscal year ended
have been prepared from the books and our records in
September 30, 2022 compared to September 30, 2021.
accordance with federal generally accepted accounting
principles (GAAP) and the formats prescribed by OMB.
Summary Financial Information (dollars in billions)
2022 2021 $ Change % Change
Total Assets $ 34,846.9 $ 32,591.1 $ 2,255.8 6.9 %
Total Liabilities $ 33,991.1 $ 31,626.2 $ 2,364.9 7.4 %
Total Net Position $ 855.8 $ 964.9 $ (109.1) (11.3)%
Total Net Cost of Treasury Operations $ 186.8 $ 137.0 $ 49.8 36.4 %
Federal Debt Interest Costs, Net $ 675.9 $ 525.9 $ 150.0 28.5 %
Other Federal Costs, Net $ 17.2 $ 23.6 $ (6.4) (27.2)%
GSEs Non‐Entity Cost (Revenue), Net $ (2.9) $ (112.0) $ 109.1 (97.4)%
COVID‐19 Non‐Entity Cost (Revenue), Net $ 1.9 $ (8.9) $ 10.8 (121.3)%
Total Net Cost of Treasury Operations and Non‐Entity Costs $ 878.1 $ 565.3 $ 312.8 55.3 %
Total Budgetary Resources $ 1,341.8 $ 1,550.0 $ (208.2) (13.4)%
Agency Outlays, Net $ 828.2 $ 832.6 $ (4.4) (0.5)%
Net Revenue Received (Custodial) $ 4,392.5 $ 3,100.8 $ 1,291.7 41.6 %
Financial Overview. Our financial performance as of and The outstanding federal debt, including interest, rose by
for the fiscal year ended September 30, 2022, reflects $2.5 trillion, to $31.0 trillion, to finance the U.S.
several major trends. Most significantly, we continued to government’s operations that included support of the
oversee and implement economic relief and recovery economic relief and recovery efforts.
programs, authorized through the American Rescue Plan
Additionally, our “Total Net Cost of Treasury Operations
Act of 2021 (ARP), Consolidated Appropriations Act, 2021
and Non-Entity Costs” for FY 2022 increased by $312.8
(CAA), and the Coronavirus Aid, Relief, and Economic
billion in fiscal year 2022 primarily stemming from non-
Security Act (CARES Act) enacted in 2020. During
entity activity, including $147.6 billion of higher federal
FY 2022 and FY 2021, pursuant to these three
debt interest costs, corresponding to the increase in
legislations, we had distributed over $214 billion and
federal debt as mentioned above, along with a $109.1
$900 billion, respectively, to individuals, state, territorial,
billion decrease in revenue from our investments in two
local, and Tribal governments, and certain businesses to
Government-Sponsored Enterprises (GSEs) – the Federal
accelerate our nation’s economic recovery (refer to Note 10
National Mortgage Association (Fannie Mae) and the
of the Consolidated Financial Statements).
Federal Home Loan Mortgage Corporation (Freddie Mac)
DEPARTMENT OF THE TREASURY 37
FY 2022 AGENCY FINANCIAL REPORT
– pursuant to our Senior Preferred Stock Purchase
Agreements (SPSPAs), as amended (refer to Note 11 of
the Consolidated Financial Statements).
Figure 1: Total Assets, Total Liabilities, and Net Position (in billions)
Total Assets of $34.8 trillion at September 30, 2022 General Fund,” which corresponds to a $2.5 trillion
consist of a receivable due from the General Fund of the increase in federal debt and interest payable. The “Due
U.S. government (General Fund) of $31.1 trillion, intra- from the General Fund” asset represents future funds
governmental loans and interest receivable of $1.6 required from the General Fund to pay borrowings from
trillion, and fund balance and various other assets the public and other federal agencies.
totaling $2.1 trillion (Figure 2).
Intra-governmental “Loans and Interest Receivable”
represent loans issued primarily by the Fiscal Service to
6.2%
4.7% other federal agencies for their own use or for the
agencies to loan to private sector borrowers whose loans
are guaranteed by the federal agencies. This receivable
decreased by $182.5 billion (or 10.2 percent) during 2022
due to lower borrowings from the Department of the
Education, partially offset by increased borrowings by
89.1%
various federal agencies—such as Small Business
Administration and Department of Housing and Urban
Development—to fund their programs.
Due from the General Fund
Intragovernmental Loans and Interest Receivable Other assets primarily include “Fund Balance,” “Cash,
Other Assets Foreign Currency, and Other Monetary Assets,” “Taxes
Interest, and Other Receivables, Net,” “Advances and
Figure 2: FY 2022 Total Assets (Composition)
Prepayments”, and “Investments in Government
The $2.3 trillion (or 6.9 percent) increase in total assets at Sponsored Enterprises.” Other assets totaling $2.1
the end of FY 2022 over the prior year is primarily due to trillion increased by $183.9 billion or (9.3 percent), largely
a $2.3 trillion increase in our receivable, “Due from the reflecting a $405.0 billion increase in our “Cash, Foreign
38 DEPARTMENT OF THE TREASURY
FY 2022 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
Currency, and Other Monetary Assets,” offset by legislations enacted during FY 2021 and FY 2020 (refer to
decreases in “Fund Balance,” “Taxes, Interest, and Other Note 10 within the Consolidated Financial Statements).
Receivables, Net,” “Advances to Trust Funds,” and
“Advances and Prepayments”. Cash, foreign currency,
and other monetary assets represent, among other things,
operating cash balances (held on behalf of the U.S.
government) from federal debt, tax collections, and other
receipts. The $418.7 billion increase in operating cash is
largely due to the 2021 debt ceiling constraints, which
forced us to maintain a significantly lower operating cash
balance during FY 2021. When the debt ceiling was
increased in December 2021, we were able to bring the
operating cash balance back to its 1-week prudent policy
level (refer to Note 5 to the Consolidated Financial
Statements entitled “Cash, Foreign Currency, and Other
Figure 3: FY 2022 Total Liabilities (Composition)
Monetary Assets”).
Total Liabilities of $34.0 trillion at September 30, 2022
The $71.9 billion decrease in “Fund Balance” reflects
principally consist of the federal debt held by the public,
additional disbursements made in FY 2022 in support of
including interest, of $24.3 trillion (Figure 3), which was
our COVID-19 financial assistance programs.
mainly issued as Treasury Notes, Bonds, and Bills.
The “Taxes, Interest, and Other Receivables, Net”, Liabilities also include intra-governmental liabilities
primarily comprised of federal taxes receivable, decreased totaling $9.5 trillion (of which $6.7 trillion represent
by $66.6 billion principally due to FY 2021 payments on principal and interest of federal debt in the form of
the employer portion of the Federal Insurance Treasury securities held by other federal agencies), and
Contributions Act (FICA) Social Security taxes owed to various other liabilities totaling $189.9 billion. Federal
us, which had been deferred for two-years pursuant to the debt, including interest, held by the public and other
CARES Act (refer to Note 8 to the Consolidated Financial federal agencies together totaled $31.0 trillion at the end
Statements entitled Taxes, Interest, and Other of FY 2022, an increase of $2.5 trillion over the prior year.
Receivables, Net). This increase in the federal debt accounts for the $2.4
billion (or 7.4 percent) increase in total liabilities over the
Other assets also reflect decreases of $44.1 billion in prior year. Federal debt is needed to finance the U.S.
“Advances to Trust Funds” and $30.9 billion in “Advances government’s operations, including our continued
and Prepayments,” respectively. The decrease in financial support of the COVID-19 recovery efforts.
Advances to Trust Funds is a result of states and HHS
repaying their outstanding borrowings from the Total Net Position of $855.8 billion at September 30, 2022
Unemployment Trust Fund and Federal Supplementary represents the combined total of our cumulative results of
Medical Insurance Trust Fund, respectively, to the operations and unexpended appropriations at the end of
General Fund (refer to Note 3 within the Consolidated the fiscal year. The $109.1 billion decrease in the net
Financial Statements). The decrease in “Advances and position at the end of FY 2022 was principally
Prepayments” represents additional liquidation of attributable to a $322.0 billion decrease in appropriations
advances paid to state, local, territorial, and Tribal received in FY 2022 as the prior year included
governments pursuant to the COVID-19 related appropriations received pursuant to CAA and ARP in
connection with implementing pandemic relief programs.
DEPARTMENT OF THE TREASURY 39
FY 2022 AGENCY FINANCIAL REPORT
This decrease was partially offset by an increase in financing the interest charges on the public debt and
appropriations used primarily in connection with disbursements under the pandemic relief program.
Figure 4: Net Cost of Treasury Operations and Non‐Entity Costs (in billions)
Total Net Cost of Treasury Operations and Non-Entity driven by a combination of $147.6 billion of higher federal
Costs, is presented on our Consolidated Statements of Net debt interest costs and $109.1 billion of decreased revenue
Cost (Figure 4). “Net Cost of Treasury Operations” from our GSE investments.
represents the gross costs, net of earned revenues, we
incurred related to our own entity activities comprising
both operating bureaus and Departmental Offices that
are consolidated with the Department. “Net Non-Entity
Costs” represents the gross costs, net of earned revenues,
we incurred on behalf of the U.S. government (or General
Fund), and primarily include “Federal Debt Interest
Costs, Net” (net of interest revenue from loans), “Other
Federal Costs, Net,” “GSE Non-Entity Costs (Revenue),
Net,” “COVID-19 Non-Entity Revenue, Net,” and other
federal costs and revenues. Figure 5 : Net Cost of Treasury Operations by Strategic
Program (in billions)
“Total Net Cost of Treasury Operations and Non-Entity
Net Cost of Treasury Operations, is presented on our
Costs” totaled $878.1 billion and $565.3 billion for FY
Consolidated Statements of Net Cost based on the costs
2022 and FY 2021, respectively, an increase of $312.8
and revenues associated with three major program
billion (or 55.3 percent) over the prior year. Net costs
segments for achieving Treasury’s mission—Financial,
associated with our entity operations (“Net Cost of
Economic, and Security (Figure 5). The following is a
Treasury Operations”) increased $49.8 billion year-over-
description of each program segment as it relates to our
year primarily as a result of increased costs associated
mission.
with our pandemic relief programs. Net costs associated
with our non-entity operations (“Net Non-Entity Costs”)
also increased by $263.0 billion year-over-year, primarily
40 DEPARTMENT OF THE TREASURY
FY 2022 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
Table 2: Program Segments by Treasury Mission liquidation preference of our GSE senior preferred stock.
The asset value of our GSE investments grew slightly by
Program
Segments Treasury Mission $2.9 billion in FY 2022 compared to 2021, reflecting a fair
value loss in our senior preferred stock and warrants of
Financial Managing the government’s finances and
Program resources effectively, protecting the integrity of $27.9 billion in FY 2022, which was more than offset by a
financial systems that are critical to the nation’s $30.8 billion growth in the liquidation preference of the
financial infrastructure, and fostering improved
senior preferred stock. The FY 2022 $27.9 billion fair
governance in financial institutions
value loss when compared to the $80.1 billion fair value
Economic Promoting economic prosperity and maintaining gain in the prior year, resulted in a year-over-year loss of
Program stability, encouraging sustainable and global
economic growth $108.0 billion as reflected in the current fiscal year’s net
costs of non-entity operations. The $108.0 billion year-
Security Enhancing national security by implementing over-year fair value loss, coupled with a $1.1 billion year-
Program economic sanctions against foreign threats to the
U.S., identifying and targeting the financial support over-year decrease in our senior preferred stock
networks of national security threats, and liquidation preference (discussed below), resulted in a
improving the safeguards of the financial systems
total $109.1 billion year-over-year change in this line.
Our “Net Cost of Treasury Operations” totaled $186.8 Pursuant to amendments to the SPSPAs that, among
billion for FY 2022 compared to $137.0 billion for FY other things, increased the GSEs’ capital reserve
2021, an increase of $49.8 billion (or 36.3 percent). This amounts, the GSEs will not pay a quarterly dividend until
increase primarily stems from the year-over-year $43.3 they achieve their regulatory minimum capital
billion net increase in costs associated with COVID-19 requirement. We received no cash dividends for the fiscal
pandemic relief efforts (refer to Note 10 of the years ended September 30, 2022 and 2021 as the GSEs’
Consolidated Financial Statements). had not achieved their capital requirement as of the fiscal
years ended (refer to Note 11 to the Consolidated
Federal Debt Interest Costs, Net (a non-entity cost) Financial Statements).
totaling $675.9 billion for FY 2022 primarily reflect
interest expense on the federal debt, net of interest As compensation to Treasury for the replacement of the
income on loans. This net cost increased $150.0 billion (or dividend, the SPSPA amendments call for the liquidation
28.5 percent) from the prior year, primarily attributable preference of the GSEs’ senior preferred stock to increase
to an increase in inflation adjustments, an increase in by a specified amount until each GSE has achieved its
interest rates, and an increase in outstanding debt held capital reserve requirement. The liquidation preference
by the public. of our senior preferred stock increased in value by $30.7
billion in FY 2022 compared to $31.8 billion in FY 2021,
Other Federal Costs, Net (a non-entity cost) of $17.2 pursuant to the amended SPSPA, which had the effect of
billion in FY 2022 decreased by $6.4 billion from the prior increasing the year-over-year net costs of non-entity
year primarily due to decreased Court of Claims judgment operations by $1.1 billion. The GSEs agreed that, at the
expenses for payments to health insurance companies end of each fiscal quarter, through and including the
related to the Affordable Care Act. capital reserve end date, our liquidation preference will
be increased by an amount equal to the increase in the
GSEs Non-Entity Cost (Revenue), Net (a non-entity cost
GSEs’ net worth amount, if any, during the immediately
or revenue) is reported as a net revenue totaling $2.9
prior fiscal quarter.
billion and $112.0 billion for FY 2022 and FY 2021,
respectively. GSE non-entity revenue is driven by fair
value changes to our GSE investments and changes to the
DEPARTMENT OF THE TREASURY 41
FY 2022 AGENCY FINANCIAL REPORT
COVID-19 Non-Entity Revenue, Net (a non-entity the U.S. government received promissory notes and
revenue) primarily reflects fair value losses or gains common stock warrants for providing financial support to
recognized on financial instruments received from U.S. the aviation industry. We recognized a fair value loss of
airlines in FY 2020 and 2021 as appropriate $1.9 billion in FY 2022 compared to an $8.9 billion fair
compensation to the U.S. government for the financial value gain in FY 2021 on these instruments.
support provided to preserve aviation jobs during the
pandemic. As a provision of the CARES Act in FY 2020,
and further extended by the CAA and ARP in FY 2021,
Figure 6 : Total Budgetary Resources and Agency Outlays, Net (in billions)
Total Budgetary Resources of $1.3 trillion in FY 2022 Reduction Act (IRA) which was passed into law in August
(Figure 6) decreased by $208.2 billion (or 13.4 percent), 2022. The IRA authorizes the IRS to offer tax incentives
primarily due to a $428.7 billion year-over-year reduction for climate-friendly investments.
in unobligated balances brought forward from the prior
Agency Outlays, Net of $828.2 billion were slightly lower
years, partially offset by a $229.3 billion increase in
in FY 2022 (Figure 6) by $4.4 billion (or 0.5 percent)
appropriations. During FY 2021, the CAA rescinded
primarily due to a year-over-year decrease in outlays in
$478.8 billion of the appropriation we received in FY 2020
the form of financial assistance payments to states,
pursuant to the CARES Act, which eliminated our ability
territorial, local, and Tribal governments, as well as to
to make new loans and investments effective January 9,
the air carrier industry, in response to the COVID
2021, and which prohibited the Federal Reserve from
pandemic. This was mostly offset by an increase in
engaging in further lending or extensions of credit, after
federal debt interest costs as discussed above.
December 31, 2020, through facilities established by the
Federal Reserve under Section 13(3) of the Federal
Reserve Act. Refer to Note 10 to the Consolidated
Financial Statements entitled COVID-19 Investments,
Advances, Receivables, and Other for additional
discussion of the financial impact of the CAA rescission.
The $229.3 billion increase in appropriations stems
primiarly from a $156.3 billion year-over-year increase in
new resources required to finance the increased public
debt (including increased inflation adjustments and
avergae interest rates), and $77.9 billion of new resources
received to implement the provisions of the Inflation Figure 7 : Net Revenue Received (Custodial) (in billions)
42 DEPARTMENT OF THE TREASURY
FY 2022 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
Net Revenue Received (Custodial), representing the net other payments that we issued to individuals in the prior
revenue we collect on behalf of the U.S. government, fiscal year pursuant to the ARP, CAA, and CARES Act to
includes various taxes, primarily income taxes, as well as help stimulate the economy through taxpayer support
user fees, fines and penalties, and other revenue (Figure payments. In FY 2022 and FY 2021, the IRS disbursed
7). Over 90 percent of these revenues (before refunds) are $89.2 billion and $625.8 billion in taxpayer support to
related to income and social security taxes. Net revenue eligible recipients in every state and territory and at
received was $4.4 trillion for FY 2022, an increase of $1.3 foreign addresses (refer to Note 10 to the Consolidated
trillion (or 41.6 percent) over the prior fiscal year. This Financial Statements entitled COVID-19 Investments,
increase is attributable mainly to an overall growth in Advances, Receivables, and Other).
income tax collections, primarily from individuals and
corporations, coupled with decreased tax refunds and
DEPARTMENT OF THE TREASURY 43
FY 2022 AGENCY FINANCIAL REPORT
MANAGEMENT ASSURANCES
THE SECRETARY’S ASSURANCE STATEMENT
The Department of the Treasury’s management is As a result of the significant deficiencies at the IRS and
responsible for managing risks and maintaining effective Fiscal Service, our financial management systems are not
internal control and financial management systems to in substantial compliance with the Federal Financial
meet the objectives of the Federal Managers’ Financial Management Improvement Act (FFMIA) as of September
Integrity Act (FMFIA). We conducted our assessment of 30, 2022. However, we were successful this year in
risk and internal controls in accordance with OMB downgrading a major component of one of our significant
Circular A-123, Management’s Responsibility for deficiencies, related to the Fiscal Service’s debt
Enterprise Risk Management and Internal Control. management systems.
Based on our assessment, we can provide reasonable We continue to make progress in remediating these
assurance that, in accordance with Section 2 of the deficiencies and remain committed to focusing
FMFIA, Treasury’s internal control over operations, management’s attention and resources on appropriate
reporting, and compliance with laws and regulations were corrective actions. Overall, we continue our efforts to
operating effectively as of September 30, 2022. In ensure high standards, minimize internal control
addition, we can provide reasonable assurance that, as of weaknesses, and meet federal financial management
September 30, 2022, we are in substantial conformance systems requirements. Additional information on the
with the federal financial management systems lack of compliance can be found in Part 3, Section A, of
requirements of Section 4 of the FMFIA, with the this report.
exception of the significant deficiencies related to the
financial management systems at the IRS and Fiscal
Service.
Janet L. Yellen
Secretary of the Treasury
November 15, 2022
44 DEPARTMENT OF THE TREASURY
FY 2022 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE
FMFIA reasonable assurance that the controls are designed,
implemented, and operating effectively. As part of the
Background evaluation process, we considered results of this extensive
testing and assessment across the Department, as well as
The FMFIA requires executive branch agencies to
independent audits conducted by the OIG and GAO.
establish and maintain internal control and financial
systems to provide reasonable assurance that: Internal Control over Financial Reporting
obligations and costs comply with applicable laws; In accordance with OMB Circular A-123, Appendix A,
funds, property, and other assets are safeguarded Management of Reporting and Data Integrity Risk, we
against waste, loss, unauthorized use, or also conducted an assessment of Treasury’s internal
misappropriation; and controls over financial reporting. Our components
assessed the effectiveness of their internal controls to
revenues and expenditures applicable to agency
support reliable financial reporting through testing the
operations are properly recorded and accounted for to
design and operating effectiveness of key internal controls
permit the preparation of accounts and reliable
for material transactions. Based on the results of this
financial and statistical reports, and to maintain
assessment we can provide reasonable assurance
accountability over the assets.
regarding the effectiveness of our internal control over
OMB Circular A-123 provides the implementing guidance financial reporting as of September 30, 2022.
for FMFIA and defines management’s responsibility for
establishing and assessing internal controls. The FFMIA AND FINANCIAL MANAGEMENT SYSTEMS
Circular also requires federal agencies to adhere to the
FFMIA
Government Accountability Office’s (GAO) Standards for
Internal Control in the Federal Government, and to The FFMIA requires federal agencies to implement and
evaluate and report on the effectiveness of the maintain financial management systems that
organization’s internal controls to achieve: (1) the substantially comply with federal financial management
objectives of effective and efficient operations, (2) reliable systems requirements, applicable federal accounting
reporting for internal and external use, and (3) standards, and the U.S. Standard General Ledger at the
compliance with applicable laws and regulations (FMFIA transaction level. A financial management system
Section 2). Additionally, agencies are required to assess includes an agency’s overall financial operation, reflecting
whether financial management systems comply with the people, processes, and technology to capture, classify,
federal financial management systems requirements summarize, and report data in a meaningful manner to
(FMFIA Section 4). support business decisions.
Analysis of Controls FFMIA Section 803(c)(1) requires us to make an annual
determination of the agency’s substantial compliance with
The Secretary relies on the annual assurances of our
Section 803(a) of the Act based on a review of relevant
principal bureaus and offices (components), which are
factors. We assess our financial management systems
supported by a comprehensive risk-based internal control
annually for conformance with the requirements of OMB
evaluation plan. This plan includes a methodology that
Circular A-123, Appendix D, Compliance with the Federal
identifies and documents key controls and provides for
Financial Management Improvement Act of 1996, and
the assessment and testing of those controls to provide
other federal financial management system requirements.
DEPARTMENT OF THE TREASURY 45
FY 2022 AGENCY FINANCIAL REPORT
Our assessment process includes the use of the FFMIA related to Fiscal Service’s debt management systems.
Compliance Determination Framework, (the “Compliance Fiscal Service is fully committed to enhancing its
Framework”) in OMB Circular A-123, Appendix D, which corrective action plans and focusing its efforts to meet
is a risk and evidence-based assessment model that federal financial management systems requirements.
leverages existing audits, evaluations, and reviews that
auditors and agency management already perform. The Financial Management Systems
Compliance Framework is an outcome-based approach to
Our financial management systems framework consists of
assessing FFMIA compliance through a series of financial
two foundational components: (1) financial and mixed
management goals that are common to all agencies.
systems maintained by our components, and (2) the
In applying the Compliance Framework, we assess Treasury-wide Financial Analysis and Reporting System
available information from audit reports and other (FARS). Our bureaus process and record detailed
relevant and appropriate sources, such as the Federal financial transactions and submit summary-level data to
Information Security Modernization Act (FISMA) the FARS, which maintains the key financial data
compliance activities, to determine whether our financial necessary for Treasury-wide consolidated financial
management systems substantially comply with FFMIA. reporting. This framework satisfies the financial
We also assess improvements and ongoing efforts to operational and reporting needs of our reporting entities,
strengthen financial management systems and the impact as well as our internal and external reporting
of instances of noncompliance on overall financial requirements. The FARS framework plays a key role in
management system performance. Based on the results our efforts to obtain an unmodified audit opinion.
of our overall assessment, we concluded that our financial The FARS includes the following financial applications:
management systems were not substantially compliant
with federal financial management system requirements Treasury Information Executive Repository (TIER) —
as of September 30, 2022, due to significant deficiencies at a financial data repository used to consolidate and
the IRS and Fiscal Service. validate bureau financial data and to support
external financial reporting requirements; and
The IRS has a significant deficiency in internal control
TIER Financial Statements (TFS) — a reporting
over financial reporting related to its unpaid assessments
application used to produce monthly and annual
and financial reporting systems. Specifically, this
financial statements, notes, and other supporting
deficiency relates to the IRS’s information system
reports
controls, business process application controls, and
general controls. The IRS worked diligently during FY Our components submit summary-level financial data to
2022 to continue to enhance its IT security. The IRS TIER monthly. The TFS application uses the bureau data
continues to implement a strategy and assessment to produce financial statements and report on a Treasury-
process to verify the effectiveness of internal controls for wide and component-level basis.
the financial systems that affect the financial statements.
Nineteen of our bureaus and offices use centralized
This assessment supports the IRS’s overall internal
financial management, budget formulation and
control framework and helps mitigate deficiencies in the
performance management, and IT hosting provided by the
IT environment.
Fiscal Service’s Administrative Resource Center (ARC).
The Fiscal Service has a significant deficiency in internal The shared service approach enables bureaus and offices
control related to its cash management systems. During to access core financial systems without maintaining
FY 2022, we were successful in downgrading a major separate technical and system architectures. ARC also
component of the long-standing significant deficiency provides administrative services in the areas of financial
46 DEPARTMENT OF THE TREASURY
FY 2022 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
FY 2018 AGENCY FINANCIAL REPORT
management transaction processing, human resources, We continue to focus on financial innovation and
procurement, and travel to Treasury’s bureaus and offices transformation. For example, in FY 2022, we worked
as well as to other federal entities to support core toward mandating bureaus that broker buy/sell
business activities. Using shared services reduces the transactions use of the government-wide G-Invoicing
need for Treasury to maintain duplicative financial solution to reduce intragovernmental differences. During
management systems, thereby promoting efficiency and FY 2022, we continued to partner closely with federal
cost savings while enhancing the quality, timeliness, and agencies and system vendors to encourage them to adopt
accuracy of financial management processes. G-Invoicing and ensure overall readiness for mandate
compliance. In FY 2022, ARC implemented more than 17
Goals and Supporting Strategies Robotic Process Automations (RPAs) to improve
efficiency, timeliness, and quality in its service operations
Our financial system goals and supporting strategies
and business processes, for a total of 101 RPAs
focus on improving, streamlining, and integrating current
implemented to date.
bureau financial management systems, as well as the
current FARS applications, to support new financial
OTHER LAWS
management requirements and to support data-driven
financial decision making by management. In FY 2022, In May 2022, we reported three violations of the
we performed assessment activities related to potentially Antideficiency Act (ADA) to the President, the President
modernizing and replacing certain FARS applications. of the Senate, the Speaker of the House of
Representatives, and the Comptroller General, in
Along with bureau financial systems, the TIER and TFS accordance with 31 U.S.C. § 1517(b). The three violations
applications form a unified financial governance solution occurred in our Guam World War II Claims Fund, in the
that focuses on improving financial processes and amounts of $3,478,000.00, $2,086,472.33, and
controls. These systems and applications help to reduce $2,078,541.12, and occurred between March 2020 and
operating costs; enable us to provide assurance over January 2021. All three instances were the result of
financial data quality; and allow us to ensure that we can obligations exceeding the applicable apportionment,
provide timely, transparent, and well controlled financial although one also resulted in expenditures exceeding the
information. apportionment. The violations occurred because the
Guam claims program has a unique statutory
We maintain an information security program for our
requirement for certification of payments. Specifically,
financial systems consistent with applicable FISMA
because the Guam claimants are assured of receiving 100
requirements, OMB policy and guidance, and National
percent of their awards upon the Department of Justice’s
Institute of Standards and Technology standards and
Foreign Claims Settlement Commission’s (the
guidelines. Our systems undergo annual security
“Commission”) certification of the claim to the Fiscal
assessments, and we remediate security weaknesses we
Service, the obligations occur at the time of the
identify through those assessments by developing and
Commission’s certifications. The Commission and the
implementing plans of action and milestones. We monitor
Fiscal Service were unaware of the timing of the
bureau conformance with government-wide information
obligations in the Guam claims programs and therefore
technology security targets and provide roll-up reports
lacked appropriate processes and controls to prevent
quarterly to OMB. Representatives of the OIG evaluate
obligations and expenditures from exceeding related
our compliance with FISMA annually.
apportionments. After identifying these violations, the
Fiscal Service took prompt action to establish appropriate
processes and controls to ensure that such violations will
not recur.
DEPARTMENT OF THE TREASURY 47
FY 2022 AGENCY FINANCIAL REPORT
Other than the three related violations noted above, we exceeds the amount of taxes due, the IRS provides a
are not aware of any other violations of the ADA. refund payment to those who qualify. The IRS estimates
that for FY 2022, 31.6 percent ($18.2 billion) of the total
IMPROPER PAYMENTS EITC payments of $57.5 billion were improper. For the
AOTC, the IRS estimates that for FY 2022, 36.1 percent
Background
($2.0 billion) of the total payments of $5.6 billion were
The Payment Integrity Information Act of 2019 (PIIA) improper. For the ACTC, the IRS estimates that for FY
requires agencies to annually report on all programs and 2022, 15.8 percent ($5.2 billion) of the total payments of
activities, identify those that may be susceptible to $32.8 billion were improper. For Net PTC, the IRS
significant improper payments, estimate annual improper estimates that for FY 2022, 27.4 percent ($578.0 million)
payments in the susceptible programs and activities, and of the total payments of $2.1 billion were improper. The
report the results of their improper payment activities. IRS has a robust enforcement program for its refundable
An improper payment is any payment that should not tax credits which consist of examinations and audits,
have been made or that was made in an incorrect amount math error notices, and document matching.
(including both overpayments and underpayments).
We are reporting improper payment estimates for these
Risk Assessments and Results four refundable tax credits in accordance with OMB
Circular A-123, Appendix C: Requirements for Payment
In FY 2022, we completed a full program inventory and Integrity Improvement. However, it is our position that
performed risk assessments to identify programs that refundable tax credit refunds that result in overclaims
have a significant risk of improper payments. We should not be reported under the improper payments
perform our assessment of each program on a three-year framework. Rather they are more appropriately
rotational schedule, excluding the Earned Income Tax addressed in the Tax Gap (see Part 3, Section B: Tax Gap
Credit (EITC), the American Opportunity Tax Credit and Tax Burden, of this report), which is how we manage
(AOTC), the Additional Child Tax Credit (ACTC), and the noncompliance. Additional information on refundable tax
net Premium Tax Credit (PTC), using the eleven credits and improper payment reporting can be found in
qualitative risk factors identified in OMB Circular A-123, Part 3, Section D: Payment Integrity.
Appendix C, Requirements for Payment integrity
Improvement. We assessed risks related to the amounts Payment Recapture Audits
of payments processed relative to the OMB specified
The PIIA requires agencies to conduct payment recapture
threshold amounts which define programs susceptible to
audits (also known as recovery audits) for each program
significant improper payments. As a result of prior risk
and activity that expends $1 million or more annually, if
assessments, we determined that the EITC, the AOTC,
conducting such audits would be cost-effective. We
the ACTC and the net PTC were susceptible to significant
performed the payment recapture activities in accordance
improper payments.
with OMB Circular A-123, Appendix C. Details on our
The EITC, AOTC, ACTC and net PTC are refundable tax improper payments and results can be found at
credits that offset income tax taxpayers owe. If the credit https://paymentaccuracy.gov/.
48 DEPARTMENT OF THE TREASURY
Message from the Acting Assistant Secretary
For Management and Acting Chief
Financial Officer ............................................................... 51
Inspector General’s Transmittal Letter ................................. 53
Independent Auditors’ Report ............................................... 55
Management’s Response to Independent
Auditors’ Report ............................................................... 61
Financial Statements ............................................................. 62
Notes to the Financial Statements ........................................ 70
Required Supplementary Information
(Unaudited) ..................................................................... 173
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
MESSAGE FROM THE ACTING ASSISTANT SECRETARY FOR MANAGEMENT
AND DEPUTY CHIEF FINANCIAL OFFICER
In fiscal year 2022, Treasury pursued an aggressive set of initiatives to manage
the Department more efficiently and implement the President’s Management
Agenda. Treasury took a leadership role in undertaking some of the
government’s most persistent challenges: continue improving workplace safety
and planning for our future workspace as we hopefully move towards a post-
pandemic environment; further promoting diversity, equity, inclusion, and
accessibility; eliminating improper payments; modernizing information
technology, improving workforce performance, leveraging data as a strategic
Anna Canfield Roth Carole Y. Banks
Acting Assistant Secretary Deputy Chief Financial asset, and delivering excellent financial management services.
for Management Officer
In fiscal year 2022, we also demonstrated effective fiscal and management leadership by:
establishing or refining complex accounting and internal controls in support of ongoing economic recovery programs
created under the Coronavirus Aid, Relief, and Economic Security Act of 2020, Consolidated Appropriations Act,
2021, and the American Rescue Plan Act of 2021;
improving our data infrastructure through establishing a data literacy framework to further support Financial Data
Transparency Act data standardization efforts;
developing Treasury’s Climate Action Plan, which includes assessing our financial investments in property and the
procurement of renewable energy credits and energy-savings performance contracts; and
receiving an A+ rating for small business programs compliance efforts that met all requirements pertaining to the
Small Business Act Section 15(k).
We received an unmodified audit opinion on our consolidated financial statements for the 23rd consecutive year. We were
successful this past year in downgrading a major component of our significant deficiency related to the Bureau of the Fiscal
Service’s debt management systems. Despite the complexity of Treasury’s financial systems, we continue to make steady
progress toward fully resolving all remaining deficiencies associated with our systems.
As we lead Treasury’s management programs and initiatives, we will continue to ensure that we can deliver our mission
effectively and efficiently and provide the best value to the American people.
Anna Canfield Roth Carole Y. Banks
Acting Assistant Secretary for Management Deputy Chief Financial Officer
November 15, 2022 November 15, 2022
DEPARTMENT OF THE TREASURY 51
[Page intentionally left blank]
Pages 53 - 61 have been moved to the front of this report prior to Section II:
For the Memorandum for the Secretary (was 53-54, now pages E - F);
For the Independent Auditors’ Report (was 55-60, now pages I - N); and
For Management’s Response (was 61, now page O).
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Consolidated Balance Sheets
As of September 30, 2022 and 2021
(in millions) 2022 2021
ASSETS
Intra‐Governmental
Fund Balance (Note 2) $ 554,590 $ 626,456
Loans Receivable:
Loans and Interest Receivable (Note 3) 1,611,875 1,794,390
Advances to Trust Funds (Note 3) 47,298 91,378
Other Assets:
Due From the General Fund (Note 4) 31,064,578 28,810,092
Other (Note 15) 1,370 1,328
Total Intra‐Governmental 33,279,711 31,323,644
Other Than Intra‐Governmental
Cash and Other Monetary Assets:
Cash, Foreign Currency, and Other Monetary Assets (Note 5) 784,073 379,105
Gold and Silver Reserves (Note 6) 11,062 11,062
Reserve Position in the International Monetary Fund (Note 7) 31,334 32,743
Accounts Receivable, Net:
Taxes, Interest, and Other Receivables, Net (Note 8) 238,027 304,629
Loans Receivable, Net:
Loans and Interest Receivable, Net (Notes 7 and 10) 12,072 14,621
Credit Program Receivables, Net (Notes 9 and 10) 3,415 4,073
Advances and Prepayments (Note 10) 225,180 256,072
Investments in Government Sponsored Enterprises (GSEs) (Note 11) 223,720 220,860
Investments in Special Purpose Vehicles (Note 10) 17,835 25,579
Other Investments:
Investments in Multilateral Development Banks (Note 12) 8,727 8,466
Other, Net (Notes 10 and 13) 6,799 6,164
General Property, Plant, and Equipment, Net (Note 14) 3,072 2,996
Other Assets (Note 15) 1,867 1,058
Total Other Than Intra‐Governmental 1,567,183 1,267,428
Total Assets $ 34,846,894 $ 32,591,072
Heritage Assets (Note 14)
The accompanying notes are an integral part of these financial statements.
62 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Consolidated Balance Sheets
As of September 30, 2022 and 2021
(in millions) 2022 2021
LIABILITIES
Intra‐Governmental
Federal Debt and Interest Payable:
Federal Debt and Interest Payable (Notes 4 and 16) $ 6,717,361 $ 6,225,208
Other Federal Debt and Interest Payable (Note 17) 4,878 6,093
Other Liabilities:
Due To the General Fund (Note 4) 2,768,781 2,649,003
Liability for Restoration of Federal Debt Principal and Interest (Notes 4 and 16) ‐ 60,562
Other (Note 19) 1,551 1,675
Total Intra‐Governmental 9,492,571 8,942,541
Other Than Intra‐Governmental
Federal Debt and Interest Payable (Notes 4 and 16) 24,308,695 22,325,218
Accounts Payable:
Refunds Payable (Note 4) 6,961 6,249
Other Payables 1,402 1,096
Other Liabilities:
Special Drawing Right Certificates Issued to the Federal Reserve (Note 5) 5,200 5,200
Allocation of Special Drawing Rights (Note 5) 147,009 161,825
Gold Certificates Issued to the Federal Reserve Banks (Note 6) 11,037 11,037
D.C. Federal Pension and Judicial Retirement Actuarial Liability (Note 18) 8,461 8,010
Liability for Restoration of Federal Debt Principal and Interest (Notes 4 and 16) ‐ 157,035
Other (Note 19) 9,776 8,005
Total Other Than Intra‐Governmental 24,498,541 22,683,675
Total Liabilities (Note 19) 33,991,112 31,626,216
Commitments and Contingencies (Note 27)
NET POSITION
Unexpended Appropriations
Funds from Dedicated Collections (Note 24) 200 200
Funds from Other than Dedicated Collections 785,761 878,410
Total Unexpended Appropriations 785,961 878,610
Cumulative Results of Operations
Funds from Dedicated Collections (Note 24) 45,259 49,178
Funds from Other than Dedicated Collections 24,562 37,068
Total Cumulative Results of Operations 69,821 86,246
Total Net Position (Note 20) 855,782 964,856
Total Liabilities and Net Position $ 34,846,894 $ 32,591,072
The accompanying notes are an integral part of these financial statements.
DEPARTMENT OF THE TREASURY 63
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Consolidated Statements of Net Cost
For the Fiscal Years Ended September 30, 2022 and 2021
(in millions) 2022 2021
COST OF TREASURY OPERATIONS:
Financial Program
Gross Cost $ 25,708 $ 24,716
Less Earned Revenue (10,511) (10,464)
Net Program Cost 15,197 14,252
Economic Program
Gross Cost (Note 10) 190,762 129,707
Less Earned Revenue (20,173) (7,692)
Net Program Cost 170,589 122,015
Security Program
Gross Cost 548 515
Less Earned Revenue (28) (26)
Net Program Cost 520 489
Total Program Gross Costs 217,018 154,938
Total Program Earned Revenues (30,712) (18,182)
Total Net Program Cost before Changes in Actuarial Assumptions 186,306 136,756
Loss on Pension, ORB, or OPEB Assumption Changes 519 243
Total Net Cost of Treasury Operations (Note 21) 186,825 136,999
NON‐ENTITY COSTS:
Federal Debt Interest 722,233 574,594
Restoration of Foregone Federal Debt Interest (Note 16) 726 ‐
Less Interest Revenue from Loans (47,064) (48,665)
Federal Debt Interest Costs, Net 675,895 525,929
Accrued Restoration of Foregone Federal Debt Interest (Note 16) ‐ 409
Other Federal Costs, Net (Note 21) 17,180 23,566
GSEs Non‐Entity Revenue, Net (Note 11) (2,860) (111,950)
COVID‐19 Non‐Entity Cost (Revenue), Net (Note 10) 1,945 (8,937)
Other, Net (858) (721)
Total Net Non‐Entity Costs 691,302 428,296
Total Net Cost of Treasury Operations and Non‐Entity Costs $ 878,127 $ 565,295
The accompanying notes are an integral part of these financial statements.
64 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Consolidated Statement of Changes in Net Position
For the Fiscal Year Ended September 30, 2022
Consolidated Consolidated
Funds from Funds from Other
Dedicated than Dedicated 2022
(in millions) Collections Collections Eliminations Total
UNEXPENDED APPROPRIATIONS (Notes 20 and 24)
Beginning Balance $ 200 $ 878,410 $ ‐ $ 878,610
Appropriations Received (Note 10) ‐ 802,456 ‐ 802,456
Appropriations Transferred In/Out ‐ 200 ‐ 200
Other Adjustments (Note 10) ‐ (18,236) ‐ (18,236)
Appropriations Used (Note 10) ‐ (877,069) ‐ (877,069)
Net Change in Unexpended Appropriations ‐ (92,649) ‐ (92,649)
Total Unexpended Appropriations 200 785,761 ‐ 785,961
CUMULATIVE RESULTS OF OPERATIONS (Notes 20 and 24)
Beginning Balance 49,178 37,068 ‐ 86,246
Appropriations Used (Note 10) ‐ 877,069 ‐ 877,069
Non‐Exchange Revenue 453 (1) (41) 411
Donations and Forfeitures of Cash/Equivalent 721 ‐ ‐ 721
Transfers In/Out Without Reimbursement (691) 547 (3) (147)
Donation/Forfeiture of Property 172 ‐ ‐ 172
Accrued Interest and Discount on Debt ‐ 38,873 ‐ 38,873
Accrued Interest on Restoration of Federal Debt Principal (Note 16) ‐ (409) ‐ (409)
Imputed Financing Sources (Note 21) 71 709 ‐ 780
Transfers to the General Fund and Other 554 (56,322) ‐ (55,768)
Net Cost of Treasury Operations and Non‐Entity Costs (5,199) (872,972) 44 (878,127)
Net Change in Cumulative Results of Operations (3,919) (12,506) ‐ (16,425)
Total Cumulative Results of Operations 45,259 24,562 ‐ 69,821
Net Position $ 45,459 $ 810,323 $ ‐ $ 855,782
The accompanying notes are an integral part of these financial statements.
DEPARTMENT OF THE TREASURY 65
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Consolidated Statement of Changes in Net Position
For the Fiscal Year Ended September 30, 2021
Consolidated Consolidated
Funds from Funds from Other
Dedicated than Dedicated 2021
(in millions) Collections Collections Eliminations Total
UNEXPENDED APPROPRIATIONS (Notes 20 and 24)
Beginning Balance $ 200 $ 903,758 $ ‐ $ 903,958
Appropriations Received (Note 10) ‐ 1,124,489 ‐ 1,124,489
Appropriations Transferred In/Out ‐ 50 ‐ 50
Other Adjustments (Note 10) ‐ (488,673) ‐ (488,673)
Appropriations Used (Note 10) ‐ (661,214) ‐ (661,214)
Net Change in Unexpended Appropriations ‐ (25,348) ‐ (25,348)
Total Unexpended Appropriations 200 878,410 ‐ 878,610
CUMULATIVE RESULTS OF OPERATIONS (Notes 20 and 24)
Beginning Balance 48,844 94,539 ‐ 143,383
Appropriations Used (Note 10) ‐ 661,214 ‐ 661,214
Non‐Exchange Revenue 443 2 (4) 441
Donations and Forfeitures of Cash/Equivalent 285 ‐ ‐ 285
Transfers In/Out Without Reimbursement (250) (394) ‐ (644)
Donation/Forfeiture of Property 185 ‐ ‐ 185
Accrued Interest and Discount on Debt ‐ 22,591 ‐ 22,591
Accrued Interest on Restoration of Federal Debt Principal (Note 16) ‐ 409 ‐ 409
Imputed Financing Sources (Note 21) 80 682 ‐ 762
Transfers to the General Fund and Other 849 (177,934) ‐ (177,085)
Net Cost of Treasury Operations and Non‐Entity Costs (1,258) (564,041) 4 (565,295)
Net Change in Cumulative Results of Operations 334 (57,471) ‐ (57,137)
Total Cumulative Results of Operations 49,178 37,068 ‐ 86,246
Net Position $ 49,378 $ 915,478 $ ‐ $ 964,856
The accompanying notes are an integral part of these financial statements.
66 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Combined Statement of Budgetary Resources
For the Fiscal Year Ended September 30, 2022
Non‐Budgetary 2022
(in millions) Budgetary Financing Total
BUDGETARY RESOURCES
Unobligated balance from prior year budget authority, net
(discretionary and mandatory) (Note 22) $ 489,225 $ 313 $ 489,538
Appropriations (discretionary and mandatory) (Notes 10 and 20) 834,390 ‐ 834,390
Borrowing authority (discretionary and mandatory) ‐ 5,463 5,463
Spending authority from offsetting collections
(discretionary and mandatory) 11,571 834 12,405
Total Budgetary Resources $ 1,335,186 $ 6,610 $ 1,341,796
STATUS OF BUDGETARY RESOURCES
New obligations and upward adjustments (Note 10) $ 930,261 $ 6,316 $ 936,577
Unobligated balance, end of year:
Apportioned, unexpired accounts 306,461 216 306,677
Exempt from apportionment, unexpired accounts 1,935 ‐ 1,935
Unapportioned, unexpired accounts 95,808 78 95,886
Unexpired unobligated balance, end of year 404,204 294 404,498
Expired unobligated balance, end of year 721 ‐ 721
Unobligated balance, end of year 404,925 294 405,219
Total Status of Budgetary Resources $ 1,335,186 $ 6,610 $ 1,341,796
OUTLAYS, NET, AND DISBURSEMENTS, NET
Outlays, net (discretionary and mandatory) $ 893,311 $ ‐ $ 893,311
Distributed offsetting receipts (65,142) ‐ (65,142)
Agency Outlays, Net (Discretionary and Mandatory) $ 828,169 $ ‐ $ 828,169
Disbursements, net (mandatory) $ (4,722) $ (4,722)
The accompanying notes are an integral part of these financial statements.
DEPARTMENT OF THE TREASURY 67
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Combined Statement of Budgetary Resources
For the Fiscal Year Ended September 30, 2021
Non‐Budgetary 2021
(in millions) Budgetary Financing Total
BUDGETARY RESOURCES
Unobligated balance from prior year budget authority, net
(discretionary and mandatory) (Note 22) $ 905,903 $ 12,291 $ 918,194
Appropriations (discretionary and mandatory) (Notes 10 and 20) 605,071 ‐ 605,071
Borrowing authority (discretionary and mandatory) ‐ 15,008 15,008
Spending authority from offsetting collections
(discretionary and mandatory) 23,140 (11,405) 11,735
Total Budgetary Resources $ 1,534,114 $ 15,894 $ 1,550,008
STATUS OF BUDGETARY RESOURCES
New obligations and upward adjustments (Note 10) $ 1,045,397 $ 15,451 $ 1,060,848
Unobligated balance, end of year:
Apportioned, unexpired accounts 443,193 18 443,211
Exempt from apportionment, unexpired accounts 1,806 ‐ 1,806
Unapportioned, unexpired accounts 43,310 425 43,735
Unexpired unobligated balance, end of year 488,309 443 488,752
Expired unobligated balance, end of year 408 ‐ 408
Unobligated balance, end of year 488,717 443 489,160
Total Status of Budgetary Resources $ 1,534,114 $ 15,894 $ 1,550,008
OUTLAYS, NET, AND DISBURSEMENTS, NET
Outlays, net (discretionary and mandatory) $ 906,270 $ ‐ $ 906,270
Distributed offsetting receipts (73,645) ‐ (73,645)
Agency Outlays, Net (Discretionary and Mandatory) $ 832,625 $ ‐ $ 832,625
Disbursements, net (mandatory) $ (64,396) $ (64,396)
The accompanying notes are an integral part of these financial statements.
68 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Statements of Custodial Activity
For the Fiscal Years Ended September 30, 2022 and 2021
(in millions) 2022 2021
SOURCES OF CUSTODIAL REVENUE (Note 23)
Individual Income and FICA Taxes $ 4,308,098 $ 3,594,002
Corporate Income Taxes 475,871 419,009
Estate and Gift Taxes 33,355 28,046
Excise Taxes 90,240 78,534
Railroad Retirement Taxes 6,148 5,307
Unemployment Taxes 7,046 6,276
Deposit of Earnings, Federal Reserve System 106,675 100,054
Fines, Penalties, Interest and Other Revenue 7,305 7,843
Total Revenue Received 5,034,738 4,239,071
Less Refunds and Other Payments (Note 10) (642,230) (1,138,267)
Net Revenue Received 4,392,508 3,100,804
Non‐Cash Accrual Adjustment (66,747) 63,958
Total Custodial Revenue 4,325,761 3,164,762
DISPOSITION OF CUSTODIAL REVENUE (Note 23)
Amounts Provided to Fund Non‐Federal Entities 421 528
Amounts Provided to Fund the Federal Government 4,392,087 3,100,276
Non‐Cash Accrual Adjustment (66,747) 63,958
Total Disposition of Custodial Revenue 4,325,761 3,164,762
Net Custodial Revenue $ ‐ $ ‐
The accompanying notes are an integral part of these financial statements.
DEPARTMENT OF THE TREASURY 69
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
NOTES TO THE FINANCIAL STATEMENTS
TABLE OF CONTENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ......................................................................................................................... 71
2. FUND BALANCE ....................................................................................................................................................................................... 93
3. LOANS AND INTEREST RECEIVABLE – INTRA-GOVERNMENTAL ..................................................................................................... 95
4. DUE FROM THE GENERAL FUND AND DUE TO THE GENERAL FUND ............................................................................................. 98
5. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS ..................................................................................................... 100
6. GOLD AND SILVER RESERVES, AND GOLD CERTIFICATES ISSUED TO THE FEDERAL RESERVE BANKS ................................. 102
7. RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND AND RELATED LOANS AND INTEREST RECEIVABLE ....... 103
8. TAXES, INTEREST, AND OTHER RECEIVABLES, NET ...................................................................................................................... 104
9. CREDIT PROGRAM RECEIVABLES, NET ............................................................................................................................................ 105
10. COVID-19 INVESTMENTS, ADVANCES, RECEIVABLES, AND OTHER .......................................................................................... 106
11. INVESTMENTS IN GOVERNMENT SPONSORED ENTERPRISES........................................................................................................ 124
12. INVESTMENTS IN MULTILATERAL DEVELOPMENT BANKS ........................................................................................................... 129
13. OTHER INVESTMENTS, NET ............................................................................................................................................................... 130
14. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET ................................................................................................................... 131
15. NON-ENTITY VS. ENTITY ASSETS...................................................................................................................................................... 133
16. FEDERAL DEBT AND INTEREST PAYABLE AND RELATED LIABILITIES ....................................................................................... 135
17. OTHER FEDERAL DEBT AND INTEREST PAYABLE .......................................................................................................................... 139
18. D.C. FEDERAL PENSION AND JUDICIAL RETIREMENT ACTUARIAL LIABILITY ........................................................................... 140
19. LIABILITIES ........................................................................................................................................................................................... 142
20. NET POSITION ...................................................................................................................................................................................... 143
21. CONSOLIDATED STATEMENTS OF NET COST AND NET COSTS OF TREASURY SUB-ORGANIZATIONS.................................... 144
22. ADDITIONAL INFORMATION RELATED TO THE COMBINED STATEMENTS OF BUDGETARY RESOURCES ............................... 150
23. SOURCES AND DISPOSITION OF CUSTODIAL REVENUE .................................................................................................................. 153
24. FUNDS FROM DEDICATED COLLECTIONS ......................................................................................................................................... 155
25. RECONCILIATION OF NET COST OF TREASURY OPERATIONS AND NON-ENTITY COSTS TO AGENCY OUTLAYS, NET......... 161
26. SCHEDULE OF FIDUCIARY ACTIVITY ................................................................................................................................................. 164
27. COMMITMENTS AND CONTINGENCIES .............................................................................................................................................. 165
28. RECLASSIFICATION OF AGENCY FINANCIAL STATEMENTS TO FINANCIAL REPORT
OF THE U.S. GOVERNMENT FORMAT ............................................................................................................................................ 169
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED – SEE ACCOMPANYING AUDITORS’ REPORT) ................................... 173
70 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REPORTING ENTITY
The accompanying financial statements include the operations of the Department of the Treasury, one of 24 Chief Financial
Officers (CFO) Act agencies of the Executive Branch of the United States (U.S.) government, and certain custodial activities
the Department manages on behalf of the entire U.S. government. Except where the content clearly indicates otherwise, the
use of the terms “Department,” “Treasury,” “we,” “us,” or “our” refers to the Department of the Treasury, including its
Departmental Offices (DO) and operating bureaus, which are further discussed below. The following paragraphs describe
the activities of the reporting entity.
We were established by an Act of Congress approved on September 2, 1789. Many subsequent acts affected our development,
delegating new duties to our charge and establishing the numerous bureaus and divisions that now comprise the
Department. As a major policy advisor to the President, the Secretary of the Treasury (Secretary) has primary responsibility
for formulating and managing the domestic and international tax and financial policies of the U.S. government.
Further, the Secretary is responsible for recommending and implementing U.S. domestic and international economic and
fiscal policy; governing the fiscal operations of the U.S. government; maintaining foreign assets control; managing the
federal debt; collecting income and excise taxes; representing the U.S. on international monetary, trade, and investment
issues; overseeing our overseas operations; and directing the manufacture of coins, currency, and other products for customer
agencies and the public.
Our reporting entities include DO and seven operating bureaus. For financial reporting purposes, DO is composed of:
Community Development Financial Institutions (CDFI) Fund, Office of D.C. Pensions (ODCP), Exchange Stabilization Fund
(ESF), Federal Financing Bank (FFB), Government Sponsored Enterprises (GSEs) Program, International Assistance
Programs (IAP), Office of Financial Research (OFR), Office of Financial Stability (OFS), Office of Inspector General (OIG),
Office of Recovery Programs (ORP), Small Business Lending Fund (SBLF), Special Inspector General for Pandemic Recovery
(SIGPR), Special Inspector General for the Troubled Asset Relief Program (SIGTARP), Treasury Forfeiture Fund (TFF),
Treasury Inspector General for Tax Administration (TIGTA), and the DO policy offices.
Our seven operating bureaus are: Bureau of Engraving and Printing (BEP), Bureau of the Fiscal Service (Fiscal Service),
Financial Crimes Enforcement Network (FinCEN), Internal Revenue Service (IRS), U.S. Mint (Mint), Office of the
Comptroller of the Currency (OCC), and Alcohol and Tobacco Tax and Trade Bureau (TTB). Our consolidated financial
statements reflect the reporting of our entity activities, comprising both our operating bureaus and DO. This includes
appropriations received to conduct our operations and revenue generated from those operations. They also reflect the
reporting of certain non-entity (custodial) functions we perform on behalf of the U.S. government and others. Non-entity
activities include collecting certain federal revenue, servicing the federal debt, disbursing certain federal funds, and
maintaining certain assets and liabilities for the U.S. government (refer to Notes 4 and 15), as well as for other federal
entities. Our reporting entity does not include the General Fund of the U.S. Government (General Fund), which maintains
receipt, disbursement, and appropriation accounts for all federal agencies.
DEPARTMENT OF THE TREASURY 71
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Following U.S. Generally Accepted Accounting Principles (GAAP) for federal entities, we do not consolidate into our financial
statements the assets, liabilities, or results of operations of any financial organization or commercial entity in which we hold
either a direct or indirect majority equity investment, unless they meet the criteria for consolidation as described in
Statement of Federal Financial Accounting Standards (SFFAS) No. 47, Reporting Entity. We have determined that none of
our significant equity investments meet such criteria for consolidation. SFFAS No. 47 also provides criteria for reporting
“disclosure entities” and “related party” relationships of such significance that it would be misleading to exclude information
about them. Refer to the accounting policy below entitled “Disclosure Entities and Related Parties” for additional
information on Treasury’s “disclosure entities” and “related parties”, which are material to our consolidated financial
statements, of significance to the public, or required by SFFAS No. 47.
B. BASIS OF ACCOUNTING AND PRESENTATION
The financial statements have been prepared from our accounting records in conformity with GAAP, and Office of
Management and Budget (OMB) Circular No. A-136, Financial Reporting Requirements, as revised. Accounting principles
generally accepted for federal entities are the standards prescribed by the Federal Accounting Standards Advisory Board
(FASAB). The American Institute of Certified Public Accountants recognizes FASAB as the official accounting standards-
setting body for the U.S. government. Certain presentations and disclosures may be modified, if needed, to prevent the
disclosure of classified information.
These financial statements consist of the Consolidated Balance Sheets, the Consolidated Statements of Net Cost, the
Consolidated Statements of Changes in Net Position, the Combined Statements of Budgetary Resources, and the Statements
of Custodial Activity. The statements and the related notes are prepared in a comparative form to present both fiscal year
(FY) 2022 and 2021 information.
We have eliminated transactions and balances among our entities from the Consolidated Balance Sheets, Consolidated
Statements of Net Cost, and Consolidated Statements of Changes in Net Position. We present the Statements of Budgetary
Resources on a combined basis; therefore, intra-departmental transactions and balances have not been eliminated from these
statements.
While these financial statements have been prepared from our accounting records primarily in accordance with the formats
prescribed by OMB, these financial statements are in addition to the financial reports we use to monitor and control
budgetary resources, which are prepared from the same accounting records.
Intra-governmental assets and liabilities are those due from or to other federal entities. Intra-governmental earned
revenues are collections or accruals of revenue from other federal entities, and intra-governmental costs are payments or
accruals of expenditures to other federal entities.
The financial statements should be read with the recognition that we are a component of the U.S. government, a sovereign
entity and, accordingly, our liabilities not covered by budgetary resources cannot be liquidated without the legislative
enactment of an appropriation, and that the payment of all liabilities other than for contracts can be abrogated by the
sovereign entity. Liabilities represent the probable and measurable future outflow or other sacrifice of resources as a result
of past transactions or events. Liabilities covered by budgetary resources are those liabilities for which Congress has
appropriated funds or funding is otherwise available to pay amounts due. Liabilities not covered by budgetary resources
represent amounts owed in excess of available, congressionally appropriated funds or other amounts, and there is no
certainty that the appropriations will be enacted. Liabilities not requiring budgetary resources are liabilities that have not
72 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
in the past required, nor will in the future, require budgetary resources, e.g., liabilities for clearing accounts, non-fiduciary
deposit funds, custodial collections, and unearned revenue.
We have reclassified certain FY 2021 activity and balances presented on the financial statements to conform to the
presentation in the current year. In FY 2022, we changed the classification of certain of our reporting entities’ program
gross costs and earned revenues as reported on the Consolidated Statements of Net Cost to better align them based on their
core function and responsibility. We reclassified corresponding gross costs and earned revenues reported for the prior fiscal
year to conform to the current year’s presentation (refer to Note 21). Furthermore, in FY 2022, we changed the presentation
of the Consolidated Balance Sheets in accordance with revisions in OMB Circular No. A-136. We reclassified corresponding
balances reported for the prior fiscal year to conform to the presentation in the current year, the effects of which are
immaterial.
There are numerous acronyms used throughout the notes herein as well as other sections of this Agency Financial Report
(AFR). Refer to the “Glossary of Acronyms” located in the Appendix of this report for a complete listing of these acronyms
and their definitions.
C. FUND BALANCE
“Fund Balance” is the aggregate amount of our accounts with the U.S. government’s central accounts from which we are
authorized to make expenditures and pay liabilities. It is an asset because it represents our claim to the U.S. government’s
resources. “Fund Balance” is not equivalent to unexpended appropriations because it also includes non-appropriated
revolving and enterprise funds, suspense accounts, and custodial funds such as deposit funds, special funds, and trust funds.
D. LOANS RECEIVABLE – INTRA-GOVERNMENTAL
Loans and Interest Receivable
Intra-governmental entity loans and interest receivable from other federal agencies represent the principal and related
interest receivable on loans we issue through FFB. We do not record loan loss allowance for credit reform subsidy costs for
loans purchased from federal agencies or for guaranteed loans made to non-federal borrowers because those agencies
guarantee the outstanding balances (interest and principal).
Intra-governmental non-entity loans and interest receivable from other federal agencies represent the principal and related
interest receivable on loans we issue, through the Fiscal Service. We act as an intermediary issuing these loans because the
agencies receiving these loans lend these funds to third parties to carry out various programs of the U.S. government.
Because of our intermediary role in issuing these loans, we do not record a loan loss allowance related to these non-entity
intra-governmental loans. Instead, the ultimate lender, the federal agency that issued the loans to the public, recognizes
loan loss allowances and subsidy costs. We accrue interest revenue on intra-governmental loans when earned.
DEPARTMENT OF THE TREASURY 73
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Advances to the Unemployment Trust Fund
The General Fund issues advances to the Department of Labor’s (DOL) Unemployment Trust Fund for states to pay
unemployment benefits. The Fiscal Service accounts for the advances issued on behalf of the General Fund. As outlined in
42 United States Code (USC) 1323, Repayable Advances to Federal Unemployment Account, these advances bear an interest
rate that is computed as the average interest rate as of the end of the calendar month preceding the issuance date of the
advance for all interest-bearing obligations of the U.S. that form the public debt, to the nearest lower 1/8 of 1.0 percent.
Interest on the advances is due on September 30 of each year. These advances are recorded within the “Advances to Trust
Funds” line of the Consolidated Balance Sheets. DOL repays advances when the Secretary, in consultation with the
Secretary of the DOL, determines that the balance in the Unemployment Trust Fund is adequate to allow repayment.
Advances to the Federal Supplementary Medical Insurance Trust Fund
The General Fund issues advances to the Department of Health and Human Services’ (HHS) Federal Supplementary
Medical Insurance Trust Fund to temporarily replace the reduction in Medicare Part B participants’ premiums. The Fiscal
Service accounts for the advances issued on behalf of the General Fund. As outlined in 42 USC 1395, Prohibition Against
Any Federal Interference, these advances do not bear any interest. These advances are recorded within the “Advances to
Trust Funds” line of the Consolidated Balance Sheets. HHS repays advances over time from amounts collected from certain
participants’ increase in premiums until the balance due reaches zero.
E. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS
Substantially all of our operating cash is non-entity government-wide cash held in depository institutions and Federal
Reserve Bank (FRB) accounts. Agencies deposit funds that are submitted to them directly into either a Federal Reserve
Treasury General Account (TGA) or a local TGA depositary. We transfer the balances in these TGA accounts into the
Federal Reserve Bank of New York’s (FRBNY) TGA throughout the day.
Operating cash of the U.S. government represents balances from tax collections, customs duties, other revenue, federal debt
receipts, and other various receipts, net of cash outflows for budget outlays and other payments held in the FRBs and in
foreign and domestic financial institutions. Outstanding checks net against operating cash until they clear the Federal
Reserve System (FR System).
The FRBNY maintains the TGA, which functions as the U.S. government’s checking account for deposits and disbursements
of public funds. Cash in the TGA is restricted for government-wide operations.
Foreign currency and Foreign Currency Denominated Assets (FCDAs) represent foreign deposit accounts and securities with
original maturities of three months.
Special Drawing Rights (SDR) holdings comprise most of the other monetary assets (refer to the accounting policy below
entitled “Special Drawing Rights”).
F. TAXES, INTEREST, AND OTHER RECEIVABLES, NET
We do not accrue federal taxes receivable, net, and the corresponding liability due to the General Fund, until the taxpayer
files related tax returns, or the IRS makes assessments and either the taxpayer or the court agrees to them. Additionally,
prepayments are netted against tax liabilities. We make accruals to reflect penalties and interest on taxes receivable
through the balance sheet date.
74 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Taxes receivable consist of unpaid assessments (taxes and associated penalties and interest) due from taxpayers. The
existence of a receivable is supported by a taxpayer agreement, such as filing of a tax return without sufficient payment, or a
court ruling in favor of the IRS. We record an allowance for doubtful accounts to reflect an estimate of the portion of total
taxes receivable deemed to be uncollectible. Taxes receivable also consist of unpaid taxes related to Internal Revenue Code
(IRC) section 965, which requires taxpayers who are shareholders of certain specified foreign corporations to pay a transition
tax on foreign earnings as if those earnings had been repatriated to the U.S.. IRC 965(h) allows taxpayers to elect to pay
their 965(h) tax on an eight-year installment schedule. Additionally, taxes receivable includes employer’s deferred share of
the Social Security portion of the Federal Insurance Contributions Act (FICA), and the employer’s and employee
representative’s share of the Railroad Retirement Tax (RRTA). Pursuant to the CARES Act, employers are allowed to defer
payment, without penalty, of these portions of FICA and RRTA.
Compliance assessments are unpaid assessments that neither the taxpayer nor a court has affirmed the taxpayer owes to the
U.S. government. Examples include assessments resulting from an IRS audit or examination in which the taxpayer does not
agree with the results. Write-offs consist of unpaid assessments for which the IRS does not expect further collections due to
factors such as taxpayers’ bankruptcy, insolvency, or death. We do not report compliance assessments and write-offs on the
balance sheet. Statutory provisions require the accounts to be maintained until the statute for collection expires.
G. LOANS RECEIVABLE, NET – OTHER THAN INTRA-GOVERNMENTAL
Loans and Interest Receivable, Net
Other than intra-governmental (or public) loans and interest receivable include a supplemental borrowing arrangement
between the U.S. and the International Monetary Fund (IMF) (refer to Note 7). These loans are denominated in SDRs and
recorded at the equivalent U.S. dollar amount (refer to the accounting policy below entitled “Special Drawing Rights”). We
periodically adjust the value of these loans, due to fluctuations in the value of the U.S. dollar with respect to the SDR, to
maintain the amount of these loans in dollar terms. We do not record a loan loss allowance for these loans as we do not
anticipate any defaults on the repayment of these loans.
The Coronavirus Disease 2019 (COVID-19) notes and interest receivable represent the principal and related interest
receivable on promissory notes received in connection with providing financial assistance to air carriers, cargo air carriers,
and airline contractors to support ongoing employment of their aviation workers under the Coronavirus Aid, Relief, and
Economic Security Act, P.L. 116-136 (CARES Act), Consolidated Appropriations Act, 2021, P.L. 116-260 (CAA), and
American Rescue Plan Act of 2021, P.L. 117-2 (ARP) (refer to Note 10). Interest revenue on the promissory notes is accrued
as earned over the life of the notes. The notes include a Payment-In-Kind (PIK) option in which borrowers may elect to pay
the interest in-kind, capitalizing the interest due to the principal amount of the note, instead of paying the interest in cash.
We increase the principal balance of the note and reduce interest receivable by the amount of unpaid interest when
borrowers make this PIK election.
This receivable is an asset of the U.S. government, and we are precluded from using the cash proceeds realized from the
financial instruments we receive. We report the non-entity receivable net of an allowance for loss, which reflects our best
estimate of the amount of credit losses experienced within the existing portfolio of promissory notes, within the “Loans and
Interest Receivable, Net” line of the Consolidated Balance Sheets. We annually assess this estimated credit loss amount by
deriving the fair value of these notes and determining the extent to which credit factors (such as historical loss experience,
delinquencies, and note restructurings) reduced the value of these receivables from their face value to their lower net
realizable value. We derived the fair value of the notes portfolio as the present value of the expected future cash flows of the
DEPARTMENT OF THE TREASURY 75
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
notes (including disbursements, repayments, interest, defaults, and recoveries). We recognize the receivable and related
interest as a non-entity exchange transaction within the “COVID-19 Non-Entity Cost (Revenue), Net” line of the
Consolidated Statements of Net Cost. This receivable also results in a corresponding increase to “Due To the General Fund.”
Credit Program Receivables, Net
We account for all of our credit program receivables under the provisions of credit reform accounting pursuant to the Federal
Credit Reform Act (FCRA). Credit programs include loans or equity securities associated with our state and local Housing
Finance Agency (HFA) initiative programs, SBLF program, CDFI Fund programs, and the Troubled Asset Relief Program
(TARP) (refer to Note 9). Our credit programs also include loans associated with emergency relief efforts in response to the
COVID-19 pandemic.
To account for our credit program receivables, we apply the accounting provisions of SFFAS No. 2, Accounting for Direct
Loans and Loan Guarantees, as amended. SFFAS No. 2 requires measurement of the asset or liability at the net present
value of the estimated future cash flows. The cash flow estimates for each credit program transaction reflect the actual
structure of the instruments. For each of these instruments, we estimate cash inflows and outflows related to the program
over the estimated term of the instrument. Further, each cash-flow estimate reflects the specific terms and conditions of the
program, technical assumptions regarding the underlying assets, risk of default or other losses, and other factors as
appropriate. The measurement of assets within these programs is primarily derived from inputs, which generally represent
market data and, when such data is not available, management’s best estimate of how a market participant would assess the
asset’s inherent risk.
The primary purpose of the FCRA is to measure the cost of federal credit programs, and to place the cost of such credit
programs on a basis equivalent with other federal spending. FCRA requires that the ultimate costs of a credit program be
calculated and the budgetary resources be obtained before incurring the direct loan obligations. To accomplish this, we first
predict or estimate the future performance of direct and guaranteed loans when preparing our annual budget. We re-
estimate the data we use for these budgetary estimates at the fiscal year-end to reflect changes in actual loan performance
and actual interest rates in effect when the loans were issued. The re-estimated data reflect adjustments for market risks,
asset performance, and other key variables and economic factors. We then use the re-estimated data to report the cost of the
loans disbursed under the direct or guaranteed loan program as a program cost on our Consolidated Statements of Net Cost.
Cash flows associated with our credit programs generally include disbursements, repayments, repurchases, fees, recoveries,
interest, dividends, proceeds from sales of instruments, borrowings from Treasury, negative subsidy, and the subsidy cost
received from the program accounts. We draw security-level data and assumptions used as the basis for cash flow model
forecasts and program performance from widely available market sources, as well as information published by investees.
Key inputs and assumptions to the cash flow forecasts include, but are not limited to:
security characteristics such as unpaid principal balance, coupon rate, weighted-average loan age, issued bond balance,
credit rating, maturity date, sinking fund schedules, principal and interest payment schedules, and performance of
underlying collateral;
discount rate;
observed market prices;
department actions, as well as changes in legislation;
forecast dividend payments, late payments, prepayment rates and default rates;
forward interest rates;
76 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
historical prepayments;
option adjusted spread;
default and recovery reports Moody’s and Standard and Poor’s publish;
modeled asset prices from third-party market sources; and
forecast and historical Special Purpose Vehicles (SPVs) preferred equity repayments.
The recorded subsidy cost associated with each of our credit programs represents the difference between disbursed amounts
and the net present value of future cash flows we anticipate receiving. The subsidy allowance, as initially established by the
subsidy cost, takes into consideration projected repayments and defaults, and the projected cost of borrowings. We amortize
the allowance to reflect the difference between projected and actual financing costs.
Our actions, as well as changes in legislation, may impact estimated future cash flows and related subsidy costs. We
recognize the cost or cost savings of a modification in subsidy costs when the terms of a program are modified. Workouts are
actions taken to maximize repayments of existing credit programs, and the expected effects on cash flows are included in the
original estimate and re-estimates of the subsidy cost. Subsidy costs are also impacted by re-estimates, which may occur as
a result of updates to the original program subsidy cost estimates to reflect actual cash flows experience, as well as changes
in forecasts of estimated future cash flows associated with the credit program.
H. ADVANCES AND PREPAYMENTS
We issue advances to COVID-19 pandemic-related recovery financial assistance programs directed through state, local,
territorial, and Tribal governments (refer to Note 10). These advances are issued as direct payments for specified use to
cover the recipient’s anticipated qualified incurred costs. These advances are initially recorded when disbursed within the
“Advances and Prepayments” line of the Consolidated Balance Sheets and subsequently recognized as expense within the
“Economic Program” costs on the Consolidated Statements of Net Cost as the qualified costs are incurred.
I. INVESTMENTS
Investments in GSEs
We hold senior preferred stock and warrants for the purchase of common stock of two GSEs: the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). We present these non-federal
investment holdings at their fair value (see the discussion below on “Fair Value Measurement”). We record changes in the
valuation of these investments as non-entity exchange transactions on the Consolidated Statements of Net Cost. We also
record dividends related to these investments as non-entity exchange transactions, which are accrued when declared.
The GSE Senior Preferred Stock Purchase Agreements (SPSPAs), which we entered into with each GSE when the GSEs
were placed under conservatorship, require that we increase our investment in the GSEs’ senior preferred stock if, at the end
of any quarter, the Federal Housing Finance Agency (FHFA), acting as the conservator, determines that the liabilities of
either GSE exceed its respective assets. Since funding to the GSEs to pay their excess liabilities is appropriated directly to
us, we report such payments, as needed, as entity expenses within the “Economic Program” on the Consolidated Statements
of Net Cost, and in the line item, “Cumulative Results of Operations,” on the Consolidated Balance Sheets. These payments
also result in an increase to the non-entity investment in the GSEs’ senior preferred stock, with a corresponding increase to
“Due To the General Fund,” as we hold the investment on behalf of the General Fund.
DEPARTMENT OF THE TREASURY 77
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
The annual valuation as of September 30 of the preferred stock and warrants incorporates various forecasts, projections and
cash flow analyses to develop an estimate of the assets’ fair value. We estimate the value of the senior preferred stock by
first estimating the fair value of the total equity of each GSE (which, in addition to the senior preferred stock, is comprised of
other equity instruments including common stock, common stock warrants, and junior preferred stock). We base the fair
value of the total equity on a discounted cash flow valuation methodology, whereby the primary input is the present value of
the projected quarterly cash flows to equity holders. The fair value of the GSEs’ other equity instruments is then deducted
from its total equity, with the remainder representing the fair value of the senior preferred stock. The primary input into
the warrants valuation is the market value of the shares of common stock of the GSEs which, along with the junior preferred
stock, are traded on the OTC Market. We evaluate the need for adjusting our OTC market-based valuation of the warrants
for the effects, if any, of significant events occurring after the close of the market but before the end of the measurement date
(refer to Note 11).
Investments in Special Purpose Vehicles
Pursuant to the CARES Act enacted in FY 2020 in response to the COVID-19 pandemic, we hold preferred equity
investments in SPVs the Board of Governors of the Federal Reserve System (Federal Reserve Board or Board) established
through the Federal Reserve Bank of New York (FRBNY) and Federal Reserve Bank of Boston (FRBB) to enhance the
liquidity of the U.S. financial system (refer to Note 10). We present these non-federal investment holdings at their fair value
(see the discussion below on “Fair Value Measurement”). We record changes in the valuation of these investments as entity
exchange transactions on the Consolidated Statements of Net Cost.
The annual valuation of these investments as of September 30 incorporates various forecasts, projections and cash flow
analyses to develop an estimate of the assets’ fair value. We estimate the fair value of our SPV preferred equity investments
based on a discounted cash flow valuation methodology which calculates the present value of the projected annual cash flows
associated with these investments.
Investments in Multilateral Development Banks
On behalf of the U.S., we invest in Multilateral Development Banks (MDBs) to support poverty reduction, private sector
development, transitions to market economies, and sustainable economic growth and development, thereby advancing U.S.
economic, political, and commercial interests abroad. As a participating member country, we provide a portion of the capital
base of the MDBs, through subscriptions to capital, which allows the MDBs to issue loans at market-based rates to middle-
income developing countries. These paid-in capital investments are non-marketable equity investments valued at cost on
our Consolidated Balance Sheets.
In addition, on behalf of the U.S., we contribute funding to MDBs to finance grants and extend credit to poor countries at
below market-based interest rates. We report these U.S. contributions, also referred to as “concessional window”
contributions, as an expense within the “Financial Program” on our Consolidated Statements of Net Cost.
78 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Other Investments, Net
In connection with our Emergency Capital Investment Program established pursuant to the FY 2021 enactment of the CAA,
we hold preferred stock and subordinate debt we received in exchange for our capital disbursed to low- and moderate-income
community financial institutions to augment their efforts to support small businesses and consumers in their communities
(refer to Notes 10 and 13). We present these non-federal investment holdings at their fair value (see the discussion below on
“Fair Value Measurement”). We record changes in the valuation of these investments as entity exchange transactions on the
Consolidated Statements of Net Cost. We recognize preferred stock dividend income when declared and interest income on
subordinate debt when earned.
In connection with other emergency relief programs established in response to the COVID-19 pandemic, we also hold
warrants for the purchase of common stock we received as compensation from recipients of financial assistance provided to
support ongoing employment of aviation workers during the pandemic (refer to Note 10). The warrants are assets of the U.S.
government and we are precluded from using the cash proceeds realized from the financial instruments we received. We
present these non-entity, non-federal investment holdings at their fair value (see the discussion below on “Fair Value
Measurement”). These investments and related fair valuation changes also result in a corresponding “Due To the General
Fund” liability, as we hold these investments on behalf of the General Fund. We report the investment revenue, as well as
changes in valuation, as non-entity, exchange transactions within the “COVID-19 Non-Entity Cost (Revenue), Net” line of
the Consolidated Statements of Net Cost.
The annual valuation as of September 30 of the preferred stock, subordinate debt, and common stock warrants incorporates
various forecasts, projections and cash flow analyses to develop an estimate of the assets’ fair value. We estimate the fair
value of our preferred stock, and subordinate debt based on a discounted cash flow valuation methodology which calculates
the present value of the projected annual cash flows associated with these investments. The primary input into our
preferred stock is dividend rates; our subordinate debt primarily incorporates interest rates and percentage of deferred
interest payments (interest deferral rates). Both our preferred stock and subordinate debt inputs include redemption rates,
annual qualified lending growth rates, issuer credit scores, and market yield discount rates.
We estimate the fair value of our common stock warrants that are closely held based on a discounted cash flow valuation
methodology, which calculates the present value of the projected annual cash flows associated with these investments. The
primary input into our common stock warrants investments that are publicly held is the market value of the underlying
shares of common stock of those warrants. We evaluate the need for adjusting our market-based valuation of these warrants
for the effects, if any, of significant events occurring after the close of the market but before the end of the measurement
date.
The ESF holds most of our foreign currency investments (refer to Note 13). We present the ESF’s foreign currency
denominated assets and investment securities at fair value (see the discussion below on “Fair Value Measurement”). These
holdings are normally invested in interest-bearing securities issued or held through foreign governments or monetary
authorities. We recognize interest on investments, amortization of premiums, and accretion of discounts on an accrual basis,
and amortize or accrete premiums and discounts over the life of the related investment security as an adjustment to yield
using the effective interest method.
DEPARTMENT OF THE TREASURY 79
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Fair Value Measurement
Fair value is a market-based measurement. For certain assets and liabilities, observable market transactions or market
information may be available. For other assets and liabilities, observable market transactions and market information may
not be available. However, the objective of a fair value measurement in both cases is to estimate the price at which an
orderly transaction to sell an asset or to transfer a liability between market participants at the measurement date occurs
under current market conditions.
When a price for an identical asset or liability is not observable, a reporting entity measures fair value using another
valuation technique that maximizes relevant observable inputs and minimizes unobservable inputs. Because fair value is a
market-based measurement, it is measured using the assumptions that market participants would use when pricing the
asset or liability, including assumptions about risk.
The measurement of fair value of an asset or a liability is categorized with different levels of fair value hierarchy as follows:
Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can
access at the measurement date.
Level 2—Inputs other than quoted prices included within Level 1 inputs that are observable for the asset or liability,
either directly or indirectly.
Level 3—Unobservable inputs for the asset or liability.
The inputs or methodology we use for valuing assets and liabilities are not necessarily indicative of the risks associated with
those assets and liabilities.
J. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET
General property, plant, and equipment (PP&E) is composed of capital assets used in providing goods or services. It also
includes assets acquired through capital leases, which are initially recorded at the amount recognized as a liability for the
capital lease at its inception. PP&E is stated at full cost, including costs related to acquisition, delivery, and installation,
less accumulated depreciation. We capitalize major alterations and renovations, including leasehold and land
improvements, while we charge maintenance and repair costs to expense as incurred. We record costs for construction
projects as construction-in-progress until completed and value the costs at actual (direct) cost plus applied overhead and
other indirect costs.
Internal-use software encompasses software design, development, and testing of projects adding significant new
functionality and long-term benefits. We accumulate costs for developing internal-use software in work-in-development until
we place a project into service and we successfully complete testing and final acceptances. Once completed, we transfer the
costs to depreciable property.
We lease land and buildings from the General Services Administration (GSA) to conduct most of our operations. We have no
material leases that meet capital lease requirements for financial reporting purposes. GSA charges a standard level user
fee, which approximates commercial rental rates for similar properties.
80 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Our bureaus are diverse both in size and in operating environment. Accordingly, our capitalization policy provides minimum
capitalization thresholds, which generally range from $25,000 to $50,000 for all property categories except for internal-use
software. Minimum capitalization thresholds for internal-use software generally range from $50,000 to $250,000 (except for
the IRS, for which minimum capitalization thresholds generally range from $10 million to $50 million). We also use a
capitalization threshold for bulk purchases, which generally ranges from $50,000 to $500,000 for non-manufacturing
bureaus, and $25,000 to $50,000 for manufacturing bureaus. Bureaus determine the individual items that comprise bulk
purchases based on our guidance.
We expense depreciation on a straight-line basis over the estimated useful life of the asset except for leasehold improvements
and capital leases, which we depreciate over the term of the lease or the useful life of the improvement or asset, whichever is
shorter. Service life ranges (two to 50 years) are wide due to the diversity of our PP&E. We do not depreciate land,
construction-in-progress, and internal-use software in development. We record impairment costs related to a significant and
permanent decline in the service utility of general PP&E and construction-in-progress in the period incurred.
Heritage Assets
Heritage assets are of historical significance. Multi-use heritage assets are those heritage assets for which the predominant
use is general government operations. We capitalize all acquisition, reconstruction, and betterment costs for our multi-use
heritage asset buildings as general PP&E and depreciate these costs over their service life.
K. FEDERAL DEBT AND INTEREST PAYABLE
We issue federal debt in the form of Treasury securities. This debt relates to monies borrowed from the public and certain
other federal agencies to fund the operations of the U.S. government. We issue certain federal debt at a discount or
premium. We amortize these discounts and premiums over the term of the security using an interest method for all long-
term securities and the straight-line method for short-term securities. We accrue interest costs as an expense as incurred
and report the costs on the Consolidated Statements of Net Cost as non-entity costs.
L. REFUNDS PAYABLE
Refunds payable arise in the normal course of tax administration when we determine that taxpayers have paid more than
the actual taxes they owe. We record amounts concluded to be valid refunds owed to taxpayers as a liability entitled
“Refunds Payable” on the Consolidated Balance Sheets, with a corresponding receivable from the General Fund included in
the line entitled “Due From the General Fund.”
M. SPECIAL DRAWING RIGHTS
The SDR is an international reserve asset the IMF created to supplement its member countries’ official reserves. Under its
Articles of Agreement, the IMF may allocate SDRs to member countries in proportion to their IMF quotas. Pursuant to the
Special Drawing Rights Act of 1968, as amended, the ESF holds all SDRs allocated to or otherwise acquired by the U.S.
DEPARTMENT OF THE TREASURY 81
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Allocations and Holdings
We record the SDR holdings that are permanent resources to the U.S. as part of “Cash, Foreign Currency, and Other
Monetary Assets,” and we record the SDR allocations as a liability entitled “Allocation of Special Drawing Rights” when the
IMF allocates SDRs to the U.S. The SDR allocations are permanent resources to the U.S. as well, but we account for these
allocations as a liability because the U.S. is obligated to repay the allocation amount to the IMF under specified
circumstances. Except for the payment of interest and charges on SDR allocations to the U.S., the payment of the U.S.
commitment related to SDR allocations is conditional on the following events in which the U.S. has a substantial or
controlling voice: (1) withdrawal by the U.S. from IMF membership or termination of its position in the SDR Department of
the IMF, (2) cancellation of the SDRs by the Board of Governors (pursuant to an 85 percent majority decision of the voting
power of IMF members), (3) liquidation of the IMF, or (4) liquidation of the SDR Department of the IMF.
SDR holdings increase primarily as a result of IMF SDR allocations. We record SDR transactions as incurred, and include
acquisitions and sales of SDRs, interest received on SDR holdings, interest charges on SDRs allocations, and valuation
adjustments. The U.S. government also receives remuneration in SDRs from the IMF based on claims on the IMF as
represented by the U.S. Reserve Position in the IMF and loans receivable from the supplemental borrowing arrangement.
We credit remuneration to the ESF, which transfers to the TGA account an equivalent amount of dollars plus nominal
interest.
On a daily basis, the IMF calculates the value of the SDR using the currency exchange rate in terms of the U.S. dollar from
weighted amounts of each of five freely usable currencies, as defined by the IMF. These currencies are the U.S. dollar, the
European euro, the Japanese yen, the British pound sterling, and the Chinese renminbi. We revalue the U.S. SDR holdings
and allocations from the IMF monthly based on the SDR valuation rate calculated by the IMF, resulting in the recognition of
unrealized gains or losses on revaluation that are reported on the Consolidated Statements of Net Cost.
Certificates Issued to the Federal Reserve
The Special Drawing Rights Act of 1968, as amended, authorizes the Secretary to issue certificates, not to exceed the value of
SDRs held against the certificates, to the FRBs in return for dollar amounts equal to the face value of certificates issued. We
issue certificates to finance the acquisition of SDRs from other countries or to provide U.S. dollar resources to finance other
ESF operations. We redeem certificates issued at such times and in such amounts as the Secretary may determine. The
certificates do not bear interest. We report certificates issued to the FRBs at their face value, which approximates their
carrying value since, under the terms of the arrangements with the Federal Reserve Board, there is no set repayment date
and no interest accrued while certificates remain outstanding.
82 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
N. FEDERAL EMPLOYEE BENEFITS PAYABLE – FECA ACTUARIAL LIABILITY
The Federal Employees’ Compensation Act (FECA) provides income and medical cost protection to covered federal civilian
employees injured on the job, and employees who have incurred a work-related injury or occupational disease. The DOL
adminsters the FECA program, pays valid claims, and subsequently seeks reimbursements from us for these paid claims.
Generally, we reimburse the DOL within two to three years once funds are appropriated. The FECA liability consists of two
components. The first component is based on actual claims the DOL paid but which we have not yet reimbursed. The second
component is the estimated liability for future workers compensation as a result of past events. We report both components
in the “Other” line item within “Other Liabilities” on the Consolidated Balance Sheets. DOL generates these future workers’
compensation estimates by applying actuarial procedures developed to estimate the liability for FECA benefits. The
actuarial liability estimates for FECA benefits include the expected liability for death, disability, medical, and miscellaneous
costs for approved compensation cases.
O. ANNUAL, SICK, AND OTHER LEAVE
We report annual and compensatory leave employees earn, but have not yet used, as an accrued liability. We adjust the
accrued balance annually to reflect current pay rates. Any portion of the accrued leave for which funding is not available is
recorded as an unfunded liability as reported in the “Other” line item within “Other Liabilities” on the Consolidated Balance
Sheets. We expense sick and other leave as taken and do not record a liability for such amounts, because employees do not
vest in sick and other leave benefits.
P. PENSION COSTS, OTHER RETIREMENT BENEFITS, AND OTHER POST-EMPLOYMENT BENEFITS
Federal Pension Costs, Other Retirement Benefits, and Other Post-Employment Benefits
We recognize the full cost of our employees’ pension benefits, including recognizing imputed cost for the difference between
the estimated service cost and the sum of participants’ pension benefit withholdings and agency contributions. However, the
Office of Personnel Management (OPM) rather than the Department recognizes the assets and liabilities associated with
these benefits.
Most of our employees hired prior to January 1, 1984, participate in the Civil Service Retirement System (CSRS), and
employees hired between January 1, 1984, and December 31, 1986, are covered under the CSRS Offset System, to which we
contribute 7.0 percent and 7.5 percent of pay for regular and law enforcement employees, respectively. On January 1, 1987,
the Federal Employees’ Retirement System (FERS) went into effect pursuant to the Federal Employees’ Retirement System
Act of 1986, Public Law (P.L.) 99-335. FERS is a three-tiered retirement system consisting of a Basic Benefit Plan, Thrift
Savings Plan (TSP), and Social Security benefits. For the FERS Basic Benefit Plan, we contribute between 16.6 percent and
18.4 percent for regular employees, and between 35.8 percent and 37.6 percent for law enforcement officers. The TSP under
FERS is a 401(k)-type savings plan in which we automatically contribute one percent of base pay and match any employee
contributions up to an additional four percent of base pay. For most employees hired after December 31, 1983, we also
contribute the employer’s matching share for Social Security.
DEPARTMENT OF THE TREASURY 83
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Similar to federal retirement plans, OPM, rather than the Department, reports the assets and liability for future payments
to retired employees who participate in the Federal Employees Health Benefits Program (FEHBP) and Federal Employees
Group Life Insurance (FEGLI) Program. We report the full cost of providing other retirement benefits (ORB). We also
recognize an expense and a liability for other post-employment benefits (OPEB), which includes all types of benefits,
provided to former or inactive (but not retired) employees, their beneficiaries, and covered dependents. Additionally, one of
our bureaus, OCC, separately sponsors a postretirement life insurance benefit plan for current and future retired employees.
OCC is also a participating employer in the Pentegra Defined Benefit Plan for Financial Institutions, a multiple employer
plan that provides benefits for certain retired employees who meet eligibility requirements. In addition, the OCC
administers two 401(k) plans. Eligible OFR employees also participate in one of these two plans.
District of Columbia Federal Pension and Judicial Retirement Plans
Pursuant to Title XI of the Balanced Budget Act of 1997, as amended, we became responsible for the District of Columbia
Judicial Retirement and Survivors Annuity Fund (the Judicial Retirement Fund) and the District of Columbia Teachers,
Police Officers, and Firefighters Federal Pension Fund (the D.C. Federal Pension Fund) retirement plans (refer to Note 18).
The actuarial cost method we use to determine costs and actuarial liability for the Judicial Retirement Fund is the
Individual Entry Age Normal Cost Method, which approximates the methodology specified by the Aggregate Entry Age
Normal Actuarial Cost Method. The actuarial cost method we use to determine the cost and actuarial liability for the D.C.
Federal Pension Fund is the Projected Unit Credit Cost Method, which recognizes that participants have fully accrued all
service and does not generate a normal cost. These methodologies base actuarial liabilities on long-term economic
assumptions. The pension benefit costs the plans incur are included on the Consolidated Statements of Net Cost.
Q. COMMITMENTS AND CONTINGENCIES
Through FFB, we make loan commitments with federal agencies, or private sector borrowers with loans guaranteed by
federal agencies, to extend credit for their own use (refer to the accounting policy above entitled “Loans and Interest
Receivable, Intra-Governmental”). We establish loan commitments when FFB and other parties fully execute agreements in
which we become obligated to issue loans pursuant to the terms and conditions within the agreements. We reduce loan
commitments when we issue the loans or when the commitments expire.
On behalf of the U.S., we subscribe to shares of certain MDBs, of which some shares represent capital commitments that are
callable under certain limited circumstances to meet the obligations of the respective MDB. The callable capital
commitments become binding on the U.S. when we issue instruments of commitment subscribing to the U.S. portion of
callable capital.
Additionally, on behalf of the U.S., we have established financial commitments through our participation in the IMF through
a quota subscription and a borrowing arrangement that supplements IMF resources. U.S. financial commitments to the IMF
become binding when the U.S. consents to an increase in its participation as an IMF member country, and all other
conditions to the increase have been met. The outstanding financial commitment in the U.S. quota decreases or increases
when the IMF draws upon or repays funding it obtained pursuant to a letter of credit established by the U.S. to make
domestic currency available to the IMF as needed. The outstanding financial commitment in the supplemental borrowing
arrangement decreases or increases when the IMF borrows and repays loans under the related supplemental funding
arrangement (refer to Note 7).
84 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
In accordance with SFFAS No. 5, Accounting for Liabilities of the Federal Government, we recognize material contingent
liabilities meeting the following criteria:
a past event or exchange transaction has occurred;
a future cash outflow is probable; and
a future cash outflow is measurable.
The estimated liability we record is either a specific amount or within a range of amounts. If some amount within the range
is a better estimate than any other amount within the range, we recognize that amount. If no amount within the range is a
better estimate than any other amount, we recognize the minimum amount in the range, and we disclose the range and a
description of the nature of the contingency. We follow this policy in recording a contingent liability, if any, related to the
GSE SPSPA program (refer to Note 11), and loss contingencies that may arise from claims, assessments, litigations, fines,
penalties, and other sources (refer to Note 27).
If we meet one or more, but not all, of the above criteria for recognition, and there is a reasonable possibility of loss, we will
disclose, if material, the nature of the contingent liability, along with a range of possible loss, if estimable, and a description
of the nature of the contingency.
R. REVENUE AND FINANCING SOURCES
We finance our activities either through exchange revenue we receive from others or through non-exchange revenue and
financing sources (such as appropriations the Congress provides and penalties, fines, and certain user fees we collect). User
fees primarily include collections from the public for the IRS costs to process installment agreements, letter ruling and
determinations, and income verification. We recognize exchange revenue when we earn it, i.e., we delivered goods or
rendered services. We recognize revenue from reimbursable agreements when providing services. We record non-exchange
revenues when we receive them or when we accrue revenues due to a legal claim. We recognize appropriations used as
financing sources when we incur related expenses or purchase assets.
We also incur certain costs paid in total or in part by other federal entities, such as pension costs, the FEHBP, and any un-
reimbursed payments made from the Treasury Judgment Fund on our behalf. We recognize these subsidized costs on the
Consolidated Statements of Net Cost, and we recognize the imputed financing for these costs on the Consolidated
Statements of Changes in Net Position. As a result, there is no effect on net position. We also recognize other non-exchange
financing sources, such as donations and transfers of assets without reimbursements, for the period in which they occurred
on the Consolidated Statements of Changes in Net Position.
We recognize revenue we receive from disposition of forfeited property as non-exchange revenue on the Consolidated
Statements of Changes in Net Position. We report costs related to the Forfeiture Fund program on the Consolidated
Statements of Net Cost. The TFF is the special fund account for depositing non-tax forfeiture proceeds we receive pursuant
to laws law enforcement bureaus that participate in the TFF enforce or administer. We report forfeited property balances in
other than intra-governmental “Other Assets” on the Consolidated Balance Sheets.
DEPARTMENT OF THE TREASURY 85
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
S. CUSTODIAL REVENUES
Non-entity revenue reported on our Statements of Custodial Activity includes cash we collected, primarily from taxes. It
does not include revenue other federal agencies collect, such as user fees and other receipts, which are remitted for general
operating purposes of the U.S. government or are dedicated for certain trust funds. We present the Statements of Custodial
Activity on the “modified accrual basis.” We recognize revenues as we collect cash, and record a “non-cash accrual
adjustment” representing the net increase or decrease during the reporting period in net revenue-related assets and
liabilities, mainly taxes receivable.
T. APPROPRIATIONS AND OTHER BUDGETARY ACTIVITY
Combined Statement of Budgetary Resources Activity
We record appropriations when authorized by legislation. We record incurred obligations of appropriations when we place
orders or sign contracts for goods and services, award a grant, or take other actions that require us to make payments to the
public or another federal entity. We record outlays when we make disbursements.
Permanent and Indefinite Appropriations
We use permanent and indefinite appropriations to disburse tax refunds, refundable tax credits and related interest. We
recognize refund payment funding we use appropriations. Permanent indefinite authority for refund activity is available for
an unlimited period of time in the amount necessary to cover the refund and/or credit. We report tax refunds and credits as
a custodial activity of the Department, since they are, in substance, a custodial revenue-related activity resulting from
taxpayer overpayments of their tax liabilities.
We have two permanent and indefinite appropriations related to debt activity. We use one permanent and indefinite
appropriation to pay interest on the public debt securities, and use the other to redeem securities that are matured, called, or
eligible for early redemption. These accounts are not annual appropriations and do not have refunds. We report debt
redemption appropriations related to our liability on our Consolidated Balance Sheets. We record interest appropriations at
the beginning of the fiscal year and again at mid-year, if necessary, and we return any unused authority to the General Fund
at the end of the fiscal year. Permanent indefinite authority for debt redemptions and related interest is available for an
unlimited period of time.
We also have permanent and indefinite appropriations to fund increases in the projected subsidy costs of credit programs as
determined by the re-estimation process the FCRA requires.
Additionally, we have other permanent and indefinite appropriations to make certain payments on behalf of the U.S.
government. We receive these appropriations to make payments to the FRB for fiscal services provided, and to the financial
institutions for services provided as financial agents of the U.S. government. They also include appropriations provided to
make other disbursements on behalf of the U.S. government, including payments made to various parties as a result of
certain claims and judgments rendered against the U.S.
U. INCOME TAXES
As an agency of the U.S. government, we are exempt from all income taxes any governing body imposes, whether it is a
federal, state, commonwealth, local, or foreign government.
86 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
V. USE OF ESTIMATES
We have made certain estimates and assumptions relating to the reporting of assets, liabilities, revenues, expenses, and the
disclosure of contingent liabilities to prepare our financial statements. Actual results may differ from these estimates.
Adverse changes in the outlook for the key assumptions underlying management’s estimates may materially affect the
results of our operations, cash flows, and our financial position in future periods. Transactions subject to estimates
principally include our GSE and other non-federal investment holdings, loan and credit program receivables, credit reform
subsidy costs, tax receivables, impairment to any of our investments and receivables, loan guarantees, depreciation,
actuarial liabilities, cost and earned revenue allocations, as well as contingencies and any related recognized liabilities.
Estimation of such complex and long-duration receivables, investments, and contingencies is subject to uncertainty. It is
possible that new developments will adversely impact the value of receivables, investments, and contingencies, as well as
ultimate amounts we are required to fund. Except as expressly noted herein, we have not revalued or included in our
estimates as of September 30, 2022, the effects of any new developments that may have occurred subsequent to September
30, 2022.
We derive credit program receivables using credit reform modeling, which is subject to the use of estimates and forecasts
that have inherent uncertainty. Refer to the accounting policy above entitled “Credit Program Receivables, Net” and Notes 9
and 10 for additional discussion related to the estimation of credit program receivables.
We estimate our non-federal investment holdings based on fair value and changes in these asset valuations, including
impairment. Since the valuation is an annual process, we deem changes in valuation of our equity investments as usual and
recurring. Refer to the accounting policy above entitled “Investments” and Notes 10 and 11 for additional discussion related
to fair value estimations.”
For certain of our liabilities, we perform annual calculations, as of September 30, to assess our need for recording an
estimated liability in accordance with SFFAS No. 5 related to certain liabilities of our CARES Act programs, as well as
liabilities related to our funding commitment to the GSEs under the SPSPAs.
As stipulated by the CARES Act, we must remit excess residual proceeds we realize from our SPV capital contributions and
direct loans to air carriers and other related businesses to the Federal Old-Age and Survivors Insurance Trust Fund (refer to
Note 10). We estimate and record the net present value of this potential liability, if any, based on the probable future
occurrence of excess cash flows received above the full recovery of our costs associated with these programs. This calculation
is subject to the same sensitivities as those related to our credit reform modeling we discuss above.
Liability to the GSEs recognition is predicated on the probable future occurrence of an excess of liabilities and minimum
capital reserve amounts, as defined, over the assets of either GSE at the end of any reporting quarter. The occurrence of
future GSE deficits, which ultimately determines our liability to the GSEs, is most sensitive to future changes in the housing
price index and, to a lesser extent, future changes in guarantee fees the GSEs receive on single-family mortgages and
interest rates (refer to Note 11).
Refer to the accounting policy above entitled “Pension Costs, Other Retirement Benefits, and Other Post-Employment
Benefits” and Note 8 for additional discussion related to the estimation of actuarial liabilities and tax receivables,
respectively.
DEPARTMENT OF THE TREASURY 87
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
W. OTHER-THAN-TEMPORARY IMPAIRMENTS
We account for a decline in the market value (either due to credit, price or currency) of any investment below cost that is
deemed to be other-than-temporary as an impairment, and reduce the carrying value to fair value for financial reporting
purposes. To determine whether an impairment is other-than-temporary, we consider whether we have the ability and
intent to hold the investment until a market price recovery, and consider whether evidence indicating that the cost of the
investment is recoverable outweighs evidence to the contrary.
X. CREDIT, MARKET AND FOREIGN CURRENCY RISK
Credit risk is the potential, no matter how remote, for financial loss from a failure of a borrower or counterparty to perform
in accordance with underlying contractual obligations. We take on possible credit risk when we make direct loans or
guarantees to non-federal entities, provide credits to foreign entities, or become exposed to institutions that engage in
financial transactions with foreign countries (refer to Note 13). The following programs entail credit risk: monetary assets
held; investments, direct loans and other receivables related to our COVID-19, CDFI, SBLF, and TARP programs, as well as
committed but undisbursed direct loans and funding commitments related to our COVID-19 and GSE programs; and GSE
direct loans receivable under the HFA initiative (the New Issue Bond Program).
Our activities generally focus on the underlying problems in the credit markets. We developed these programs, or provided
credit support to the pandemic emergency relief programs of the Federal Reserve Board, to provide credit where borrowers
are not able to get access to credit with reasonable terms and conditions. Because these programs attempt to correct for a
market imperfection, it can expose us to potential costs and losses. Additional risk of costs and losses could result from
terrorist attacks under the Terrorism Risk Insurance Program. We describe the extent of the risk we assumed in more detail
in the notes to the financial statements and, where applicable, we factor it into credit reform models and reflect it in fair
value measurements (refer to Notes 9, 10, 11, and 27).
We face certain risks and uncertainties as a result of holding securities denominated in foreign currency. The price of
holdings of such securities may widely fluctuate as a result of volatility in foreign currency markets and changes in real and
perceived credit risk of our counterparties.
Y. FUNDS FROM DEDICATED COLLECTIONS
We account for revenues and other financing sources for funds from dedicated collections (FDC) separately from other funds.
Such funds are financed by specifically identified revenues provided to the U.S. government by non-federal sources, often
supplemented by federal and other financing sources, which remain available over time. Statute requires that we use these
specifically identified revenues and other financing sources for designated activities, benefits, or purposes. We apply the
following criteria for purposes of designating funds as dedicated collections: (i) a statute committing the U.S. government to
use specifically identified revenues and/or other financing sources that are originally provided to the U.S. government by a
non-federal source only for designated activities, benefits, or purposes; (ii) explicit authority for the fund to retain revenues
and/or other financing sources not used in the current period for future use to finance the designated activities, benefits, or
purposes; (iii) a requirement to account for and report on the receipt, use, and retention of the revenues and/or other
financing sources that distinguishes the fund from the U.S. government’s general revenues; and (iv) for funds comprised of
both federal and non-federal sources, such funding is predominantly non-federal, or the non-federal funding is material to
our financial statements.
88 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Z. ALLOCATION TRANSFERS
We are a party to allocation transfers with other federal agencies as both a transferring (parent) entity and/or a receiving
(child) entity. Allocation transfers are legal delegations by one department of its authority to obligate budget authority and
outlay funds to another department. A separate fund account (allocation account) is created in Treasury as a subset of the
parent fund account for tracking and reporting purposes. We credit all allocation transfers of balances to this account, and
charge subsequent obligations and outlays the child entity incurs to this allocation account as they execute the delegated
activity on behalf of the parent. Parent federal agencies report both the proprietary and budgetary activity and the child
agency does not report any financial activity related to budget authority allocated from the parent federal agency to the child
federal agency. However, OMB guidance requires Treasury to report the activity when we receive allocation transfers, as
the child, from the Executive Office of the President (see Circular No. A-136, II.3.1, Parent-Child Reporting for two
exceptions).
We allocate funds, as the parent, to the DOL and HHS. Also, we receive allocation transfers, as the child, from HHS,
Department of Justice (DOJ), the Department of Transportation, Agency for International Development, and the Executive
Office of the President.
AA. FIDUCIARY ACTIVITIES
Fiduciary activities are the collection or receipt, and the management, protection, accounting, investment, and disposition by
the U.S. government of cash or other assets in which non-federal individuals or entities have an ownership interest that the
U.S. government must uphold. Fiduciary cash and other assets are not assets of the U.S. government. We do not report
these activities in our consolidated financial statements, but instead report them in Note 26.
AB. DISCLOSURE ENTITIES AND RELATED PARTIES
SFFAS No. 47, Reporting Entity, requires that our consolidated financial statements reflect the balances and activities of
consolidation entities, including Treasury bureaus and other reporting entities, meeting the following “principles for
inclusion” when considered as a whole: (1) the entity is included in the Budget of the United States (also known as the
President’s Budget); (2) the U.S. government holds “majority ownership interest”; (3) the U.S. government has “control with
risk of loss or expectation of benefit”; or (4) it would be misleading to exclude such entity. SFFAS No. 47 also provides
guidance for assessing whether we report an organization meeting the inclusion principles as a disclosure entity or related
party.
A disclosure entity exists when we determine that an entity meets any of the following SFFAS No. 47 “inclusion principles”
with respect to the U.S. government but does not meet the characteristics of a “consolidation entity.” Based on SFFAS No.
47 criteria, the Federal Reserve System is considered to be a disclosure entity. Additionally, entities the U.S. government
owns and/or controls as a result of regulatory actions—such as organizations in receivership or conservatorship—or other
U.S. government intervention actions are generally classified as disclosure entities if the relationship with such entities is
not expected to be permanent.
A related party exists when one party to an established relationship has the ability to exercise significant influence over
another party in making policy decisions. Related parties generally do not meet the SFFAS No. 47 inclusion principles;
however, we report on a relationship that is of such significance that it would be misleading to exclude information about
that entity. Disclosure entities and related parties are not considered components of the consolidated Treasury reporting
DEPARTMENT OF THE TREASURY 89
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
entity and, thus, are only disclosed in the notes to our consolidated financial statements. Using the principles prescribed in
SFFAS No. 47, we identified the following disclosure entities and related parties as of September 30, 2022.
Disclosure Entities
Federal Reserve System
Congress, under the Federal Reserve Act of 1913 (Federal Reserve Act), created the FR System. The FR System includes the
Federal Reserve Board, Federal Reserve Banks (FRB), and the Federal Open Market Committee (FOMC). Collectively, the
FR System serves as the nation’s central bank and is responsible for formulating and conducting monetary policy, issuing
and distributing currency (Federal Reserve Notes), supervising and regulating financial institutions, providing nationwide
payments systems (including large-dollar transfers of funds, automated clearinghouse operations, and check collection),
providing certain financial services to federal agencies and fiscal principals, and serving as the U.S. government’s bank.
Monetary policy includes actions the FR System undertakes that influence the availability and cost of money and credit as a
means of helping to promote national economic goals. The FR System also conducts operations in foreign markets in order to
counter disorderly conditions in exchange markets or to meet other needs specified by the FOMC to carry out its central
bank responsibilities.
While we consult with the FR System on matters affecting the economy and certain financial stabilization activities it is
considered an independent central bank, and the executive branch of the U.S. government does not ratify its decisions. In
accordance with SFFAS No. 47 criteria, the FR Systems’ assets, liabilities, and operations are not consolidated into our
consolidated financial statements; however, we account for and disclose our financial activities with the FR System within
our consolidated financial statements.
Federal Reserve System Structure
Federal Reserve Board of Governors
The Board is an independent regulatory organization governed by seven members appointed by the President and confirmed
by the Senate. The full term of a Board member is 14 years, and the appointments are staggered so that one term expires on
January 31 of each even-numbered year. The Board has a number of supervisory and regulatory responsibilities for
institutions including, among others, state-chartered banks that are members of the FR System, bank holding companies,
and savings and loan holding companies. In addition, the Board has general supervisory responsibilities for the 12 FRBs,
and issues currency (Federal Reserve Notes) to the FRBs for distribution. No government appropriation is required to
support the operation of the Board. The Board’s budget transactions are not included in the President’s Budget, nor are they
subject to the President’s review because of its unique role in conducting monetary policy.
Federal Reserve Banks
The 12 FRBs are chartered under the Federal Reserve Act, which requires each member bank to own the capital stock of its
FRB. Each FRB has a board of directors that exercises supervision and control of each FRB, with three members appointed
by the Board, and six board members elected by their member banks. The FRBs participate in formulating and conducting
monetary policy, distributing currency and coin, and serving as the government’s fiscal agent, as well as the fiscal agent for
other fiscal principals (i.e., banks, credit unions, saving and loan institutions). Additionally, the FRBs provide short-term
loans to depository institutions and loans to participants in programs or facilities with broad-based eligibility in unusual and
crucial circumstances when approved by the Board and the Secretary of the Treasury.
90 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
We utilize the services of the FRBs to execute a variety of transactions on behalf of the Fiscal Service and the ESF. The
following are examples of our interaction with the FRBs:
The FRBs serve as our fiscal agent and depositary, executing banking and other financial transactions on our behalf
(refer to Note 5). We reimburse the FRBs for these services, the cost of which is included on the Consolidated
Statements of Net Costs.
The FRBs hold Treasury and other federal securities in the FRBs’ System Open Market Account (SOMA) for the purpose
of conducting monetary policy.
The FRBs hold gold certificates we issue in which the certificates are collateralized by gold (refer to Note 6).
The FRBs hold SDR certificates we issue which are collateralized by SDRs (refer to Notes 5 and 7).
The FRBs are required by Board policy to transfer their excess earnings to us on behalf of the U.S. government (refer to
Notes 8 and 23).
Federal Open Market Committee
The FOMC is comprised of the seven Board members and five of the 12 FRB presidents. FOMC formulates and conducts
monetary policy primarily through open market operations (the purchase and sale of certain securities in the open market),
the principal tool of national monetary policy. These operations affect the amount of reserve balances available to depository
institutions, thereby influencing overall monetary and credit conditions.
Federal Reserve System Assets and Liabilities
The FRBs hold Treasury and other securities in the SOMA for the purpose of conducting monetary policy. These assets are
generally subject to the same market conditions as other financial instruments. In the open market, the FR System
purchases and sells Treasury securities as a mechanism for controlling the money supply.
The FRBs have deposit liabilities with Treasury and depository institutions. The FRBs issue Federal Reserve Notes, the
circulating currency of the U.S., which are collateralized by the Treasury securities and other assets held by the FRBs.
FRB Residual Earnings Transferred to the Department
FRBs generate income from interest earned on securities, reimbursable services provided to federal agencies, and by
providing priced services to depository institutions as specified by the Monetary Control Act of 1980. Although the FRBs
generate earnings from carrying out open market operations, via the earnings on securities held in the SOMA account, their
execution of these operations is for the purpose of accomplishing monetary policy rather than generating earnings. Each
FRB is required by Board policy to transfer to us its residual (or excess) earnings after providing for the cost of operations,
payment of dividends, and surplus funds not to exceed an FRB’s allocated portion of an aggregate of $6.8 billion for all FRBs,
in accordance with the provisions of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year
2021 (P.L. 116-283).
FRBs’ residual earnings may vary due to, among other things, changes in the SOMA balance levels that may occur in
conducting monetary policy. Under P.L. 116-283, if an FRB’s earnings for the year are not sufficient to provide for the cost of
operations, dividend payments, or allocated portion of the $6.8 billion aggregate surplus funds limitation, an FRB will
suspend its payments to us until such earnings become sufficient. The FRB residual earnings of $106.7 billion and $100.1
billion for fiscal years ended September 30, 2022 and 2021, respectively, are reported as custodial revenues on our
Statements of Custodial Activity. They constituted 2.1 percent and 2.4 percent of our total custodial revenues collected in FY
2022 and 2021, respectively. “Taxes, Interest and Other Receivables, Net” includes a receivable for FRB’s residual earnings
DEPARTMENT OF THE TREASURY 91
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
which represents the earnings due to us as of September 30, but not collected by us until after the end of the month (refer to
Note 8).
FRB-Managed Special Purpose Vehicles – Liquidity Lending Facilities
In response to the COVID-19 pandemic, we hold equity investments in SPVs the Federal Reserve Board established through
the FRBNY and FRBB to enhance the liquidity of the U.S. financial system. Our involvement in these programs represents
non-permanent intervention activities designed to help mitigate the economic impacts of the pandemic. Accordingly, our
equity interests in these SPVs meet the SFFAS No. 47 criteria for classifying our SPV investments as disclosure entities.
These entities are not consolidated as part of our consolidated financial statements; however, the value of our investments in
these entities is presented as equity investments on our Consolidated Balance Sheets (refer to Note 10).
Government Sponsored Enterprises – Fannie Mae and Freddie Mac
During the FY 2008 financial crisis, the U.S. government placed Fannie Mae and Freddie Mac under conservatorship to help
ensure their financial stability. These entities meet the SFFAS No. 47 criteria for disclosure entities as organizations owned
or controlled by the U.S. government as the result of regulatory actions (“such as conservatorship”). Additionally, the U.S.
government’s intervention actions with regards to these GSEs are not expected to be permanent. Accordingly, these entities
are not consolidated as part of our consolidated financial statements; however, the value of our investments in these entities
is presented as equity investments on our Consolidated Balance Sheets (refer to Note 11).
Related Parties
In accordance with SFFAS No. 47 determination principles, we currently maintain related party relationships with the IMF
and the MDBs. The IMF is an international organization of 190 member countries that works to foster global monetary
cooperation, secure financial stability, sustain economic growth, and reduce poverty around the world. The U.S. government
holds the largest quota subscription of any member. The U.S. quota subscription serves as the key determinant for our 16.5
percent share of voting rights in various IMF decisions for which the U.S. government has a substantial voice. The Secretary
serves as the U.S. Governor to the IMF, and the U.S. Governor nominates and elects the U.S. Executive Director of the IMF,
who is one of 24 directors responsible for exercising voting rights over the strategic direction of the institution.
The U.S. commitment to the IMF is in the form of cash and interest-bearing instruments. Historically, the U.S. has not
experienced a loss to its commitment in the IMF (refer to accounting policies above entitled “Loans Receivable, Net – Other
Than Intra-Governmental,” “Commitments and Contingencies,” “Special Drawing Rights,” and Notes 5 and 7 for a further
description of our relationship, financial risk, and activities with the IMF).
Additionally, on behalf of the U.S., we invest in and provide funding to the MDBs to support poverty reduction and promote
sustainable economic growth in developing countries. The MDBs provide financial and technical support by means of
strengthening institutions, providing assistance that addresses the root causes of instability in fragile and conflict-affected
states, responding to global crises, and fostering economic growth and entrepreneurship. U.S. participation in the MDBs is
in the form of financial contributions used to ensure the effectiveness and impact of the MDBs’ global development agenda.
The U.S. has voting power in each of the MDBs to which we contribute, ranging from approximately six percent to 50 percent
(refer to accounting policies above entitled “Investments,” “Commitments and Contingencies,” and Notes 12 and 27 for a
further description of our relationship, financial risk, and activities with the MDBs).
92 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
2. FUND BALANCE
Fund Balance increases when we receive appropriations, reappropriations, continuing resolutions, appropriation
restorations, and allocations; and when we receive transfers and reimbursements from other federal agencies. Fund Balance
can also be increased by amounts borrowed from the Fiscal Service, FFB, other federal entities, and by amounts collected
and credited to appropriation or fund accounts.
Likewise, Fund Balance is reduced when we make disbursements to pay liabilities or to purchase assets, goods, and services;
investments in U.S. securities (securities issued by Fiscal Service or other federal agencies); when expired appropriations are
canceled; transfers and reimbursements made to other federal entities, non-federal entities, or the General Fund; and due to
sequestration or rescission of appropriations.
STATUS OF FUND BALANCE
As of September 30, 2022 and 2021, the status of the fund balance consisted of the following:
(in millions) 2022 2021
Unobligated Balance ‐ Available $ 308,612 $ 445,017
Unobligated Balance ‐ Not Available 96,607 44,143
Obligated Balance Not Yet Disbursed 181,515 175,467
Subtotal 586,734 664,627
Adjustment for ESF (188,154) (207,601)
Adjustment for Intra‐Treasury Investments (10,481) (9,906)
Adjustment for Borrowing Authority (7,180) (6,117)
Adjustment for IMF 150,041 163,962
Adjustment for Authority Unavailable for Obligations 17,371 17,188
Other Adjustments 6,259 4,303
Total Status of Fund Balance $ 554,590 $ 626,456
Portions of the Unobligated Balance Not Available, as shown on the Combined Statement of Budgetary Resources, include
amounts appropriated in prior fiscal years that are not available to fund new obligations. However, we may use such
amounts for upward and downward adjustments for existing obligations in future years. The Obligated Balance Not Yet
Disbursed represent amounts designated for payment of goods and services we ordered but have not received, or goods and
services we received but for which payment has not yet been made. The decline in Unobligated Balance - Available is
primarily due to the reduction in COVID-19 relief funding (refer to Note 10). The increase in Unobligated Balance - Not
Available is primarily due to additional funding provided by the Inflation Reduction Act (IRA). In August 2022, Congress
passed, and the President signed into law the IRA, which, among other things, addresses climate change by providing tax
incentives.
Since the following line items are either a component of Fund Balance or post to budgetary status accounts, the following
adjustments are required to reconcile the budgetary status to the non-budgetary Fund Balance as reported on the
Consolidated Balance Sheets:
Adjustments for ESF – ESF investments in Treasury securities (which are eliminated on the Consolidated Balance
Sheets), foreign investments, SDR holdings, and related balances that meet the criteria for reporting as part of
budgetary resources are reported on the Combined Statements of Budgetary Resources; however, they are not a
component of the Fund Balance as they represent invested funds.
DEPARTMENT OF THE TREASURY 93
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Adjustments for Intra-Treasury Investments – Budgetary resources include Treasury security investments; however, we
have moved the money from the Fund Balance to Investments, which we eliminate on the Consolidated Balance Sheets;
Adjustments for Borrowing Authority – Borrowing authority is in budgetary status reported on the Combined
Statements of Budgetary Resources but not in the Fund Balance because we have not received the amounts.
Adjustments for IMF – We report the funding we receive through appropriation warrants for IMF quota subscription
and borrowing arrangement as a component of Fund Balance; however, we do not report the IMF transactions as
budgetary resources and uses on the Combined Statements of Budgetary Resources (refer to Note 7); and
Adjustment for Authority Unavailable for Obligations – Resources unavailable for obligations reduced the budgetary
resources reported on the Combined Statements of Budgetary Resources; however, they do not impact the Fund Balance.
As of September 30, 2022 and 2021, we had no budgetary authority in the Fund Balance that was specifically withheld from
apportionment by the OMB. We hold balances in non-entity funds, such as certain deposit funds (e.g., seized cash), for the
public or for another federal entity, such as the General Fund. Such funds have an offsetting liability equal to the Fund
Balance. Refer to Note 7 regarding restrictions related to the letter of credit held for a portion of the U.S. quota in the IMF.
94 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
3. LOANS AND INTEREST RECEIVABLE – INTRA-GOVERNMENTAL
ENTITY INTRA-GOVERNMENTAL
Through FFB, we issue loans to federal agencies for the agencies’ own use or for the agencies to loan to private sector
borrowers whose loans are guaranteed by the federal agencies. FFB is a wholly-owned Government corporation that
operates under the general supervision of the Secretary, and has its own broad statutory authority to finance any obligations
that federal agencies issue, sell, or guarantee. For agencies that have the statutory authority to borrow in the market, but
not from Treasury through the Fiscal Service (refer to the Non-Entity Intra-Governmental section below), FFB uses its
statutory authority to make these loans directly to federal agencies.
FFB also uses its statutory authority to finance direct or indirect federally-guaranteed obligations, which, as a matter of
long-standing federal credit policy, is the least expensive and most efficient method of financing these credit-risk obligations
when compared to private sector lender financing. When a federal agency has to honor its guarantee because a private-
sector borrower defaults, the federal agency that guaranteed the loan must obtain an appropriation or use other resources to
repay FFB.
All principal and interest on FFB loans to federal agencies and private-sector borrowers are, or have a commitment to be,
backed by the full faith and credit of the U.S. government. Accordingly, we have not recognized any credit-related losses on
its loans, nor have we recorded an allowance for uncollectible intra-governmental loans.
As of September 30, 2022 and 2021, entity intra-governmental loans (issued by FFB) and interest receivable consisted of the
following:
Loans Interest 2022 Loans Interest 2021
(in millions) Receivable Receivable Total Receivable Receivable Total
Department of Agriculture $ 51,814 $ 30 $ 51,844 $ 48,742 $ 30 $ 48,772
Department of Energy 15,449 73 15,522 15,904 72 15,976
United States Postal Service(1) 10,000 39 10,039 11,000 35 11,035
Department of Housing & Urban
Development 2,716 8 2,724 2,630 8 2,638
Other Agencies 623 3 626 476 2 478
Total Entity Intra‐Governmental $ 80,602 $ 153 $ 80,755 $ 78,752 $ 147 $ 78,899
(1) The United States Postal Service (USPS) has experienced an operating deficit in the past fiscal years, including FY 2021. On April 6,
2022, the President signed the Postal Service Reform Act of 2022 (“PSRA”), enacted as Public Law 117-108. The objective of this
legislation is to return the USPS to a sound financial position. We, along with Congress and other stakeholders, will continue
monitoring the USPS progress towards this objective.
DEPARTMENT OF THE TREASURY 95
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
NON-ENTITY INTRA-GOVERNMENTAL
Through the Fiscal Service, we account for and report on the principal borrowings from and repayments to the General Fund
for various funds other federal agencies manage, as well as the related interest due to the General Fund. These federal
agencies are statutorily authorized to borrow from the General Fund, through the Fiscal Service, to make loans for a broad
range of purposes, such as education, housing, farming, and small business support. The information below reflect amounts
borrowed under the federal agency’s statutory authorization, and does not include unused available borrowing authority.
As of September 30, 2022 and 2021, non-entity intra-governmental loans (issued by the Fiscal Service) and interest
receivable that were due to the General Fund consisted of the following:
Loans Interest 2022 Loans Interest 2021
(in millions) Receivable Receivable Total Receivable Receivable Total
Department of Education $ 905,076 $ ‐ $ 905,076 $ 1,221,382 $ ‐ $ 1,221,382
Small Business Administration 362,801 ‐ 362,801 262,655 ‐ 262,655
Department of Housing and Urban 93,585 ‐ 93,585 66,289 ‐ 66,289
Development
Department of Agriculture 87,342 ‐ 87,342 84,049 ‐ 84,049
Department of Homeland Security 20,533 ‐ 20,533 20,618 ‐ 20,618
Department of Transportation 16,066 ‐ 16,066 14,753 ‐ 14,753
Export Import Bank of the U.S. 13,501 ‐ 13,501 14,531 ‐ 14,531
US International Development Finance
Corporation 8,965 ‐ 8,965 7,724 ‐ 7,724
Department of Labor 6,557 ‐ 6,557 6,353 ‐ 6,353
Department of Energy 6,442 31 6,473 6,968 28 6,996
Railroad Retirement Board 4,418 35 4,453 4,567 38 4,605
Department of Defense 1,598 ‐ 1,598 1,600 ‐ 1,600
Environmental Protection Agency 1,557 ‐ 1,557 747 ‐ 747
Executive Office of the President
Security Assistance Accounts 1,022 1,022 1,652 1,652
Other Agencies 1,591 ‐ 1,591 1,537 ‐ 1,537
Total Non‐Entity Intra‐
Governmental $ 1,531,054 $ 66 $ 1,531,120 $ 1,715,425 $ 66 $ 1,715,491
Total Intra‐Governmental Loans
and Interest Receivable (Entity
and Non‐Entity) $ 1,611,656 $ 219 $ 1,611,875 $ 1,794,177 $ 213 $ 1,794,390
96 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
ADVANCES TO TRUST FUNDS
Advances to Trust Funds consists of Advances to the Unemployment Trust Fund and Advances to the Federal
Supplementary Medical Insurance Trust Fund. The General Fund issues advances to the DOL’s Unemployment Trust Fund
to disburse to states for unemployment benefits. The Bipartisan Budget Act of 2015 (P.L. 114-74) authorized a transfer from
the General Fund to HHS’ Federal Supplementary Medical Insurance Trust Fund to temporarily replace the reduction in
Medicare Part B participants’ premiums. We transfer DOL’s and HHS’s repayment of these advances to the General Fund.
As of September 30, 2022 and 2021, Advances to Trust Funds consisted of the following:
Loans Interest 2022 Loans Interest 2021
(in millions) Receivable Receivable Total Receivable Receivable Total
Advances to the Unemployment Trust $ 39,500 $ 51 $ 39,551 $ 55,000 $ 66 $ 55,066
Advances to the Federal Supplementary
Medical Insurance Trust Fund 7,747 ‐ 7,747 36,312 ‐ 36,312
Total Advances to Trust Funds $ 47,247 $ 51 $ 47,298 $ 91,312 $ 66 $ 91,378
Advances to these two trust funds decreased by a combined total of $44.1 billion from the end of the prior fiscal year, largely
due to states and HHS repaying their outstanding borrowings from the Unemployment Trust Fund and Federal
Supplementary Medical Insurance Trust Fund, respectively, to the General Fund.
DEPARTMENT OF THE TREASURY 97
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
4. DUE FROM THE GENERAL FUND AND DUE TO THE GENERAL FUND
The General Fund consists of assets and liabilities used to finance the daily and long-term operations of the U.S government,
as a whole. It also includes accounts used in the management of the Budget of the U.S. Government.
We hold and manage General Fund assets, such as loans and interest receivable, cash, and investments in the GSEs on
behalf of the U.S. government. General Fund assets constitute resources available to meet the operating needs of the U.S.
government. We report these managed assets separately on the Consolidated Balance Sheets, with a corresponding amount
reported as Due To the General Fund that represents a liability to reflect assets we owed to the General Fund.
General Fund liabilities, primarily federal debt and interest payable and liability for restoration of federal debt principal and
interest, are obligations of the U.S. government. We report these Department-managed liabilities separately on the
Consolidated Balance Sheets, with a corresponding amount reported as Due From the General Fund that represents a
receivable, or future funds required of the General Fund to repay borrowings from the public and other federal agencies.
As of September 30, 2022 and 2021, the General Fund liabilities we owed exceeded the assets we hold on behalf of the
General Fund by $28.3 trillion and $26.2 trillion, respectively. This represents the amount the U.S. government needs,
through a combination of future tax collections or continued borrowing from the public and federal agencies to meet its
obligations.
As of September 30, 2022 and 2021, Due From the General Fund included the following non-entity liabilities:
Liabilities Requiring Funding from the General Fund (in millions) 2022 2021
Federal Debt and Interest Payable ‐ Held by the Public (Note 16) $ 24,308,695 $ 22,325,218
Federal Debt and Interest Payable ‐ Intra‐Governmental (Note 16) 6,717,361 6,225,208
Liability for Restoration of Federal Debt Principal and Interest ‐ Due to the
Public (Note 16) ‐ 157,035
Liability for Restoration of Federal Debt Principal and Interest ‐ Intra‐
Governmental (Note 16) ‐ 60,562
Refunds Payable 6,961 6,249
Adjustment for Eliminated Liabilities 31,561 35,820
Total Due From the General Fund $ 31,064,578 $ 28,810,092
The Adjustment for Eliminated Liabilities principally represents investments in U.S. government securities our reporting
entities hold that were eliminated against Federal Debt and Interest Payable Intra-governmental.
98 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
As of September 30, 2022 and 2021, Due To the General Fund included the following non-entity assets:
Assets to be Distributed to the General Fund (in millions) 2022 2021
Fund Balance $ 3,147 $ 2,958
Loans and Interest Receivable ‐ Intra‐Governmental (Note 3) 1,531,120 1,715,491
Advances to Trust Funds (Note 3) 47,298 91,378
Cash Due To the General Fund (Held by the Department) (Note 5) 617,114 198,396
Taxes and Other Non‐Entity Receivables Due To the General Fund 237,763 303,806
Credit Reform Downward Subsidy Re‐estimates 84 3,420
Loans and Interest Receivable, Net (Note 10) 11,585 13,684
Common Stock Warrant Investments (Notes 10 and 13) 493 847
Investments in Government Sponsored Enterprises (Note 11) 223,720 220,860
Adjustment for Eliminated Assets 94,977 96,679
Other 1,480 1,484
Total Due To the General Fund $ 2,768,781 $ 2,649,003
The assets to be distributed to the General Fund do not represent all of the non-entity assets we manage. Refer to Note 15 for all
of our non-entity assets held.
The Fund Balance reported above represents the non-entity funds we hold on behalf of the General Fund. We use it to
administer programs such as the Presidential Election Campaign and payments for Legal Services Corporation and thus it is
not available for our general use.
Taxes and Other Non-Entity Receivables Due To the General Fund primarily represents IRS-related federal taxes receivable
(refer to Note 8).
The Adjustment for Eliminated Assets principally represents loans and interest payable our Treasury reporting entities owe,
which were eliminated against Loans and Interest Receivable Intra-governmental the Fiscal Service holds.
DEPARTMENT OF THE TREASURY 99
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
5. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS
Cash, Foreign Currency, and Other Monetary Assets held as of September 30, 2022 and 2021 were as follows:
(in millions) 2022 2021
Entity:
Cash $ 25 $ 113
Foreign Currency and Foreign Currency Denominated Assets 12,816 15,669
Other Monetary Assets:
Special Drawing Right Holdings 153,596 163,885
U.S. Dollars Held in Cash by the IMF 319 375
Total Entity 166,756 180,042
Non‐Entity:
Operating Cash of the U.S. government 617,013 198,313
Foreign Currency 144 169
Miscellaneous Cash Held by All Treasury Reporting Entities 160 581
Total Non‐Entity 617,317 199,063
Total Cash, Foreign Currency, and Other Monetary Assets $ 784,073 $ 379,105
We hold non-entity operating and other miscellaneous cash due to the General Fund which consisted of the following as of
September 30, 2022 and 2021:
(in millions) 2022 2021
Operating Cash ‐ FRB Account $ 635,994 $ 215,160
Outstanding Checks (18,981) (16,847)
Total Operating Cash of the U.S. government 617,013 198,313
Miscellaneous Cash 110 92
Subtotal 617,123 198,405
Amounts Due to the Public (9) (9)
Total Cash Due to the General Fund (Note 4) $ 617,114 $ 198,396
ENTITY
Entity cash, foreign currency, and other monetary assets principally include foreign currency, foreign currency denominated
assets (FCDAs), and SDRs. These assets are valued as of September 30, 2022 and 2021 using current exchange rates plus
accrued interest.
Special Drawing Rights
The SDR is an international reserve asset the IMF created to supplement existing reserve assets (refer to Note 1M). The
SDR derives its value as a reserve asset from the commitments of participants to hold and accept SDRs and to honor various
obligations connected with their proper functioning as a reserve asset. The IMF has allocated new SDRs on several
occasions to members participating in the IMF’s SDR department typically in response to the global financial crisis. A
significant increase occurred in 2021 when we received an additional 79.5 billion SDRs valued at $112.8 billion in response
to the global economic stress the COVID-19 pandemic caused (the last increase was in 2009 due to the global economic
crisis). During FY 2022, we purchased an additional 3.3 billion SDRs valued at $4.5 billion from 10 IMF participants. Our
increased commitment to hold and accept SDRs helps to provide liquidity to the global economic system and supplement
member countries’ official reserves.
100 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
As of September 30, 2022 and 2021, the total amount of SDR holdings of the U.S. (including interest receivable) was the
equivalent of $153.6 billion and $163.9 billion, respectively. As of September 30, 2022 and 2021, the total value of SDR
allocations to the U.S. was the equivalent of $147.0 billion and $161.8 billion, respectively. The outstanding SDR certificates
issued to the Federal Reserve are valued at $5.2 billion which we reported as a liability on the Consolidated Balance Sheets
as of September 30, 2022 and 2021.
NON-ENTITY
We manage the non-entity cash, foreign currency, and other monetary assets which principally included Operating Cash of
the U.S. government. Also included is foreign currency maintained by various U.S. disbursing offices, miscellaneous cash
such as seized monetary instruments, undistributed cash, and offers in compromises which are maintained as a result of our
tax collecting responsibilities. The Operating Cash of the U.S. government increased by $418.7 billion at September 30, 2022
compared to the end of the prior fiscal year largely due to Treasury investment and borrowing policy decisions to manage the
balance and timing of the government’s cash position. During FY 2021, the debt ceiling constraints forced us to maintain a
significantly lower operating cash balance. When the debt ceiling was increased in December 2021, we were able to bring
the operating cash balance back to its 1-week prudent policy level.
DEPARTMENT OF THE TREASURY 101
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
6. GOLD AND SILVER RESERVES, AND GOLD CERTIFICATES ISSUED TO
THE FEDERAL RESERVE BANKS
Through the Mint, we are responsible for safeguarding most of the U.S. government’s gold and all of the silver reserves in
accordance with 31 USC 5117; a smaller portion of the gold is in the custody of the FRBs.
The gold reserves we hold are partially offset by a liability for gold certificates the Secretary issued to the FRBs at the
statutory rate, as provided in 31 USC 5117. Since 1934, we have issued Gold Certificates in non-definitive or book-entry
form to the FRBs. Our liability incurred by issuing the Gold Certificates, as reported on the Consolidated Balance Sheets, is
limited to the gold we hold at the statutory value. Upon issuance of Gold Certificates to the FRBs, we deposit the proceeds
from the certificates into the operating cash of the U.S. government. All of our certificates issued are payable to the FRBs.
The Mint also holds 100,000 fine troy ounces (FTO) ($4 million at the statutory carrying value) of gold reserves without
certificates.
The U.S. Mint and the FRBs hold the gold and silver bullion reserves. We report these reserves on the consolidated financial
statements at the values stated in 31 USC 5116 – 5117 (statutory rates) which are $42.2222 per FTO of gold and no less
than $1.292929292 per FTO of silver. Accordingly, the silver is valued at $1.292929292 per FTO. The market values of the
gold and silver reserves we disclose below are based on the London Gold Fixing. As of September 30, 2022 and 2021, the
values of gold and silver reserves consisted of the following:
2022
Statutory 2022
Carrying Market Market
Statutory Value Rate Per Value
FTOs Rate (in millions) FTO (in millions)
Gold Held by U.S. Mint 248,046,116 $ 42.2222 $ 10,473 $ 1,671.75 $ 414,671
Gold Held by Federal Reserve Banks 13,452,811 $ 42.2222 568 $ 1,671.75 22,490
Total Gold 261,498,927 11,041 437,161
Silver 16,000,000 $ 1.2929 21 $ 19.02 304
Total Gold and Silver Reserves $ 11,062 $ 437,465
2021
Statutory 2021
Carrying Market Market
Statutory Value Rate Per Value
FTOs Rate (in millions) FTO (in millions)
Gold Held by U.S. Mint 248,046,116 $ 42.2222 $ 10,473 $ 1,742.80 $ 432,295
Gold Held by Federal Reserve Banks 13,452,811 $ 42.2222 568 $ 1,742.80 23,446
Total Gold 261,498,927 11,041 455,741
Silver 16,000,000 $ 1.2929 21 $ 21.53 344
Total Gold and Silver Reserves $ 11,062 $ 456,085
102 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
7. RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND AND
RELATED LOANS AND INTEREST RECEIVABLE
The U.S. participates in the IMF through a quota subscription and a separate borrowing arrangement—the New
Arrangements to Borrow (NAB)—that supplements IMF resources.
As a result of the Consolidated Appropriations Act, 2016 (P.L. 114-113), we obtained appropriation warrants to cover the full
amount of the commitment made to the IMF and received current indefinite authority to maintain the U.S. dollar equivalent
of the SDR funding commitment levels. The IMF transactions—other than related interest earnings and cost estimates for
U.S. quota and NAB adjustments—are not reported as budgetary resources and uses on our Combined Statement of
Budgetary Resources.
RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND
We pay quota subscriptions partly through the transfer of reserve assets—such as foreign currencies or SDRs, which are
international reserve assets the IMF created—and partly by making domestic currency available as needed through a non-
interest-bearing letter of credit. This letter of credit, which we issue and the FRBNY maintains, represents our available
commitment to the IMF, which may be drawn upon by the IMF.
Transfers to the IMF under the U.S. quota do not result in net budgetary outlays as they constitute an exchange of monetary
assets in which the U.S. receives an equal offsetting claim on the IMF in the form of an increase in the U.S. reserve position
in the IMF. Similarly, when the IMF repays dollars to the U.S., no net budgetary receipt results because the U.S. reserve
position declines concurrently in an equal amount. The U.S. reserve position is an interest-bearing asset like other
international reserve assets the U.S. holds, and is available at any time to meet U.S. funding needs.
The U.S. quota is denominated in SDRs. As of September 30, 2022 and 2021, the U.S. quota in the IMF was SDR 83.0
billion. The equivalent U.S. dollar value of the U.S. quota consisted of the following:
(in millions) 2022 2021
Letter of Credit (1) $ 74,708 $ 83,965
Reserve Position (2) 31,334 32,743
Total U.S. Quota in the IMF $ 106,042 $ 116,708
(1) We include Letter of Credit amounts as part of the “Fund Balance” as reported on the Consolidated Balance Sheets. Amounts also include
approximately 0.25 percent of the U.S. quota held in cash in an IMF account at the FRBNY.
(2) We report the Reserve Position amounts as “Reserve Position in the IMF” on the Consolidated Balance Sheets.
Fluctuations in the value of the U.S. dollar with respect to the SDR result in valuation changes in dollar terms for the U.S.
quota. We periodically adjust this balance to maintain the SDR value of the U.S. quota as required by the IMF Articles of
Agreement. As of September 30, 2022 and 2021, the U.S. quota reflects a net downward adjustment in value of $10.7 billion
and a net upward adjustment in value of $0.1 billion, respectively, due to the appreciation and depreciation of the U.S. dollar
against the SDR, respectively.
IMF LOANS AND INTEREST RECEIVABLE
In addition to quota subscriptions, the IMF maintains borrowing arrangements to supplement its resources in order to
forestall or cope with an impairment of the international monetary system when IMF liquidity is low. The U.S. has the
DEPARTMENT OF THE TREASURY 103
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
authority to participate in the NAB. When the U.S. transfers funds to the IMF under the NAB, the U.S. receives in
exchange a liquid and interest-bearing claim on the IMF.
In accordance with the CARES Act, effective January 1, 2021, U.S. participation in the NAB increased by SDR 28.2 billion.
Accordingly, the U.S. participation in the NAB as of September 30, 2022 and 2021 was SDR 56.4 billion, which was
equivalent to $72.2 billion and $79.5 billion, respectively. As of September 30, 2022 and 2021, under the U.S. NAB
arrangement with the IMF, there was $0.5 billion and $0.9 billion, respectively, of U.S. loans outstanding, which we reported
as “Loans and Interest Receivable, Net” on the Consolidated Balance Sheets. There was $0.4 billion in principal repayments
during FY 2022.
8. TAXES, INTEREST, AND OTHER RECEIVABLES, NET
As of September 30, 2022 and 2021, Taxes, Interest, and Other Receivables, Net consisted of the following:
(in millions) 2022 2021
Non‐Entity
Federal Taxes Receivable, Gross $ 437,271 $ 493,275
Less Allowance on Taxes Receivable (201,200) (191,253)
Receivable on FRB Deposits of Earnings 7 267
Other Receivables 1,814 1,662
Less Allowance on Other Receivables (113) (137)
Total Non‐Entity (Note 15) 237,779 303,814
Entity
Miscellaneous Entity Receivables and Related Interest 248 815
Total Taxes, Interest, and Other Receivables, Net $ 238,027 $ 304,629
Federal taxes receivable constitutes the largest portion of these receivables, with IRS-related federal taxes receivable
representing the majority of the balance. IRS federal taxes receivable consists of delinquent tax assessments, penalties, and
interest, which were not paid or abated, and which were agreed to by either the taxpayer and IRS, or the courts. These
receivables also include non-delinquent IRC 965(h) amounts and employers’ deferred share of the Social Security portion of
FICA and both the employers’ and employee representatives’ share of the Railroad Retirement Tax (RRTA), as provided for
by the CARES Act. The decrease in the net federal taxes receivable amount is largely due to payments received for these
deferrals.
The portion of taxes receivable estimated to be collectible and the allowance for doubtful accounts are based on projections of
collectability from a statistical sample of taxes receivable (refer to the section entitled Required Supplementary Information
(unaudited) for additional discussion on IRS Federal Taxes Receivable, Net).
In addition to amounts attributed to taxes, these receivables also include accrued interest income due on funds deposited in
FRBs. We do not establish an allowance for the receivable on deposits of FRB earnings because weekly deposits are required
by the Federal Reserve Act, as amended, and there has been no history of uncollectible accounts.
104 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
9. CREDIT PROGRAM RECEIVABLES, NET
We administer a number of programs designed to stabilize the nation’s financial system and restore the flow of credit to
consumers, businesses, and homeowners. As of September 30, 2022 and 2021, Credit Program Receivables, Net (including
our Credit Program Receivables associated with our COVID-19 programs, which are discussed in Note 10) consisted of the
following:
(in millions) 2022 2021
State and Local Housing Finance Agency Program (GSE sponsored) $ 1,083 $ 1,416
Direct Loans to Air Carriers and Other Related Businesses (Note 10) 1,046 1,311
Other(1) 1,286 1,346
$ 3,415 $ 4,073
(1) Includes CDFI, SBLF, and TARP credit program receivables valued at $1.2 billion, $36 million, and $3 million, respectively, as of
September 30, 2022, and $1.3 billion, $36 million, and $4 million, respectively, as of September 30, 2021.
STATE AND LOCAL HOUSING FINANCE AGENCY PROGRAM (GSE SPONSORED)
Under the Housing and Economic Recovery Act of 2008 (HERA), (P.L. 110-289), we, together with the FHFA, Fannie Mae,
and Freddie Mac, created a program in October 2009 to provide support to HFAs. The HFA Program is comprised of the
New Issue Bond Program (NIBP) that is designed to support low mortgage rates and expand resources for low- and middle-
income borrowers to purchase or rent homes, making them more affordable over the long term. Under the terms of the
NIBP, we purchased securities of Fannie Mae and Freddie Mac backed by new mortgage revenue bonds HFAs issued. As of
September 30, 2022 and 2021, the HFA net credit program receivable of $1.1 billion and $1.4 billion, respectively, included a
positive subsidy allowance of $184 million and $249 million, respectively, which reflects our projection that the HFA program
will result in a net cost to us after accounting for repayments, interest, and fees.
We performed a financial statement re-estimate of the NIBP program’s cost as of September 30, 2022 and 2021. These re-
estimates resulted in a downward re-estimate, or a decrease in the cost of the program, of $55 million and $140 million as of
September 30, 2022 and 2021, respectively. The downward re-estimates in FY 2022 and 2021 were primarily driven by
higher than estimated principal collections, and a higher prepayment curve used in the projection of future years’ cash flows
as a result of improved economic conditions.
DEPARTMENT OF THE TREASURY 105
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
10. COVID-19 INVESTMENTS, ADVANCES, RECEIVABLES, AND OTHER
The global spread of the COVID-19, which commenced in early spring of 2020 and continued throughout FY 2021 and
FY 2022, resulted in a severe global health and economic crisis. In FY 2020 and FY 2021, Congress took steps to limit the
damage the pandemic in the U.S. caused by passing several key statutes, including the Coronavirus Aid, Relief, and
Economic Security Act, P.L. 116-136 (CARES Act), the Consolidated Appropriations Act, 2021, P.L. 116-260 (CAA), and the
American Rescue Plan Act of 2021, P.L. 117-2 (ARP). The relief funding these legislative Acts provided helped reduce the
financial burden on individuals and their families, minimized business and employment losses, and enhanced the liquidity of
the U.S. financial system.
The tables below summarize our key budgetary resources, as of September 30, 2022 and 2021, for each Treasury program
established under the three legislative Acts enacted in response to the COVID-19 pandemic:
106 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Fiscal Year Ended September 30, 2022
Beginning Remaining
Available Rescissions and Less: Available
Budgetary Other Obligations Budgetary
(in millions) Resources Adjustments (1) Incurred Resources
ARP Authority
Economic Impact Payments to Individuals $ ‐$ 10,534 $ (10,534)$ ‐
Advances for Child Tax Credits ‐ 46,649 (46,649) ‐
Other COVID‐19 Related Tax Credits ‐ 29,470 (29,470) ‐
Total Taxpayer Support Programs ‐ 86,653 (86,653) ‐
Coronavirus State and Local Fiscal Recovery Funds 107,066 ‐ (107,000) 66
Emergency Rental Assistance 13,084 ‐ (12,690) 394
Homeowners Assistance Fund 8,988 ‐ (8,959) 29
Coronavirus Capital Projects Fund 10,000 ‐ (9,873) 127
State Small Business Credit Initiative 9,994 (100) (4,370) 5,524
Local Assistance and Tribal Consistency Fund 2,000 ‐ (2,000) ‐
Total State, Local, Territorial, and Tribal Programs 151,132 (100) (144,892) 6,140
Payroll Support to Aviation Workers 329 ‐ 29 358
Total American Industry and Financial Markets Programs 329 ‐ 29 358
Total ARP Authority (2) $ 151,461 $ 86,553 $ (231,516)$ 6,498
CAA Authority
Economic Impact Payments to Individuals $ ‐ $ 2,721 $ (2,721) $ ‐
Total Taxpayer Support Programs ‐ 2,721 (2,721) ‐
Emergency Rental Assistance 6 ‐ 20 26
Total State, Local, Territorial and Tribal Programs 6 ‐ 20 26
Payroll Support to Aviation Workers 317 (200) 16 133
Coronavirus Economic Relief for Transportation Services 705 ‐ (689) 16
Total American Industry and Financial Markets Programs 1,022 (200) (673) 149
Emergency Capital Investment Program 8,976 ‐ (8,298) 678
CDFI Rapid Response and Equitable Recovery Programs 1,751 (2) (2) 1,747
Total CDFI Programs 10,727 (2) (8,300) 2,425
Total CAA Authority (2) $ 11,755 $ 2,519 $ (11,674)$ 2,600
(1) Rescissions and Other Adjustments primarily include permanent and indefinite authority obtained as of September 30, 2022, to fund certain tax
provision programs that extended beyond September 30, 2021. We will obtain permanent and indefinite appropriations in FY 2023 to fund
certain tax provision programs that extend beyond September 30, 2022.
(2) Total ARP and CAA Authority does not include amounts related to the Department’s program support and oversight of these programs.
DEPARTMENT OF THE TREASURY 107
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Fiscal Year Ended September 30, 2022
Beginning Remaining
Available Rescissions and Less: Available
Budgetary Other Obligations Budgetary
(in millions) Resources Adjustments (1) Incurred Resources
CARES Act Authority
Economic Impact Payments to Individuals $ ‐$ (147)$ 147 $ ‐
Total Taxpayer Support Programs ‐ (147) 147 ‐
Direct Loans to Air Carriers and National Security Business 1,591 (1,363) ‐ 228
Payroll Support to Aviation Workers 3,347 (3,000) 22 369
Total American Industry and Financial Markets Programs 4,938 (4,363) 22 597
Total CARES Act Authority (2) $ 4,938 $ (4,510)$ 169 $ 597
(1) Rescissions and Other Adjustments primarily includes a $3.0 billion rescission of CARES Act authority related to the Payroll Support to
Aviation Workers program, and a $1.4 billion rescission of CARES Act authority related to the Direct Loans to Air Carriers and National
Security Business pursuant to the IIJA.
(2) Total CARES Act Authority does not include amounts related to the Department’s program support and oversight of these programs.
108 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Fiscal Year Ended September 30, 2021
Remaining
Appropriation Less: Available
and Other Other Obligations Budgetary
(in millions) Authority (1) Adjustments (2) Incurred Resources
ARP Authority
Economic Impact Payments to Individuals $ 421,000 $ (16,697)$ (404,303)$ ‐
Advances for Child Tax Credits 70,000 (23,856) (46,144) ‐
Other COVID‐19 Related Tax Credits 52,286 (42,143) (10,143) ‐
Total Taxpayer Support Programs 543,286 (82,696) (460,590) ‐
Coronavirus State and Local Fiscal Recovery Funds 350,000 ‐ (242,934) 107,066
Emergency Rental Assistance 21,550 ‐ (8,466) 13,084
Homeowners Assistance Fund 9,961 ‐ (973) 8,988
Coronavirus Capital Projects Fund 10,000 ‐ ‐ 10,000
State Small Business Credit Initiative 10,000 ‐ (6) 9,994
Local Assistance and Tribal Consistency Fund 2,000 ‐ ‐ 2,000
Total State, Local, Territorial, and Tribal Programs 403,511 ‐ (252,379) 151,132
Payroll Support to Aviation Workers 15,000 ‐ (14,671) 329
Total American Industry and Financial Markets Programs 15,000 ‐ (14,671) 329
Total ARP Authority (3) $ 961,797 $ (82,696)$ (727,640)$ 151,461
CAA Authority
Economic Impact Payments to Individuals $ 166,000 $ (1,229)$ (164,771)$ ‐
Total Taxpayer Support Programs 166,000 (1,229) (164,771) ‐
Emergency Rental Assistance 25,000 ‐ (24,994) 6
Total State, Local, Territorial and Tribal Programs 25,000 ‐ (24,994) 6
Payroll Support to Aviation Workers 16,000 ‐ (15,683) 317
Coronavirus Economic Relief for Transportation Services 2,000 ‐ (1,295) 705
Total American Industry and Financial Markets Programs 18,000 ‐ (16,978) 1,022
Emergency Capital Investment Program 9,000 ‐ (24) 8,976
CDFI Rapid Response and Equitable Recovery Programs 3,000 ‐ (1,249) 1,751
Total CDFI Programs 12,000 ‐ (1,273) 10,727
Total CAA Authority (3) $ 221,000 $ (1,229)$ (208,016)$ 11,755
(1) Appropriation and Other Authority includes authority provided by the ARP and CAA which we used to finance emergency relief programs.
Also included is permanent and indefinite authority used to fund the tax provisions pursuant to these Acts.
(2) Other Adjustments primarily include the return of unused permanent and indefinite authority as of September 30, 2021. To fund certain tax
provision programs that extended beyond September 30, 2021, permanent and indefinite appropriations was obtained in FY 2022.
(3) Total ARP and CAA Authority does not include amounts related to the Department’s program support and oversight of these programs.
DEPARTMENT OF THE TREASURY 109
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Fiscal Year Ended September 30, 2021
Beginning Remaining
Available Rescissions and Less: Available
Budgetary Other Obligations Budgetary
(in millions) Resources Adjustments (1) Incurred Resources
CARES Act Authority
Economic Impact Payments to Individuals $ ‐ $ 434 $ (434) $ ‐
Total Taxpayer Support Programs ‐ 434 (434) ‐
Section 13(3) Federal Reserve Programs ‐ Liquidity Facilities 423,835 (423,835) ‐ ‐
Direct Loans to Air Carriers and National Security Business 44,301 (42,692) (18) 1,591
Payroll Support to Aviation Workers 3,794 ‐ (447) 3,347
Total American Industry and Financial Markets Programs 471,930 (466,527) (465) 4,938
Total CARES Act Authority (2) $ 471,930 $ (466,093) $ (899) $ 4,938
(1) Rescissions and Other Adjustments primarily include a total of $478.8 billion of CARES Act appropriation authority that was rescinded
pursuant to the CAA. Partially offsetting this amount was a de-obligation of $12.3 billion that was to be used to fund the subsidy portion of
obligated but undisbursed CARES Act investments and loans. Also includes permanent and indefinite authority obtained in FY 2021 to fund
certain tax provision programs that extended beyond September 30, 2020 pursuant to the CARES Act.
(2) Total CARES Act Authority does not include amounts related to the Department’s program support and oversight of these programs.
TAXPAYER SUPPORT
ECONOMIC IMPACT PAYMENTS FOR INDIVIDUALS
Pursuant to the CARES Act, CAA, and ARP, Treasury, through the IRS, used its permanent and indefinite authority to pay
recovery rebates for individuals (also referred to as the “Economic Impact Payments”). These Acts authorized the IRS to
allow for a tax credit (or rebate) to individuals against their 2020 income taxes (for the CARES Act and CAA) and against
their 2021 income taxes (for the ARP). These EIPs were reduced above certain income limitations per individual tax return.
The IRS disbursed payments under this provision to eligible recipients in every state and territory and at foreign addresses.
We reported these outlays as “Refunds and Other Payments” on the Statements of Custodial Activity (refer to Note 23).
ADVANCES FOR CHILD TAX CREDITS
The ARP allows eligible employers to claim refundable tax credits that reimburse them for the cost of providing paid sick and
family leave to their employees due to COVID-19, including leave employees take to receive or recover from COVID-19
vaccinations. The ARP tax credits were available to eligible employers that paid sick and family leave for leave from
April 1, 2021, through September 30, 2021. The ARP also increased the child tax credit from $2,000 to $3,000 for the 2021
tax year only. For the 2021 tax year only, the child tax credit was made fully refundable for taxpayers whose principal
residence for more than one-half of the tax year was in the United States.
OTHER RELATED TAX CREDITS
The Families First Coronavirus Response Act of 2020 (P.L. 116-127), created the Sick and Paid Family Leave tax credit. The
credit allows employers a payroll credit against the tax imposed on the qualified sick leave and family leave wages paid in
the calendar quarter, with limitations. The CAA extended the Sick and Paid Family Leave from December 31, 2020, to
March 31, 2021.
110 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
The CARES Act also authorized eligible employers to claim a credit against applicable employment taxes for an amount
equal to 50 percent of qualified wages of up to $10,000 employers paid to employees during the COVID-19 crisis. The
Employee Retention Credit (ERC) is available to employers whose (i) operations were fully or partially suspended, due to a
COVID-19 related shut-down order, or (ii) gross receipts declined by more than 50 percent when compared to the same
quarter in the prior year. Additionally, the CAA extended the ERC from December 31, 2020, to June 30, 2021.
The ARP also included a Consolidated Omnibus Budget Reconciliation Act (COBRA) tax credit where employers are entitled
to a 100 percent tax credit for subsidizing COBRA on behalf of eligible individuals. The COBRA subsidy period was from
April 1, 2021, to September 30, 2021.
Refunds and Other Payments
The IRS used its permanent and indefinite authority to fund the taxpayer support programs as authorized by the CARES
Act, CAA, and ARP. We report this activity within the “Refunds and Other Payments” line of the Statements of Custodial
Activity (also refer to Note 23). EIP outlays and tax credits paid in FY 2022 and 2021 were as follows:
(in millions) 2022 2021
Economic Impact Payments $ 13,108 $ 569,508
Advances for Child Tax Credits 46,649 46,144
Other COVID‐19 Related Tax Credits 29,470 10,143
Total COVID‐19 Related Refunds and Other Payments $ 89,227 $ 625,795
SUPPORT PROVIDED THROUGH STATE, LOCAL, TERRITORIAL AND TRIBAL GOVERNMENTS
The following is a description of each support program directed through state, local, territorial, and Tribal governments.
Following these descriptions is a section entitled, “COVID 19: Advances, Net,” which discusses the accounting treatment for
these programs.
CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS
The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), established in FY 2021 in accordance with the ARP,
provide a combined $350.0 billion, to remain available through December 31, 2024, to state, local, territorial, and Tribal
governments to reduce the fiscal effects stemming from COVID-19, and lay the foundation for a strong and equitable
recovery. Pursuant to the terms of the ARP, we provided eligible jurisdictions assistance to support:
households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;
eligible workers of state, territorial, or Tribal governments by providing them premium pay for performing essential
work during the COVID-19 public health emergency;
vital public services and help retain jobs and to replace lost state, local, territorial, and Tribal government revenue; and
make necessary investments in water, sewer, or broadband infrastructure.
We allocated the $350.0 billion of appropriations we received as follows: $195.3 billion for states, including the District of
Columbia; $130.2 billion for local governments, including counties, metropolitan cities, and non-entitlement units of local
government; $4.5 billion for territorial governments; and $20.0 billion for Tribal governments.
DEPARTMENT OF THE TREASURY 111
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
We will recoup funds from recipients that fail to comply with the provisions of the statute on specified use of funds, for the
amount in violation. If a recipient does not obligate funds received by December 31, 2024, they must return those funds to
Treasury, which we will deposit to the General Fund.
Of the $350.0 billion appropriated in FY 2021 for this program, we have disbursed an aggregate total of $348.9 billion
through September 30, 2022, of which $106.0 billion and $242.9 billion were disbursed during the fiscal years ended
September 30, 2022 and 2021, respectively.
EMERGENCY RENTAL ASSISTANCE (HOUSING SUPPORT)
Even as the American economy recovered from the devastating impact of the pandemic, millions of Americans faced deep
rental debt and fear evictions and the loss of basic housing security.
To meet this need, we established two Emergency Rental Assistance (ERA) programs in FY 2021, the first program created
pursuant to the CAA (ERA 1) and a second round under the ARP (ERA 2). The ERA programs make funding available
through state, local, territorial, and Tribal governments. Recipients must use up to 90 percent of the awarded funding to
provide financial assistance to eligible households for rent (and arrears), utilities and home energy costs (and arrears), other
housing costs and housing stability services. The ERA 1 funding expired on September 30, 2022, and the ERA 2 funding will
generally remain available until September 30, 2025.
We will recoup funds from those recipients that fail to comply with the provisions of the statute on specified use of funds, for
the amount in violation, and will deposit the recouped funds to the General Fund.
Appropriations Total Disbursed Total Disbursed
(in millions) Received FY 2022 FY 2021
CAA (ERA 1) $ 25,000 $ ‐ $ 24,994
ARP (ERA 2) 21,550 9,767 8,319
Total ERA Programs $ 46,550 $ 9,767 $ 33,313
HOMEOWNER ASSISTANCE FUND
The ARP provided $9.961 billion of appropriated funds to establish the Homeowner Assistance Fund (HAF) to help prevent
homeowner mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and displacement of
homeowners experiencing financial hardship after January 21, 2020. Funds from the HAF are being made available through
state, local, territorial, and Tribal governments. Recipients must use the funds for assistance with mortgage payments,
homeowner’s insurance, utility payments, and other specified purposes related to mortgages and housing. This funding will
remain available until September 30, 2025. Of the $9.961 billion appropriated in FY 2021 for this program, we have
disbursed an aggregate total of $9.6 billion through September 30, 2022, of which $8.6 billion and $1.0 billion were disbursed
during the fiscal years ended September 30, 2022 and 2021, respectively.
112 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
CORONAVIRUS CAPITAL PROJECTS FUND
The Coronavirus Capital Projects Fund, established pursuant to the ARP in FY 2021, addresses certain challenges of the
pandemic, especially in rural America and low- and moderate-income communities, helping to ensure that all communities
have access to high-quality, modern infrastructure, including internet access. The ARP provided an appropriation of
$10.0 billion for payments to states, territories, the freely associated states, and Tribal governments to carry out critical
capital projects that directly enable work, education, and health monitoring, including remote options, in response to the
public health emergency. This appropriation will remain available until the funds are fully spent. We commenced
disbursements under this program in FY 2022 for which we disbursed $31 million during the fiscal year ended
September 30, 2022.
STATE SMALL BUSINESS CREDIT INITIATIVE
We established the State Small Business Credit Initiative (SSBCI) program under the ARP to provide $10.0 billion in
appropriated funds to state, territorial, and Tribal governments for small business credit support and investment programs.
These funds will remain available until expended to provide support to small businesses responding to and recovering from
the economic effects of the COVID-19 pandemic, help businesses socially and economically disadvantaged individuals own
and control have access to credit and investments, provide technical assistance to help small businesses applying for various
support programs, and to pay reasonable costs of administering this program. This program amends the SSBCI program we
had previously established under the Small Business Jobs Act of 2010.
The ARP requires all disbursements and remaining obligations to be completed on or before September 30, 2030; any
remaining unexpended amounts as of that date will be rescinded and returned to the General Fund. We commenced
disbursements under this program in FY 2022 for which we disbursed $1.3 billion during the fiscal year ended September 30,
2022.
LOCAL ASSISTANCE AND TRIBAL CONSISTENCY FUND
The ARP provided us $2.0 billion of appropriated funds to establish the Local Assistance and Tribal Consistency Fund and
make payments to eligible revenue-sharing counties and Tribal governments for any governmental purpose other than a
lobbying activity. Of the total appropriated amount, the ARP reserved $750 million and $250 million for eligible revenue-
sharing counties and Tribal governments, respectively. The $2.0 billion of appropriated funds will remain available until
September 30, 2023, with amounts to be obligated for each of fiscal years 2022 and 2023. We commenced disbursements
under this program in FY 2022, for which we disbursed $59 million during the fiscal year ended September 30, 2022.
CORONAVIRUS RELIEF FUND
In FY 2020, Treasury established the Coronavirus Relief Fund (CRF) pursuant to the CARES Act to reduce financial
pressure placed upon state, territorial and Tribal governments, and certain eligible units of local governments as a result of
the pandemic. Congress appropriated $150.0 billion to the CRF for payments to state, local, territorial, and Tribal
governments, to cover expenditures incurred due to COVID–19 during the period beginning March 1, 2020, through
December 31, 2021 (as extended by the CAA from December 30, 2020). We disbursed an aggregate total of $149.9 billion
between fiscal years 2020 and 2021. Any remaining amounts are reserved for administrative disbursements or
disbursement pending litigation as of September 30, 2022.
DEPARTMENT OF THE TREASURY 113
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Advances and Prepayments:
During FY 2022 and FY 2021, we disbursed an aggregate total of $125.8 billion and $277.7 billion, respectively, in
appropriated and obligated funds to state, local, territorial, and Tribal governments related to the programs discussed above
to cover eligible costs that recipients incurred in response to the pandemic. Of the aggregate amounts disbursed, we initially
recorded $115.8 billion and $276.7 billion as an advance during FY 2022 and FY 2021, respectively, within the line item
“Advances and Prepayments” on the Consolidated Balance Sheets, and recorded the remaining $10.0 billion and $1.0 billion
disbursed in FY 2022 and FY 2021, respectively, as “Economic Program” costs on the Consolidated Statements of Net Cost.
We subsequently recognized $146.6 billion and $89.5 billion of this advance as an expense which were recorded as “Economic
Program” costs on the Consolidated Statements of Net Cost for the fiscal years ended September 30, 2022 and 2021,
respectively, to reflect the estimated amount of eligible costs incurred during those years by recipients.
SUPPORT TO AMERICAN INDUSTRY AND FINANCIAL MARKETS
INVESTMENTS AND DIRECT LOANS OVERVIEW
In FY 2020, the CARES Act appropriated $500.0 billion to our Exchange Stabilization Fund to fund the credit subsidy costs
associated with making loans, loan guarantees or investments through December 31, 2020 in support of eligible businesses,
states and municipalities that incurred losses as a result of COVID-19. Additionally, in FY 2020, the Federal Reserve Board
of Governors (Board) used its emergency-lending authority under Section 13(3) of the Federal Reserve Act (Section 13(3)
hereafter) and Regulation A of the Board, authorizing the Federal Reserve Bank of New York (FRBNY) and Federal Reserve
Bank of Boston (FRBB) to establish liquidity lending facilities for the purpose of making loans and purchasing debt and
commercial paper of eligible entities to support key U.S. financial markets.
During FY 2020, we disbursed an aggregate total of $104.3 billion (comprised of $102.5 billion and $1.8 billion for
investments and direct loans, respectively), which we financed with a combination of $19.3 billion of appropriations to fund
the credit subsidy portion and $85.0 billion of Fiscal Service borrowings. The enactment of the CAA on December 27, 2020,
among other things, eliminated our ability to make new loans and investments under the CARES Act effective
January 9, 2021, and prohibited the Federal Reserve from engaging in further lending or extensions of credit, after
December 31, 2020, through all but one facility the Federal Reserve established under Section 13(3) in which Treasury made
an investment pursuant to the CARES Act (and after January 8, 2021, for that one facility). Accordingly, on
December 27, 2020, the CAA rescinded $429.0 billion of the $500.0 billion appropriation provided to Treasury. In accordance
with the CAA, an additional $49.8 billion was rescinded on January 9, 2021. Further, on November 15, 2021, the
Infrastructure Investment and Jobs Act (P.L. 117-58) rescinded an additional $1.4 billion of the remaining appropriation.
The remaining appropriation as of September 30, 2022, is $228 million.
SECTION 13(3) FEDERAL RESERVE PROGRAMS
In FY 2020, pursuant to its emergency-lending authority under Section 13(3), the FRBNY and FRBB implemented certain
emergency lending facilities through Special Purpose Vehicles (SPVs) governed by Limited Liability Company (LLC)
agreements between Treasury and the applicable Federal Reserve Bank (FRB). The FRBNY and FRBB established these
SPVs to make loans and purchase debt and other commercial paper of eligible entities affected by COVID-19. The SPVs
purchased assets and offered loans collateralized by corporate bonds, commercial paper, asset-backed securities, and
municipal debt and loans to certain eligible states, municipalities, businesses and non-profit organizations affected by
COVID-19. The FRBNY and FRBB made loans to the SPVs, on a recourse basis, to fund the SPVs’ purchase of assets from,
or loans to, eligible U.S. issuers and businesses with certain assets as collateral. As the managing member of each SPV,
114 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
FRBNY or FRBB, as applicable, has the exclusive right to manage the business of the SPV and has all powers and rights
necessary to carry out the purposes and business of the SPV.
In FY 2020, we disbursed an aggregate total of $102.5 billion in equity to the SPVs (and committed to future disbursements
of an additional $92.5 billion) to protect the FRBNY and FRBB from potential losses from financing the facilities. We
provided this protection by committing and contributing capital in the form of cash to the SPVs in exchange for a preferred
equity interest in the SPVs. To the extent the FRBNY and FRBB experience losses, our preferred equity accounts absorb
such losses up to the maximum amounts per the terms of the LLC agreements. As a preferred equity member, we have no
voting, consent, or control rights over the SPVs. The managing member and preferred equity member are the sole members
of the SPVs.
Under the initial terms of the LLC agreements, membership interests would not receive periodic or other distributions
during the life of the SPV (except for the interim distribution that occurred pursuant to the amendments to the LLC
agreements, as further discussed below). Distribution of the SPV’s assets would be made only upon dissolution of the
facility, after liabilities and other interests were paid. Upon dissolution, we will be entitled to an amount equal to the cash
balance of the preferred equity account plus 90 percent of the cash balance in all the other accounts of the SPV. The
applicable FRB is entitled to 10 percent of the cash balance in all the other accounts of the SPV. We will use the final
distribution amount we receive to repay all costs associated with our preferred equity investment in the SPV, including the
initial subsidy amounts funded by appropriation and all amounts borrowed from Fiscal Service. In accordance with the
CARES Act, any excess amount of the final distribution after repayment of the appropriations and debt will be deposited into
the Federal Old-Age and Survivors Insurance Trust Fund established under Section 201(a) of the Social Security Act.
In December 2020, Treasury and the Federal Reserve amended the SPV LLC Agreements for each of the SPVs funded under
the CARES Act. The amended agreements provided for the cancellation, at that time, of Treasury’s undisbursed investment
commitments totaling an aggregate of $92.5 billion, which we de-obligated in FY 2021. The amendment also provided for
interim distributions to Treasury, received in FY 2021, totaling an aggregate of $62.2 billion. In November 2021, Treasury
and the Federal Reserve further amended the SPV LLC Agreements which provided for additional interim distributions to
Treasury, received in November 2021 and May 2022, totaling an aggregate of $8.5 billion. The interim distributions to
Treasury in both FY 2022 and FY 2021 represent the amounts by which funds that were contributed by Treasury to each
facility (and earnings thereon) exceeded the purchase price of the assets, loans, and/or loan participations, as the case may
be, within each facility at such time. We used this cash we received to repay outstanding debt to the Fiscal Service that we
used to finance the non-subsidized portion of these investment transactions. Future interim distributions will take place in
November and May of each fiscal year in accordance with the terms of the most recent amended agreements. We cannot use
our funds remaining in the SPVs funded under the CARES Act for further lending, asset purchases, or extensions of credit.
Remaining
Outstanding Outstanding
Equity FY 2022 FY 2022 Equity
Contribution Interim Final Contribution
(in millions) 9/30/21 Distribution Dissolution 9/30/22 (1)
Main Street Facilities LLC $ 16,572 $ (2,681) $ ‐ $ 13,891
Municipal Liquidity Facility LLC 6,276 (3,381) ‐ 2,895
Term Asset‐Backed Securities II LLC 3,549 (2,395) ‐ 1,154
Total 13(3) Facilities $ 26,397 $ (8,457) $ ‐ $ 17,940
(1) These amounts exclude cumulative 9/30/22 fair valuations associated with these assets. See table below for such fair valuations.
DEPARTMENT OF THE TREASURY 115
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Remaining
Outstanding Outstanding
Equity FY 2021 FY 2021 Equity
Contribution Interim Final Contribution
(in millions) 9/30/20 Distribution Dissolution (1) 9/30/21 (2)
Corporate Credit Facilities LLC (3) $ 37,500 $ (23,619) $ (13,881) $ ‐
Main Street Facilities LLC 37,500 (20,928) ‐ 16,572
Municipal Liquidity Facility LLC 17,500 (11,224) ‐ 6,276
Term Asset‐Backed Securities II LLC 10,000 (6,451) ‐ 3,549
Commercial Paper Funding Facility II LLC (3) 10,000 ‐ (10,000) ‐
Money Market Mutual Fund Liquidity Facility (3) 1,500 ‐ (1,500) ‐
Total 13(3) Facilities $ 114,000 $ (62,222) $ (25,381) $ 26,397
(1) These amounts exclude residual amounts we received in connection with the dissolution of these facilities.
(2) These amounts exclude cumulative 9/30/21 fair valuations associated with these assets. See table below for such fair valuations.
(3) The FRBNY or FRBB established these liquidity facilities in FY 2020. During FY 2021, the facilities ceased making loans and
extending credit and capital contributions (and earnings thereon) were returned to Treasury. The Commercial Paper and
Money Market facilities were dissolved in FY 2021 and the Corporate Credit Facility was dissolved in FY 2022.
The following is a description of the remaining liquidity lending facilities. Following these descriptions is a section entitled,
“Investments in Special Purpose Vehicles” which discusses the accounting treatment for these facilities.
Main Street Facilities LLC
On May 18, 2020, the FRBB established the Main Street Facilities LLC (MSF) SPV to support lending to small- and
medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic and have good
post-pandemic prospects. Through loans from the FRBB, the SPV purchased 95 percent participations in loans originated by
eligible lenders, while the lender retained five percent. Loans issued under the MSF program have a five-year maturity,
principal payments are deferred for two years, and interest payments are deferred for one year. The SPV ceased purchasing
loan participations on January 8, 2021.
Municipal Liquidity Facility LLC
On May 1, 2020, the FRBNY established the Municipal Liquidity Facility LLC (MLF) SPV to help state and local
governments manage cash flow pressures while continuing to serve households and businesses in their communities. The
FRBNY loaned to the MLF, on a recourse basis, to allow the facility to purchase short-term notes directly from eligible U.S.
states (including the District of Columbia), counties and cities. The SPV ceased purchasing eligible notes on
December 31, 2020.
Term Asset-Backed Securities Loan Facility II LLC
FRBNY established the Term Asset-Backed Securities Loan Facility II LLC (TALF) SPV on March 23, 2020, to support the
flow of credit to consumers and businesses to stabilize the U.S. financial system. The TALF facilitated the issuance of asset-
backed securities backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business
Administration, commercial mortgages, and certain other assets. No new credit extensions were made after
December 31, 2020.
116 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Investments in Special Purpose Vehicles
As of September 30, 2022 and 2021, our preferred equity investments in the SPVs were valued as follows:
Gross Cumulative
Investments Valuation 9/30/22
Investments in SPVs (in millions) As of 9/30/22 Gain (Loss) Fair Value
Main Street Facilities LLC (1) $ 13,891 $ (200) $ 13,691
Municipal Liquidity Facility LLC (1) 2,895 44 2,939
Term Asset‐Backed Securities II LLC (1) 1,154 51 1,205
Total Investments in SPVs $ 17,940 $ (105) $ 17,835
(1) In FY 2022, Treasury received interim distributions equivalent to the amount by which its initial capital contribution to the facility (and
earnings thereon) exceeded the purchase price of the assets held within these SPVs.
Gross Cumulative
Investments Valuation 9/30/21
Investments in SPVs (in millions) As of 9/30/21 Gain (Loss) Fair Value
Main Street Facilities LLC (1) $ 16,572 $ (998) $ 15,574
Municipal Liquidity Facility LLC (1) 6,276 177 6,453
Term Asset‐Backed Securities II LLC (1) 3,549 3 3,552
Total Investments in SPVs $ 26,397 $ (818) $ 25,579
(1) In FY 2021, Treasury received interim distributions equivalent to the amount by which its initial capital contribution to the facility (and
earnings thereon) exceeded the purchase price of the assets held within these SPVs.
Budgetary vs. Proprietary Accounting Treatment of SPVs. The CARES Act stipulated that our SPV investment
transactions, to the extent they involved the use of the CARES Act appropriation, be funded in accordance with the
provisions of FCRA. For budgetary accounting purposes, we accounted for the initial investment financing and subsequent
activity related to these investments pursuant to FCRA guidelines in accordance with Section 185 of OMB Circular A-11,
Preparation, Submission, and Execution of the Budget.
For proprietary accounting purposes, we accounted for all SPV investments at fair value, rather than as direct loans, as
these instruments do not meet the criteria of SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees. Accordingly,
we record changes in the fair value of these investments as realized or unrealized fair value gains or losses within the
“Economic Program” on the Consolidated Statements of Net Cost. The budgetary subsidy cost allowance is based on cash
flows discounted using a Treasury rate to determine the subsidy cost, and the proprietary fair value adjustment is based on
market interest rates to discount projected cash flows. For the fiscal years ended September 30, 2022 and 2021, we recorded
an unrealized fair value net gain of $0.7 billion and $3.8 billion related to these investments, respectively.
Fair Value Estimation Factors. In determining the fair value of our SPV investments, we use available market pricing data,
forward interest rates, expected loss rates, historical prepayment rates, and contractual instrument terms to estimate
scenario-specific, expected cash flows for the SPVs. For market pricing data, we specifically use: (i) active market prices for
the TALF program that owns publicly traded securities, (ii) Bloomberg estimated prices for the MLF program, which owns
securities that do not have active market prices but have estimated prices in Bloomberg, or (iii) market prices for baskets of
comparable publicly traded bonds for the MSF program, based on relevant bond attributes, such as instrument credit rating,
time to maturity, issuer industry, coupon rate, and call provisions. We use contractual instrument terms, active market prices,
expected loss rates, historical prepayment rates, and, where applicable, forward interest rates, to estimate scenario-specific,
expected cash flows, which are discounted using market-based discount rates.
DEPARTMENT OF THE TREASURY 117
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
In deriving the fair value of our SPV investments, we relied upon market observed prices for SPV purchased assets and
collateral, market prices for comparable assets, asset valuations performed by third parties, historical asset data, discussions
with subject matter experts within Treasury, and other information pertinent to the valuations. Because the instruments are
not publicly traded, there is no comparable trading information available. The fair valuations rely on Level 3 inputs that
reflect assumptions about the expectations that market participants would use in pricing.
Transfer of Proceeds Upon Dissolution of SPVs. For those SPVs that we funded through a combination of CARES Act
appropriation and Fiscal Service borrowings in accordance with FCRA guidelines, all proceeds that we realize from these
investments upon the dissolution of the SPVs are transferred to us to repay all borrowings and other funding costs incurred
from these investments. In accordance with the CARES Act, we must transfer any remaining excess residual proceeds to the
Federal Old-Age and Survivors Insurance Trust Fund. To the extent that the fair value of the SPV investment assets also
incorporates anticipated realization of excess residual proceeds, we record a corresponding liability due to the Federal Old-
Age and Survivors Insurance Trust Fund. We recorded a liability of $186 million and $222 million as of September 30, 2022
and 2021, respectively.
Entity vs. Non-Entity Exchange Transactions. Our SPV preferred equity investments are treated as exchange transactions
in that we received a preferred equity interest in the SPVs in exchange for our capital funding of the liquidity facilities. All
SPV investment assets funded through a combination of CARES Act appropriation and Fiscal Service borrowings, along with
any related income or loss associated with these assets, are treated as entity transactions, with the exception of that portion
of the assets and related income or loss representing the excess residual proceeds that will be remitted to the Federal Old-
Age and Survivors Insurance Trust Fund, which are treated as non-entity transactions.
DIRECT LOANS TO AIR CARRIERS AND OTHER RELATED BUSINESSES
The CARES Act authorized us to make direct loans and loan guarantees to eligible passenger and cargo air carriers and
national security businesses to provide them liquidity for losses they incurred as a result of COVID-19. We chose to make only
direct loans under this authorization. We disbursed an aggregate total of $2.7 billion between fiscal years 2020 and 2021, of
which we disbursed $858 million in FY 2021. As of September 30, 2022 and 2021, there were no remaining loan commitments
for which future borrowings could be made under the CARES Act.
The CARES Act specified that the Secretary determines the terms and conditions of the loans and stated that the duration of
the loans will be no longer than five years. It also mandated that these loans “shall be at a rate determined based on the risk
and the current average yield on outstanding marketable obligations of the United States of comparable maturity.” As
“financial protection of the Government,” the CARES Act also mandated that we obtain certain financial instruments including,
but not limited to, common stock in the eligible business for the benefit of taxpayers. The following is a discussion of our
accounting related to our direct loans.
118 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Credit Program Receivables, Net
We present the direct loans as credit program receivables on our Consolidated Balance Sheets. As of September 30, 2022,
the net credit program receivables of the passenger airlines and other related businesses programs of $358 million and
$688 million, respectively, included a negative subsidy allowance of $123 million and a positive subsidy allowance of
$91 million, respectively. The other related businesses include national security, air cargo carriers, ticket agents, and
maintenance and repair businesses. As of September 30, 2021, the net credit program receivables of the passenger airlines
and other related businesses of $594 million and $717 million, respectively, included a negative subsidy allowance of
$213 million and a positive subsidy allowance of $56 million, respectively. The negative or positive subsidies at the end of
fiscal years 2022 and 2021 reflect our projection as of those dates that these programs would result in net earnings or net
cost to us, respectively, after accounting for principal loan repayments, interest, and fees. Included in these receivables are
the projected cash flows associated with the common stock warrants, common stock shares, and senior debt instruments we
received in connection with making these direct loans.
We performed a financial statement re-estimate of these credit programs costs. The re-estimates we performed as of
September 30, 2022 resulted in a upward re-estimate, or an increase of $79 million, and a downward re-estimate, or a
decrease of $1 million, in the cost of the passenger airline programs and other related businesses programs, respectively.
The upward re-estimate primarily stemmed from a decline in the value of warrants we hold. The downward re-estimate
stemmed from lower expected losses for outstanding investments, which is partially offset by a decline in the value of equity
we hold. The re-estimates we performed as of September 30, 2021, resulted in a downward re-estimate, or a decrease of
$415 million and $268 million, in the cost of the passenger airline programs and other related businesses programs,
respectively. This re-estimate stemmed from lower expected losses for the outstanding investments and collections we
received during FY 2021, which included several large prepayments. The FY 2022 and FY 2021 re-estimates we recorded
included the expected Federal Old-Age and Survivors Insurance Trust Fund liabilities for passenger airlines and other
related businesses.
We treat our net credit program receivables, including loan principal repayments, interest, fees, and proceeds from common
stock sales, as entity exchange transactions since we will use all such future proceeds we realize from the net credit program
receivables to repay all of our borrowing and other funding costs we incur from these direct loans. In accordance with the
CARES Act, we must transfer any remaining excess residual proceeds to the Federal Old-Age and Survivors Insurance Trust
Fund. Accordingly, to the extent that our net credit program receivables also incorporate anticipated realization of excess
residual proceeds, we will record a corresponding liability due to the Federal Old-Age and Survivors Insurance Trust Fund.
Hence, our net credit program receivables, including loan principal repayments, interest, fees, and proceeds from common stock
sales are treated as entity transactions, with the exception of any excess residual amounts owed to this trust fund, which are
treated as non-entity transactions. As of September 30, 2022 and 2021, we recorded a liability of $184 million and $261 million,
respectively, due to the Federal Old-Age and Survivors Insurance Trust Fund.
DEPARTMENT OF THE TREASURY 119
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
PAYROLL SUPPORT TO AVIATION WORKERS
Disruption to economic activity the spread of COVID-19 caused in the early spring of 2020 placed significant pressure on
U.S. airlines and the aviation industry as a whole. We established three payroll support programs (PSPs), the first program
created pursuant to the CARES Act (PSP1) in FY 2020, and continued in FY 2021 through the CAA (PSP2) and ARP (PSP3),
with PSP3 only providing additional assistance to those who received assistance under PSP2. These PSP programs provided
for relief to this industry by helping to preserve aviation jobs and compensate air carrier industry workers. Specifically, the
PSPs provided financial assistance to passenger air carriers, cargo air carriers, and certain contractors to be used exclusively
for the continuation of payment of employee salaries, wages, and benefits.
We entered into Payroll Support Program Agreements (PSPA) with passenger air carriers, cargo air carriers, and aviation
industry contractors. Each agreement specified that the recipient could receive up to a maximum awardable amount equal
to the compensation the recipient paid to its employees for a certain period specified in the relevant Act. For the fiscal years
ended September 30, 2022 and 2021, we recorded $21 million and $30.7 billion, respectively, of financial assistance
disbursements under the PSPs as “Economic Program” costs on the Consolidated Statements of Net Cost.
The CARES Act further authorized the Secretary to receive warrants, options, preferred stock, debt securities, or other
financial instruments recipients of the PSP issued, which provide appropriate compensation to the federal government for
providing the financial assistance. As compensation for the financial assistance paid in FY 2021, we received $7.6 billion
and $375 million of promissory notes and warrants, respectively. We received no promissory notes and warrants during the
period ended September 30, 2022. The contractors repaid an aggregate total of $351 million and $103 million of promissory
notes during fiscal years 2022 and 2021, respectively. We report the promissory notes and warrants we received as
compensation within “Loans and Interest Receivable, Net” and “Other Investments, Net,” respectively, on the Consolidated
Balance Sheets.
The following provides further discussion of our accounting for the promissory notes and common stock warrants.
Loans and Interest Receivable, Net
We present our promissory notes totaling $11.6 billion and $13.7 billion as of September 30, 2022 and 2021, respectively, net
of an allowance for doubtful accounts estimated at $3.2 billion and $1.4 billion, respectively. Interest on the notes is payable
semi-annually on March 31 and September 30 of each year. For the fiscal years ended September 30, 2022 and 2021, we
recognized interest revenue of $166 million and $131 million, respectively.
We treat the promissory notes as exchange transactions as we received them as compensation for financial assistance paid to
air carriers to support ongoing employment of their aviation workers. The notes and related interest receivable also
represent assets of the U.S. government, or non-entity assets, as we are precluded from using any of the cash proceeds
realized from these promissory notes. Accordingly, we reported the initial revenue recognized at the inception of the loans,
and subsequent recognition of related interest revenue, within the “COVID-19 Non-Entity Cost (Revenue), Net” line item of
the Consolidated Statements of Net Cost. The recording of this receivable also resulted in a corresponding amount recorded
to the “Due To the General Fund” liability (refer to Note 4).
120 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Other Investments, Net
We account for the common stock warrants at fair value, with changes in the fair value of these investments recorded as
realized or unrealized gains or losses within the Consolidated Statements of Net Cost. As of September 30, 2022 and 2021, our
common stock warrants were valued at $493 million and $847 million, respectively, which includes a fair value loss of
$354 million and $14 million, respectively, recognized for the fiscal years ended September 30, 2022 and 2021, respectively.
Our common stock warrants are comprised of those that give us a right to purchase common shares of either publicly traded
or non-publicly traded air carriers. If we obtained the warrants from publicly traded companies, then we determined the fair
value based on quoted prices of underlying shares in an active market as well as other significant unobservable inputs that
reflect assumptions about the expectations that market participants would use in pricing. If we obtained the warrants from
non-publicly traded companies, then we determined their fair value based only on significant unobservable inputs. As such,
the measurement of our common stock warrants fair value includes Level 3 inputs.
CORONAVIRUS ECONOMIC RELIEF FOR TRANSPORTATION SERVICES
Established under the CAA, we created the Coronavirus Economic Relief for Transportation Services (CERTS) program to
support transportation service providers affected by the COVID-19 pandemic, including motorcoach, school bus, passenger
vessel, and pilot vessel companies.
Under the program, we provided up to $2.0 billion in grants to eligible companies that certified they had experienced an
annual revenue loss of 25 percent or more as a direct or indirect result of COVID-19. CERTS grant funds primarily cover
payroll costs, but may also be used to cover acquisition of services, equipment that includes personal protective equipment
and protection measures from COVID-19 for workers and customers, and continued operations and maintenance of existing
equipment and facilities (i.e., rent, leases, insurance, and interest on regular debt service).
A recipient who does not use disbursed funds for qualified purposes within one year upon receipt of such funds must return
the funds to Treasury. Of the $2.0 billion appropriated in FY 2021 for this program, we disbursed $688 million and
$1.3 billion during the fiscal years ended September 30, 2022 and 2021, respectively, which we reported as “Economic
Program” costs on the Consolidated Statements of Net Cost.
SUPPORT TO AMERICAN SMALL BUSINESSES THROUGH CDFIS
EMERGENCY CAPITAL INVESTMENT PROGRAM
Established under the CAA, the Emergency Capital Investment Program encourages low- and moderate-income community
financial institutions to augment their efforts to support small businesses and consumers in their communities. Under this
program, we are providing up to $9.0 billion in capital directly to depository institutions through purchases of preferred stock
or subordinated debt from certified CDFIs or minority depository institutions (MDIs). This funding is intended to be used to,
among other things, provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers,
especially in low-income and undeserved communities, that may be disproportionately impacted by the economic effects of
the COVID-19 pandemic. We will set aside $2.0 billion for CDFIs and MDIs with less than $500 million in assets and an
additional $2.0 billion for CDFIs and MDIs with less than $2.0 billion in assets. We commenced disbursements under this
program in FY 2022. As of September 30, 2022, we have disbursed $8.3 billion in connection with this program. This
funding will remain available for obligation until six months after the date on which the President of the U.S. terminates the
national emergency concerning the COVID-19 pandemic.
DEPARTMENT OF THE TREASURY 121
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
With the permission of the institution, we may transfer or sell the interest in the capital investment for no consideration or
for a de minimis amount to a mission-aligned nonprofit affiliate of an applicant that is an insured community development
financial institution. We will transfer all cash proceeds we receive in connection with these investments, including dividend
and payments, and proceeds from the sale of the investments, to the CDFI Fund—a Treasury component—to be used to
provide financial and technical assistance pursuant to the Community Development Banking and Financial Institutions Act
of 1994.
We account for the preferred stock and subordinated debt investments at fair value, with changes in the fair value of these
investments recorded as realized or unrealized gains or losses within the “Economic Program” on the Consolidated
Statements of Net Cost. As the incentives and other conditions of our capital investments result in more favorable terms
than available to the CDFIs and MDIs from private investors and more favorable terms compared to investment pricing
available in the conventional financial markets, their fair values are less than the amounts we paid at acquisition. As of
September 30, 2022, our preferred stock and subordinated debt investments were valued at $2.5 billion, which includes a fair
value loss of $5.8 billion recognized for the fiscal year ended September 30, 2022.
CDFI FUND’S RAPID RESPONSE AND EQUITABLE RECOVERY PROGRAMS
The CAA also provided $1.25 billion in appropriations to our CDFI Fund, which awarded CDFIs with grants to deliver
immediate assistance in communities impacted by the COVID-19 pandemic. The CDFI Fund awarded these funds through
its newly established CDFI Rapid Response Program (CDFI RRP), which was designed to quickly deploy capital to certified
CDFIs through a streamlined application and review process for those specialized organizations that provide financial
services to low-income communities and those that lack access to financing. We disbursed $108 million and $1.1 billion in
grants for the fiscal years ended September 30, 2022 and 2021, respectively, which we reported as “Economic Program” costs
on the Consolidated Statements of Net Cost. This funding was available for obligation through September 30, 2021.
In addition to the funding provided for the CDFI RRP, the CAA also appropriated our CDFI Fund with $1.75 billion to
deliver COVID-19 recovery resources to CDFIs to expand financial activity in low- or moderate-income minority communities
and to minorities that have significant unmet capital or financial services needs. The CDFI Fund will make these funds
available to support lending in minority communities through its newly established Equitable Recovery Program
commencing in FY 2023. This funding will remain available for obligation until expended.
COVID-19 PANDEMIC RELIEF – SUMMARY IMPACT ON THE STATEMENT OF NET COST
For the fiscal years ended September 30, 2022 and 2021, the primary impact of COVID-19 relief efforts reported as
“Economic Program” costs on the Consolidated Statements of Net Cost were as follows:
122 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
(in millions) 2022 2021
Entity Cost/(Revenue):
Expense Recognition of Support to States, Local, Territorial, and Tribal Governments $ 156,360 $ 90,517
Emergency Capital Investment Program ‐ Fair Value Loss 5,848 ‐
Section 13(3) SPV Investments ‐ Fair Value Gain (1) (715) (3,802)
Payroll Support to Aviation Workers ‐ Financial Assistance Payments 21 30,727
Coronavirus Economic Relief for Transportation Services Payments 686 1,295
CDFI Fund's Rapid Response and Equitable Recovery Programs Payments 110 1,085
Other 125 (690)
Total Net Entity Costs (Economic Program) (Note 21) 162,435 119,132
Non‐Entity Cost/(Revenue):
Payroll Support for Aviation Workers ‐ Promissory Note Compensation 1,591 (8,577)
Payroll Support for Aviation Workers ‐ Common Stock Warrant Compensation 354 (360)
Total Non‐Entity Cost/(Revenue) 1,945 (8,937)
Total COVID‐19 Pandemic Relief Costs, Net $ 164,380 $ 110,195
(1) For FY 2021, includes realized gains of $17 million and $49 million associated with the dispositions of the CCF and CPFF liquidity lending
facilities, respectively.
DEPARTMENT OF THE TREASURY 123
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
11. INVESTMENTS IN GOVERNMENT SPONSORED ENTERPRISES
Congress established Fannie Mae and Freddie Mac as GSEs to provide stability and increase liquidity in the secondary
mortgage market and to promote access to mortgage credit throughout the nation. A key function of the GSEs is to purchase
mortgages, package those mortgages into securities, which are subsequently sold to investors, and guarantee the timely
payment of principal and interest on these securities.
Congress passed HERA (P.L. 110-289) in July 2008 in response to the financial crisis that year and the increasingly difficult
conditions in the housing market, which challenged the soundness and profitability of the GSEs and thereby threatened to
undermine the entire housing market. This act created FHFA, with enhanced regulatory authority over the GSEs, and
provided the Secretary with certain authorities intended to ensure the financial stability of the GSEs, if necessary. In 2008,
FHFA placed the GSEs under conservatorship, and we invested in the GSEs by entering into a Senior Preferred Stock
Purchase Agreement (SPSPA) with each GSE. We took these actions to preserve the GSEs’ assets, ensure a sound and
solvent financial condition, and mitigate systemic risks that contributed to market instability. The purpose of such actions is
to maintain the solvency of the GSEs so they can continue to fulfill their vital roles in the mortgage market while the
Administration and Congress determine what structural changes should be made to the housing finance system. Draws
under the SPSPAs would result in an increased investment in the GSEs as further discussed below.
In return for committing to maintain the GSEs’ solvency by making a quarterly advance of funds to each GSE in an amount
equal to any excess of the GSEs’ total liabilities over its total assets as of the end of the previous quarter, we initially
received from each GSE: (i) 1,000,000 shares of non-voting variable liquidation preference senior preferred stock with a
liquidation preference value of $1,000 per share, and (ii) a non-transferable warrant for the purchase, at a nominal cost, of
79.9 percent of common stock on a fully-diluted basis. The warrants expire on September 7, 2028. We were entitled to
distributions on our senior preferred stock equal to 10.0 percent per annum fixed rate dividend on the total liquidation
preference (as discussed below). In the third amendment in August 2012, this dividend structure was changed to a variable
equivalent to the GSEs’ positive net worth above a capital reserve amount. The capital reserve amount was initially set at
$3.0 billion for calendar year 2013 and, upon nearing its scheduled decline to zero, was reset at $3.0 billion in calendar year
2017.
On September 27, 2019, the Department and FHFA amended the SPSPAs to increase the capital reserve amounts of Fannie
Mae and Freddie Mac to $25 billion and $20 billion, respectively. In exchange, our liquidation preference in each GSE was
scheduled to gradually increase up to the adjusted capital reserve amounts based on the quarterly earnings of each GSE.
On January 14, 2021, the Department and FHFA further amended the SPSPAs to replace the prior variable dividend with
an alternative compensation plan for the Department that permits the GSEs to continue their recapitalization efforts, as
prescribed by the GSE capital framework finalized by FHFA in 2020. Under the amended SPSPAs, each GSE is permitted to
retain capital until the GSE has achieved its regulatory minimum capital requirement, including buffers (i.e., the capital
reserve end date), at which point its cash dividend obligations will resume along with the obligation to pay a periodic
commitment fee. As compensation to Treasury for the replacement of the variable dividend, the liquidation preference of
Treasury’s senior preferred stock in each GSE will increase by the amount of retained capital until each GSE has achieved
its capital reserve end date.
124 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Additionally, the January 14 amendment, among other things, imposed restrictions on certain GSE business activities,
including purchases of loans backed by investment properties, second homes, and multifamily properties, and on purchases
of loans with multiple high-risk characteristics or for cash consideration. On September 14, 2021, Treasury and FHFA
entered into letter agreements to suspend certain business activity restrictions added to the SPSPAs by the January 14
amendment while FHFA undertakes a review of the extent to which these requirements are redundant or inconsistent with
existing FHFA standards, policies, and directives. Under the letter agreements, the suspension will terminate six months
after Treasury notifies the GSEs. As of September 30, 2022, Treasury has not provided notice to the GSEs to terminate the
suspension.
As of September 30, 2022, Treasury’s liquidation preference in Fannie Mae and Freddie Mac increased by $19.1 billion and
$11.7 billion, respectively. As of September 30, 2021, Treasury’s liquidation preference in Fannie Mae and Freddie Mac
increased by $20.9 billion and $11.0 billion, respectively. The GSEs will not pay a quarterly dividend until after the capital
reserve end date. We received no cash dividends for the fiscal year ended September 30, 2022 and 2021, as the GSEs had not
achieved their capital reserve end date as of September 30, 2022.
The SPSPAs, which have no expiration date, require us to disburse funds to either GSE if, at the end of any quarter, the
FHFA determines that the liabilities of either GSE exceed its assets. Draws from the Department under the SPSPAs are
designed to ensure that the GSEs maintain positive net worth, with a fixed maximum amount available to each GSE under
this agreement, established as of December 31, 2012 (refer to the “Contingent Liability to GSEs” section below). Draws
against the funding commitment of the SPSPAs do not result in the issuance of additional shares of senior preferred stock;
instead, they increase the liquidation preference of the initial 1,000,000 shares by the amount of the draw. The combined
cumulative liquidation preference totaled $284 billion and $254 billion as of September 30, 2022 and 2021, respectively.
There were no payments to the GSEs for the fiscal years ended September 30, 2022 and 2021.
ACCOUNTING TREATMENT
Entity Transactions― If we estimate a probable contingent liability to the GSEs, we will accrue and report this liability on
our Consolidated Balance Sheets and fund the liability through our direct appropriations. We will report the liability
accrual, if any, at its gross amount as an “entity” cost on our Consolidated Statements of Net Cost, and within the line item,
“Cumulative Results of Operations” on our Consolidated Balance Sheets, without considering the increase in senior preferred
stock liquidation preference/fair value adjustments, and future dividend receipts from the GSEs.
Non-Entity Transactions― If we make actual payments to the GSEs, they will result in increases to the U.S. government’s
liquidation preference in the GSEs’ senior preferred stock, and thus represent General Fund exchange revenue reported on
our Consolidated Statements of Net Cost as “GSEs Non-Entity Revenue, Net.” Changes in the fair valuation of the GSE
preferred stock and common stock warrants, and related dividends received, are General Fund-related costs and revenues
which we report as “GSEs Non-Entity Revenue, Net.”
INVESTMENTS IN GSES
As of September 30, 2022 and 2021, our investments in the GSEs consisted of the following:
DEPARTMENT OF THE TREASURY 125
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Gross Cumulative
Investments Valuation 9/30/22
GSEs Investments (in millions) As of 9/30/22 Gain/(Loss) Fair Value
Fannie Mae Senior Preferred Stock $ 177,746 $ (62,046) $ 115,700
Freddie Mac Senior Preferred Stock 106,572 (2,072) 104,500
Fannie Mae Warrants Common Stock 3,104 (854) 2,250
Freddie Mac Warrants Common Stock 2,264 (994) 1,270
Total GSEs Investments $ 289,686 $ (65,966) $ 223,720
Gross Cumulative
Investments Valuation 9/30/21
GSEs Investments (in millions) As of 9/30/21 Gain/(Loss) Fair Value
Fannie Mae Senior Preferred Stock $ 158,683 $ (38,183) $ 120,500
Freddie Mac Senior Preferred Stock 94,874 126 95,000
Fannie Mae Warrants Common Stock 3,104 366 3,470
Freddie Mac Warrants Common Stock 2,264 (374) 1,890
Total GSEs Investments $ 258,925 $ (38,065) $ 220,860
SENIOR PREFERRED STOCK AND WARRANTS FOR COMMON STOCK
In determining the fair value of the senior preferred stock and warrants for common stock, we relied on the GSEs’ public
filings and press releases concerning their financial statements, as well as non-public, long-term financial forecasts, monthly
summaries, quarterly credit supplements, independent research regarding preferred stock trading, independent research
regarding the GSEs’ common stock trading on the OTC Market, discussions with each of the GSEs and FHFA, and other
information pertinent to the valuations. Because the senior preferred stock is not publicly traded, there is no comparable
trading information available. The fair valuation of the senior preferred stock relies on significant Level 3 unobservable
inputs that reflect assumptions about the expectations that market participants would use in pricing.
The fair value of the senior preferred stock considers forecasted cash flows to equity holders and the traded prices of the
other equity securities, including the GSE’s common stock and junior preferred stock. The fair value of the senior preferred
stock—as measured by unobservable and observable inputs—increased as of September 30, 2022, when compared to
September 30, 2021. Freddie Mac’s senior preferred stock drove this increase primarily due to higher projected cash flows
and a decrease in the market value of Freddie Mac’s other equity securities that comprise its total equity (refer to Notes 1I
and 1V).
Factors impacting the fair value of the warrants include the nominal exercise price and the large number of potential
exercise shares, the market prices and trading volumes of the underlying common stock as of September 30, the principal
market, and the market participants. Other factors impacting the fair value include, among other things, the holding period
risk related directly to the assumption of the amount of time that it will take to sell the exercised shares without depressing
the market. The fair value of the warrants—as measured by observable inputs—decreased at the end of FY 2022, when
compared to 2021, primarily due to decreases in the Level 1 fair value measurement of the market price of the underlying
common stock of each GSE.
126 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
CONTINGENT LIABILITY TO GSES
As part of the annual process, we prepare a series of long-term financial forecasts to assess, as of September 30, the
likelihood and magnitude of future draws to be required by the GSEs under the SPSPAs within the forecast time horizon.
We used 25-year financial forecasts prepared through years 2047 and 2046 in assessing if a contingent liability was required
as of September 30, 2022 and 2021, respectively. If future payments under the SPSPAs are deemed to be probable within
the forecast horizon, and we can reasonably estimate such payment, we will accrue a contingent liability to the GSEs to
reflect the forecasted equity deficits of the GSEs. We do not discount this accrued contingent liability, nor do we take into
account any of the offsetting dividends that we could receive, as the dividends, if any, would be owed directly to the General
Fund. We will adjust such recorded accruals in subsequent years as new information develops or circumstances change.
Based on our annual assessment, we estimated there was no probable future funding draws as of September 30, 2022 and
2021, and thereby accrued no contingent liability. However, as of September 30, 2022, it is reasonably possible that a period
of sustained economic and housing market volatility could potentially cause the GSEs to generate quarterly losses of
sufficient magnitude to result in future funding draws against our funding commitment. Due to challenges quantifying
future market volatility or the timing, magnitude, and likelihood of such events, we could not estimate the total amount of
this reasonably possible future funding liability as of September 30, 2022. There were no payments to the GSEs for the fiscal
year ended September 30, 2022. At September 30, 2022 and 2021, the maximum remaining contractual commitment to the
GSEs for the remaining life of the SPSPAs was $254.1 billion.
In assessing the need for an estimated contingent liability, we rely on the GSEs’ public filings and press releases, including
their financial statements, monthly business summaries, and quarterly credit supplements, as well as non-public, long-term
financial forecasts, the FHFA House Price Index, discussions with each of the GSEs and FHFA, and other information
pertinent to the liability estimates. The forecasts prepared in assessing the need for an estimated contingent liability as of
September 30, 2022 include two potential scenarios, with varying assumptions regarding the continuation of the GSEs new
business activities, including purchasing mortgage loans and issuing new guaranteed mortgage-backed securities. The
forecasts as of September 30, 2022, also assumed the maintenance of the GSEs’ retained mortgage portfolios below the
maximum permitted under the amended SPSPAs.
ESTIMATION FACTORS
Our forecasts concerning the GSEs may differ from actual experience. Estimated senior preferred values and future draw
amounts will depend on numerous factors that are difficult to predict including, but not limited to, changes in government
policy with respect to the GSEs, the business cycle, inflation, home prices, unemployment rates, interest rates, changes in
housing preferences, home financing alternatives, availability of debt financing, market rates of guarantee fees, outcomes of
loan refinancings and modifications, new housing programs, and other applicable factors.
GSES NON-ENTITY REVENUE
For the fiscal years ended September 30, 2022 and 2021, GSEs Non-Entity Revenue, Net consisted of the following:
Summary of GSEs Non‐Entity Revenue (in millions) 2022 2021
General Fund Revenue from Increase in Liquidation Preference of GSEs
Preferred Stock $ (30,761) $ (31,828)
Fair Value Loss/(Gain) on GSEs Warrants/Preferred Stock 27,901 (80,122)
Total GSEs Non‐Entity Revenue, Net $ (2,860) $ (111,950)
DEPARTMENT OF THE TREASURY 127
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
REGULATORY ENVIRONMENT
To date, Congress has not passed legislation nor has FHFA taken action to end the GSEs’ conservatorships. The GSEs
continue to operate under the direction of FHFA as conservator.
The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78) was funded by an increase of ten basis points in the
GSEs’ guarantee fees (referred to as “the incremental fees”) which began in April 2012, and extended by the Infrastructure
Investment and Jobs Act of 2021 (P.L. 117-58) through September 30, 2032. The incremental fees are remitted to us and not
retained by the GSEs and, thus, do not affect the profitability of the GSEs. For FY 2022 and 2021, the GSEs remitted to us
the incremental fees totaling $5.8 billion and $4.9 billion, respectively, which are reported within the line item entitled
“Fines, Penalties, Interest and Other Revenue” on our Statements of Custodial Activity.
128 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
12. INVESTMENTS IN MULTILATERAL DEVELOPMENT BANKS
As of September 30, 2022 and 2021, Investments in Multilateral Development Banks consisted of the following:
(in millions) 2022 2021
International Bank for Reconstruction and Development $ 3,470 $ 3,264
Inter‐American Development Bank (1) 2,023 2,023
Asian Development Bank 991 991
European Bank for Reconstruction and Development 636 636
International Finance Corporation 569 569
African Development Bank 543 488
North American Development Bank 450 450
Multilateral Investment Guarantee Agency 45 45
Total $ 8,727 $ 8,466
Refer to Note 27 for a description of the additional commitments related to these institutions.
(1) Includes Inter-American Investment Corporation
DEPARTMENT OF THE TREASURY 129
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
13. OTHER INVESTMENTS, NET
Other Investments, Net include foreign currency holdings that we typically invest in interest-bearing securities issued or
held through foreign governments or monetary authorities (refer to Note 5). The ESF holds most of our foreign currency
investments. Of the total $3.8 billion fair value of foreign investments (excluding interest receivable) held at September 30,
2022, $0.3 billion will mature within one year, $2.4 billion will mature after one year but before five years, and $1.1 billion
will mature after five years but before ten years.
Other Investments, Net also include non-federal investment holdings acquired pursuant to the establishment of emergency
relief programs in response to the COVID-19 pandemic, including investments as of September 30, 2022, of $2.5 billion in
preferred stock and subordinated debt pursuant to the Emergency Capital Investment Program, and $0.5 billion of common
stock warrants for the Payroll Support to Aviation Workers Program (refer to Note 10).
The table below presents the fair value measurements hierarchy classification by investment type:
Fair Value Measurement of Other Investments, Net as of September 30, 2022
Investment Type (in millions) Level 1 Level 2 Level 3 Total
Foreign Investments $ 3,796 $ ‐$ ‐$ 3,796
COVID‐19 Investments (Note 10) ‐ ‐ 2,945 2,945
Other Investments 58 ‐ ‐ 58
Total Fair Value Measurements $ 3,854 $ ‐$ 2,945 $ 6,799
Fair Value Measurements of Other Investments, Net as of September 30, 2021
Investment Type (in millions) Level 1 Level 2 Level 3 Total
Foreign Investments $ 5,265 $ ‐$ ‐$ 5,265
COVID‐19 Investments (Note 10) ‐ ‐ 847 847
Other Investments 52 ‐ ‐ 52
Total Fair Value Measurements $ 5,317 $ ‐$ 847 $ 6,164
The following table provides a roll forward of our investment balances for the fiscal years ended September 30, 2022 and
2021:
(in millions) 2022 2021
Beginning Balance $ 6,164 $ 6,309
Acquisition of Investments(1) 21,343 9,315
Sale/Repayment of Investments (12,208) (9,199)
Valuation Adjustments(2) (7,436) (253)
(Loss)/Gain on Sales/Dispositions (943) ‐
Change in Accrued Dividend/Interest Income and Other (121) (8)
Ending Balance $ 6,799 $ 6,164
(1) The significant increase in acquisition of investments includes $8.3 billion of investments related to the
Emergency Capital Investment Program. The remaining increase in acquisition of investments and the
increase in sale/repayment of investments are primarily related to foreign investments activity.
(2) Valuation adjustments of $5.8 billion in the fiscal year ended September 30, 2022 represent fair value
losses on investments purchased under the Emergency Capital Investment Program. No investment
purchases under this program occurred in the fiscal year ended September 30, 2021 (refer to Note 10).
130 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
14. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET
As of September 30, 2022 and 2021, General Property, Plant, and Equipment, Net consisted of the following:
2022
Net
Service Accumulated Book
(in millions) Life Cost Depreciation Value
Buildings, Structures and Facilities 3 ‐ 50 years $ 1,040 $ (597) $ 443
Furniture, Fixtures and Equipment 2 ‐ 20 years 2,671 (1,972) 699
Construction‐in‐Progress N/A 377 ‐ 377
Land N/A 12 ‐ 12
Internal‐Use Software in Use 2 ‐ 15 years 3,968 (3,223) 745
Internal‐Use Software in Development N/A 612 ‐ 612
Assets Under Capital Lease 2 ‐ 25 years 32 (24) 8
Leasehold Improvements 2 ‐ 25 years 446 (270) 176
Total $ 9,158 $ (6,086) $ 3,072
2021
Net
Service Accumulated Book
(in millions) Life Cost Depreciation Value
Buildings, Structures and Facilities 3 ‐ 50 years $ 885 $ (567) $ 318
Furniture, Fixtures and Equipment 2 ‐ 20 years 2,728 (1,964) 764
Construction‐in‐Progress N/A 404 ‐ 404
Land N/A 12 ‐ 12
Internal‐Use Software in Use 2 ‐ 15 years 3,924 (3,036) 888
Internal‐Use Software in Development N/A 470 ‐ 470
Assets Under Capital Lease 2 ‐ 25 years 32 (20) 12
Leasehold Improvements 2 ‐ 25 years 399 (271) 128
Total $ 8,854 $ (5,858) $ 2,996
The service life ranges vary significantly due to the diverse nature of PP&E we hold.
DEPARTMENT OF THE TREASURY 131
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
The following table provides a reconciliation of total PP&E and accumulated depreciation for the fiscal years ended
September 30, 2022 and 2021:
2022 2021
Accumulated Net Accumulated Net
(in millions) PP&E Depreciation PP&E PP&E Depreciation PP&E
Balance Beginning of Year $ 8,854 $ (5,858) $ 2,996 $ 8,747 $ (5,789) $ 2,958
Capitalized Acquisitions 597 ‐ 597 575 (4) 571
Dispositions (293) 286 (7) (468) 443 (25)
Depreciation Expense ‐ (514) (514) ‐ (508) (508)
Balance at End of Year $ 9,158 $ (6,086) $ 3,072 $ 8,854 $ (5,858) $ 2,996
HERITAGE ASSETS
We have 15 heritage assets, of which five are considered multi-use, for FY 2022 and 2021. The Treasury Complex (Main
Treasury Building and Annex), declared a national historical landmark in 1972, is treated as a multi-use heritage asset,
along with the collection of artifacts within, and is expected to be preserved indefinitely. The buildings that house the Mint
in Denver, San Francisco, Fort Knox, and West Point are also multi-use heritage assets and included on the National
Register of Historic Places. Additionally, the Mint maintains heritage assets consisting of four coin collections and six
collections of historical artifacts. They include various coins produced over the years, furniture and equipment used in
Mint’s facilities, and examples of the coin manufacturing process. These items are collection-type assets that are maintained
for exhibition and are preserved indefinitely because of their historical, cultural, educational, or artistic importance.
132 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
15. NON-ENTITY VS. ENTITY ASSETS
Non-entity assets are those that we hold and manage on behalf of the General Fund but are not available for our use. The
table below shows our total assets, segregated between non-entity and entity, as of September 30, 2022 and 2021:
2022
(in millions) Non‐Entity Entity Total
Intra‐Governmental
Fund Balance (Note 2)(a) $ 5,888 $ 548,702 $ 554,590
Loans Receivable: (Note 3)
Loans and Interest Receivable 1,531,120 80,755 1,611,875
Advances to Trust Funds 47,298 ‐ 47,298
Other Assets:
Due From the General Fund (Note 4) 31,064,578 ‐ 31,064,578
Other (b) 1,311 59 1,370
Total Intra‐Governmental 32,650,195 629,516 33,279,711
Other Than Intra‐Governmental
Cash and Other Monetary Assets:
Cash, Foreign Currency, and Other Monetary Assets (Note 5) 617,317 166,756 784,073
Gold and Silver Reserves (Note 6) 11,062 ‐ 11,062
Reserve Position in the International Monetary Fund (Note 7) ‐ 31,334 31,334
Accounts Receivable, Net:
Taxes, Interest, and Other Receivables, Net (Note 8) 237,779 248 238,027
Loans Receivable, Net:
Loans and Interest Receivable, Net (Notes 7 and 10) 11,585 487 12,072
Credit Program Receivables, Net (Notes 9 and 10) ‐ 3,415 3,415
Advances and Prepayments (Note 10) ‐ 225,180 225,180
Investments in GSEs (Note 11) 223,720 ‐ 223,720
Investments in Special Purpose Vehicles (Note 10) ‐ 17,835 17,835
Other Investments:
Investments in Multilateral Development Banks (Note 12) ‐ 8,727 8,727
Other, Net (Notes 10 and 13) 493 6,306 6,799
General Property, Plant, and Equipment, Net (Note 14) ‐ 3,072 3,072
Other Assets (c) ‐ 1,867 1,867
Total Other Than Intra‐Governmental 1,101,956 465,227 1,567,183
Total Assets $ 33,752,151 $ 1,094,743 $ 34,846,894
(a) $3.1 billion of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).
(b) Consists of accounts receivable, net and advances and prepayments totaling $1.3 billion and $37 million, respectively.
(c) Consists of inventory and related property.
DEPARTMENT OF THE TREASURY 133
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
2021
(in millions) Non‐Entity Entity Total
Intra‐Governmental
Fund Balance (Note 2)(d) $ 4,203 $ 622,253 $ 626,456
Loans Receivable: (Note 3)
Loans and Interest Receivable 1,715,491 78,899 1,794,390
Advances to Trust Funds 91,378 ‐ 91,378
Other Assets:
Due From the General Fund (Note 4) 28,810,092 ‐ 28,810,092
Other (e) 1,290 38 1,328
Total Intra‐Governmental 30,622,454 701,190 31,323,644
Other Than Intra‐Governmental
Cash and Other Monetary Assets:
Cash, Foreign Currency, and Other Monetary Assets (Note 5) 199,063 180,042 379,105
Gold and Silver Reserves (Note 6) 11,062 ‐ 11,062
Reserve Position in the International Monetary Fund (Note 7) ‐ 32,743 32,743
Accounts Receivable, Net:
Taxes, Interest, and Other Receivables, Net (Note 8) 303,814 815 304,629
Loans Receivable, Net:
Loans and Interest Receivable, Net (Notes 7 and 10) 13,684 937 14,621
Credit Program Receivables, Net (Notes 9 and 10) ‐ 4,073 4,073
Advances and Prepayments (Note 10) ‐ 256,072 256,072
Investments in GSEs (Note 11) 220,860 ‐ 220,860
Investments in Special Purpose Vehicles (Note 10) ‐ 25,579 25,579
Other Investments:
Investments in Multilateral Development Banks (Note 12) ‐ 8,466 8,466
Other, Net (Notes 10 and 13) 847 5,317 6,164
General Property, Plant, and Equipment, Net (Note 14) ‐ 2,996 2,996
Other Assets (f) ‐ 1,058 1,058
Total Other Than Intra‐Governmental 749,330 518,098 1,267,428
Total Assets $ 31,371,784 $ 1,219,288 $ 32,591,072
(d) $3.0 billion of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).
(e) Consists of accounts receivable, net and advances and prepayments totaling $1.3 billion and $16 million, respectively.
(f) Consists of inventory and related property.
134 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
16. FEDERAL DEBT AND INTEREST PAYABLE AND RELATED LIABILITIES
Treasury is responsible for administering the federal debt on behalf of the U.S. government. The federal debt includes
borrowings from the public as well as borrowings from federal agencies. The federal debt does not include debt other
governmental agencies issue, including agencies such as the Tennessee Valley Authority or Department of Housing and
Urban Development.
Debt held by the public primarily represents the amount the U.S. government has borrowed to finance cumulative cash
deficits. In contrast, debt held by other federal agencies, primarily trust funds, represents balances of Treasury securities
held by individual federal agencies with either the authority or the requirement to invest excess receipts in Treasury
securities, with the principal and interest guaranteed by the full faith and credit of the U.S. government.
Federal Debt and Interest Payable as of September 30, 2022 and 2021 is as follows:
Held by Other Federal Agencies (Intra‐Governmental) (in millions) 2022 2021
Beginning Balance $ 6,104,279 $ 5,897,192
New Borrowings/(Repayments) ‐ Net 489,048 207,087
Subtotal at Par Value 6,593,327 6,104,279
Premium/(Discount) 88,757 86,081
Debt Principal Not Covered by Budgetary Resources (Note 19) 6,682,084 6,190,360
Interest Payable Covered by Budgetary Resources 35,277 34,848
Total $ 6,717,361 $ 6,225,208
Held by the Public (in millions) 2022 2021
Beginning Balance $ 22,282,900 $ 21,018,952
New Borrowings ‐ Net of Repayments 2,016,293 1,263,948
Subtotal at Par Value 24,299,193 22,282,900
Premium/(Discount) (71,681) (26,840)
Debt Principal Not Covered by Budgetary Resources (Note 19) 24,227,512 22,256,060
Interest Payable Covered by Budgetary Resources 81,183 69,158
Total $ 24,308,695 $ 22,325,218
FEDERAL DEBT HELD BY OTHER FEDERAL AGENCIES
Certain federal agencies are allowed to invest excess funds in debt securities we issue on behalf of the U.S. government. The
terms and the conditions of debt securities we issue allow the U.S. government to meet its cash needs. The vast majority of
debt securities are non-marketable securities issued at par value, but others are issued at market prices and interest rates
that reflect market terms. The average intra-governmental interest rate for debt held by the federal entities, excluding
Treasury Inflation-Protected Securities (TIPS) and Floating Rate Notes (FRNs), for FY 2022 and 2021 was 2.3 percent and
2.1 percent, respectively. The average intra-governmental interest rate on TIPS for FY 2022 and 2021 was 1.0 percent and
1.1 percent, respectively. The average interest rate on FRNs for FY 2022 and 2021 was 3.0 percent and 0.1 percent,
respectively. The average interest rate represents the original issue weighted effective yield on securities outstanding at the
end of the fiscal year.
The federal debt also includes intra-governmental marketable debt securities that certain agencies are permitted to buy and
sell on the open market. The debt federal agencies held at par value (not including premium/discount or interest payable) as
of September 30, 2022 and 2021 is as follows:
DEPARTMENT OF THE TREASURY 135
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
(in millions) 2022 2021
Social Security Administration $ 2,838,279 $ 2,853,817
Office of Personnel Management 1,120,736 1,036,772
Department of Defense Agencies 1,528,954 1,334,074
Department of Health and Human Services 349,663 310,928
All Other Federal Entities — Consolidated 755,695 568,688
Total Federal Debt Held by Other Federal Agencies $ 6,593,327 $ 6,104,279
These amounts do not include intra-departmental debt and related interest that are eliminated from our financial statements.
FEDERAL DEBT HELD BY THE PUBLIC
Federal Debt Held by the Public at par value (not including premium/discount or interest payable) as of September 30, 2022
and 2021 consisted of the following:
Average
Interest
(at par value in millions) Term Rates 2022
Marketable:
Treasury Bills 1 Year or Less 2.5% $ 3,643,675
Treasury Notes Over 1 Year ‐ 10 Years 1.6% 13,696,488
Treasury Bonds Over 10 Years 3.0% 3,867,672
Treasury Inflation‐Protected Securities (TIPS) 5 Years or More 0.5% 1,839,843
Treasury Floating Rate Notes (FRN) 2 Years 3.3% 625,897
Total Marketable 23,673,575
Non‐Marketable On Demand to Over 40 Years 2.7% 625,618
Total Federal Debt Held by the Public $ 24,299,193
Average
Interest
(at par value in millions) Term Rates 2021
Marketable:
Treasury Bills 1 Year or Less 0.1% $ 3,712,952
Treasury Notes Over 1 Year ‐ 10 Years 1.4% 12,570,463
Treasury Bonds Over 10 Years 3.1% 3,340,760
Treasury Inflation‐Protected Securities (TIPS) 5 Years or More 0.5% 1,651,998
Treasury Floating Rate Notes (FRN) 2 Years 0.4% 579,292
Total Marketable 21,855,465
Non‐Marketable On Demand to Over 40 Years 1.3% 427,435
Total Federal Debt Held by the Public $ 22,282,900
We generally issue Treasury bills, notes, bonds, and TIPS to meet the borrowing needs of the U.S. government. We issue
marketable bills at a discount or at par, and pay the par amount of the security upon maturity. The average interest rate on
Treasury bills represents the original issue effective yield on securities outstanding at year end. We issue marketable notes
and bonds as long-term securities that pay semi-annual interest based on the securities’ stated interest rates. We issue
these securities at either par value or at an amount that reflects a discount or premium. The average interest rate on
marketable notes and bonds represents the stated interest rate adjusted by any discount or premium on securities
outstanding at year-end.
136 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
We also issue TIPS that have interest and redemption payments tied to the Consumer Price Index (CPI) for all Urban
Consumers, a widely used measurement of inflation. We adjust the principal for TIPS daily over the life of the security
based on the CPI for all Urban Consumers. At maturity, TIPS are redeemed at the inflation-adjusted principal amount, or
the original par value, whichever is greater. TIPS pay a semi-annual fixed rate of interest applied to the inflation-adjusted
principal. The average interest rate on TIPS represents the stated interest rate on principal plus inflation, adjusted by any
discount or premium on securities outstanding as of the end of the fiscal year. The inflation-adjusted TIPS principal balance
of federal debt held by the public included inflation of $336.1 billion and $217.1 billion as of September 30, 2022 and 2021,
respectively.
We also issue marketable FRNs which pay interest quarterly based on the interest rate at the time of payment. The interest
rate of FRNs can change over time and is indexed to the highest acceptable discount rate of the most recent 13-week
marketable bill auction. Similar to marketable notes and bonds, we issue these securities at either par value or at an
amount that reflects a discount or premium. The average interest rate on marketable FRNs represents the highest accepted
discount rate of the most recent 13-week marketable auction as of September 30, adjusted by any discount or premium on
securities outstanding as of that date.
Federal Debt Held by the Public includes federal debt held outside of the U.S. government by individuals, corporations,
FRBs, state and local governments, foreign governments, and central banks. As of September 30, 2022, the FRB’s SOMA
had total holdings of $2.7 trillion which: (i) excluded $2.9 trillion in Treasury securities used in overnight reverse repurchase
transactions, and (ii) includes a net of $3.7 billion held by the FRB as collateral for securities lending activities. As of
September 30, 2021, the FRB’s SOMA had total holdings of $3.8 trillion which: (i) excluded $1.6 trillion in Treasury
securities used in overnight reverse repurchase transactions, and (ii) excluded $1.4 billion lent to dealers and not
collateralized by other Treasury securities. For the years ended September 30, 2022 and 2021, we incurred interest expense
of $114.7 billion and $87.1 billion, respectively, related to Treasury securities held by the FRBs.
We issue non-marketable securities at either par value or at an amount that reflects a discount or a premium. The average
interest rate on the non-marketable securities represents the original issue weighted effective yield on securities outstanding
as of September 30, 2022 and 2021. Non-marketable securities are issued with a term of on demand out to 40 years. In FY
2020, we expanded our non-marketable securities to include a new special non-marketable Treasury security, known as a
Special Purpose Vehicle (SPV) security. We issued these securities to SPVs, which were established by the Federal Reserve
to implement its emergency lending facilities under Section 13(3) of the Federal Reserve Act to respond to the COVID-19
pandemic (refer to Note 10). An SPV security is a demand deposit certificate of indebtedness for which interest accrues daily
and is paid at redemption. The total amount of SPV securities redeemed in FY 2022 and FY 2021 was $7.0 billion and $73.4
billion, respectively; including $122 million and $22 million in capitalized interest, respectively. There were no issuances of
SPV securities in fiscal years 2022 and 2021. As of September 30, 2022 and 2021, the total amount of SPV securities
outstanding was $15.4 billion and $22.3 billion, respectively.
DEPARTMENT OF THE TREASURY 137
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
STATUTORY DEBT LIMIT
The statutory debt limit is the total amount of money that the U.S. government is authorized to borrow to meet its existing
legal obligations, with certain adjustments. Outstanding debt obligations subject to the statutory limit were $30.9 trillion
and $28.4 trillion as of September 30, 2022 and 2021, respectively. Congress has provided us with statutory authority to
take certain extraordinary measures in the event that the public debt nears the statutory debt limit and a delay in raising
the statutory debt limit occurs. These measures authorize us to deviate from our normal debt management operations –
which include the investment (or non-investment) of trust fund balances in Treasury securities – to avoid exceeding the
statutory debt limit. We undertake these measures to meet the U.S. government’s obligations as they come due without
exceeding the debt limit.
During a period of delay in raising the statutory debt limit, we may undertake the following extraordinary measures: (i)
suspend new issuances of Treasury securities to the Government Securities Investment Fund (G Fund) of the FERS TSP, the
Civil Service Retirement and Disability Fund (Civil Service Fund), the Postal Service Retiree Health Benefits Fund (Postal
Benefits Fund), and the ESF; (ii) redeem early a certain amount of Treasury securities held by the Civil Service Fund and
Postal Benefit Fund; (iii) suspend new issuances of State and Local Government Series (SLGS) securities; (iv) utilize FFB to
exchange outstanding Treasury securities held by the Civil Service Fund for non-Treasury securities (refer to Note 17); and
(v) issue cash management bills to manage short-term financing needs.
When the period of delay in raising the statutory debt limit ends, we discontinue using extraordinary measures and resume
our normal debt management operations. Furthermore, we are required by the relevant statutes to issue to the G Fund,
along with the OPM-administered Civil Service Fund and Postal Benefits Fund (the OPM funds), Treasury securities that
bear such interest rates and maturity dates necessary to replicate the investments the funds would have held had the delay
not occurred (the unissued securities). In addition, relevant statutes require us to pay these funds the related lost interest
(foregone interest) on the unissued securities. While we may restore the ESF, relevant statutes do not permit us to pay the
ESF interest lost during a period of delay.
On August 2, 2019, Congress enacted the Bipartisan Budget Act of 2019 (P.L. 116-37), which temporarily suspended the debt
limit through July 31, 2021. A delay in raising the statutory debt limit occurred commencing August 2, 2021, at which time
we departed from our normal debt management operations, which included not issuing federal debt securities to the G Fund
and OPM Fund accounts, to avoid exceeding the statutory debt limit. On October 14, 2021, Congress enacted P.L. 117-50,
raising the statutory debt limit by $480 billion, from $28.401 trillion to $28.881 trillion. On October 18, 2021, the Secretary
notified Congress that this increase in the statutory debt limit provided only a temporary reprieve, and that continued use of
extraordinary measures is expected to allow Treasury to meet U.S. government obligations without exceeding the debt limit
through December 3, 2021. On December 16, 2021, Congress enacted P.L. 117-73, raising the debt limit by $2.5 trillion, from
$28.881 trillion to $31.381 trillion. On December 16, 2021, we restored uninvested principal totaling $326.7 billion, of which
$262.0 billion was restored to the G Fund and $64.7 billion was restored to the OPM administered Civil Service Fund. We
also restored foregone interest totaling $1.1 billion, of which $812.3 million was restored to the G Fund on the next interest
payment date of December 17, 2021, and $322.4 million was restored to the OPM funds on the next semi-annual interest
payment date of December 31, 2021.
138 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Of the $1.1 billion of foregone interest we paid in FY 2022, we reported $726 million in FY 2022 as a current year, non-entity
expense within the line item “Restoration of Foregone Federal Debt Interest,” and reported $409 million in FY 2021 as an
accrued non-entity expense within the line item “Accrued Restoration of Foregone Federal Debt Interest” on our
Consolidated Statements of Net Cost. In FY 2022, we reversed the $409 million of the FY 2021 accrued foregone interest
within the line item “Accrued Interest on Restoration of Federal Debt Principal,” on the Consolidated Statements of Changes
in Net Position.
Since the delay in raising the statutory debt limit did not end until December 16, 2021, none of the uninvested principal and
foregone interest payable as of result of the extraordinary measures had been restored to the G Fund and the OPM Funds as
of September 30, 2021. Accordingly, we recorded a liability as of September 30, 2021, totaling $217.6 billion, comprised of
uninvested principal owed to the G Fund and the OPM administered Civil Service Fund totaling $217.2 billion, and foregone
interest payable to the G Fund and OPM funds for the period of August 2, 2021, through September 30, 2021, totaling $409
million.
We reported the liability for the uninvested principal and foregone interest payable as of September 30, 2021, on our
Consolidated Balance Sheets in the line item “Liability for Restoration of Federal Debt Principal and Interest,” of which
$60.6 billion represented an intra-governmental liability of the combined principal and interest payable to the OPM funds,
and the remaining $157.0 billion represented the principal and interest payable to the G Fund, a public liability. We
reported corresponding amounts in the line item “Due From the General Fund” on the Consolidated Balance Sheets for the
total $217.6 billion of uninvested principal and foregone interest owed to the funds as of September 30, 2021 (refer to Note
4). Additionally, we reported the accrued foregone interest expense totaling $409 million as a non-entity expense within the
line item “Accrued Restoration of Foregone Federal Debt Interest,” on the Consolidated Statements of Net Cost, with an
offsetting amount reported within the line item “Accrued Interest on Restoration of Federal Debt Principal,” on the
Consolidated Statements of Changes in Net Position.
17. OTHER FEDERAL DEBT AND INTEREST PAYABLE
Through FFB, we have outstanding borrowings and related accrued interest owed to the Civil Service Fund. At September
30, 2022 and 2021, FFB had outstanding borrowings of $4.9 billion and $6.1 billion, inclusive of $31 million and $40 million
of accrued interest payable, respectively. The outstanding borrowings at September 30, 2022, had stated interest rates that
ranged from 2.25 percent to 2.88 percent per annum, and an effective interest rate of 2.53 percent. The outstanding
borrowings at September 30, 2021, had stated interest rates that ranged from 2.25 percent to 2.88 percent per annum, and
an effective interest rate of 2.60 percent. Maturity dates ranged from June 30, 2023, to June 30, 2029, for outstanding
borrowings at September 30, 2022, and from June 30, 2022, to June 30, 2029, for outstanding borrowings at September 30,
2021.
DEPARTMENT OF THE TREASURY 139
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
18. D.C. FEDERAL PENSION AND JUDICIAL RETIREMENT ACTUARIAL
LIABILITY
Title XI of the Balanced Budget Act of 1997, as amended, was intended to relieve the D.C. government of the burden of
unfunded pension liabilities transferred to the District by the U.S. government in 1979. To fulfill our responsibility, we
manage two funds ― the District of Columbia Teachers, Police Officers, and Firefighters Federal Pension Fund (the D.C.
Federal Pension Fund) and the District of Columbia Judicial Retirement and Survivors Annuity Fund (the Judicial
Retirement Fund). We are required to make annual amortized payments from the General Fund to the D.C. Federal Pension
Fund and the Judicial Retirement Fund. The D.C. Federal Pension Fund benefit payments relate to creditable service
performed on or before June 30, 1997, while the Judicial Retirement Fund benefit payments relate to all creditable service.
A reconciliation of the combined actuarial pension liability for the D.C. Federal Pension Fund and the Judicial Retirement
Fund as of September 30, 2022 and 2021 is as follows:
(in millions) 2022 2021
Beginning Liability Balance $ 8,010 $ 8,272
Pension Expense:
Normal Cost 7 6
Interest on Pension Liability During the Year 67 72
Actuarial (Gains) Losses During the Year:
From Experience 384 (42)
From Discount Rate Assumption Change 194 337
From Other Economic Assumption Changes 326 (7)
From Non‐Economic Assumption Changes 28 (83)
Total Pension Expense 1,006 283
Less Amounts Paid (555) (545)
Ending Liability Balance $ 8,461 $ 8,010
140 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
D.C. Federal Judicial 2022
Additional Information ($ in millions): Pension Fund Retirement Fund Total
Amount Received from the General Fund $ 540 $ 19 $ 559
Annual Rate of Investment Return Assumption 0.87% ‐ 3.21% 0.87% ‐ 3.21%
Future Annual Rate of Inflation and Cost‐Of‐
Living Adjustment:
Police Officers 2.15% N/A
Firefighters 2.15% N/A
Teachers 2.14% N/A
Judicial N/A 1.88%
Future Annual Rate of Salary Increases:
Police Officers 2.15% N/A
Firefighters 2.20% N/A
Teachers 2.30% N/A
Judicial N/A 1.26%
D.C. Federal Judicial 2021
Additional Information ($ in millions): Pension Fund Retirement Fund Total
Amount Received from the General Fund $ 576$ 19$ 595
Annual Rate of Investment Return Assumption 0.80% ‐ 3.33% 0.80% ‐ 3.33%
Future Annual Rate of Inflation and Cost‐Of‐
Living Adjustment:
Police Officers 1.75% N/A
Firefighters 1.75% N/A
Teachers 1.68% N/A
Judicial N/A 1.65%
Future Annual Rate of Salary Increases:
Police Officers 2.15% N/A
Firefighters 2.20% N/A
Teachers 2.30% N/A
Judicial N/A 1.04%
DEPARTMENT OF THE TREASURY 141
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
19. LIABILITIES
LIABILITIES NOT COVERED BY BUDGETARY RESOURCES
As of September 30, 2022 and 2021, liabilities not covered by budgetary resources consisted of the following:
(in millions) 2022 2021
Intra‐Governmental Liabilities Not Covered by Budgetary Resources
Federal Debt Principal, Premium/Discount (Note 16) $ 6,682,084 $ 6,190,360
Liability for Restoration of Federal Debt Principal and Interest (Note 16) ‐ 60,562
Other Intra‐Governmental Liabilities 75 80
Total Intra‐Governmental Liabilities Not Covered by Budgetary Resources 6,682,159 6,251,002
Federal Debt Principal, Premium/Discount (Note 16) 24,227,512 22,256,060
Other Payables 5 6
Liability for Restoration of Federal Debt Principal and Interest (Note 16) ‐ 157,035
Other Liabilities 1,078 1,138
Total Liabilities Not Covered by Budgetary Resources 30,910,754 28,665,241
Total Liabilities Covered by or Not Requiring Budgetary Resources 3,080,358 2,960,975
Total Liabilities $ 33,991,112 $ 31,626,216
OTHER LIABILITIES
The “Other” line item within “Other Liabilities” displayed on the Consolidated Balance Sheets consists of liabilities that are
covered by, not covered by, and not requiring budgetary resources. The “Other” line item within “Other Liabilities” at
September 30, 2022 and 2021, consisted of the following:
Non‐ 2022 Non‐ 2021
(in millions) Current Current Total Current Current Total
Intra‐Governmental
Accounts Payable $ 855 $ ‐ $ 855 $ 887 $ ‐ $ 887
Advances From Others and Deferred Revenue 27 ‐ 27 32 ‐ 32
Other Accrued Liabilities 611 58 669 694 62 756
Total Intra‐Governmental $ 1,493 $ 58 $ 1,551 $ 1,613 $ 62 $ 1,675
Other Than Intra‐Governmental
Federal Employee Benefits Payable $ 29 $ 592 $ 621 $ 22 $ 665 $ 687
Unfunded Leave 648 1 649 668 1 669
Advances From Others and Deferred Revenue 1,164 ‐ 1,164 471 ‐ 471
Accrued Funded Payroll and Leave 664 ‐ 664 604 ‐ 604
Other Liabilities Without Related Budgetary Obligations 316 28 344 660 ‐ 660
Other Liabilities With Related Budgetary Obligations 604 ‐ 604 458 ‐ 458
Liability for Non‐Fiduciary Deposit Funds
and Clearing Accounts 5,729 ‐ 5,729 4,453 ‐ 4,453
Other Accrued Liabilities ‐ 1 1 1 2 3
Total Other Than Intra‐Governmental $ 9,154 $ 622 $ 9,776 $ 7,337 $ 668 $ 8,005
142 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
20. NET POSITION
Unexpended Appropriations represents the amount of spending authorized as of year-end that is unliquidated or unobligated
and has not lapsed, been rescinded, or withdrawn. No-year appropriations remain available for obligation until expended.
Annual appropriations remain available for upward or downward adjustment of obligations until canceled. We report
adjustments related to unexpended appropriations, such as cancellations of expired funds or rescissions, as “Other
Adjustments” on the Consolidated Statements of Changes in Net Position.
Cumulative Results of Operations represents the net results of operations since inception, and includes cumulative amounts
related to investments in capitalized assets and donations and transfers of assets in and out without reimbursement. Also
included as a reduction in Cumulative Results of Operations are accruals for which the related expenses require funding
from future appropriations and assessments. These future funding requirements include, among others: (a) accumulated
annual leave earned but not taken; (b) accrued FECA; (c) credit reform cost re-estimates; (d) unfunded D.C. Federal pension;
and (e) expenses for contingent liabilities.
APPROPRIATIONS RECEIVED
Congress appropriates the amount reported as “Appropriations Received” from the General Fund receipts, such as income
taxes, that are not dedicated by law for a specific purpose. This amount will not necessarily agree with the “Appropriations
(discretionary and mandatory)” amount reported on the Combined Statements of Budgetary Resources because of differences
between proprietary and budgetary accounting concepts and reporting requirements. For example, certain dedicated
receipts are recorded as “Appropriations (discretionary and mandatory)” on the Combined Statements of Budgetary
Resources, but are recognized as exchange or non-exchange revenue (i.e., typically in revolving, special, and non-revolving
trust funds) and reported on the Consolidated Statements of Changes in Net Position in accordance with SFFAS No. 7,
Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, as
amended.
TRANSFERS TO THE GENERAL FUND AND OTHER
The amount reported as “Transfers to the General Fund and Other” on the Consolidated Statements of Changes in Net
Position includes the following for the years ended September 30, 2022 and 2021:
(in millions) 2022 2021
Categories of Transfers to the General Fund and Other
Interest Revenue $ (49,204) $ (51,222)
U.S. Quota in the IMF ‐ Valuation (Downward)/Upward Adjustment (3,177) 10
Increase in Liquidation Preference of GSEs Preferred Stock and Valuation Changes (Note 11) (2,860) (111,950)
Downward Re‐estimates of Credit Reform Subsidies (1,349) (4,613)
COVID‐19 Non‐Entity Cost/(Revenue) (Note 10) 1,945 (8,937)
Other (1,123) (373)
Total $ (55,768) $ (177,085)
DEPARTMENT OF THE TREASURY 143
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Included in “Transfers to the General Fund and Other” is accrued interest revenue on inter-agency loans held on behalf of
the U.S. government. We report a corresponding amount on the Consolidated Statements of Net Cost under “Non-Entity
Costs: Less Interest Revenue from Loans.” Eliminations between our bureaus reduce the amount reported on the
Consolidated Statements of Net Cost. Also included are unrealized gains and losses recognized on the U.S. Quota in the IMF
due to SDR exchange rate fluctuation. Additionally, there is the increase in liquidation preference in the GSE Senior
Preferred Stock investments and annual valuation adjustment. The credit reform downward re-estimate subsidies
transferred to the General Fund is driven by a change in forecasted future cash flows. Also, our “COVID-19 Non-Entity Cost
(Revenue)” relates to notes receivable and common stock warrants received pursuant to the CARES Act, CAA, and ARP.
21. CONSOLIDATED STATEMENTS OF NET COST AND NET COSTS OF
TREASURY SUB-ORGANIZATIONS
Our Consolidated Statements of Net Cost display information on a consolidated basis. We consist of Departmental Offices
(DO) and seven operating bureaus that we provide supporting schedules for Net Cost in the notes to the financial statements
(refer to Note 1). These supporting schedules provide consolidating information, which fully displays the costs, revenues,
and net cost of DO and each operating bureau.
The classification of sub-organizations has been determined in accordance with SFFAS No. 4, Managerial Cost Accounting
Standards and Concepts which states that the predominant factor is the reporting entity’s organization structure and
existing responsibility components, such as bureaus, administrations, offices, and divisions within a department.
Each sub-organization is responsible for accumulating costs. The assignment of the costs to Department-wide programs is
the result of using the following cost assignment methods: (1) direct costs, (2) cause and effect, and (3) cost allocation.
INTRA-DEPARTMENTAL COSTS/REVENUES
We report intra-departmental costs/revenues from providing goods and/or services on a reimbursable basis among our sub-
organizations as costs by providing sub-organizations and as revenues by receiving sub-organizations. We recognized intra-
departmental imputed costs, such as un-reimbursed payments made from the Treasury Judgment Fund on our behalf, on the
Consolidated Statements of Net Cost of $1.4 billion and $1.3 billion during FY 2022 and 2021, respectively. Accordingly, we
eliminated such costs or revenues in the consolidation process.
INTRA-GOVERNMENTAL COSTS
Intra-governmental costs relate to the source of goods and services we purchased and not to the classification of the related
intra-governmental revenue.
In certain cases, other federal agencies incur costs that are directly identifiable to our operations. In accordance with SFFAS
No. 4, as amended, we recognize identified costs paid on our behalf by other agencies. The imputed intra-governmental
financing sources we currently recognize include the actual cost of future benefits for the federal pension plans, and the
Federal Employees Health Benefits Program that other federal entities pay on our behalf. We reflect the funding for these
costs as costs on the Consolidated Statements of Net Cost, and as imputed financing sources on the Consolidated Statements
of Changes in Net Position. Costs other agencies pay on our behalf were $780 million and $762 million for the fiscal years
ended September 30, 2022 and 2021, respectively.
144 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
CONSOLIDATED STATEMENTS OF NET COST PRESENTATION
Basis of Presentation and Prior Year Reclassification
On our Consolidated Statements of Net Cost, we present the net cost of operations by major programs. Specifically, we
present our gross costs and earned revenues by three major program categories aligned with Treasury’s mission: (i)
Financial program – our mission of managing the government’s finances and resources effectively, protecting the integrity of
financial systems that are critical to the nation’s financial infrastructure, and fostering improved governance in financial
institutions; (ii) Economic program – our mission of promoting economic prosperity and maintaining stability, encouraging
sustainable and global economic growth; and (iii) Security program – our mission of enhancing national security by
implementing economic sanctions against foreign threats to the U.S., identifying and targeting the financial support
networks of national security threats, and improving the safeguards of the financial systems. We assign each of our bureaus
and reporting entities to one of the above three program categories based on their major function and core mission
responsibility. Our bureaus’ and reporting entities’ gross costs and earned revenues fall within a single program category in
the Consolidated Statements of Net Cost, with the exception of DO for which we allocate gross costs and earned revenues to
multiple programs using a net cost percentage calculation.
Prior to FY 2022, we presented the gross costs and earned revenues by major program categories aligned with Treasury’s
Strategic Plan. In FY 2022, for comparative purposes, we reclassified the FY 2021 gross costs and earned revenues for
certain bureaus and reporting entities to conform to the current year’s presentation of such costs and revenues.
Reclassifications made to the FY 2021 Consolidated Statement of Net Cost primarily included $14.8 billion of IRS program
net costs (gross costs net of revenues, before eliminations), which were reclassified from the Economic to the Financial
program category. We also reclassified $1.6 billion of International Assistance Programs’ net costs (included in DO) from the
Financial to the Economic program category, as well as other reclassifications totaling $0.2 billion. On an aggregated basis
(after $1.5 billion of eliminations reclassification), for FY 2021, total consolidated net cost of the Economic program category
decreased by $11.5 billion and total consolidated net cost of the Financial program category increased by $11.5 billion as a
result of this reclassification.
Non-Entity Costs and Revenues
Our Consolidated Statements of Net Cost also present interest expense on the federal debt, other federal costs incurred, and
non-entity exchange revenues earned on behalf of the U.S. government. We present these costs and revenues separately
from the net cost of Treasury operations. We eliminate these costs in the consolidation process to the extent that they
involve transactions with our sub-organizations.
Non-entity other federal costs shown on the Consolidated Statements of Net Cost for the fiscal years ended September 30,
2022 and 2021 consisted of the following:
(in millions) 2022 2021
Credit Reform Interest on Uninvested Funds (Intra‐Governmental) $ 12,699 $ 12,617
Judgment Claims and Contract Disputes 2,170 8,215
Resolution Funding Corporation 920 1,367
Legal Services Corporation 529 465
Corporation for Public Broadcasting 485 640
All Other Payments 377 262
Total $ 17,180 $ 23,566
DEPARTMENT OF THE TREASURY 145
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
21. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF
TREASURY SUB-ORGANIZATIONS (IN MILLIONS)
For Fiscal Year Ended September 30, 2022
Financial
Bureau of Bureau of the Depart‐ Crimes Internal
Engraving & Fiscal mental Enforcement Revenue
Program Costs Printing Service Office(a) Network Service U.S. Mint
FINANCIAL PROGRAM
Gross Cost $ 874 $ 2,562 $ 4,175 $ ‐ $ 16,201 $ 4,857
Less Earned Revenue (1,012) (476) (3,497) ‐ (534) (5,006)
Net Program Cost (138) 2,086 678 ‐ 15,667 (149)
ECONOMIC PROGRAM
Gross Cost ‐ ‐ 191,038 ‐ ‐ ‐
Less Earned Revenue ‐ ‐ (20,348) ‐ ‐ ‐
Net Program Cost ‐ ‐ 170,690 ‐ ‐ ‐
SECURITY PROGRAM
Gross Cost ‐ ‐ 538 154 ‐ ‐
Less Earned Revenue ‐ ‐ (35) (2) ‐ ‐
Net Program Cost ‐ ‐ 503 152 ‐ ‐
Total Net Program Cost (Revenue)
Before Changes in Actuarial
Assumptions (138) 2,086 171,871 152 15,667 (149)
(Gain)/Loss on Pension, ORB, or OPEB
Assumption Changes ‐ ‐ 548 ‐ ‐ ‐
Total Net Cost of (Revenue From)
Treasury Operations $ (138) $ 2,086 $ 172,419 $ 152 $ 15,667 $ (149)
(a) The total $170.7 billion of the Economic Program net costs DO reported consisted of $163.0 billion of net costs from ORP: $122.1 billion for Coronavirus
State and Local Fiscal Recovery Funds, $13.3 billion for Emergency Rental Assistance, $10.9 billion for Coronavirus Relief Fund, $8.6 billion for
Homeowners Assistance Fund, $5.9 billion for Emergency Capital Investment Program, $1.3 billion for State Small Business Credit Initiative, and $0.9
billion for other COVID-19 relief programs (refer to Note 10); $4.2 billion of net costs from ESF; and $2.5 billion from IAP. The remaining net costs
consisted of net costs from other DO programs or offices.
146 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
21. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF
TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):
For Fiscal Year Ended September 30, 2022
Alcohol
and
Tobacco
Office of the Tax and
Comptroller of the Trade Combined 2022
Program Costs Currency Bureau Total Eliminations Consolidated
FINANCIAL PROGRAM
Gross Cost $ 1,135 $ ‐$ 29,804 $ 4,096 $ 25,708
Less Earned Revenue (1,205) ‐ (11,730) (1,219) (10,511)
Net Program Cost (70) ‐ 18,074 2,877 15,197
ECONOMIC PROGRAM
Gross Cost ‐ 137 191,175 413 190,762
Less Earned Revenue ‐ (8) (20,356) (183) (20,173)
Net Program Cost ‐ 129 170,819 230 170,589
SECURITY PROGRAM
Gross Cost ‐ ‐ 692 144 548
Less Earned Revenue ‐ ‐ (37) (9) (28)
Net Program Cost ‐ ‐ 655 135 520
Total Net Program Cost (Revenue)
Before Changes in Actuarial
Assumptions (70) 129 189,548 3,242 186,306
(Gain)/Loss on Pension, ORB, or OPEB
Assumption Changes (29) ‐ 519 ‐ 519
Total Net Cost of (Revenue From)
Treasury Operations $ (99)$ 129 $ 190,067 $ 3,242 $ 186,825
DEPARTMENT OF THE TREASURY 147
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
21. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF
TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):
For Fiscal Year Ended September 30, 2021
Financial
Bureau of Bureau of the Depart‐ Crimes Internal
Engraving & Fiscal mental Enforcement Revenue
Program Costs Printing Service Office(a) Network Service U.S. Mint
FINANCIAL PROGRAM
Gross Cost $ 945 $ 2,459 $ 3,722 $ ‐$ 15,447 $ 4,911
Less Earned Revenue (929) (469) (3,351) ‐ (624) (5,025)
Net Program Cost 16 1,990 371 ‐ 14,823 (114)
ECONOMIC PROGRAM
Gross Cost ‐ ‐ 130,383 ‐ ‐ ‐
Less Earned Revenue ‐ ‐ (7,847) ‐ ‐ ‐
Net Program Cost ‐ ‐ 122,536 ‐ ‐ ‐
SECURITY PROGRAM
Gross Cost ‐ ‐ 516 134 ‐ ‐
Less Earned Revenue ‐ ‐ (30) (2) ‐ ‐
Net Program Cost ‐ ‐ 486 132 ‐ ‐
Total Net Program Cost (Revenue)
Before Changes in Actuarial
Assumptions 16 1,990 123,393 132 14,823 (114)
(Gain)/Loss on Pension, ORB, or OPEB
Assumption Changes ‐ ‐ 247 ‐ ‐ ‐
Total Net Cost of (Revenue From)
Treasury Operations $ 16 $ 1,990 $ 123,640 $ 132 $ 14,823 $ (114)
(a) The total $122.5 billion of the Economic Program net costs DO reported consisted of $122.7 billion of net costs from DO Policy Offices primarily related to
the COVID-19 relief programs: $58.4 billion for Coronavirus Relief Fund, $30.7 billion for Payroll Support to Aviation Workers, $21.0 billion for Emergency
Rental Assistance, $10.2 billion for Coronavirus State and Local Fiscal Recovery Funds, $1.3 billion for Transportation Services Economic Relief, and $1.0
billion for Homeowners Assistance Fund (refer to Note 10); $1.5 billion of net costs from CDFI including $1.1 billion for Rapid Response Program; and $1.6
billion of net costs from IAP; partially offset by $3.5 billion of net income from ESF. The remaining net costs consisted of net costs from other DO programs
or offices.
148 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
21. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF
TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):
For Fiscal Year Ended September 30, 2021
Alcohol
and
Tobacco
Office of the Tax and
Comptroller of the Trade Combined 2021
Program Costs Currency Bureau Total Eliminations Consolidated
FINANCIAL PROGRAM
Gross Cost $ 1,114 $ ‐ $ 28,598 $ 3,882 $ 24,716
Less Earned Revenue (1,145) ‐ (11,543) (1,079) (10,464)
Net Program Cost (31) ‐ 17,055 2,803 14,252
ECONOMIC PROGRAM
Gross Cost ‐ 132 130,515 808 129,707
Less Earned Revenue ‐ (7) (7,854) (162) (7,692)
Net Program Cost ‐ 125 122,661 646 122,015
SECURITY PROGRAM
Gross Cost ‐ ‐ 650 135 515
Less Earned Revenue ‐ ‐ (32) (6) (26)
Net Program Cost ‐ ‐ 618 129 489
Total Net Program Cost (Revenue)
Before Changes in Actuarial
Assumptions (31) 125 140,334 3,578 136,756
(Gain)/Loss on Pension, ORB, or OPEB
Assumption Changes (4) ‐ 243 ‐ 243
Total Net Cost of (Revenue From)
Treasury Operations $ (35) $ 125 $ 140,577 $ 3,578 $ 136,999
DEPARTMENT OF THE TREASURY 149
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
22. ADDITIONAL INFORMATION RELATED TO THE COMBINED
STATEMENTS OF BUDGETARY RESOURCES
NET ADJUSTMENTS TO UNOBLIGATED BALANCE, BROUGHT FORWARD, OCTOBER 1
Net adjustments to unobligated balance, brought forward, October 1 as of September 30, 2022 and 2021 consisted of the
following:
(in millions) 2022 2021
Unobligated Balance, Brought Forward From Prior Year $ 489,160 $ 771,181
Adjustments to Budgetary Resources Made During Current Year
Downward Adjustments of Prior Year Undelivered Orders 1,329 126,845
Downward Adjustments of Prior Year Delivered Orders 19,123 2,712
Other Adjustments (20,074) 17,456
Unobligated Balance From Prior Year Budgetary Authority, Net
(Discretionary and Mandatory) $ 489,538 $ 918,194
The decrease in Unobligated Balance, Brought Forward From Prior Year Budgetary Authority, Net is primarily the result of
FY 2021 activity related to a $478.8 billion CARES Act appropriation rescission in FY 2021 pursuant to the CAA (refer to
Note 10) and a $112.8 billion IMF allocation to us of new SDRs during FY 2021 (refer to Note 5). These FY 2021 reductions
in unobligated balances was partially offset by the effects of $168.2 billion of unobligated ARP, CAA, and CARES Act
resources carried forward from FY 2021 (refer to Note 10).
UNDELIVERED ORDERS
Undelivered orders represent goods and services ordered and obligated which have not been received. This includes any
orders for which we have paid in advance, but for which delivery or performance has not yet occurred. The decrease in
Undelivered Orders - Paid as of September 30, 2022, primarily reflects the use of COVID-19 financial assistance by
recipients for covered eligible costs incurred in response to the pandemic (refer to Note 10). The increase in Undelivered
Orders - Unpaid as of September 30, 2022, primarily reflects the amounts associated with those COVID-19 financial
assistance programs that had not yet fully commenced program disbursements as of September 30, 2022 (refer to Note 10).
Undelivered orders as of September 30, 2022 and 2021 consisted of the following:
2022 2021
(in millions) Federal Non‐Federal Total Federal Non‐Federal Total
Paid $ 38 $ 225,181 $ 225,219 $ 16 $ 256,075 $ 256,091
Unpaid 830 26,416 27,246 609 5,889 6,498
Undelivered Orders at the End of the Year $ 868 $ 251,597 $ 252,465 $ 625 $ 261,964 $ 262,589
CONTRIBUTED CAPITAL
Contributed capital represents the current year authority and prior year balances of amounts actually transferred through
non-expenditure transfers to miscellaneous receipt accounts of the General Fund to repay a portion of a capital investment
150 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
or transfer seigniorage and numismatic profits. Contributed capital for the fiscal year ended September 30, 2022, was $114
million. We did not have any contributed capital for the fiscal year ended September 30, 2021.
TERMS OF BORROWING AUTHORITY USED
Several of our programs have authority to borrow under the FCRA, as amended. The FCRA provides indefinite borrowing
authority to financing accounts to fund the unsubsidized portion of direct loans and to satisfy obligations in the event the
financing account’s resources are insufficient. OMB Circular No. A-11 defines repayment requirements. We calculate
interest expense due based on the beginning balance of borrowings outstanding and the borrowings/repayments activity that
occurred during the fiscal year. Undisbursed Departmental borrowings earn interest at the same rate as the financing
account pays on its debt owed to the Fiscal Service. In the event that principal and interest collections exceed the interest
expense due, we receive the excess payment. If principal and interest do not exceed interest expense due, we will borrow the
difference. We make periodic principal repayments based on the analysis of cash balances and future disbursement needs.
All interest on borrowings is due on September 30. Interest rates on FCRA borrowings range from 0.54 percent to 5.50
percent.
AVAILABLE BORROWING
The available borrowing authority and related changes in available borrowing authority as of and for the fiscal years ended
September 30, 2022 and 2021 are shown below:
(in millions) 2022 2021
Beginning Balance $ 6,117 $ 99,676
Current Authority(1) 5,513 15,008
Borrowing Authority Withdrawn (59) (93,318)
Borrowing Authority Converted to Cash (4,391) (15,249)
Ending Balance $ 7,180 6,117
(1) The significant decrease in borrowing authority is primarily related to the expiration of authority to make loans and investments in accordance with the
CARES Act (refer to Note 10).
RECONCILIATION OF THE PRESIDENT’S BUDGET
The Budget of the United States (also known as the President’s Budget), with actual numbers for FY 2022, was not
published at the time that these financial statements were issued. We expect OMB to publish the FY 2024 President’s
Budget in February 2023, and will be available from the U.S. Government Publishing Office. The following chart displays
the differences between the Combined Statement of Budgetary Resources (SBR) in the FY 2021 AFR and the actual FY 2021
balances included in the FY 2023 President’s Budget.
DEPARTMENT OF THE TREASURY 151
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Reconciliation of FY 2021 Combined Statement of Budgetary Resources
to the FY 2023 President’s Budget
New
Obligations Outlays (net Distributed
Budgetary and Upward of offsetting Offsetting Net
(in millions) Resources Adjustments collections) Receipts Outlays
Combined Statement of Budgetary Resources (SBR) Amounts $ 1,550,008 $ 1,060,848 $ 906,270 $ (73,645) $ 832,625
IRS non‐entity tax credit payments and other outlays not in SBR (1) 808,260 808,260 804,173 ‐ 804,173
Tax and Trade Bureau (TTB) non‐entity collections for Puerto Rico not in SBR 520 520 520 ‐ 520
Expired funds in SBR (535) ‐ ‐ ‐ ‐
Non‐Treasury offsetting receipts ‐ ‐ ‐ (33) (33)
Non‐Budgetary Financing Disbursements, net(2) ‐ ‐ (64,396) ‐ (64,396)
Other (12) (6) 4 ‐ 4
President's Budget Amounts $ 2,358,241 $ 1,869,622 $ 1,646,571 $ (73,678) $ 1,572,893
(1)
These are primarily Economic Impact Payments, Refundable Premium Tax Credit, Refundable Earned Income Tax Credit, and Child Tax Credit,
reported with refunds as custodial activities in our financial statements and thus are not reported as budgetary resources.
(2)
These are credit reform financing account net outlays. The SBR excludes gross disbursements and offsetting collections from credit financing
accounts.
LEGAL ARRANGEMENTS AFFECTING USE OF UNOBLIGATED BALANCES
The use of unobligated balances is restricted based on annual legislation requirements or enabling authorities. Funds are
presumed to be available for only one fiscal year unless otherwise noted in the annual appropriation language. Unobligated
balances in unexpired Treasury account fund symbols are available in the next fiscal year for new obligations unless some
restrictions have been placed on those funds by law. In those situations, the restricted funding will be temporarily
unavailable until such time as the reasons for the restriction have been satisfied or legislation has been enacted to remove
the restriction.
Amounts in expired Treasury account fund symbols are not available for new obligations, but may be used to make
adjustments to reflect, and make disbursements to liquidate, obligations that were created before the budgetary authority
expired.
152 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
23. SOURCES AND DISPOSITION OF CUSTODIAL REVENUE
We collect the majority of federal revenue from income and excise taxes. The table below shows collection activity, by
revenue type and tax year, for the fiscal years ended September 30, 2022 and 2021:
Tax Year
Pre‐ 2022
(in millions) 2022 2021 2020 2020 Collections
Individual Income and FICA Taxes $ 2,495,597 $ 1,679,952 $ 99,529 $ 33,020 $ 4,308,098
Corporate Income Taxes 294,023 156,609 3,428 21,811 475,871
Estate and Gift Taxes 2,310 25,840 1,785 3,420 33,355
Excise Taxes 69,930 19,916 36 358 90,240
Railroad Retirement Taxes 4,417 1,341 389 1 6,148
Unemployment Taxes 4,799 2,050 22 175 7,046
Fines, Penalties, Interest & Other Revenue ‐
Tax Related 320 1 ‐ 1 322
Tax Related Revenue Received 2,871,396 1,885,709 105,189 58,786 4,921,080
Deposit of Earnings, Federal Reserve System 79,961 26,714 ‐ ‐ 106,675
Fines, Penalties, Interest & Other Revenue ‐
Non‐Tax Related 5,599 1,384 ‐ ‐ 6,983
Non‐Tax Related Revenue Received 85,560 28,098 ‐ ‐ 113,658
Total Revenue Received $ 2,956,956 $ 1,913,807 $ 105,189 $ 58,786 $ 5,034,738
Less Amounts Collected for Non‐Federal Entities 421
Total $ 5,034,317
Tax Year
Pre‐ 2021
(in millions) 2021 2020 2019 2019 Collections
Individual Income and FICA Taxes $ 2,283,050 $ 1,231,838 $ 43,803 $ 35,311 $ 3,594,002
Corporate Income Taxes 254,782 130,508 4,270 29,449 419,009
Estate and Gift Taxes 1,523 21,074 2,673 2,776 28,046
Excise Taxes 58,413 19,569 220 332 78,534
Railroad Retirement Taxes 4,167 1,140 ‐ ‐ 5,307
Unemployment Taxes 4,415 1,709 7 145 6,276
Fines, Penalties, Interest & Other Revenue ‐
Tax Related 644 1 ‐ 1 646
Tax Related Revenue Received 2,606,994 1,405,839 50,973 68,014 4,131,820
Deposit of Earnings, Federal Reserve System 77,000 23,054 ‐ ‐ 100,054
Fines, Penalties, Interest & Other Revenue ‐
Non‐Tax Related 5,894 1,303 ‐ ‐ 7,197
Non‐Tax Related Revenue Received 82,894 24,357 ‐ ‐ 107,251
Total Revenue Received $ 2,689,888 $ 1,430,196 $ 50,973 $ 68,014 $ 4,239,071
Less Amounts Collected for Non‐Federal Entities 528
Total $ 4,238,543
DEPARTMENT OF THE TREASURY 153
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
AMOUNTS PROVIDED TO FUND THE U.S. GOVERNMENT
For the fiscal years ended September 30, 2022 and 2021, collections of custodial revenue transferred to other federal entities
were as follows:
(in millions) 2022 2021
General Fund $ 4,390,703 $ 3,098,877
Other Federal Agencies 1,384 1,399
Total $ 4,392,087 $ 3,100,276
FEDERAL TAX REFUNDS AND OTHER PAYMENTS
Federal tax refunds and other payments include amounts paid to taxpayers who have paid more than the actual taxes they
owe, as well as payments for various refundable tax credits. The CARES Act, CAA, and ARP included provisions to help
stimulate the economy through economic impact payments (including recovery rebate credits) (refer to Note 10). In FY 2022
and 2021, the IRS disbursed $13.1 billion and $569.5 billion, respectively, of payments to eligible taxpayers based upon the
criteria in each Act. Refunds and other payments, by revenue type and tax year, were as follows for the years ended
September 30, 2022 and 2021:
Tax Year
2022
Pre‐ Refunds/
(in millions) 2022 2021 2020 2020 Payments
Individual Income and FICA Taxes $ 85,825 $ 418,527 $ 63,548 $ 15,433 $ 583,333
Corporate Income Taxes 4,378 12,267 6,047 32,919 55,611
Estate and Gift Taxes 1 10 589 248 848
Excise Taxes 540 921 425 389 2,275
Railroad Retirement Taxes ‐ 45 (16) ‐ 29
Unemployment Taxes ‐ 73 13 47 133
Fines, Penalties, Interest & Other Revenue ‐ ‐ ‐ 1 1
Total $ 90,744 $ 431,843 $ 70,606 $ 49,037 $ 642,230
Tax Year
2021
Pre‐ Refunds/
(in millions) 2021 2020 2019 2019 Payments
Individual Income and FICA Taxes $ 533,300 $ 496,896 $ 38,336 $ 12,652 $ 1,081,184
Corporate Income Taxes 3,886 6,358 13,730 29,113 53,087
Estate and Gift Taxes ‐ 154 507 288 949
Excise Taxes 617 1,829 198 213 2,857
Railroad Retirement Taxes ‐ 22 (1) 24 45
Unemployment Taxes ‐ 77 31 36 144
Fines, Penalties, Interest & Other Revenue ‐ ‐ ‐ 1 1
Total $ 537,803 $ 505,336 $ 52,801 $ 42,327 $ 1,138,267
154 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
24. FUNDS FROM DEDICATED COLLECTIONS
The ESF represents the majority of our FDC activities. In addition, such funds managed by BEP, Mint, and OCC (our non-
appropriated bureaus) and certain funds managed by the IRS are public enterprise (or revolving) funds and receive no
appropriations from the Congress. Fiscal Service, DO, IRS, OFR, TFF, and the CDFI Fund manage other miscellaneous
FDCs.
The following is a list of FDCs and a brief description of the purpose, accounting, and uses of these funds.
Bureau Fund Code Fund Title/Description
Exchange Stabilization Fund (ESF)
ESF 020X4444 Exchange Stabilization Fund
Public Enterprise/Revolving/Trust Revolving
BEP 020X4502 Bureau of Engraving and Printing Fund
Mint 020X4159 United States Mint Public Enterprise Fund
OCC 020X8413 Assessment Funds
IRS 020X4413 Federal Tax Lien Revolving Fund
Other FDC Funds
Fiscal Service 020X5080 Gifts to Reduce Public Debt
Fiscal Service 020X5081 Presidential Election Campaign
Fiscal Service 020X8625 Gulf Coast Restoration Trust Fund
Fiscal Service 020X8902 Esther Cattell Schmitt Gift Fund
Fiscal Service 5805585001 Travel Promotion Fund, Corp for Travel Promotion
Fiscal Service 580X5585 Travel Promotion Fund, Corp for Travel Promotion
Fiscal Service 020X5581 HOPE Reserve Fund
Fiscal Service 0205445002 Debt Collection Special Fund
Fiscal Service 0205445003 Debt Collection Special Fund
Fiscal Service 020X5445 Debt Collection Special Fund
Fiscal Service 0206/75445 Debt Collection Special Fund
Fiscal Service 0207/85445 Debt Collection Special Fund
Fiscal Service 0208/95445 Debt Collection Special Fund
Fiscal Service 0209/05445 Debt Collection Special Fund
Fiscal Service 0200/15445 Debt Collection Special Fund
Fiscal Service 020X5680 Guam World War II Claims Fund
Fiscal Service 0205680001 Taxes, Duties and Fees, Guam World War II Claims Fund
DO 020X8790 Gifts and Bequests Trust Fund
IRS 020X5510 Private Collection Agent Program
IRS 020X5433 Informant Reimbursement
IRS 020X5622 Special Compliance Personnel Program Account
OFR 020X5590 Financial Research Fund
TFF 020X5697 Treasury Forfeiture Fund
CDFI 020X8524 Capital Magnet Fund
Pursuant to the legal authority found in Section 10 of the Gold Reserve Act of 1934, as amended, the Secretary, with the
approval of the President, through the ESF, may deal in gold, foreign exchange, and other instruments of credit and
securities the Secretary considers necessary, consistent with U.S. obligations in the IMF on orderly exchange arrangements
and a stable system of exchange rates. The ESF accounts for and reports its holdings to the Fiscal Service on the Standard
Form 224, “Statement of Transactions,” and provides other reports to Congress. Interest on SDRs in the IMF, investments
in Treasury securities, and investments in foreign currency assets are the ESF’s primary sources of revenue. The ESF’s
DEPARTMENT OF THE TREASURY 155
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
earnings and realized gains on foreign currency assets represent inflows of resources to the government, and the interest
revenues earned from Treasury securities are the result of intra-departmental flows.
The BEP, Mint, OCC, and IRS operate “public enterprise/revolving funds” to account for all or some of their respective
revenues and expenses. 31 USC 5142 established the Bureau of Engraving and Printing Fund for BEP to account for
revenue and expenses related to the production of currency and other federal security documents. P.L. 104-52 (31 USC 5136)
established the Public Enterprise Fund for the Mint to account for all revenue and expenses related to the production and
sale of numismatic products and circulating coinage. Revenues and other financing sources at the Mint are mainly from the
sale of numismatic and bullion products and the sale of circulating coins to the FRB system. These revenues represent
inflows of resources to the government. 12 USC 16, 481 and 482 established the Assessment Funds for OCC. Revenue and
financing sources are from the bank assessments for the oversight of the national banks, federal savings associations, and
federal branches and agencies of foreign banks. These non-appropriated funds contribute to the inflows of resources to the
government to specifically fund these entities’ operations. 26 USC 7810 established the Federal Tax Lien Revolving Fund to
account for revenue and expenses from the sale of property foreclosed upon by a holder of a lien. Such revenue represents
inflows of resources to the U.S. government. There are minimal transactions with other government agencies.
There are other FDCs at several of our bureaus, such as donations to the Presidential Election Campaign Fund, gifts to
reduce the public debt, and other enforcement related activities. Public laws and the U.S. Code established and authorized
the use of these funds. Sources of revenues and other financing sources include contributions, cash and property forfeited in
enforcement activities, public donations, and other allocations, all which represent inflows to the government.
INTRA-GOVERNMENTAL INVESTMENTS IN TREASURY SECURITIES
The U.S. government does not set aside assets to pay future benefits or other expenditures associated with FDCs. Our
bureaus and other federal agencies invest some of the funds that they collect from the public, if they have the statutory
authority to do so, in Treasury securities. The Fiscal Service collects cash and makes deposits in the General Fund, which is
then available for general government purposes.
When our bureaus or other federal agencies redeem these securities to make expenditures, the government finances those
redemptions out of accumulated cash balances, by collecting taxes or other receipts, by borrowing from the public, or by
curtailing expenditures. This is the same way that the government finances all other expenditures.
The securities are an asset to our bureaus and other federal agencies and a liability of the General Fund. Because our
bureaus and other federal agencies are parts of the U.S. government, these assets and liabilities offset each other from the
standpoint of the government as a whole. For this reason, they do not represent an asset or a liability in the U.S.
government-wide financial statements.
Our financial statements do not display the balances related to the investments made by our bureaus because the bureaus
are subcomponents of the Department. However, the General Fund remains liable to the Fiscal Service for the invested
balances and the Fiscal Service remains liable to the investing bureaus (refer to Note 4).
156 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Summary Information for Funds from Dedicated Collections
as of and for the Fiscal Year Ended September 30, 2022
Public
Enterprise/
Revolving/
Exchange Trust Eliminations
Stabilization Revolving Other FDC Combined between Consolidated
(in millions) Fund Funds Funds FDC Funds FDC Funds FDC Funds
ASSETS
Intra‐Governmental:
Fund Balance $ ‐$ 1,587 $ 1,821 $ 3,408 $ ‐$ 3,408
Investments, Net 18,401 2,225 4,143 24,769 ‐ 24,769
Other Assets ‐ 4 ‐ 4 ‐ 4
Total Intra‐Governmental 18,401 3,816 5,964 28,181 ‐ 28,181
Other Than Intra‐Governmental
Cash, Foreign Currency, and Other Monetary Assets 166,412 ‐ 12 166,424 ‐ 166,424
Taxes, Interest, and Other Receivables, Net ‐ 113 126 239 ‐ 239
Advances and Prepayments ‐ 2 ‐ 2 ‐ 2
Other Investments, Net 3,796 20 ‐ 3,816 ‐ 3,816
General Property, Plant, and Equipment, Net ‐ 993 20 1,013 ‐ 1,013
Other Assets ‐ 1,026 842 1,868 ‐ 1,868
Total Other Than Intra‐Governmental 170,208 2,154 1,000 173,362 ‐ 173,362
Total Assets $ 188,609 $ 5,970 $ 6,964 $ 201,543 $ ‐$ 201,543
LIABILITIES
Intra‐Governmental
Due To the General Fund $ ‐$ ‐$ 728 $ 728 $ ‐$ 728
Other ‐ 33 848 881 ‐ 881
Total Intra‐Governmental ‐ 33 1,576 1,609 ‐ 1,609
Other Than Intra‐Governmental
Other Payables 404 137 76 617 ‐ 617
Special Drawing Right Certificates Issued to the Federal
Reserve 5,200 ‐ ‐ 5,200 ‐ 5,200
Allocation of Special Drawing Rights 147,009 ‐ ‐ 147,009 ‐ 147,009
Other ‐ 674 975 1,649 ‐ 1,649
Total Other Than Intra‐Governmental 152,613 811 1,051 154,475 ‐ 154,475
Total Liabilities 152,613 844 2,627 156,084 ‐ 156,084
Net Position
Unexpended Appropriations 200 ‐ ‐ 200 ‐ 200
Cumulative Results of Operations 35,796 5,126 4,337 45,259 ‐ 45,259
Total Liabilities and Net Position $ 188,609 $ 5,970 $ 6,964 $ 201,543 $ ‐$ 201,543
DEPARTMENT OF THE TREASURY 157
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Summary Information for Funds from Dedicated Collections
as of and for the Fiscal Year Ended September 30, 2022
Public
Enterprise/
Revolving/
Exchange Trust Eliminations
Stabilization Revolving Other FDC Combined between Consolidated
(in millions) Fund Funds Funds FDC Funds FDC Funds FDC Funds
Statement of Net Cost
Gross Cost $ 24,750 $ 6,865 $ 1,346 $ 32,961 $ ‐$ 32,961
Less: Earned Revenue (20,126) (7,223) (384) (27,733) ‐ (27,733)
Gains/Losses on Pension, ORB, or OPEB Assumption ‐ (29) ‐ (29) ‐ (29)
Total Net Cost of (Revenue From) Operations $ 4,624 $ (387)$ 962 $ 5,199 $ ‐$ 5,199
Statement of Changes in Net Position
Cumulative Results of Operations:
Beginning Balance $ 40,420 $ 4,888 $ 3,870 $ 49,178 $ ‐$ 49,178
Individual Income Tax ‐ ‐ 21 21 ‐ 21
Intra‐Governmental Non‐Exchange Revenue ‐ ‐ 432 432 ‐ 432
Donations and Forfeitures of Cash/Equivalent ‐ ‐ 721 721 ‐ 721
Transfers In/Out Without Reimbursement (95) (114) (482) (691) ‐ (691)
Donation/Forfeiture of Property ‐ ‐ 172 172 ‐ 172
Imputed Financing Sources ‐ 64 7 71 ‐ 71
Transfers to the General Fund and Other 95 (99) 558 554 ‐ 554
Net Revenue (Cost) of Operations (4,624) 387 (962) (5,199) ‐ (5,199)
Net Change in Cumulative Results of Operations (4,624) 238 467 (3,919) ‐ (3,919)
Ending Balance $ 35,796 $ 5,126 $ 4,337 $ 45,259 $ ‐$ 45,259
158 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Summary Information for Funds from Dedicated Collections
as of and for the Fiscal Year Ended September 30, 2021
Public
Enterprise/
Revolving/
Exchange Trust Eliminations
Stabilization Revolving Other FDC Combined between Consolidated
(in millions) Fund Funds Funds FDC Funds FDC Funds FDC Funds
ASSETS
Intra‐Governmental:
Fund Balance $ ‐$ 1,647 $ 1,672 $ 3,319 $ ‐$ 3,319
Investments, Net 22,837 2,103 3,748 28,688 ‐ 28,688
Other Assets ‐ 5 ‐ 5 ‐ 5
Total Intra‐Governmental 22,837 3,755 5,420 32,012 ‐ 32,012
Other Than Intra‐Governmental
Cash, Foreign Currency, and Other Monetary Assets 179,554 ‐ 100 179,654 ‐ 179,654
Taxes, Interest, and Other Receivables, Net ‐ 122 219 341 ‐ 341
Other Investments, Net 5,265 5 ‐ 5,270 ‐ 5,270
General Property, Plant, and Equipment, Net ‐ 898 23 921 ‐ 921
Other Assets ‐ 902 161 1,063 ‐ 1,063
Total Other Than Intra‐Governmental 184,819 1,927 503 187,249 ‐ 187,249
Total Assets $ 207,656 $ 5,682 $ 5,923 $ 219,261 $ ‐$ 219,261
LIABILITIES
Intra‐Governmental
Due To the General Fund $ ‐$ ‐$ 893 $ 893 $ ‐$ 893
Other ‐ 34 848 882 ‐ 882
Total Intra‐Governmental ‐ 34 1,741 1,775 ‐ 1,775
Other Than Intra‐Governmental
Other Payables 11 79 112 202 ‐ 202
Special Drawing Right Certificates Issued to the Federal
Reserve 5,200 ‐ ‐ 5,200 ‐ 5,200
Allocation of Special Drawing Rights 161,825 ‐ ‐ 161,825 ‐ 161,825
Other ‐ 681 200 881 ‐ 881
Total Other Than Intra‐Governmental 167,036 760 312 168,108 ‐ 168,108
Total Liabilities 167,036 794 2,053 169,883 ‐ 169,883
Net Position
Unexpended Appropriations 200 ‐ ‐ 200 ‐ 200
Cumulative Results of Operations 40,420 4,888 3,870 49,178 ‐ 49,178
Total Liabilities and Net Position $ 207,656 $ 5,682 $ 5,923 $ 219,261 $ ‐$ 219,261
DEPARTMENT OF THE TREASURY 159
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Summary Information for Funds from Dedicated Collections
as of and for the Fiscal Year Ended September 30, 2021
Public
Enterprise/
Revolving/
Exchange Trust Eliminations
Stabilization Revolving Other FDC Combined between Consolidated
(in millions) Fund Funds Funds FDC Funds FDC Funds FDC Funds
Statement of Net Cost
Gross Cost $ 8,230 $ 6,970 $ 955 $ 16,155 $ ‐$ 16,155
Less: Earned Revenue (7,523) (7,098) (272) (14,893) ‐ (14,893)
Gains/Losses on Pension, ORB, or OPEB Assumption ‐ (4) ‐ (4) ‐ (4)
Total Net Cost of (Revenue From) Operations $ 707 $ (132)$ 683 $ 1,258 $ ‐$ 1,258
Statement of Changes in Net Position
Cumulative Results of Operations:
Beginning Balance $ 41,127 $ 4,407 $ 3,310 $ 48,844 $ ‐$ 48,844
Individual Income Tax ‐ ‐ 24 24 ‐ 24
Intra‐Governmental Non‐Exchange Revenue ‐ ‐ 419 419 ‐ 419
Donations and Forfeitures of Cash/Equivalent ‐ ‐ 285 285 ‐ 285
Transfers In/Out Without Reimbursement (23) ‐ (227) (250) ‐ (250)
Donation/Forfeiture of Property ‐ ‐ 185 185 ‐ 185
Imputed Financing Sources ‐ 74 6 80 ‐ 80
Transfers to the General Fund and Other 23 275 551 849 ‐ 849
Net Revenue (Cost) of Operations (707) 132 (683) (1,258) ‐ (1,258)
Net Change in Cumulative Results of Operations (707) 481 560 334 ‐ 334
Ending Balance $ 40,420 $ 4,888 $ 3,870 $ 49,178 $ ‐$ 49,178
160 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
25. RECONCILIATION OF NET COST OF TREASURY OPERATIONS AND
NON-ENTITY COSTS TO AGENCY OUTLAYS, NET
The Reconciliation of Net Cost of Treasury Operations and Non-Entity Costs (referred to as “Net Cost” for purposes of this
note) to Agency Outlays, Net (referred to as “Net Outlays” for purposes of this note) depicts the difference between
proprietary information and budgetary accounting information. Proprietary financial accounting information is intended to
depict the U.S. government’s financial operations and financial position presented on an accrual basis in accordance with
GAAP, which includes the recognition of assets and liabilities for which collections and payments, respectively, have or have
not been made. In contrast, we use budgetary accounting information for planning and control purposes, and it includes net
outlays that reflect both the receipt and use of cash, as well as reporting of the federal deficit. “Agency Outlays, Net” also
includes $81.2 billion and $69.2 billion of interest accrued on outstanding public debt as of September 30, 2022 and 2021,
respectively; as well as $28.7 billion and $9.3 billion of net amortization of discounts on outstanding public debt as of
September 30, 2022 and 2021, respectively. These amounts represent non-cash outlays that have not yet been disbursed.
The reconciliation of Net Cost (presented on an accrual basis) and Net Outlays (presented on a budgetary basis) reflects the
relationship between proprietary accounting and budgetary information. The reconciliation serves not only to identify costs
paid in the past and those that will be paid in the future, but also to assure integrity between financial and budgetary
accounting. The following is a description of principal transactions that result in differences between our proprietary net
costs and budgetary net outlays:
Non-Entity Activity – Represents activity related to assets that we hold and manage on behalf of the General Fund but
are not available for our use. We removed this activity from Net Cost through inclusion of change in asset activity,
however, it has no impact on either Net Cost or Net Outlays and must be included as an Other Reconciling Item.
Accrued Liabilities on Federal Debt – Represents, among other things, accrued interest and discount on federal debt
that has been recorded by Fiscal Service and only impacts the Statement of Changes in Net Position. We removed this
activity Net Cost through inclusion of change in liability activity, however, it has no impact on either Net Cost or Net
Outlays and must be included as an Other Reconciling Item.
Intradepartmental Eliminations – Represents intra-agency activity that is included in our Net Outlays, which is
presented on a combined basis. As we report Net Cost on a consolidated basis, we exclude this intra-agency activity. To
reconcile between combined and consolidated amounts, we must remove intra-agency transactions and only present
activity with other federal agencies and with the public.
DEPARTMENT OF THE TREASURY 161
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
For the fiscal years ended September 30, 2022 and 2021, the Reconciliation of Net Cost of Treasury Operations and Non-
Entity Costs to Agency Outlays, Net consisted of the following:
Other Than
Intra‐ Intra‐
(in millions) Governmental Governmental 2022 Total
Total Net Cost of Treasury Operations and Non‐Entity Costs $ 194,394 $ 683,733 $ 878,127
Components of Net Operating Cost Not Part of Budgetary Outlays:
Liquidation Preference of GSEs Preferred Stock and Valuation Changes (Notes 11 and 20) ‐ 2,860 2,860
Property, Plant, and Equipment Depreciation Expense and Disposals (Note 14) ‐ (521) (521)
Unrealized Valuation (Loss) on Special Drawing Rights ‐ (473) (473)
Unrealized Valuation (Loss) and Sales/Dispositions (Loss) on Investments (Note 13) ‐ (8,379) (8,379)
Year‐End Credit Reform Subsidy Accrual Re‐Estimates ‐ (804) (804)
Adjustments to Prior Year Credit Reform Re‐Estimates accrual ‐ 1,163 1,163
Increase/(Decrease) in Assets:
Loans and Interest Receivable (Notes 3, 7, and 10) (182,515) (2,549) (185,064)
Advances to Trust Funds (Note 3) (44,080) ‐ (44,080)
Due From the General Fund (Note 4) 2,254,486 ‐ 2,254,486
Cash, Foreign Currency, and Other Monetary Assets (Note 5) ‐ 420,257 420,257
Advances and Prepayments (Note 10) ‐ (30,892) (30,892)
Other Assets 42 382 424
(Increase)/Decrease in Liabilities:
Federal Debt and Interest Payable (Notes 4 and 16) (492,153) (1,983,477) (2,475,630)
Liability for Restoration of Federal Debt Principal and Interest (Notes 4 and 16) 60,562 157,035 217,597
Due To the General Fund ‐ Excludes Custodial Liability Activity (Note 4) (185,470) ‐ (185,470)
Other Liabilities 1,339 (3,240) (1,901)
Other Financing Sources:
Imputed Costs (780) ‐ (780)
Total Components of Net Operating Cost Not Part of Budgetary Outlays 1,411,431 (1,448,638) (37,207)
Components of Budgetary Outlays That Are Not Part of Net Cost:
Acquisition of Property, Plant and Equipment (Note 14) ‐ 597 597
Acquisition of Other Investments, Net (Note 13) ‐ 21,343 21,343
Sale/Repayment of Other Investments, Net (Note 13) ‐ (12,208) (12,208)
Other Financing Sources:
Transfers (In)/Out Without Reimbursement 147 ‐ 147
Total Components of Budgetary Outlays That Are Not Part of Net Cost 147 9,732 9,879
Other Reconciling Items:
Distributed Offsetting Receipts ‐ (65,142) (65,142)
Non‐Entity Activity 53,405 ‐ 53,405
Accrued Liabilities on Federal Debt (4,882) ‐ (4,882)
Other 781 (1,476) (695)
Intradepartmental Eliminations (5,316) ‐ (5,316)
Total Other Reconciling Items 43,988 (66,618) (22,630)
Agency Outlays, Net $ 1,649,960 $ (821,791)$ 828,169
162 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Other Than
Intra‐ Intra‐
(in millions) Governmental Governmental 2021 Total
Total Net Cost of Treasury Operations and Non‐Entity Costs $ 148,680 $ 416,615 $ 565,295
Components of Net Operating Cost Not Part of Budgetary Outlays:
Liquidation Preference of GSEs Preferred Stock and Valuation Changes (Notes 11 and 20) ‐ 111,950 111,950
Property, Plant, and Equipment Depreciation Expense and Disposals (Note 14) ‐ (533) (533)
Unrealized Valuation (Loss) on Investments ‐ (284) (284)
Unrealized Valuation Gain on Special Drawing Rights ‐ 1,792 1,792
Year‐end Credit Reform Subsidy Accrual Re‐Estimates ‐ (9,125) (9,125)
Increase/(Decrease) in Assets:
Loans and Interest Receivable (Notes 3 and 7) 59,474 (764) 58,710
Advances to Trust Funds (Note 3) 54,212 ‐ 54,212
Due From the General Fund (Note 4) 1,716,162 ‐ 1,716,162
Cash, Foreign Currency, and Other Monetary Assets (Note 5) ‐ (1,460,334) (1,460,334)
Taxes, Interest, and Other Receivables, Net (entity activity only) (Note 8) ‐ 582 582
COVID‐19 Advances (Note 10) ‐ 187,171 187,171
COVID‐19 Notes and Interest Receivable (Note 10) ‐ 8,357 8,357
COVID‐19 Other Assets (Note 10) ‐ (119) (119)
Other Assets 110 220 330
(Increase)/Decrease in Liabilities:
Federal Debt and Interest Payable (Notes 4 and 16) (219,956) (1,262,368) (1,482,324)
Liability for Restoration of Federal Debt Principal and Interest (Notes 4 and 16) (60,562) (157,035) (217,597)
Due To the General Fund ‐ Excludes Custodial Liability Activity (Note 4) 1,409,682 ‐ 1,409,682
Allocation of Special Drawing Rights (Note 5) ‐ (112,834) (112,834)
Refunds Payable (Note 4) ‐ (2,498) (2,498)
Other Liabilities (Note 19) 268 (1,974) (1,706)
Other Financing Sources:
Imputed Costs (762) ‐ (762)
Total Components of Net Operating Cost Not Part of Budgetary Outlays 2,958,628 (2,697,796) 260,832
Components of Budgetary Outlays That Are Not Part of Net Cost:
Acquisition of Property, Plant and Equipment (Note 14) ‐ 571 571
Acquisition of Investments ‐ 9,300 9,300
Sale of Investments ‐ (19,199) (19,199)
Sale of COVID‐19 Other Assets (Note 10) ‐ (1,500) (1,500)
Other Financing Sources:
Transfers (In)/Out Without Reimbursement 644 ‐ 644
Total Components of Budgetary Outlays That Are Not Part of Net Cost 644 (10,828) (10,184)
Other Reconciling Items:
Distributed Offsetting Receipts ‐ (73,645) (73,645)
Non‐Entity Activity 177,828 ‐ 177,828
Accrued Liabilities on Federal Debt (12,300) ‐ (12,300)
Other Reconciling Items 455 2,228 2,683
Intradepartmental Eliminations (77,884) ‐ (77,884)
Total Other Reconciling Items 88,099 (71,417) 16,682
Agency Outlays, Net $ 3,196,051 $ (2,363,426)$ 832,625
DEPARTMENT OF THE TREASURY 163
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
26. SCHEDULE OF FIDUCIARY ACTIVITY
We have identified the following 21 funds as meeting the criteria for fiduciary activity. Details of the funds are provided
below.
Bureau Fund Code Authority Fund Title/Description
Fiscal Service 020X6133 31 USC 1322 Payment of Unclaimed Monies
BEP 020X6513.013 31 USC 5119 Mutilated Currency Claims Funds
Fiscal Service 020X6045 31 USC 3328 Proceeds, Payments of Unpaid Checks
Fiscal Service 020X6048 31 USC 3329, 3330 Proceeds of Withheld Foreign Checks
Fiscal Service 020015X6078 50 APP. USC 2012 War Claims Fund, Foreign Claims Settlement Commission
Fiscal Service 020X6092 31 USC 1321 Debt Management Operations
Fiscal Service 020X6104 22 USC 1627 Albanian Claims Fund, Treasury
Fiscal Service 020X6210 22 USC 1623 Iraq Claims Settlement Fund
Fiscal Service 020X6309 22 USC 1627(a) Libyan Claims Settlement Fund
Fiscal Service 020X6312 22 USC 1627 Iranian Claims Settlement Fund
Fiscal Service 020X6314 22 USC 1644g German Democrat Settlement Fund
Fiscal Service 020X6315 22 USC 1645h Vietnam Claims Settlement Fund
Fiscal Service 020X6501.018 31 USC 3513 Small Escrow Amounts
Fiscal Service 020X6720 31 USC 3513 Small Difference Account for Deposit and Check Adjustments
Fiscal Service 020X6830 104 Stat. 1061 Net Interest Payments to/from State
Fiscal Service 020X6999 31 USC 3513 Accounts Payable, Check Issue Underdrafts
Fiscal Service 020X6317.001 22 USC 2431 Belize Escrow, Debt Reduction
IRS 020X6737 90 Stat. 269‐270 Internal Revenue Collections for Northern Mariana Island
IRS 020X6738 31 USC 3513 Coverover Withholdings‐U.S. Virgin Islands
IRS 020X6740 31 USC 3515 Coverover Withholdings‐Guam
IRS 020X6741 31 USC 3513 Coverover Withholdings‐American Samoa
“Payment of Unclaimed Monies” is a fund authorized by 31 USC 1322, permitting the Fiscal Service to collect unclaimed
monies on behalf of the public. Our other fiduciary activities as listed above are included in All Other Fiduciary Funds.
Schedule of Fiduciary Activity
2022 2021
Payment of All Payment of All
Unclaimed Other Total Unclaimed Other Total
Monies Fiduciary Fiduciary Monies Fiduciary Fiduciary
(in millions) Fund Funds Funds Fund Funds Funds
Fiduciary Net Assets, Beginning of
the Year $ 890 $ 154 $ 1,044 $ 855 $ 150 $ 1,005
Increases:
Contributions to Fiduciary Net Assets 84 1,096 1,180 43 5,734 5,777
Total Increases 84 1,096 1,180 43 5,734 5,777
Decreases:
Disbursements to and on behalf
of beneficiaries ‐ (1,106) (1,106) (8) (5,730) (5,738)
Total Decreases ‐ (1,106) (1,106) (8) (5,730) (5,738)
Net Increase (Decrease) in
Fiduciary Assets 84 (10) 74 35 4 39
Fiduciary Net Assets, End of Year $ 974 $ 144 $ 1,118 $ 890 $ 154 $ 1,044
164 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Schedule of Fiduciary Net Assets
2022 2021
Payment of All Payment of All
Unclaimed Other Total Unclaimed Other Total
Monies Fiduciary Fiduciary Monies Fiduciary Fiduciary
(in millions) Fund Funds Funds Fund Funds Funds
Fiduciary Net Assets
Fund Balance with Treasury $ 974 $ 143 $ 1,117 $ 890 $ 153 $ 1,043
Investments in Treasury Securities ‐ 1 1 ‐ 1 1
Total Fiduciary Assets 974 144 1,118 890 154 1,044
Total Fiduciary Net Assets $ 974 $ 144 $ 1,118 $ 890 $ 154 $ 1,044
27. COMMITMENTS AND CONTINGENCIES
LEGAL CONTINGENCIES
We are a party in various administrative proceedings, legal actions, and claims, which may ultimately result in settlements
or decisions adverse to the U.S. government. These contingent liabilities arise in the normal course of operations, and their
ultimate disposition is unknown. We disclose contingent liabilities where the conditions for liability recognition have not
been met and the likelihood of unfavorable outcome is more than remote. We do not accrue for possible losses related to
cases where we cannot estimate the potential loss or the likelihood of an unfavorable outcome is less than probable.
In some cases, a portion of any loss that may occur may be paid by our Judgment Fund, which is separate from our operating
resources. For cases related to the Contract Disputes Act of 1978 (P.L. 95-563) and awards under federal anti-discrimination
and whistle-blower protection acts, we must reimburse the Judgment Fund from future appropriations.
In the opinion of our management and legal counsel, based on information available as of the date of this report, the
expected outcome of other legal actions, individually or in the aggregate, will not have a materially adverse effect on our
consolidated financial statements, except for the pending legal actions described below which may have a materially adverse
impact on our consolidated financial statements depending on the outcomes of the cases.
Pending Legal Actions
Tribal Trust Fund Cases: Native American tribes have filed numerous cases in the U.S. District Courts seeking a
declaration that the U.S. has not provided the tribes with a full and complete accounting of their trust funds, and also
seeking an order requiring the U.S. government to provide such an accounting. In addition, there are a number of other
related cases seeking damages in the U.S. Court of Federal Claims, that do not name Treasury as a defendant. The U.S.
government is currently in discussion with counsel representing most of the remaining plaintiff tribes with tribal trust
fund cases pending against the U. S. about the feasibility of an out-of-court settlement. Plaintiff tribes in several of the
pending cases have chosen to pursue active litigation, rather than settlement discussion, and the U.S. government is
litigating those cases vigorously. We are unable to determine the likelihood of an unfavorable outcome or an estimate of
potential loss at this time.
GSE Related Cases: A number of cases were filed in the U.S. Court of Federal Claims and U.S. District Courts in which
the plaintiffs allege, among other things, that the U.S. government took their property, breached contractual rights of
preferred and common stockholders, and breached fiduciary duties when the third amendments to the SPSPAs between
DEPARTMENT OF THE TREASURY 165
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
us and each GSE were executed in August 2012 (refer to Note 11). In the U.S. Court of Federal Claims, the plaintiffs
seek just compensation and other damages from the U.S. government. With respect to certain cases pending before the
U.S. Court of Federal Claims, the U.S. government’s motion to dismiss was granted with respect to certain claims and
denied with respect to certain other claims. The U.S. Court of Appeals for the Federal Circuit dismissed all of the
claims. Certain plaintiffs filed petitions for a writ of certiorari with the Supreme Court. In the U.S. District Courts, the
plaintiffs seek to set aside the third amendments to the SPSPAs as well as damages, and in some cases an injunction
that (i) results in changes to Treasury’s liquidation preference, or (ii) converts Treasury’s senior preferred stock to
common stock. Following the Supreme Court’s decision in June 2021, the Court left open the possibility that the
plaintiffs may be entitled to retrospective relief if the unconstitutional provision inflicted “compensable harm”. The
Fifth and Eighth Circuit Courts of Appeal remanded cases to the U.S. District Court for the Southern District of Texas
and the U.S. District Court for the District of Minnesota, where plaintiffs filed amended complaints and motions to
dismiss are pending. The Sixth Circuit Court of Appeals remanded a case to the U.S. District Court for the Western
District of Michigan to determine if the unconstitutional provision inflicted “compensable harm.” A case in the Eastern
District of Pennsylvania remains in litigation, and a motion to dismiss is pending. We are unable to determine the
likelihood of an unfavorable outcome or an estimate of potential loss in these cases at this time.
Adam Steele, Brittany Montrois, and Joseph Henchman v. United States: The plaintiffs filed a class claim in the U.S.
District Court for the District of Columbia seeking refunds of all user fees paid, plus interest, to obtain a preparer tax
identification number (PTIN). Additionally, the plaintiffs seek to force IRS to cease charging a user fee to obtain a PTIN
and asking for more information than is necessary to issue a PTIN. On June 1, 2017, the U.S. District Court for the
District of Columbia found for the plaintiffs in the previously mentioned matters, and the U.S. government appealed. In
March 2019, the U.S. Court of Appeals for the District of Columbia Circuit reversed the lower court’s opinion and
determined that IRS is entitled to charge a PTIN user fee. The case was remanded back to the lower court to determine
whether the amount of the fees previously charged was appropriate. As of September 30, 2022, the Department has
determined the likelihood of an unfavorable outcome as reasonably possible and estimated a potential loss within a
range of $0 to $230 million.
American Recovery and Reinvestment Tax Act of 2009 (ARRA) Cases: A number of cases were filed in the U.S. Court of
Federal Claims alleging that the U.S. government violated statutory and regulatory mandates to make proper payments
to plaintiffs under ARRA, Section 1603, for having placed certain energy properties into service. On October 28, 2016,
the U.S. Court of Federal Claims entered judgment against the U. S. in the amount of $207 million in one of the cases.
The U.S. government appealed the judgment, and on July 27, 2018, the Federal Circuit reversed the trial court’s
decision, vacated judgment, and remanded the case to the U.S. Court of Federal Claims for reassignment to a new judge.
The case remains in litigation. As of September 30, 2022 and 2021, we have determined there is a reasonably possible
likelihood of an unfavorable outcome in some of the cases totaling approximately $265 million and $324 million,
respectively.
Keough et al. v. United States et al.: A case was filed in the U.S. District Court for the District of Massachusetts seeking
to determine if the fees Treasury charges agencies in its Cross-Servicing program related to the collection of delinquent
debt are unlawful. We are unable to determine the likelihood of an unfavorable outcome or an estimate of potential loss
at this time.
Johnathan Dinh, et. al. v. United Sates: A purported class action lawsuit on behalf of certain bondholders was filed in
the U.S. Court of Federal Claims seeking to determine if the enactment of the Puerto Rico Oversight, Management, and
166 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Economic Stability Act, brought about the taking of the principal and interest due to them, as well as the destruction of
their lien on the fund that secured the bonds. We are unable to determine the likelihood of an unfavorable outcome or
an estimate of potential loss at this time.
Other Legal Actions: We are also involved in employment related legal actions (e.g., matters alleging discrimination and
other claims before federal courts, the Equal Employment Opportunity Commission, and the Merit Systems Protection
Board) for which an unfavorable outcome is reasonably possible, but for which an estimate of potential loss cannot be
determined at this time. We do not expect that these cases will have a material adverse effect on our consolidated
financial position or results.
OTHER COMMITMENTS AND CONTINGENCIES
Loan Commitments
Through the FFB, we make loan commitments with federal agencies, or private sector borrowers with loans guaranteed by
federal agencies, to extend them credit for their own use (refer to Notes 1Q and 3). As of September 30, 2022 and 2021, we
had remaining loan commitments totaling $34.7 billion and $40.7 billion, respectively.
In addition to the loan commitments, the FFB has agreements with agencies that permit FFB to issue loans up to amounts
authorized in those agencies’ annual program appropriations. The FFB also has agreements with the Federal Deposit
Insurance Corporation and the Farm Credit System Insurance Corporation that permit FFB to issue loans up to a specified
amount of $100 billion and $10 billion, respectively.
Multilateral Development Banks
On behalf of the U.S., we have subscribed to shares of certain MDBs, of which some shares represent capital commitments
that are callable under certain limited circumstances to meet the obligations of the respective MDB. There has never been,
nor is there anticipated, a call on the U.S. commitment for these subscriptions. As of September 30, 2022 and 2021, U.S.
callable capital in MDBs was as follows:
(in millions) 2022 2021
Inter‐American Development Bank $ 49,181 $ 49,181
International Bank for Reconstruction and Development 47,785 46,363
Asian Development Bank 18,701 18,702
African Development Bank 7,321 6,464
European Bank for Reconstruction and Development 3,055 3,055
North American Development Bank 1,530 1,530
Multilateral Investment Guarantee Agency(1) 315 315
Total $ 127,888 $ 125,610
(1) Both FY 2022 and 2021 include commitments of $22 million for the undisbursed portion of the subscription to paid-in capital
investments.
Terrorism Risk Insurance Program
Congress originally enacted the Terrorism Risk Insurance Act in November 2002, to address market disruptions resulting
from terrorist attacks on September 11, 2001. Most recently, the Terrorism Risk Insurance Program Reauthorization Act of
2019 (P.L. 116-94) extended the Terrorism Risk Insurance Program (TRIP) until December 31, 2027. The TRIP helps to
DEPARTMENT OF THE TREASURY 167
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
ensure available and affordable commercial property and casualty insurance for terrorism risk, and simultaneously allows
private markets to stabilize. The authority to pay claims under the TRIP is activated when the Secretary (in consultation
with the Secretary of the Department of Homeland Security and the Attorney General of the United States) certifies an “act
of terrorism.” In the event of certification of an “act of terrorism,” insurers may be eligible to receive reimbursement from
the U.S. government for associated insured losses – assuming an aggregate insured loss threshold (“program trigger”) has
been reached – once a particular insurer has satisfied its designated deductible amount. For calendar years 2022 and 2021,
the program trigger amount was $200 million. Insurance companies and the U.S. government will share insured losses
above insurer deductibles. The TRIP includes both mandatory and discretionary authority for Treasury to recoup federal
payments made under the TRIP through policyholder surcharges under certain circumstances, and contains provisions
designed to manage litigation arising from or relating to a certified act of terrorism. There were no claims under the TRIP as
of September 30, 2022 or 2021.
Exchange Stabilization Agreement
The North American Framework Agreement (NAFA), which we signed in 1994 and renew annually, is implemented by
Treasury through the Exchange Stabilization Agreement (ESA) with Mexico. Treasury, through the ESF, offers Mexico a
swap line with drawings contingent on certain conditions being met. Effective November 30, 2018, an amended and restated
ESA increased the potential size of the swap line from $3.0 billion to $9.0 billion. The amounts and terms (including the
assured source of repayment) of any swap arrangement under the NAFA and/or the ESA will have to be negotiated and
agreed to before any actual drawing can occur. There were no drawings outstanding on the ESF swap line as of September
30, 2022 and 2021.
Housing Programs Under TARP
We design housing programs under TARP to provide stability for both the housing market and homeowners. These
programs assist homeowners who are experiencing financial hardships to remain in their homes until their financial position
improves or they relocate to a more sustainable living situation, and to obtain other assistance designed to prevent
foreclosures. As of September 30, 2022 and 2021, we had committed up to $32.6 billion for these programs. Outstanding
commitments totaled $0.9 billion and $1.2 billion as of September 30, 2022 and 2021, respectively. For FY 2022 and 2021,
payments made on behalf of the housing programs under TARP totaled $334 million and $479 million, respectively, reported
within the Financial Program on our Consolidated Statements of Net Cost.
168 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
28. RECLASSIFICATION OF AGENCY FINANCIAL STATEMENTS TO
FINANCIAL REPORT OF THE U.S. GOVERNMENT FORMAT
To prepare the Financial Report of the U.S. Government (Financial Report), federal agencies submit to Fiscal Service a trial
balance containing financial statement account ending balances and activity. Fiscal Service uses this trial balance
information to reclassify agencies’ account balances and activity in a manner that conforms to the format of the financial
statement presentation in the Financial Report. Our reclassified financial statement includes the Reclassified Statement of
Net Cost, that is accessed using the Government-wide Treasury Account Symbol Adjusted Trial Balance System. Fiscal
Service eliminates all intragovernmental balances and activity between federal agencies in generating the Financial Report
consolidated financial statements. This note depicts how our AFR Consolidated Statements of Net Cost is adjusted to derive
the Financial Report reclassified financial statements prior to the elimination of intragovernmental balances and prior to the
aggregation of repeated Financial Report line items. A copy of the FY 2021 Financial Report can be found on the Fiscal
Service website and a copy of the FY 2022 Financial Report will be posted to the site as soon as it is released.
DEPARTMENT OF THE TREASURY 169
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Consolidated Statement of Net Cost
For the Fiscal Year Ended September 30, 2022
All Other Eliminations
Dedicated Dedicated Amounts between
Amounts Collections Collections (with Dedicated Total
AFR Financial Statement Line (in millions) Combined Eliminations Eliminations) and All Other (in millions) Reclassified Financial Statement Line
COST OF TREASURY OPERATIONS:
Total Program Gross Costs $ 217,018 $ 31,817 $ ‐$ 179,594 $ ‐$ 211,411 Non‐Federal Gross Costs
Intra‐governmental Costs
267 ‐ 2,136 ‐ 2,403 Benefit Program Costs
71 ‐ 709 ‐ 780 Imputed Costs
422 1 1,492 219 1,694 Buy/Sell Cost
52 ‐ 1 ‐ 53 Purchase of Assets
‐ ‐ 149 ‐ 149 Federal Securities Interest Expense
‐ ‐ 6 ‐ 6 Borrowing Losses
17 ‐ 558 ‐ 575 Other Expenses (without Reciprocals)
(52) ‐ (1) ‐ (53) Purchase of Assets Offset
777 1 5,050 219 5,607 Total Intra‐governmental Costs
Total Program Gross Costs 217,018 32,594 1 184,644 219 217,018 Total
Total Program Earned Revenues (30,712) (27,322) ‐ (837) ‐ (28,159) Non‐Federal Earned Revenue
Intra‐governmental Revenue
(50) ‐ (591) (215) (426) Buy/Sell Revenue
Federal Securities Interest Revenue Including Associated
(164) ‐ ‐ (164) ‐ Gains and Losses
‐ ‐ (2,050) ‐ (2,050) Borrowing and Other Interest Revenue
‐ ‐ (13) ‐ (13) Borrowing Gains
Collections Transferred in to a TAS Other Than the General
(64) ‐ ‐ ‐ (64) Fund of the U.S. Government ‐ Exchange
(278) ‐ (2,654) (379) (2,553) Total Intra‐governmental Earned Revenue
Total Program Earned Revenues (30,712) (27,600) ‐ (3,491) (379) (30,712) Total
Loss on Pension, ORB, or OPEB Assumption
Changes 519 (29) ‐ 548 ‐ 519 Non‐Federal Gross Costs
Total Net Cost of Treasury Operations 186,825 4,965 1 181,701 (160) 186,825 Total
170 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Consolidated Statement of Net Cost
For the Fiscal Year Ended September 30, 2022
All Other Eliminations
Dedicated Dedicated Amounts between
Amounts Collections Collections (with Dedicated Total
AFR Financial Statement Line (in millions) Combined Eliminations Eliminations) and All Other (in millions) Reclassified Financial Statement Line
NON‐ENTITY COSTS:
Federal Debt Interest $ 722,233 $ ‐$ ‐$ 495,721 $ ‐$ 495,721 Interest on Debt Held by the Public (Non‐Federal)
‐ ‐ 226,714 202 226,512 Federal Securities Interest Expense (Federal)
Total Federal Debt Interest 722,233 ‐ ‐ 722,435 202 722,233 Total
Restoration of Foregone Federal Debt Interest 726 ‐ ‐ (339) ‐ (339) Non‐Federal Gross Costs
‐ ‐ 812 ‐ 812 Interest on Debt Held by the Public (Non‐Federal)
Intra‐governmental Costs
‐ ‐ (70) ‐ (70) Buy/Sell Cost
‐ ‐ 323 ‐ 323 Federal Securities Interest Expense (Federal)
‐ ‐ 253 ‐ 253 Total Intra‐governmental Costs
Total Restoration of Foregone Federal Debt
Interest 726 ‐ ‐ 726 ‐ 726 Total
Less Interest Revenue from Loans (47,064) ‐ ‐ (47,064) ‐ (47,064) Borrowing and Other Interest Revenue (Federal)
Other Federal Costs, Net 17,180 321 ‐ 4,451 ‐ 4,772 Non‐Federal Gross Costs
Intra‐governmental Costs
‐ ‐ 118 ‐ 118 Buy/Sell Cost
‐ ‐ 12,699 ‐ 12,699 Borrowing and Other Interest Expenses
‐ ‐ 12,817 ‐ 12,817 Total Intra‐governmental Costs
(132) ‐ ‐ ‐ (132) Non‐Federal Earned Revenue
‐ ‐ (277) ‐ (277) Buy/Sell Revenue (Federal)
Total Other Federal Costs, Net 17,180 189 ‐ 16,991 ‐ 17,180 Total
DEPARTMENT OF THE TREASURY 171
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Consolidated Statement of Net Cost
For the Fiscal Year Ended September 30, 2022
All Other Eliminations
Dedicated Dedicated Amounts between
Amounts Collections Collections (with Dedicated Total
AFR Financial Statement Line (in millions) Combined Eliminations Eliminations) and All Other (in millions) Reclassified Financial Statement Line
GSEs Non‐Entity Revenue, Net (2,860) ‐ ‐ (2,860) ‐ (2,860) Non‐Federal Earned Revenue
COVID‐19 Non‐Entity Cost (Revenue), Net 1,945 ‐ ‐ 2,124 ‐ 2,124 Non‐Federal Gross Costs
‐ ‐ (179) ‐ (179) Non‐Federal Earned Revenue
Total COVID‐19 Non‐Entity Cost (Revenue), Net 1,945 ‐ ‐ 1,945 ‐ 1,945 Total
Other, Net (858) 46 ‐ 1 ‐ 47 Non‐Federal Gross Costs
‐ ‐ (4) ‐ (4) Non‐Federal Earned Revenue
‐ ‐ (901) ‐ (901) Buy/Sell Revenue (Federal)
Total Other, Net (858) 46 ‐ (904) ‐ (858) Total
Total Net Non‐Entity Costs 691,302 235 ‐ 691,269 202 691,302 Total
27 ‐ 338,243 ‐ 338,270 Non‐Federal Gross Costs (1)
Total Net Cost of Treasury Operations and Non‐
Entity Costs $ 878,127 $ 5,227 $ 1$ 1,211,213 $ 42 $ 1,216,397 Total Net Cost (1)
(1) Includes income tax credits of $338.3 billion, which are reported on the Treasury Statement of Custodial Activity within the “Less Refunds and Other Payments” line item. These costs are reported as part of net cost on the reclassified
financial statements for the purpose of presenting these costs in the manner presented in the Financial Report.
172 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED – SEE ACCOMPANYING
AUDITORS’ REPORT)
INTRODUCTION
This section provides the Required Supplementary Information as prescribed by accounting standards.
OTHER CLAIMS FOR REFUNDS
We estimated that $3.4 billion and $2.5 billion as of September 30, 2022 and 2021, respectively, may be payable as other
claims for tax refunds. This estimate represents amounts (principal and interest) that we may pay for claims pending
judicial review by the federal courts or internally, by Appeals. In FY 2022, the total estimated payout (including principal
and interest) for claims pending judicial review by the federal courts and appeals courts is $2.1 billion and $1.3 billion,
respectively. In FY 2021, the total estimated payout (including principal and interest) for claims pending judicial review by
the federal courts and appeals courts was $1.5 billion and $1.0 billion, respectively. To the extent judgments against the
government in these cases prompt other similarly situated taxpayers to file similar refund claims, these amounts could
become significantly greater.
IRS FEDERAL TAXES RECEIVABLE, NET
In accordance with SFFAS No. 7, some unpaid tax assessments do not meet the criteria for financial statement recognition.
Internal Revenue Code (IRC) 6201 authorizes and requires us to make inquiries, determinations, and assessments of all
taxes that taxpayers have not duly paid (including interest, additions to the tax, and assessable penalties) under the law.
Unpaid assessments result from taxpayers filing returns without sufficient payment, as well as from tax compliance
programs such as examination, under-reporter, substitute for return, and combined annual wage reporting. We also have
authority to abate the paid or unpaid portion of an assessed tax, interest, and penalty. Abatements occur for a number of
reasons and are a normal part of the tax administration process. Abatements may result in claims for refunds or a reduction
of the unpaid assessed amount.
Under federal accounting standards, we consider unpaid assessments agreed to by the taxpayer or the court federal taxes
receivable. We consider assessments not agreed to by taxpayer or the court compliance assessments. Due to the lack of
agreement, these compliance assessments are less likely to have future collection potential than those unpaid assessments
that we consider federal taxes receivable.
We call assessments with little or no future collection potential write-offs. Write-offs principally consist of amounts owed by
deceased, bankrupt, or defunct taxpayers. Write-offs have little or no future collection potential, but statutory provisions
require that we maintain these assessments until the statute for collection expires.
Although we do not consider compliance assessments and write-offs receivables under federal accounting standards, they
represent legally enforceable claims of the U.S. government.
The components of the total unpaid assessments at September 30, 2022 and 2021, were as follows:
DEPARTMENT OF THE TREASURY 173
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
(in millions) 2022 2021
Total Unpaid Assessments $ 602,000 $ 658,000
Less Compliance Assessments (88,000) (80,000)
Write‐Offs (77,000) (85,000)
Gross Federal Taxes Receivable 437,000 493,000
Less Allowance for Doubtful Accounts (201,000) (191,000)
Federal Taxes Receivable, Net $ 236,000 $ 302,000
Total unpaid assessments include $182 billion of non-delinquent taxes receivable, including $135 billion of non-delinquent
IRC 965(h) tax, which is collectible based on the type of taxpayer and the financial assistance of large dollar businesses. The
non-delinquent IRC 965 (h) component refers to taxpayers who elected to pay their IRC 965(h) tax on an eight-year
installment schedule. The remaining balance is related to Social Security tax deferral under the CARES Act, which contains
a provision for employers to defer the employer’s share of the Social Security portion of FICA, and the employer and
employee representative’s share of the RRTA. The deferred amount is due by December 31, 2022.
To eliminate double counting, the compliance assessments reported above exclude trust fund recovery penalties assessed
against officers and directors of businesses involved in the non-remittance of federal taxes withheld from their employees.
The penalties totaled $1.1 billion and $1.2 billion as of September 30, 2022 and 2021, respectively. We report the related
unpaid assessments of those businesses as taxes receivable or write-offs, but we may also recover portions of those
businesses’ unpaid assessments from any and all individual officers and directors against whom we assess a trust fund
recovery penalty.
ALCOHOL AND TOBACCO TAX AND TRADE BUREAU
As an agent of the U.S. government and as authorized by 26 USC, the TTB collects excise taxes from alcohol, tobacco,
firearms, and ammunition industries. In addition, the TTB collects special occupational taxes from certain tobacco
businesses. During FY 2022 and 2021, TTB collected approximately $19.6 billion and $20.3 billion in taxes, interest, and
other revenues, respectively. TTB also collects federal excise taxes on certain articles produced in Puerto Rico and the Virgin
Islands, and imported into the U.S. In accordance with 26 USC 7652, such taxes collected on rum imported into the U.S. are
“covered over” or paid into the treasuries of Puerto Rico and the Virgin Islands.
TTB remits substantially all of the taxes collected, net of related refund disbursements, to the General Fund. We further
distribute this revenue to federal agencies in accordance with various laws and regulations. The firearms and ammunition
excise taxes are an exception. TTB remits those revenues to the Fish and Wildlife Restoration Fund under provisions of the
Pittman-Robertson Act of 1937.
DEFERRED MAINTENANCE AND REPAIRS
In FY 2022 and 2021, we had no material amounts of deferred maintenance and repair costs to report on vehicles, buildings,
heritage assets, and structures we owned.
Deferred maintenance and repairs applies to owned PP&E. Deferred maintenance and repairs are maintenance and repair
activity that we had not performed when it should have been, or scheduled to be, and put off or delayed for a future period.
We define maintenance and repairs as the act of keeping capitalized assets in an “acceptable condition” to serve their
required mission. It includes preventive maintenance, normal repairs, replacement of parts and structural components, and
other activities needed to preserve the asset so that it continues to provide acceptable services and achieves its expected
useful life. Deferred maintenance and repairs excludes activities aimed at expanding the capacity or significantly upgrading
174 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
the assets to a different form than it was originally intended (i.e., activities related to capitalized improvements,
modernization, and/or restoration).
Logistic personnel use condition assessment surveys and/or the total life-cycle cost methods to determine if there are any
deferred maintenance and repairs needed to keep an asset in acceptable operating condition. We use periodic condition
assessments, physical inspections, and review of manufacturing and engineering specifications, work orders, and building
and other structure logistics reports under these methodologies.
LAND
We hold land for BEP and Mint operational use in the production of U.S. currency and circulating coins.
The estimated land acreage for operational use as of September 30, 2022, was as follows:
(in acreage) 2022
Beginning Balance 175
Increase in land for operational use 104
Total Land 279
STATEMENT OF BUDGETARY RESOURCES DISAGGREGATED BY TREASURY REPORTING ENTITY
The following tables provide the Statement of Budgetary Resources for the fiscal years ended September 30, 2022 and 2021
disaggregated by Treasury reporting entity rather than by Treasury major budget account, since we manage our budget at
the reporting entity level.
DEPARTMENT OF THE TREASURY 175
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Fiscal Year 2022 Combining Statement of Budgetary Resources Disaggregated
by Sub-organization Accounts
Bureau of Bureau of Fin. Crimes Internal
Engraving & the Fiscal Departmental Enforcement Revenue
(in millions): Printing Service Offices (a) Network Service
BUDGETARY RESOURCES
Unobligated balance from prior year budget authority, net
(discretionary and mandatory) $ 610 $ 1,910 $ 481,367 $ 29 $ 2,694
Appropriations (discretionary and mandatory) ‐ 738,997 2,536 202 92,527
Borrowing authority (discretionary and mandatory) ‐ ‐ 5,463 ‐ ‐
Spending authority from offsetting collections
(discretionary and mandatory) 1,253 321 4,515 24 154
Total Budgetary Resources $ 1,863 $ 741,228 $ 493,881 $ 255 $ 95,375
STATUS OF BUDGETARY RESOURCES
New obligations and upward adjustments $ 1,038 $ 739,482 $ 174,836 $ 180 $ 14,569
Unobligated balance, end of year:
Apportioned, unexpired accounts 704 1,636 269,422 72 34,338
Exempt from apportionment, unexpired accounts ‐ 4 90 ‐ 7
Unapportioned, unexpired accounts 121 93 49,095 ‐ 46,196
Unexpired unobligated balance, end of year 825 1,733 318,607 72 80,541
Expired unobligated balance, end of year ‐ 13 438 3 265
Unobligated balance, end of year 825 1,746 319,045 75 80,806
Total Status of Budgetary Resources $ 1,863 $ 741,228 $ 493,881 $ 255 $ 95,375
OUTLAYS, NET, AND DISBURSEMENTS, NET
Outlays, net (discretionary and mandatory) $ (39)$ 739,117 $ 140,249 $ 143 $ 13,855
Distributed offsetting receipts ‐ (52,374) (12,192) ‐ (576)
Agency Outlays, Net (Discretionary and Mandatory) $ (39)$ 686,743 $ 128,057 $ 143 $ 13,279
Disbursements, net (mandatory) $ ‐$ ‐$ (4,722)$ ‐$ ‐
(a) Of the $494 billion of Total Budgetary Resources for DO, ORP, GSE, ESF and OAS had $166 billion, $254 billion, $41 billion and
$16 billion, respectively. The remainder is spread throughout other offices.
176 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Fiscal Year 2022 Combining Statement of Budgetary Resources Disaggregated
by Sub-organization Accounts
Alcohol
and
Office of the Tobacco
Comptroller Tax and
of the Trade Non‐
(in millions): U. S. Mint Currency Bureau Budgetary Budgetary
BUDGETARY RESOURCES
Unobligated balance from prior year budget authority, net
(discretionary and mandatory) $ 1,182 $ 1,738 $ 8 $ 489,225 $ 313
Appropriations (discretionary and mandatory) ‐ ‐ 128 834,390 ‐
Borrowing authority (discretionary and mandatory) ‐ ‐ ‐ ‐ 5,463
Spending authority from offsetting collections
(discretionary and mandatory) 4,905 1,224 9 11,571 834
Total Budgetary Resources $ 6,087 $ 2,962 $ 145 $ 1,335,186 $ 6,610
STATUS OF BUDGETARY RESOURCES
New obligations and upward adjustments $ 5,206 $ 1,128 $ 138 $ 930,261 $ 6,316
Unobligated balance, end of year:
Apportioned, unexpired accounts 500 ‐ 5 306,461 216
Exempt from apportionment, unexpired accounts ‐ 1,834 ‐ 1,935 ‐
Unapportioned, unexpired accounts 381 ‐ ‐ 95,808 78
Unexpired unobligated balance, end of year 881 1,834 5 404,204 294
Expired unobligated balance, end of year ‐ ‐ 2 721 ‐
Unobligated balance, end of year 881 1,834 7 404,925 294
Total Status of Budgetary Resources $ 6,087 $ 2,962 $ 145 $ 1,335,186 $ 6,610
OUTLAYS, NET, AND DISBURSEMENTS, NET
Outlays, net (discretionary and mandatory) $ (18)$ (123)$ 127 $ 893,311 $ ‐
Distributed offsetting receipts ‐ ‐ ‐ (65,142) ‐
Agency Outlays, Net (Discretionary and Mandatory) $ (18)$ (123)$ 127 $ 828,169 $ ‐
Disbursements, net (mandatory) $ ‐$ ‐$ ‐ $ (4,722)
DEPARTMENT OF THE TREASURY 177
FY 2022 AGENCY FINANCIAL REPORT | FINANCIAL SECTION
Fiscal Year 2021 Combining Statement of Budgetary Resources Disaggregated
by Sub-organization Accounts
Bureau of Bureau of Fin. Crimes Internal
Engraving & the Fiscal Departmental Enforcement Revenue
(in millions): Printing Service Offices (a) Network Service
BUDGETARY RESOURCES
Unobligated balance from prior year budget authority, net
(discretionary and mandatory) $ 754 $ 1,915 $ 911,615 $ 35 $ 1,583
Appropriations (discretionary and mandatory) ‐ 588,905 1,015 127 14,900
Borrowing authority (discretionary and mandatory) ‐ ‐ 15,008 ‐ ‐
Spending authority from offsetting collections
(discretionary and mandatory) 1,098 315 3,690 9 151
Total Budgetary Resources $ 1,852 $ 591,135 $ 931,328 $ 171 $ 16,634
STATUS OF BUDGETARY RESOURCES
New obligations and upward adjustments $ 1,249 $ 589,326 $ 449,777 $ 145 $ 14,074
Unobligated balance, end of year:
Apportioned, unexpired accounts 462 1,704 437,837 21 2,296
Exempt from apportionment, unexpired accounts ‐ 3 77 ‐ 7
Unapportioned, unexpired accounts 141 90 43,501 ‐ 3
Unexpired unobligated balance, end of year 603 1,797 481,415 21 2,306
Expired unobligated balance, end of year ‐ 12 136 5 254
Unobligated balance, end of year 603 1,809 481,551 26 2,560
Total Status of Budgetary Resources $ 1,852 $ 591,135 $ 931,328 $ 171 $ 16,634
OUTLAYS, NET, AND DISBURSEMENTS, NET
Outlays, net (discretionary and mandatory) $ 70 $ 588,357 $ 304,892 $ 137 $ 13,290
Distributed offsetting receipts ‐ (51,762) (20,396) ‐ (1,487)
Agency Outlays, Net (Discretionary and Mandatory) $ 70 $ 536,595 $ 284,496 $ 137 $ 11,803
Disbursements, net (mandatory) $ ‐$ ‐$ (64,396)$ ‐$ ‐
(a) Of the $931 billion of Total Budgetary Resources for DO, ESF, GSE, and OAS had $173 billion, $254 billion,
and $14 billion, respectively. The remainder is spread throughout other offices.
178 DEPARTMENT OF THE TREASURY
FINANCIAL SECTION | FY 2022 AGENCY FINANCIAL REPORT
Fiscal Year 2021 Combining Statement of Budgetary Resources Disaggregated
by Sub-organization Accounts
Alcohol
and
Office of the Tobacco
Comptroller Tax and
of the Trade Non‐
(in millions): U. S. Mint Currency Bureau Budgetary Budgetary
BUDGETARY RESOURCES
Unobligated balance from prior year budget authority, net
(discretionary and mandatory) $ 618 $ 1,665 $ 9 $ 905,903 $ 12,291
Appropriations (discretionary and mandatory) ‐ ‐ 124 605,071 ‐
Borrowing authority (discretionary and mandatory) ‐ ‐ ‐ ‐ 15,008
Spending authority from offsetting collections
(discretionary and mandatory) 5,298 1,166 8 23,140 (11,405)
Total Budgetary Resources $ 5,916 $ 2,831 $ 141 $ 1,534,114 $ 15,894
STATUS OF BUDGETARY RESOURCES
New obligations and upward adjustments $ 5,030 $ 1,112 $ 135 $ 1,045,397 $ 15,451
Unobligated balance, end of year:
Apportioned, unexpired accounts 886 ‐ 5 443,193 18
Exempt from apportionment, unexpired accounts ‐ 1,719 ‐ 1,806 ‐
Unapportioned, unexpired accounts ‐ ‐ ‐ 43,310 425
Unexpired unobligated balance, end of year 886 1,719 5 488,309 443
Expired unobligated balance, end of year ‐ ‐ 1 408 ‐
Unobligated balance, end of year 886 1,719 6 488,717 443
Total Status of Budgetary Resources $ 5,916 $ 2,831 $ 141 $ 1,534,114 $ 15,894
OUTLAYS, NET, AND DISBURSEMENTS, NET
Outlays, net (discretionary and mandatory) $ (481)$ (115)$ 120 $ 906,270 $ ‐
Distributed offsetting receipts ‐ ‐ ‐ (73,645) ‐
Agency Outlays, Net (Discretionary and Mandatory) $ (481)$ (115)$ 120 $ 832,625 $ ‐
Disbursements, net (mandatory) $ ‐$ ‐$ ‐ $ (64,396)
DEPARTMENT OF THE TREASURY 179
[Page intentionally left blank]
SECTION A: TAX GAP AND TAX BURDEN ............................. 183
SECTION B: MANAGEMENT AND PERFORMANCE CHALLENGES AND
TREASURY RESPONSE .................................................. 185
SECTION C: SUMMARY OF FINANCIAL STATEMENT
AUDIT AND MANAGEMENT ASSURANCES ...................... 197
SECTION D: PAYMENT INTEGRITY ..................................... 245
SECTION E: CIVIL MONETARY PENALTIES............................ 252
SECTION F: GRANTS PROGRAMS ....................................... 259
SECTION G: CLIMATE‐RELATED FINANCIAL RISK ................... 260
APPENDIX: GLOSSARY OF ACRONYMS ................................ 261
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
SECTION A: SUMMARY OF FINANCIAL STATEMENT AUDIT AND
MANAGEMENT ASSURANCES
The following tables summarize the results of Treasury’s financial statement audit, as well as management’s assurances
regarding conformance with the Federal Managers’ Financial Integrity Act of 1982 (FMFIA) and compliance with the
Federal Financial Management Improvement Act of 1996 (FFMIA).
SUMMARY OF FINANCIAL STATEMENT AUDIT
Audit Opinion: Unmodified
Restatement: No
Beginning Ending
Material Weakness Balance New Resolved Consolidated Balance
Total Material Weaknesses 0 0 0 0 0
SUMMARY OF MANAGEMENT ASSURANCES
EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING (FMFIA SECTION 2)
Statement of Assurance: Unmodified
Beginning Ending
Material Weakness Balance New Resolved Consolidated Reassessed Balance
Total Material Weaknesses 0 0 0 0 0 0
EFFECTIVENESS OF INTERNAL CONTROL OVER OPERATIONS (FMFIA SECTION 2)
Statement of Assurance: Unmodified
Beginning Ending
Material Weakness Balance New Resolved Consolidated Reassessed Balance
Total Material Weaknesses 0 0 0 0 0 0
CONFORMANCE WITH FMFIA SECTION 4
Statement of Assurance: Federal systems conform, except for instances of nonconformance with financial management system
requirements
Beginning Ending
NonConformances Balance New Resolved Consolidated Reassessed Balance
Fiscal Service's Cash Management
Information Systems 1 1 0 0 0 0 1
Fiscal Service's Federal Debt Information
Systems 1 1 0 1 0 0 0
IRS's Unpaid Tax Assessments 1 1 0 0 0 0 1
IRS's Financial Reporting Systems 1 1 0 0 0 0 1
Total nonconformances 4 0 1 0 0 3
1
Refer to Independent Auditors’ Report in Part 2 of this report.
DEPARTMENT OF THE TREASURY 183
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
COMPLIANCE WITH FFMIA SECTION 803(a)
Agency Auditor
1. Federal Financial Management System Requirements Lack of compliance noted Lack of compliance noted
2. Applicable Federal Accounting Standards No lack of compliance noted No lack of compliance noted
3. U.S. Standard General Ledger (USSGL) at Transaction Level No lack of compliance noted No lack of compliance noted
FMFIA AND FFMIA REQUIREMENTS
The FMFIA requires agencies to establish and maintain internal controls to ensure that federal programs operate efficiently,
effectively, and in compliance with laws and regulations. The Secretary must evaluate and report annually on (a) whether
there is reasonable assurance that the Agency’s controls are achieving their intended objectives, and (b) material weaknesses
in the Agency’s controls (FMFIA Section 2). Additionally, the Secretary must evaluate and report separately on whether the
Agency’s financial management systems comply with government-wide requirements (FMFIA Section 4). The FFMIA
requires agencies to implement and maintain financial management systems that substantially comply with federal
financial management systems requirements, applicable federal accounting standards, and the USSGL at the transaction
level. The requirements of the FMFIA serve as an umbrella under which other reviews, evaluations, and audits should be
coordinated and considered to support management’s assertion about the effectiveness of internal control over operations,
reporting, and compliance with laws and regulations.
As of September 30, 2022, we had no material weaknesses under Section 2 or Section 4 of the FMFIA. However, we have
three instances of non-conformance with the federal financial management systems requirements of Section 4 of the FMFIA
down from four instances in FY 2021. In FY 2022, we were successful in downgrading a major component of one of our
significant deficiencies, related to the Bureau of the Fiscal Service’s debt management systems, which resolved the related
nonconformance. These remaining three instances of nonconformance also constitute a lack of compliance with federal
financial management system requirements, as reported above under FFMIA Section 803(a).
Fiscal Service has one nonconformance related to the deficiencies in its cash management information systems. The IRS has
two instances of nonconformance related to the deficiencies in unpaid tax assessments and financial reporting systems.
Refer to the section in Part 1 entitled Systems, Controls and Legal Compliance and the section in Part 2 entitled
Independent Auditors’ Report for additional information on the nonconformance issues.
184 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
SECTION B: TAX GAP AND TAX BURDEN
TAX GAP
The gross tax gap is the difference between the amount of tax the law imposes and what taxpayers actually pay on time. The
tax gap provides an estimate of the level of overall non-compliance and voluntary compliance during the relevant tax periods
and under the Internal Revenue Code (IRC) provisions in effect at the time. Tax gap estimates provide the Internal Revenue
Service (IRS) with periodic appraisals about the nature and extent of noncompliance for use in formulating tax
administration strategies.
Measuring and reporting on taxpayer compliance related to various tax provisions is inherently complex and challenging. As
a result, the IRS develops estimates of the tax gap in order to measure overall compliance with the current tax system. The
IRS also undertakes analyses of compliance behavior with respect to specific tax provisions, such as refundable and non-
refundable tax credits. The IRS enforcement strategies and legislative proposals are influenced by its National Research
Program (NRP), which involves conducting detailed audits of a statistically representative sample of taxpayers to estimate
compliance with individual income tax provisions and provides data on misreporting on voluntarily filed returns. To provide
greater reliability and precision of the compliance estimates, the IRS groups multiple years of data together. This results in
a timing difference between the time period from which the IRS generates the reported data and issues the report.
Misreporting can be in favor of the taxpayer or the government, although estimates indicate that the majority of
misreporting is associated with tax underreporting. Underreporting can manifest as either understatements of the liability
due at the time the taxpayer files the return, the taxpayer claiming and receiving an excessive refund, or a combination of
both.
Tax Gap Estimates
The IRS prepares the tax gap estimates periodically, depending on the availability of the NRP data to produce such
estimates for those components of the tax gap that depend on the NRP. In October 2022, the IRS released new estimates
covering the tax year (TY) 2014 – 2016 timeframe. The following is a brief overview of these estimates. A more in-depth
discussion of the tax gap is available on the IRS website at:
Federal Tax Compliance Research: Tax Gap Estimates for Tax Years 2014 – 2016 (https://www.irs.gov/pub/irs-
pdf/p1415.pdf); and
News Release: IRS updates tax gap estimates; new data points the way toward enhancing taxpayer service,
compliance efforts (https://www.irs.gov/newsroom/irs-updates-tax-gap-estimates-new-data-points-the-way-toward-
enhancing-taxpayer-service-compliance-efforts).
The gross tax gap is the amount of tax liability that is not paid voluntarily and on time. The average annual estimated gross
tax gap for the TY 2014 – 2016 timeframe is $496 billion. The net tax gap is the gross tax gap less tax that will be
subsequently paid, either paid voluntarily but late, or collected as a result of IRS administrative and enforcement activities.
In effect, the net tax gap is the portion of the gross tax gap that will not be paid. We estimate that $68 billion of the gross
tax gap will eventually be paid, resulting in a net tax gap of $428 billion.
DEPARTMENT OF THE TREASURY 185
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
The tax gap structure separates noncompliance into components by the type of tax and source of noncompliance. The three
primary sources of noncompliance that result in payment of less than the tax owed are: (i) the nonfiling tax gap, which is the
tax not paid on time by those who do not file required returns on time; (ii) the underreporting tax gap which is the net
understatement of tax on timely filed returns; and (iii) the underpayment tax gap, which is the amount of tax reported on
timely filed returns that is not paid on time. These components comprise $39 billion, $398 billion, and $59 billion,
respectively, of the $496 billion estimated annual average gross tax gap. We also group the gross tax gap estimates by type
of tax. The estimated gross tax gap for individual income tax, corporate income tax, employment tax, and estate and excise
tax is $357 billion, $41 billion, $93 billion, and $5 billion, respectively. The estimates below are excerpted from a schematic
representation, known as the tax gap “map” from the Tax Gap Estimates for Tax Years 2014 – 2016 publication.
TAX GAP MAP: TAX GAP ESTIMATES FOR TAX YEARS 2014 – 2016 (EXCERPT) ($ IN BILLIONS)
Notes:
*Totals include Excise Tax
# ‐ No estimate
Detail may not add to totals due to rounding.
(1) Includes adjustments, deductions, and exemptions.
(2) Includes the Alternative Minimum Tax and taxes reported in the “Other Taxes” section of the Form 1040 except for self‐employment tax and unreported social
security and Medicare tax (which are included in the employment tax gap estimates).
(3) The difference between: (1) the estimate of the individual income tax underreporting tax gap where underreported tax is calculated based on all misreporting
combined and, (2) the estimate of the individual income tax underreporting tax gap based on the sum of the tax gaps associated with each line item where the line
item tax gap is calculated based on the misreporting of that item only. There may be differences if the marginal tax rates are different in these two situations.
Tax Gap Estimation Methodology
Estimating the tax gap is inherently challenging and requires assessing alternative methods, assumptions, and data sources.
There is no single approach for estimating all the components of the tax gap. Each approach to estimating the tax gap is
subject to non-sampling error. Furthermore, the component estimates that are based on statistical samples are also subject
to sampling error. The uncertainty of the estimates is not readily captured by standard errors that typically accompany
estimates based on sample data. For that reason, standard errors, confidence intervals, and statistical comparisons across
years are not reported.
186 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
These estimates reflect an estimated average compliance rate and associated average annual tax gap for the TY 2014 – 2016
timeframe. The IRS estimates tax gap using a three-year timeframe to provide greater reliability and precision on the
estimates. For individual income tax compliance, the IRS uses pooled data from several tax years to estimate the tax gap
because the aggregated data provides more information upon which to base estimates of individual income tax
underreporting, categorized by sources of noncompliance. The individual income tax NRP reporting compliance studies are
the foundation for the individual income tax underreporting tax gap estimates. The methodology incorporates additional
data and analytical techniques designed to account for income that is not detected by the NRP audits. The IRS audits tax
returns to produce the compliance estimates for the underreporting tax gap related to individual income taxes. Since this
estimate is derived from actual compliance data obtained through the audit of tax returns, there is a resulting mismatch
between the latest tax year and the period from which the estimates are calculated.
Individual Income Tax Underreporting Tax Gap Estimates for Tax Years 2014 – 2016
The estimates in the table below provide a breakout of the components of the individual income tax underreporting tax gap,
which is the largest single contributor to the gross tax gap. For each income component, the table shows the component’s
share of the individual income tax underreporting tax gap. The table also shows each component’s share of the gross tax
gap. Business income accounts for 47 percent of the total individual income tax underreporting tax gap for TY 2014 – 2016.
This primarily consists of nonfarm proprietor income, which accounts for 29 percent; flow-through income (partnerships, S
corporations, and estates and trusts), which accounts for nine percent; rent and royalty income which accounts for seven
percent; and farm income, which accounts for two percent.
DEPARTMENT OF THE TREASURY 187
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
INDIVIDUAL INCOME TAX UNDERREPORTING TAX GAP BY SOURCE: TAX YEARS 2014–2016 (1)
($ IN BILLIONS)
Tax Line Item Amount
Share of Individual
Income Tax
Share of Gross Tax Underreporting Net Misreporting
Tax Return Line Items Tax Gap Gap Tax Gap Percentage (2)
Gross Tax Gap $ 496 100% N/A N/A
Individual Income Tax Underreporting Tax Gap $ 278 56% 100% 17%
Items Subject to Substantial Information Reporting and
Withholding $ 7 1% 2% 1%
Wages, salaries, tips $ 7 1% 2% 1%
Items Subject to Substantial Information Reporting $ 15 3% 5% 6%
(3) (3)
Interest income 1 4%
(3) (3)
Dividend income $ 1 4%
(3) (3)
State income tax refunds $ 1 9%
Pension & annuities $ 7 1% 2% 4%
(3) (3) (3)
Unemployment Compensation 12%
Taxable Social Security benefits $ 6 1% 2% 13%
Items Subject to Some Information Reporting $ 43 9% 15% 15%
Partnership, S‐Corp, Estate & Trust, etc. $ 25 5% 9% 12%
(4) (4) (4) (4)
Alimony income
Capital Gains $ 18 4% 6% 18%
Short‐term Capital Gains $ 6 1% 2% 17%
Long‐Term Capital Gains $ 12 2% 4% 16%
Items Subject to Little or No Information Reporting $ 126 25% 45% 55%
Form 4797 income $ 4 1% 1% 35%
Other income $ 16 3% 6% 42%
Nonfarm proprietor income $ 80 16% 29% 57%
Farm income $ 5 1% 2% 64%
Rents and royalties $ 21 4% 7% 53%
Other Taxes $ 4 1% 1% 6%
Unallocated Marginal Effects $ 11 2% 4% N/A
Income Offsets (Adjustments, Deductions, Exemptions) $ 25 5% 9% 6%
Total Tax Credits $ 42 9% 15% 38%
Filing Status $ 5 1% 2% N/A
(1)
The estimates are the annual averages for the TY 2014 – 2016 timeframe.
(2)
The net misreporting percentage is the net misreported amount divided by the sum of the absolute values of the amounts that should have been reported, expressed as a
percentage.
(3)
Less than 0.5 percent or $0.5 billion.
(4)
Estimate is based on very small sample size. Estimated tax gap is less than $0.5 billion and Net Misreporting Percentage is less than 5 percent.
Note: Individual amounts may not add to total due to rounding.
Individual Income Tax Credits
The IRS is responsible for administering 21 refundable and non-refundable individual income tax credits, including the
Earned Income Tax Credit (EITC), American Opportunity Tax Credit (AOTC), and Additional Child Tax Credit (ACTC).
Total tax credits account for 15 percent of the individual income tax underreporting tax gap. EITC accounts for 10 percent of
the individual income tax underreporting tax gap, followed by the refundable and non-refundable Child Tax Credit (CTC)
(three percent), and the refundable and non-refundable education credits (two percent).
188 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
INDIVIDUAL INCOME TAX UNDERREPORTING TAX GAP ESTIMATES FOR TAX CREDITS: TY 2014 – 2016 ($ IN
BILLIONS) (1)
Share of Individual
Income Tax
Underreporting Tax
Tax Return Line Items Tax Gap Share of Gross Tax Gap Gap
Gross Tax Gap $ 496 100% N/A
Individual Income Tax Underreporting Tax Gap $ 278 56% 100%
Total Credits $ 42 9% 15%
Earned Income Tax Credit $ 28 6% 10%
Education Credits (Including AOTC) $ 5 1% 2%
Child Tax Credit and Additional Child Tax Credit $ 8 2% 3%
(2)
All Other Credits $ 2 1%
(1)
The estimates are the annual averages for the TY 2014 – 2016 timeframe.
(2)
Less than 0.5 percent.
Note: Individual amounts may not add to total due to rounding.
Earned Income Tax Credit (EITC)
Congress enacted the EITC in 1975 through the Tax Reduction Act (Public Law (P.L.) 94-12), as a temporary anti-poverty
measure to offset inflation and rising Social Security payroll taxes. In addition to encouraging work and reducing
dependence on cash welfare, the credit was also viewed as a means to encourage economic growth in the face of the 1974
recession and rising food and energy prices. 1 Since then, the EITC has undergone numerous legislative changes, most
notably by the Revenue Act of 1978, which made the EITC a permanent refundable tax credit. Congress believed the EITC
would be an effective way to provide financial assistance to working families, with or without children, who might otherwise
rely on government subsidized welfare payments. For TY 2018, more than 26 million taxpayers received almost $65 billion
in EITCs, making the EITC one of the largest need-tested anti-poverty programs that provides cash benefits.2
American Opportunity Tax Credit (AOTC)
Education tax credits have generally been intended to provide federal financial assistance to students from middle-income
families who may not benefit from other forms of traditional student aid.3 Congress enacted the AOTC as part of the
American Recovery and Reinvestment Act of 2009 (P.L. 111-5) to replace the Hope Credit and to expand the education tax
credit to lower and upper-income students. The AOTC is a partially refundable tax credit that provides financial assistance
to taxpayers (or their children) with qualified educational expenses who are pursuing a higher education. Like other
education tax credits, the AOTC was enacted with the goal of making higher education more affordable.
Additional Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC)
Congress enacted the CTC to help ease the financial burdens for families with children as part of the Taxpayer Relief Act of
1997 (P.L. 105-34). If the CTC exceeds the tax liability, taxpayers may receive some or all of the credit as a refund, known as
the ACTC. Various legislative changes over the past 20 years have made significant changes to the CTC, which have
expanded it from a generally non-refundable credit available only to the middle and upper-middle class, to a partially
refundable credit that more low-income families are eligible to claim. Notably, the Tax Cuts and Jobs Act of 2017 (P.L. 115-
97) doubled the CTC, increased the amount that could be claimed as a refund, and allowed it to include more upper-middle
class families.
1 Congressional Research Report, The Earned Income Tax Credit (EITC): A Brief Legislative History, March 20, 2018.
2 Congressional Research Report, The Earned Income Tax Credit (EITC): How it Works and Who Receives It, Updated January 12, 2021.
3 Congressional Research Report, The American Opportunity Tax Credit: Overview, Analysis, and Policy Options, Updated June 4, 2018.
DEPARTMENT OF THE TREASURY 189
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Tax Gap Projections for Tax Years 2017-2019
The IRS included average annual tax gap projections for the TY 2017-2019 timeframe in its most recent release of tax gap
estimates. The tax gap projections are available for more recent years than are tax gap estimates, but tax gap projections
rely more heavily on assumptions because less data is available in these years.
As shown in the table, the average annual gross tax gap is projected to be $540 billion for TY 2017-2019. The projection of
enforced and other late payments is $70 billion, which yields a net tax gap projection of $470 billion. The projections of the
gross tax gap components for nonfiling, underreporting, and underpayment for the TY 2017-2019 timeframe are $41 billion,
$433 billion, and $66 billion respectively.
TAX GAP PROJECTIONS BY COMPONENT: TAX YEARS 2017-2019 ($ IN BILLIONS)
Share of Gross Tax
Tax Gap Component TY 2017‐2019 Gap
Estimated Total True Tax $3,621
Gross Tax Gap $540 100%
Voluntary Compliance Rate 85.1%
Enforced and Other Late Payments $70 6%
Net Tax Gap $470 1%
Net Compliance Rate 87.0% 2%
Nonfiling Tax Gap $41 8%
Individual Income Tax $33 6%
Self‐Employment Tax $7 1%
[3] [2]
Estate Tax
Underreporting Tax Gap $433 80%
Individual Income Tax $304 56%
Corporation Income Tax $37 7%
Small Corporations (assets under $10M) $15 3%
Large Corporations (assets of $10M or more) $22 4%
Employment Tax $91 17%
Self‐Employment Tax $58 11%
[3] [2]
Uncollected Social Security and Medicare Tax
FICA and FUTA Tax $32 6%
[2]
Estate Tax $1
Underpayment Tax Gap $66 12%
Individual Income Tax $53 10%
Corporation Income Tax $6 1%
Employment Tax $4 1%
Estate Tax $3 1%
[3] [2]
Excise Tax
1)
The projections are the annual averages for the TY 2017 – 2019 timeframe.
(2)
Less than 0.5 percent.
(3)
Less than $0.5 billion.
Note: Individual amounts may not add to total due to rounding.
Relationship of Tax Compliance Estimation to Improper Payments
190 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
The Payment Integrity Improvement Act (PIIA) requires additional reporting requirements for payment programs that are
determined to be susceptible to significant improper payments. The focus of PIIA, as well as related guidance issued by the
Office of Management and Budget (OMB), is on implementing internal controls to prevent and detect improper payments.
PIIA does not take into consideration all aspects of administering tax provisions in a system that relies heavily on voluntary
reporting. In keeping with PIIA requirements, the IRS reports risk assessments for refundable tax credits, as well as
improper payment (i.e., overclaim) estimates for the EITC, AOTC, ACTC and net PTC (refer to Part 3, Section D: Payment
Integrity, of this report).
The IRS follows the practice of conducting risk assessments largely because refundable tax credits may result in a payment
to the taxpayer in excess of tax liability. It can be challenging to distinguish between the portion of a credit that offsets an
individual tax liability versus the portion that is refundable. Determining the impact of a refundable tax credit depends on
multiple variables, including other return elements and information the taxpayer provides, some of which are unrelated to
the refundable tax credit in question.
The same features of the tax system and taxpayer behaviors that create the compliance problems with refundable tax credits
also create the risk of noncompliance with other tax provisions. Several credits enacted by Congress to promote social and
economic objectives (e.g., assisting particular groups of individuals or businesses) have eligibility rules that are often
complex and lead to high overclaim rates.
Tax refunds, which constitute a transfer of cash from the federal government to a taxpayer, are an integral part of the tax
system as a whole. The IRS tax gap estimation process measures compliance with the current tax system and always
includes noncompliance with refundable and non-refundable tax credits. Whether a tax credit results in a refund instead of
a reduction in tax liability depends on all of the taxpayers' characteristics, such as income, deductions, and other credits
claimed, and is not simply driven by the credit itself.
The IRS’s risk assessments on refundable tax credits have consistently concluded that overclaims are not rooted in internal
control deficiencies, but instead are due to the complexities of verifying eligibility, including unavailability of relevant third-
party data, for refundable tax credits within the time periods prescribed by the tax system. As we further explain in Part 3,
Section D, it is our position that refundable tax credit overclaims resulting in payment errors should not be reported under
the improper payments framework as RTCs are not “payments” as intended under the improper payments legislation. A
payment system is generally designed to implement internal controls that provide for appropriate verification and validation
prior to payments being made; however, the statutory structure and design for administering refundable tax credit refunds
prevents the IRS from verifying or validating such amounts prior to making a refund. Consequently, errors are not the
result of internal control weaknesses that we can remediate internally but are, in fact, the result of factors beyond our
control under current law and existing authority. Therefore, errors in taxpayer claims for credits are more appropriately
included in the analysis of tax compliance.
Refundable Tax Credits and the Challenges of Compliance
Refundable tax credits generally have different eligibility rules, often relating to personal family and living arrangements,
which determine eligibility. Complexity in the form of differing rules is a contributor to tax credit errors. Additionally, these
credits are difficult for the IRS to verify due to the lack of available and relevant third-party data.
DEPARTMENT OF THE TREASURY 191
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Eligibility rules for refundable tax credits contribute to the compliance burden for taxpayers and administrative costs for the
IRS. These rules differ by credit and are often complex because they must address complicated family relationships and
residency arrangements to determine eligibility. The relatively high overclaim error rates for these credits are a result, in
part, of this complexity. In some cases, due also in part to the complex rules, overclaims by an ineligible taxpayer could go to
another family member who is eligible for, but fails to claim, the credit. The lack of third-party data to verify eligibility
requirements for these refundable credits complicates the ability of the IRS to administer the credits. Such data may not
exist, may be unreliable or inaccurate, or may be reported to the IRS too late to be useful during tax return processing. The
IRS also has limited authority to correct mismatches at filing and must use audits to correct errors, which increases
taxpayer burden. The IRS continually looks for complete and accurate data sources to verify eligibility for claimed
refundable credits in order to reduce the burden on compliant taxpayers.
Faced with the complexities of claiming certain refundable credits, many potential credit recipients seek help filing their tax
returns from paid preparers. 50 percent of taxpayers claiming refundable credits use paid preparers. Unenrolled return
preparers, who prepare a significant number of EITC returns, are not subject to the same level of training and certification
requirements as other tax professionals and have higher error rates for EITC returns than taxpayers who prepare their own
returns or who hire enrolled return preparers.
The IRS has a responsibility to detect and address errors and misreporting on tax returns, including those claiming the
refundable credits. The IRS frequently enhances filters and other detection tools to improve the accuracy of tax returns and
reduce taxpayer burden, but in some instances, enforcement activities must take place. The IRS rejects millions of
electronically filed returns claiming refundable credits for a variety of reasons, such as missing forms, incorrect Social
Security numbers (SSNs), or if another taxpayer has claimed the same child. Most taxpayers can correct their electronic
returns and successfully re-file with little burden. In some cases, a taxpayer must print and submit a paper return,
resulting in refund delays. Despite the compliance burden and costs to the government associated with these refundable tax
credits, the burden to taxpayers may be lower than with other payment or benefit programs. For example, tax credit
recipients can self-certify eligibility; they do not need to meet with caseworkers, nor submit upfront documentation as is
required with some direct service anti-poverty programs, such as with the Supplemental Security Income or Temporary
Assistance for Needy Families programs. Increasing pre-refund screening for eligibility would increase the administrative
costs for refundable tax credits and may discourage eligible taxpayers from claiming the credits.
The IRS may initiate a correspondence audit if it identifies, through its scoring and selection process, potential
noncompliance with eligibility requirements. The IRS conducts most refundable credit audits before it issues a refund,
meaning the IRS holds the credit refund until the taxpayer substantiates eligibility. The IRS sends a letter to the taxpayer
requesting documentation showing that the taxpayer meets credit eligibility requirements. In addition to the refund delay,
taxpayers face the burden of gathering and sending in the requested information. In FY 2022, the IRS conducted 310,081
refundable credit exams, the majority through correspondence audits..
192 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
TAX BURDEN
The IRC creates the basis for a progressive tax system that applies higher rates of taxation to progressively higher levels of
income. The amount of taxable income can be adjusted through the application of exemptions and deductions, which will
influence the amount of taxes taxpayers owe. In addition, many taxpayers qualify for one or more refundable tax credits,
which collectively have a significant impact on tax administration, federal tax revenues, and refund payments.
The IRS measures tax liability by income level for individuals, and by revenue and assets for corporations. Using these data,
it is possible to illustrate how tax liability rises with increases in Adjusted Gross Income (AGI) for individuals (Figures 1.1
and 1.2 and Table 1). Similar data for corporations shows the tax burden based on the percentage of taxable income (Figure
2 and Table 2). This information is the most recent data available for individuals (TY 2020) and corporations (TY 2019).
DEPARTMENT OF THE TREASURY 193
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
INDIVIDUAL INCOME TAX LIABILITY
FIGURE 1.1: AVERAGE AGI REPORTED AND AVERAGE INDIVIDUAL INCOME TAX LIABILITY FOR TY 2020
FIGURE 1.2: INDIVIDUAL INCOME TAX LIABILITY AS A PERCENTAGE OF AGI FOR TY 2020
194 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
TABLE 1: INDIVIDUAL INCOME TAX DATA BY AGI FOR TY 2020
Average
Average AGI Income tax Income tax
Adjusted Gross Number of Total per return per return as a
Income taxable returns AGI income tax (in whole (in whole) percentage
(AGI) (in thousands) (in millions) (in millions) dollars) dollars) of AGI
Under $15,000 31,045 $ 232,112 $ 491 $ 7,477 $ 16 0.2%
$15,000 under
$30,000 29,265 655,347 12,849 22,394 439 2.0%
$30,000 under
$50,000 29,930 1,173,046 50,346 39,193 1,682 4.3%
$50,000 under
$100,000 36,983 2,635,417 192,163 71,260 5,196 7.3%
$100,000 under
$200,000 22,415 3,060,066 334,648 136,519 14,930 10.9%
$200,000 under
$500,000 7,615 2,187,229 366,794 287,226 48,167 16.8%
$500,000 or more 1,845 2,923,397 753,251 1,584,497 408,266 25.8%
Total 159,098 $ 12,866,614 $ 1,710,542
All negative AGI under $15,000 are treated as zero-dollar amount.
DEPARTMENT OF THE TREASURY 195
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
CORPORATION TAX LIABILITY
FIGURE 2: CORPORATION TAX LIABILITY AS A PERCENTAGE OF TAXABLE INCOME FOR TY 2019
TABLE 2: CORPORATION TAX DATA BY TOTAL ASSETS FOR TY 2019
Total Assets Income subject to tax Total income tax after credits Percentage of income tax
(in thousands) (in millions) (in millions) after credits to taxable income
Zero Assets $ 26,676 $ 5,240 19.6%
$1 under $500 8,235 1,669 20.0%
$500 under $1,000 5,279 1,080 20.5%
$1,000 under $5,000 18,004 3,629 20.2%
$5,000 under $10,000 11,642 2,281 19.6%
$10,000 under $25,000 15,884 3,122 19.7%
$25,000 under $50,000 14,549 2,821 19.4%
$50,000 under $100,000 16,588 3,166 19.1%
$100,000 under $250,000 25,381 4,781 18.8%
$250,000 under $500,000 25,573 4,652 18.2%
$500,000 under $2,500,000 111,437 19,156 17.2%
$2,500,000 or more 1,453,939 205,533 14.1%
Total $ 1,733,187 $ 257,130
196 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
SECTION C: MANAGEMENT AND PERFORMANCE CHALLENGES AND
TREASURY RESPONSE
In accordance with the Reports Consolidation Act of 2000, the Inspectors General are required to identify specific
management and performance challenges we face. At the end of each fiscal year, the Treasury Office of Inspector General
(OIG) and Treasury Inspector General for Tax Administration (TIGTA) send an update of these management challenges to
the Secretary of the Treasury (hereafter referred to as “Secretary”) and cite any new challenges for the upcoming fiscal year.
The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) identifies its management or performance
challenges for the Office of Financial Stability (OFS) separately in their quarterly report to Congress. This section contains
the OIG and TIGTA identified management and performance challenges and management’s response.
DEPARTMENT OF THE TREASURY 197
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
TREASURY INSPECTOR GENERAL MANAGEMENT CHALLENGES
DEPARTMENT OF THE TREASURY
W ASHINGTON, D.C. 20220
October 14, 2022
OFFICE OF
INSPECTOR GENERAL
INFORMATION MEMORANDUM FOR SECRETARY YELLEN
FROM: Richard K. Delmar /s/
Deputy Inspector General
SUBJECT: Management and Performance Challenges Facing the
Department of the Treasury (OIG-CA-23-002)
In accordance with the Reports Consolidation Act of 2000, we are providing you with our perspective on
the most serious management and performance challenges facing the Department of the Treasury (herein
“Treasury” or “the Department”). In this year’s memorandum, my office is reporting five challenges, one of
which is new and reports on the challenges faced with implementing climate initiatives. As shown below,
four challenges are repeated and updated from last year to include Treasury’s continued role in combatting
the economic fallout of the Coronavirus Disease 2019 (COVID-19) global pandemic, as well as its impacts
on related workforce and workstreams.
COVID-19 Pandemic Relief (Repeat)
Cyber Threats (Repeat)
Anti-Money Laundering/ Terrorist Financing and Bank Secrecy Act Enforcement (Repeat)
Information Technology Acquisition and Project Management (Repeat)
Climate Initiatives Risk (New)
In addition to the above challenges, we are reporting a concern about regulating digital assets.
We identified challenges and a concern based on the threat they pose to Treasury’s mission and
stakeholders’ interests. We also acknowledge the Department’s accomplishments and efforts over the past
year to address critical matters as noted within each challenge. That said, the COVID-19 pandemic caused a
global health emergency and economic crisis that Treasury continues to tackle. Furthermore, Treasury will
continue to provide financial assistance to the transportation industry and to all 50 states, units of local
government, U.S. territories, and tribal governments for the foreseeable future. As noted throughout this
memorandum, Treasury will need to continue to act swiftly and draw on its existing resources to meet
economic needs.
198 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
We are available to discuss our views on the management and performance challenges and the other matters
expressed in this memorandum in more detail.
cc: Anna Canfield Roth
Acting Assistant Secretary for Management
DEPARTMENT OF THE TREASURY 199
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Challenge 1: COVID-19 Pandemic Relief (Repeat)
The Coronavirus Disease 2019 (COVID-19) pandemic continues to affect the health and economic stability
of communities worldwide. In the early stages of the COVID-19 outbreak, Congress passed legislation in
succession to address the public health crisis and the economic fallout affecting individuals, businesses, and
many industry sectors. The Coronavirus Preparedness and Response Supplemental Appropriation Act of
2020, signed into law on March 6, 2020, authorized $8.3 billion in emergency funding to address health and
medical care. 1 Shortly thereafter, the Families First Coronavirus Response Act was enacted on March 18,
2020, which provided approximately $104 billion to address the financial stress of individuals and
households.2 The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)3 passed on March 27,
2020 and provided over $2.4 trillion in health and economic relief to hospitals and healthcare providers,
individuals and households, businesses and employees, as well as, states, local and tribal governments, and
federal agencies, among others. As the public health crisis continued into late 2020 and 2021, Congress
legislated additional relief in passing the Consolidated Appropriations Act, 20214 (CAA, 2021) on
December 27, 2020, and the American Rescue Plan Act of 20215 (ARP) on March 11, 2021. These laws
provided another $900 billion and $1.9 trillion of economic stimulus, respectively.
The Department of the Treasury (hereinafter Treasury or the Department) has been instrumental to the
implementation of economic relief provisions of the CARES Act, CAA, 2021, and ARP. As a result,
Treasury’s responsibilities and workloads expanded enormously. Treasury is tasked with disbursing over
$655 billion6 in aid to more than 35,000 recipients, including state, local, territorial, and tribal government
entities, in a relatively short period of time and with limited staffing. The Department is challenged with (1)
filling and transitioning key leadership positions for pandemic programs not fully established, (2) quickly
establishing internal controls, guidance, and methodologies for monitoring, reporting, and oversight of
funds disbursed, (3) data collection, quality, and reliability, and (4) lack of funding to sustain operations. In
addition, Treasury must carry the administrative and monitoring responsibilities in its new role resolving
Single Audit findings and potentially serving as cognizant agency for a significant number of entities 7 under
the Office of Management and Budget’s (OMB) Uniform Administrative Requirements, Cost Principles,
and Audit Requirements for Federal Awards. 8
Because of Treasury’s expanded responsibilities and workloads, pandemic recovery programs and
provisions of the CARES Act, CAA, 2021, and ARP within the oversight purview of my office, are
extensive and include programs that support transportation industry workers; renters and homeowners; and
state, local, territorial, and tribal government entities through direct financial assistance. The pandemic
programs Treasury is responsible for and their challenges are discussed below.
1 Public Law 116-123 (March 6, 2020).
2 Public Law 116-127 (March 18, 2020).
3 Public Law 116-136 (March 27, 2020).
4 Public Law 116-260 (December 27, 2020).
5 Public Law 117-2 (March 11, 2021).
6 Amount excludes Economic Impact Payments distributed by the Internal Revenue Service and support to small businesses under the Paycheck
Protection Program administered by the Small Business Administration.
7 Single Audit Act of 1984 (P.L 98-502; October 19, 1984), as amended by the Single Audit Act Amendments of 1996 (P.L 104-156; July 5, 1996).
8 https://www.ecfr.gov/current/title-2/part-200
200 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Financial Assistance Programs - Air Carrier Worker Support and Other Transportation Services
Payroll Support Programs
To maintain pay and benefits of airline industry workers, Treasury implemented the Air Carrier Worker
Support Program provisions of the CARES Act that authorized up to $63 billion of direct financial
assistance for passenger air carriers, cargo air carriers, and contractors. Using existing resources and
contractor support, Treasury quickly stood up the Payroll Support Program (PSP1) and made direct
payments of approximately $28.6 billion to 611 applicants as of April 7, 2022. Financial support for air
carrier workers was extended twice by CAA, 2021 and ARP which provided additional assistance to
passenger air carriers and contractors up to $16 billion and
$15 billion, respectively. Using the mechanisms that established PSP1, Treasury implemented the Payroll
Support Program Extension (PSP2) and the Payroll Support Program 3 (PSP3) to make corresponding
payments. As of July 27, 2022, Treasury disbursed approximately $15.6 billion to 489 applicants under
PSP2 and $14.6 billion to 484 applicants under PSP3.
My office will continue audits of PSP1 recipients’ certifications and initiate audits of certifications
submitted by PSP2 recipients in fiscal year 2023. My office is not mandated to audit the applicants’
certifications to receive PSP3 payments authorized under ARP. However, Treasury disbursed financial
assistance to passenger air carriers and contractors based on information submitted by recipients on their
PSP2 certifications, which we will audit. That said, my office plans to assess Treasury’s calculation of
award amounts under PSP3 and Treasury’s post-award monitoring of recipients under PSP1, PSP2, and
PSP3. It is incumbent upon the Department to implement and maintain strong internal controls over
recipients’ compliance with signed terms and conditions for receiving financial assistance. That is,
Treasury’s compliance monitoring function is essential to ensuring that recipients use funds for the
continuation of salaries and benefits as intended.
Coronavirus Economic Relief for Transportation Services
Congress expanded financial support to non-air carrier transportation service providers under the
Coronavirus Economic Relief for Transportation Services (CERTS) provisions of CAA, 2021. Treasury
established the CERTS Program that provides $2 billion in non-competitive grants to eligible companies
that certify revenue loss of 25 percent or more due to the COVID-19 pandemic. In consultation with the
Department of Transportation, Treasury provided initial guidelines on May 6, 2021, that included among
other things, the priority use of funds must be for payroll, although operating expenses and debt accrued to
maintain payroll are eligible uses. Treasury disbursed approximately $1.97 billion to 1,464 recipients as of
May 20, 2022. It is incumbent upon the Department to establish and maintain strong internal controls over
recipients’ compliance with grant agreements. Although there is no mandate directing my office to audit
CERT recipients, we plan to monitor and audit Treasury’s administration of the program.
Financial Assistance Programs - State, Local, U.S. Territorial, and Tribal Governments
Coronavirus Relief Fund
The $150 billion Coronavirus Relief Fund (CRF), established under Title VI of the Social Security Act, as
amended by Title V of the CARES Act, continues to be a large endeavor for both the Department and my
office. The Department disbursed the entire $150 billion in direct payments to states, units of local
government, the District of Columbia, U.S. territories, and tribal governments. Disbursement of funds was a
complicated undertaking given the number of recipients at varying levels of government and other payment
requirements of the CARES Act. As you are aware, the CARES Act created a unique challenge in
distinguishing between the programmatic administrative responsibility for payments made from the CRF
DEPARTMENT OF THE TREASURY 201
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
and the Treasury Office of Inspector General’s (OIG) independent oversight. Although Treasury is
authorized to make payments, the CARES Act assigned Treasury OIG with responsibility for monitoring
and oversight of the receipt, disbursement, and use of funds. Additionally, my office has authority to recoup
funds if it is determined that recipients fail to comply with uses of funds for COVID-19 related costs under
Section 601 (d), “Uses of Funds,” of the Social Security Act, as amended.9
The Department also has a fundamental role to clarify its policy10 over the uses of funds when interpretation
matters arise. As recipients are still in the process of reporting on and closing out their awards, we anticipate
that questions will continue to arise that will require interpretation. Providing as much clarity as possible is
essential for ensuring recipients understand the compliance requirements and are accountable and
transparent in how they report uses of funds. My office has received over 300 complaints regarding
recipient, and in some instances sub-recipient, uses of CRF proceeds that require continued collaboration
between the Department and my office.
Coronavirus State and Local Fiscal Recovery Funds
The Coronavirus State and Local Fiscal Recovery Funds provisions of ARP provide state, local, U.S.
territorial, and tribal governments another $350 billion under the Coronavirus State Fiscal Recovery Fund
and the Coronavirus Local Fiscal Recovery Fund (together referred to as SLFRF); $10 billion under the
Coronavirus Capital Projects Fund (CPF); and $2 billion under the Local Assistance and Tribal Consistency
Fund (LATCF).
SLFRF
As of August 2022, Treasury has disbursed approximately $349.9 billion of the $350 billion SLFRF
through non-competitive direct assistance to over 35,000 direct recipients, including approximately
26,000 Non-Entitlement Units (NEU) of Local Governments that received funding through a state or
U.S. territory. Administering SLFRF poses challenges given the volume of recipients that Treasury must
oversee that include all 50 states, U.S. territories, tribal governments, local government recipients with
population sizes of 250,000 or more, and approximately 26,000 NEUs. States and U.S. territories were
required to establish a process for NEUs to provide pre-pandemic budget and other critical information
and documentation before distributing funds. In addition to the volume of NEUs for Treasury to
oversee, reconciliation between states’ and U.S. territories’ disbursements to NEUs and recipient
performance reporting may be challenging. That is, performance reporting for NEU funding is the
responsibility of the NEUs and not the states and U.S. territories where accountability for the
disbursement of funds resides. Furthermore, due to increased pandemic funding many NEUs are now
required to have a Single Audit or alternate compliance examination engagement over which Treasury
may have agency cognizance as detailed below related to challenges with Treasury’s ongoing
compliance monitoring of SLFRF recipients and related administrative issues.
While Treasury has built a portal within Salesforce11 for recipient communication and reporting, there
are still challenges obtaining sufficient quality data from SLFRF recipients. Treasury allows for lengthy
narrative responses as part of the data collection that may be more cumbersome to review and lack
critical data details. Confirming data quality and timely providing data to the public and oversight
community has been challenging for Treasury. To effectively administer and monitor SLFRF recipients’
compliance, Treasury must have access to sufficient data that accurately reflects how recipients have
9 Section 601 (d), Use of Funds, to cover only those costs of the state, tribal government, or unit of local government that (1) are necessary expenditures
incurred due to the public health emergency with respect to COVID–19; (2) were not accounted for in the budget most recently approved as of the date
of enactment of this section for the State or government; and (3) were incurred during the period that begins on March 1, 2020, and ends on December
31, 2021, as extended by the CAA, 2021.
10 Coronavirus Relief Fund Guidance for State, Territorial, Local, and Tribal Governments Federal Register, Vol. 86, No. 10; January 15, 2021.
11 Salesforce is a cloud-based customer- relationship management software platform.
202 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
expended SLFRF awards. As Treasury continues to receive quarterly and annual reports on SLFRF
recipients’ uses of funds, it is critical that Treasury continues to refine mechanisms to ensure the data is
complete, accurate, reliable, and transparent in reflecting how recipients have expended SLFRF awards.
Treasury management has expressed difficulty finding the staff needed to administer and monitor the
SLFRF program. The Office of Recovery Programs had a number of key leadership positions that were
either vacant or temporarily staffed throughout fiscal year 2022. As discussed in more detail under the
accountability and transparency section below, Treasury faces future funding challenges to support the
Office of Recovery operations, to include ongoing administration of the SLFRF program and recipient
monitoring.
CPF
As of September 2022, Treasury awarded $1.4 billion to 13 states12 from the $10 billion of CPF
available to address infrastructure challenges, such as reliable internet, that low to moderate income and
rural communities have experienced during the COVID-19 pandemic. Although Treasury issued
recipient reporting guidance for states, U.S. territories, and Freely Associated States in August 2022,
Treasury still needs to inform eligible tribal government recipients of their reporting obligations to
provide full accountability and transparency as to how CPF awards are used. To do this, Treasury needs
to begin collecting sufficient and accurate CPF data.
LATCF
Treasury has been delayed in standing up the LATCF program, which was appropriated $2 billion for
fiscal years 2022 and 2023 to make COVID-19 assistance payments to eligible revenue sharing counties
and Tribes. Treasury issued LATCF guidance, including general reporting requirements to eligible
recipients, and as of September 30, 2022, both tribal governments and revenue counties are able to apply
for funds. Now, Treasury will need to prepare for the collection of sufficient and accurate LATCF data
for monitoring recipients’ compliance with the program.
With the overlap of recipients of CRF, SLFRF, CPF, and LATCF, we expect that there will be confusion
between the uses of funds requirements, and reporting mechanisms that may be a challenge for recipients
going forward. Given the volume of recipients and varying requirements under these programs, Treasury
will need to ensure that there are sufficient resources for the remaining distribution of funds and ongoing
monitoring of recipient reporting and compliance with terms and conditions for funds received.
Furthermore, with the level of funding under both CRF and SLFRF, Treasury may have agency cognizance
over many smaller local governments (particularly NEUs) and tribal governments now required to have a
Single Audit for the first time. To minimize recipient burden, Treasury developed alternate reporting
requirements for smaller SLFRF recipients, which would otherwise be subject to Single Audit. In the
Compliance Supplement for 2022, Treasury provides the option of an alternate compliance examination
engagement for SLFRF recipients meeting certain eligibility requirements. Treasury has been working with
OMB and the audit community to find a solution for receiving these reports as the Federal Audit
Clearinghouse (FAC) was not designed to collect non-audit products. Treasury plans to collect these reports
directly for fiscal year 2021 compliance examinations, and is continuing to work with the FAC to receive
these reports for fiscal year 2022, which is expected to begin as soon as October 2022. While the alternative
compliance examination engagement addresses the burden to these smaller government entities and
auditors, Single Audit and alternative compliance examination procedures may be new to thousands of
SLFRF recipients, so there will be much more guidance and oversight required of Treasury in its
cognizance role and related to the Compliance Supplement. Treasury must be prepared to use results of
12Treasury announced awards for Louisiana, New Hampshire, Virginia, West Virginia, Kansas, Maine, Maryland, Minnesota, Arkansas, Connecticut,
Indiana, Nebraska, and North Dakota.
DEPARTMENT OF THE TREASURY 203
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Single Audits and alternate compliance examinations as part of its compliance monitoring of recipients and
will need the appropriate level of staffing to address these issues on such a large scale. As discussed in more
detail under the accountability and transparency section below, Treasury is evaluating whether it will have
cognizance over thousands of non-federal recipients of SLFRF and its impact as it faces budget shortfalls in
fiscal year 2023 to carry out its ongoing administration and monitoring of SLFRF recipients.
Emergency Rental Assistance and Homeowner Assistance Programs
To provide assistance to vulnerable households at risk of housing instability, Congress established two
Emergency Rental Assistance (ERA) Programs and a Homeowner’s Assistance Fund (HAF) availing over
$56 billion to households in need. Division N, Title V, Subtitle A, of CAA, 2021, created the initial ERA
Program (ERA1) and ARP created a supplemental ERA Program (ERA2) and HAF.
ERA1
Treasury established ERA1 and as of September 30, 2022, disbursed $24.93 billion of the $25 billion
appropriated by CAA, 2021. The $24.93 billion was disbursed to states (including Washington, DC),
U.S. territories, tribal governments (with a provision for the Department of Hawaiian Home Lands), and
units of local government with populations of 200,000 or greater to pay for rent, utilities, and other
housing-related expenses and arrears through September 30, 2022. In addition to disbursing the funds,
Treasury provided guidance on ERA1 fund usage and set up a Portal where government recipients are to
report on their spending.
CAA, 2021 requires that my office conduct monitoring and oversight of the receipt, disbursement, and
use of ERA1 funds. We will conduct our oversight with audits of Treasury’s (1) establishment and
implementation of the program, (2) payments of funds, and (3) guidance and management over the
program. We will use the data reported in Treasury’s ERA Portal to inform our monitoring function;
thus, it is imperative that Treasury ensures recipients’ compliance to Treasury ERA guidance when
reporting to Treasury’s ERA Portal. My office is also authorized to require repayment of funds to
Treasury when we determine a recipient failed to comply with ERA1 requirements.
ERA2
For ERA2, as of June 30, 2022, Treasury disbursed $21.51 billion of the $21.55 billion appropriated in
ARP. Similar to ERA1, ERA2 provides funding for eligible renter households’ rent, utilities, and other
housing-related expenses and arrears, but does not include tribal governments as eligible grantees.
ERA2 funds are to remain available until September 30, 2027. Treasury has also provided ERA2
guidance for the state, territory, and local, government recipients. My office is tasked with oversight of
the program and will conduct our ERA2 oversight with a similar methodology to our ERA1 oversight.
HAF
ARP also created HAF to prevent mortgage delinquencies, defaults, foreclosures, loss of utility services,
and displacement by covering mortgage-related expenses, utility expenses, and arrears for homeowners
experiencing financial hardship after January 21, 2020. As of August 2022, Treasury has disbursed more
than $9.5 billion of the $9.9 billion authorized to states (including the District of Columbia and Puerto
Rico), tribal governments (including the Department of Hawaiian Home Lands), Guam, American
Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands. The funds are
available until September 30, 2025 and Treasury provided guidance on HAF. ARP mandates that my
office provide oversight of the funds, which will include audits of Treasury’s (1) establishment and
implementation of the fund, (2) payments of funds, and (3) guidance and management over the program.
204 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
While Treasury has issued relevant guidance for each of the programs, it is essential its program offices
continue to be responsive to recipients to clarify guidance and to provide insight into the eligible uses of the
funds Treasury distributed. Clear and timely guidance and responsiveness to recipient questions are also
critical in enabling program recipients to administer their programs and disburse funds to households in
need without delay.
State Small Business Credit Initiative
The State Small Business Credit Initiative (SSBCI), which was originally created in the Small Business Jobs
Act of 2010 to increase availability of credit for small businesses, ended in 2017. However, Section 3301 of
ARP reauthorized SSBCI and provided $10 billion in funding for the program. Under SSBCI, participating
states, U.S. territories, and tribal governments may obtain funding for programs that partner with private
lenders to extend credit to small businesses.
Additionally, ARP modified SSBCI in a number of ways including the following set-asides: (1) $500
million in allocations to tribal governments in proportions determined appropriate by the Secretary of the
Treasury; (2) $1.5 billion in allocation to states, U.S. territories, and tribal governments for business
enterprises owned and controlled by socially and economically-disadvantaged individuals (SEDI); (3) $1
billion to be allocated as an incentive for states, U.S. territories, and tribal governments that demonstrate
robust support for SEDI businesses; (4) $500 million to be allocated to very small businesses with fewer
than 10 employees; and (5) $500 million to provide technical assistance to certain businesses applying for
SSBCI or other state or federal programs that support small businesses.
Primary oversight of the use of SSBCI funds is the responsibility of the participating state, U.S. territory or
tribal government. The participants are responsible for providing Treasury with quarterly assurances that
their programs approved for SSBCI funding comply with program requirements. However, Treasury will
face challenges in holding participants accountable for the proper use of funds, as it has not clearly defined
the oversight obligations of the states, U.S. territories, and tribal governments or specified minimum
standards for determining whether participants have fulfilled their oversight responsibilities. In the past,
Treasury has also not required participating states to collect and review compliance assurances made by
lenders and borrowers or defined what constitutes a material adverse change in a state's financial or
operational condition that must be reported to Treasury. As a result, Treasury may have difficulty finding
recipients to be in default of program requirements and holding recipients accountable.
Community Development Investment Programs13
Emergency Capital Investment Program
As authorized under CAA, 2021, Treasury has invested $8.26 billion in 161 Community Development
Financial Institutions (CDFI) and Minority Deposit Institutions of the $9 million available under the
Emergency Capital Investment Program (ECIP), providing capital to low-to-moderate income community
financial institutions that support small businesses and consumers. Treasury has experienced challenges in
fully implementing ECIP. As reported in our audit of ECIP’s implementation, Treasury had not completed
key documentation, such as policies and procedures to include a post-investment compliance and
monitoring plan to fully implement and administer investments. 14 With investments now underway, it is
more imperative that Treasury develop and implement policies and procedures to govern its post–
13 Treasury OIG is required to submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing,
and Urban Affairs of the Senate, and the Secretary of the Treasury, not less frequently than 2 times per year, a report relating to the oversight provided
including any recommendations for improvements to the Community Development Investment programs.
14 OIG, Audit of Treasury’s Implementation of the Emergency Capital Investment Program (OIG-22-028; March 8, 2022)
DEPARTMENT OF THE TREASURY 205
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
investment activities. Because of the demands for resources within the Office of Recovery Programs,
Treasury may continue to experience further delays and challenges administering the ECIP.
CDFI Rapid Response Program
Treasury has disbursed $1.19 billion of the $3 billion, authorized under the CAA, 2021, under the CDFI
Fund Rapid Response Program (CDFI RRP), to deliver immediate assistance to low-income communities
through competitive grants to CDFIs. However, as we reported in our audit of the CDFI RRP
implementation,15 the CDFI Fund did not include the award term and condition for integrity and performance
matters in its assistance agreement template. CDFI Fund stated this was rectified before the agreements
were signed. We will confirm that CDFI Fund included the required language in the executed assistance
agreements with CDFI RRP grant recipients as part of our ongoing mandated audits of the CDFI RRP.
CDFI Equitable Recovery Program
The CDFI Fund is delayed in awarding the remaining $1.75 billion of the $3 billion authorized under CAA,
2021 for the CDFI Fund Equitable Recovery Program (CDFI ERP). Awards granted under ERP are
intended for low- or moderate-income minority communities that have significant unmet capital or financial
services needs, and were disproportionately impacted by the COVID-19 pandemic. This program will be
more challenging for the CDFI Fund to administer in fiscal year 2023 because of unique and complex
program materials for the application process and award administration needed to address program policy
priorities in order to meet the statutory intent. In addition, CDFI Fund plans to implement designation of
minority lending institutions as defined under the CAA, 2021 separately from the award of ERP funds and
will begin in fiscal year 2023.
Accountability and Transparency
In the context of this overarching challenge, we recognize the breadth and scope of Treasury’s
responsibilities as it impacts programs, operations, and activities regardless of jurisdictional oversight
boundaries. Along with administering and delivering economic relief, Treasury must manage the
unprecedented oversight that pandemic relief funding is subject to. As noted above, Treasury is evaluating
whether it will have cognizance over thousands of non-federal recipients of SLFRF and be required to carry
out a larger administrative and monitoring role to ensure compliance under OMB’s Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards. Among its responsibilities as a
Federal awarding agency, Treasury must follow-up on audit findings to ensure that recipients take
appropriate and timely corrective action and issue management decision letters.16 Many recipients are
smaller governments, which for the first time are subject to Single Audit or the alternative compliance
examination available to eligible recipients meeting eligibility requirements. Regardless of cognizance,
Treasury will have to work with recipients to resolve Single Audit and alternative compliance examination
findings specific to each of its pandemic relief programs. Given the anticipated budget short-falls as noted
below, carrying out this level of oversight of thousands of recipients will be very challenging for Treasury.
15 OIG, Audit of the Community Development Financial Institutions Fund’s Implementation of the CDFI Rapid Response Program (OIG-22-023; December 21,
2021).
16 2 CFR § 200.521, “The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the
expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a
timetable for follow-up should be given...” (https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/subpart-F/subject-group-
ECFR4424206eaecf751/section-200.521)
206 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
In addition to my office’s ongoing work on pandemic programs, Treasury is subject to additional
Congressional oversight bodies, the Special Inspector General for Pandemic Recovery17 (SIGPR), the
Government Accountability Office (GAO), and the Pandemic Response Accountability Committee (PRAC).
Treasury is also accountable for providing transparency over the expenditure of pandemic relief funds.
Many reporting requirements of sections 15010 and 15011 of the CARES Act were extended under the
CAA, 2021, PRAC amendments. Most notably, Treasury is responsible for reporting obligations and
expenditures of large covered funds (over $150,000) to the PRAC. While my office continues to collect and
report CRF data to the PRAC under an agreement with the Department as noted above, Treasury is
responsible for reporting expenditures of its other pandemic relief programs. As noted above, data collection
and quality are still challenges for Treasury under the various pandemic programs. The Department must
balance its ongoing response to the financial impacts of the public health emergency with its responsibility
to stakeholders for reporting and transparency.
While the economic fallout of COVID-19 pandemic continues, Treasury must persevere in navigating this
challenging time. While Treasury has leveraged its existing workforce, hired contractors, and obtained
detailees from other Federal agencies to address the demands of the pandemic programs, it faces future
funding challenges to carry out its expansive administrative and compliance monitoring role. Treasury
projected an administrative funding shortfall of $35 million to continue compliance activities over SLFRF
and ERA recipients in its Congressional Budget Justification and Annual Performance Plan and Report for
FY 2023.18 Treasury requested “Administrative Funding Transfer Authority” to move appropriated
administrative funding amounts from one pandemic program to another to cover the anticipated shortfall.
Without this flexibility, Treasury estimated that funds to administer the SLFRF program will run out by
mid-fiscal year 2023 and early fiscal 2024 for ERA, causing further shortages in resources. Treasury is pro-
actively working to reduce spending across the board on SLFRF and other impacted programs, as well as in
central service areas to extend essential operations, but this may not be enough to carry out the large-scale
compliance monitoring responsibilities in the event Congress does not approve the “Administrative Funding
Transfer Authority” timely. On September 23, 2022 Treasury notified recipients of funding constraints
impacting Treasury’s ability to provide ongoing administrative support and monitoring of funds distributed
under SLFRF, CPF, ERA, HAF, and LATCF. Treasury advised that a number of functions will be halted or
reduced, such as recipient monitoring and reporting, if its request for administrative funding flexibility is
not provided. Given the adverse impacts of Treasury’s planned measures, my office expressed concerns to
Congress, most notably to the reduction of recipient monitoring and reporting, in a letter dated October 3,
2022. We stressed that Treasury’s funding constraints jeopardize accountability and transparency of more
than $400 billion distributed to thousands of recipients of SLFRF, CPF, ERA, HAF, and LATCF. In
addition, we highlighted the cascading effect of Treasury’s reduced recipient monitoring and reporting on
oversight functions performed by my office and the PRAC as we depend on Treasury obtaining quality data
from recipients on uses of pandemic funds.
Going forward, Treasury may experience difficulties in balancing its ongoing pandemic oversight
responsibilities and workloads while managing several ongoing challenges as described throughout this
memorandum. While I am hopeful that fiscal year 2023 will see an end to the horrific fallout that the
COVID-19 pandemic has had on our nation, I am also mindful that both short-term and long-term
challenges lay ahead for both Treasury and my office.
17 SIGPR was authorized under the CARES Act to oversee loans, loan guarantees, and other investments provided by Treasury and must report to
congress quarterly on the SIGPR’s activities and Treasury’s loan programs. SIGPR terminates five years after enactment of the CARES Act (March 27,
2025).
18 https://home.treasury.gov/system/files/266/07A.-COVID-FY-2023-CJ.pdf
DEPARTMENT OF THE TREASURY 207
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Challenge 2: Cyber Threats (Repeat)
Cybersecurity remains a long-standing and serious challenge facing the Nation as reported by GAO as a
government-wide issue in its 2021 high- risk list published biennially.19 A reliable critical infrastructure,
including information systems and networks, is vital to our national security and economic stability. Cyber
threats remain a persistent concern as Treasury’s information systems are critical to the core functions of
government and the Nation’s financial infrastructure, along with the financial sector it oversees. As cyber
threats continue to evolve and become more sophisticated, subtle, and easier to perform, Treasury must
fortify and safeguard its internal systems and operations while modernizing and maintaining them. Although
managing known risks is an ongoing challenge, Treasury must also be ready to reinforce and/or redirect
cybersecurity efforts when unforeseen events occur, such as the COVID-19 pandemic, the recent conflict in
the Ukraine, 20 the 2020 SolarWinds attack,21 or when serious flaws are discovered in software or systems,
such as Log4J22 and VMWare,23 that allow for remote administrative-level access.24
Threat actors frequently exploit vulnerable networks or systems in a string of trusted connections to gain
access to government systems. Organized hacking groups leverage published and unpublished
vulnerabilities and vary their methods to make attacks hard to detect and even harder to prevent. Criminal
groups and nation-states are constantly seeking to steal information; commit fraud; disrupt, degrade, or deny
access to information systems; or infiltrate information systems and maintain a presence to enable future
actions. Through information sharing, federal agencies are better prepared to thwart potential attacks to the
cyber infrastructure of the Federal government and the financial sector.
The tools used to perpetrate cyber-attacks continue to become easier to use and more widespread, lowering
the technological knowledge and resources needed to launch successful attacks of increasing sophistication.
Such attacks include distributed denial of service, phishing, fraudulent wire payments, business email
compromise, malicious spam (malspam), ransomware, and compromise of supply chains (both hardware
and software). While the federal workforce shifts from a primarily telework status to a hybrid work
environment, Treasury must remain cognizant of the increased risk profile a remote workforce, which
provides threat actors with a broader attack surface. Increased network traffic from remote sources provides
cover for attackers to blend in with the federal workforce and launch cyber assaults. These opportunities
may allow threat actors to launch a denial of service attack upon a network that can prevent remote workers
from performing their duties and disrupt operations.
There is continuing concern over foreign adversaries creating and exploiting vulnerabilities in the Nation’s
supply chain for information and communication technology and services as evidenced by the 2020
SolarWinds attack that affected many federal agencies and private sector companies. Executive Order (EO)
13873, Securing the Information and Communications Technology and Services Supply Chain, was issued
on May 15, 2019, to secure the supply technology and services chain by banning the import, use, or sale of
technology or services designed, developed, manufactured, or supplied from persons or companies that are
19 GAO, High‐Risk Series, Dedicated Leadership Needed to Address Limited Progress in Most High‐Risk Areas (GAO-21-119SP: March 2021).
20 A joint Cybersecurity Advisory was issued by the Cybersecurity and Infrastructure Security Agency to “warn organizations that Russia’s invasion of
Ukraine could expose organizations both within and beyond the region to increased malicious cyber activity. This activity may occur as a response to the
unprecedented economic costs imposed on Russia as well as materiel support provided by the United States and U.S. allies and partners.” (Alert (AA22‐
110A) Russian State‐Sponsored and Criminal Cyber Threats to Critical Infrastructure; April 20, 2022)
21 The SolarWinds attack, reported in December 2020, was a supply chain attack that used the update mechanism for legitimate software to distribute
malicious software.
22 Log4j is software used by other software to enable logging of selected events upon a system.
23 VMWare, Inc. provides a variety of software tools to manage virtual or cloud environments.
24 Cybersecurity and Infrastructure Security Agency, Emergency Directive 22‐02 Mitigate Apache Log4J Vulnerability (April 8, 2022), Emergency Directive
22‐03 Mitigate VMWare Vulnerabilities (May 18, 2022).
208 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
owned or controlled by governments defined as hostile to the United States.25 On May 12, 2022, this EO was
extended again for 1 year.26 There are risks that Treasury’s systems and resources already in use, including
critical infrastructure, contain components from sources that have yet to be designated as threats. Once a
source is designated as such, repairs and/or upgrades of key system components may no longer be available.
Therefore, there is risk of disruption of critical operations. The Department will need to continue to monitor
developments in this area closely and plan for the possibility that its current supply chain may no longer be
available.
Furthermore, EO 14028, Improving the Nation’s Cybersecurity, issued on May 12, 2021, calls for federal
agencies to update existing plans to prioritize resources for adoption and use of cloud technology and to
adopt a zero-trust architecture,27 among other things. To achieve the goals outlined in EO 14028, OMB
issued M-22-09, Moving the U.S. Government Toward Zero Trust Cybersecurity Principles28 to provide the
strategy for achieving a zero-trust architecture, and requires agencies to meet specific cybersecurity
standards and objectives by the end of fiscal year 2024. OMB also issued M-22-18, Enhancing the Security
of the Software Supply Chain through Secure Software Development Practices29 to use only software that
complies with secure software development standards. As mentioned above, Treasury management must be
mindful that the efforts to secure Treasury’s supply chain may hamper cloud adoption and the
implementation of zero-trust architecture. In response to our prior year memorandum, Treasury reported the
Enterprise Cyber Risk Management program enhanced the risk assessment process to identify compliance
items separately from cybersecurity risk reporting, and continued to grow the Supply Chain Risk
Management program.
We continue to remind the Department that, in addition to Treasury’s own networks and systems,
management must be cognizant of, and mitigate, the risks posed by attacks made against other federal and
non-federal agencies and Treasury contractors and subcontractors. Increased threats and risks posed to third
parties’ networks and systems due to the opportunities that extended telework provides to potential attackers
also poses increased risks to Treasury’s networks and systems. Treasury frequently enters into
interconnection agreements with other federal, state, and local agencies, and service providers to conduct its
business. Management must exercise due care when authorizing such internetwork connections and verify
that third parties comply with federal policies and standards including any guidance issued to address new
and/or expanded threats and risks. Management is also challenged with ensuring that critical data and
information maintained by third-party cloud service providers are properly protected. Issues related to
management of cloud systems were reported in four consecutive Federal Information Security
Modernization Act of 2014 30 audits (fiscal years 2015, 2016, 2017, and 2018), with one repeat
recommendation, related to third-party cloud service providers demonstrating FISMA compliance,
remaining unimplemented as of fiscal year 2022.
Treasury is looked upon to provide effective leadership to financial institutions in particular, and the
financial sector in general, to strengthen awareness and preparedness against cyber threats to the Nation’s
critical infrastructure. As such, effective public-private coordination is essential to the Nation’s financial
and national security. In this regard, The Office of Critical Infrastructure Protection and Compliance Policy
25 EO 13873, Securing the Information and Communications Technology and Services Supply Chain
(May 15, 2019).
26 Notice on the Continuation of the National Emergency with Respect to Securing the Information and Communications Technology and Services Supply
Chain (May 12, 2022).
27 Zero-trust architecture is a method of designing a system in which all actions are presumed dangerous until reasonably proven otherwise, thereby
reducing the chance of a successful attack causing further damage.
28 OMB M-22-09, Moving the U.S. Government Toward Zero Trust Cybersecurity Principles (January 26, 2022), (https://www.whitehouse.gov/wp-
content/uploads/2022/01/M-22-09.pdf).
29 OMB M-22-18, Enhancing the Security of the Software Supply Chain through Secure Software Development Practices (September 14, 2022),
(https://www.whitehouse.gov/wp-content/uploads/2022/09/M-22-18.pdf).
30 Public Law 113-283 (December 18, 2014).
DEPARTMENT OF THE TREASURY 209
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
coordinates Treasury’s efforts to enhance the security and resilience of the financial services sector critical
infrastructure and reduce operational risk including risks associated with cybersecurity. Given the stress that
the global COVID-19 pandemic and the conflict in Ukraine place on financial institutions and the financial
sector, it is important that the Department monitors cyber risks in these areas. That said, Treasury and other
federal agencies have yet to fully implement the National Institute of Standards and Technology (NIST)
guidance to assist federal agencies in managing cybersecurity risks.31 In 2018, GAO had reported that the
extent of adoption of the NIST framework by critical infrastructure sectors was unknown since agencies
were not measuring framework implementation.32 With respect to Treasury, GAO had recommended that
steps be taken to consult with respective sector partners to develop methods for determining the level and
type of adoption by entities across the financial services sector. In its May 10, 2022 letter33 regarding its top
open recommendations, GAO acknowledged that Treasury had developed a cybersecurity profile for the
sector that maps the NIST Cybersecurity Framework's (CSF) five core functions34 to existing regulations and
guidance for financial services entities, but had not developed methods to determine the level and type of
framework adoption; the recommendation remained open.
The Department continues to report progress in managing risk as Treasury obtained an overall rating of
“Managing Risk” across all NIST CSF categories (Identify, Protect, Detect, Respond and Recover) on the
OMB Cybersecurity Risk Management Assessment for the first time in fiscal year 2021. Treasury also
reported the creation of enhanced risk profiles to allow senior leadership greater visibility into the risks for
all Departmental High Value Assets. 35 While addressing increases in cyber threats, Treasury will need to
continue to balance cybersecurity demands while maintaining and modernizing Information Technology
(IT) systems. To this end, Treasury must ensure that cybersecurity is fully integrated into its IT investment
decisions as discussed in Challenge 4.
31 NIST, Framework for Improving Critical Infrastructure Cybersecurity (Version 1.0, February 12, 2014; superseded by Version 1.1; April 16, 2018).
32 GAO, Critical Infrastructure Protection: Additional Actions Are Essential for Assessing Cybersecurity Framework Adoption (GAO-18-211; February 18,
2018)
33 GAO, Priority Open Recommendations: Department of the Treasury (GAO-22-105633; May 10, 2022)
34 The NIST Cybersecurity Framework functions include: Identify, Protect, Detect, Respond and Recover.
35 High Value Assets are assets, information systems, information, and data for which an unauthorized access, use, disclosure, disruption, modification, or
destruction could cause a significant impact to the U S.’ national security interests, foreign relations, economy, or to the public confidence, civil liberties,
or public health and safety.
210 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Challenge 3: Anti-Money Laundering/Terrorist Financing and Bank Secrecy Act
Enforcement (Repeat)
Over the past year, the Office of Terrorism and Financial Intelligence (TFI) has remained dedicated to
countering the ability of financial networks that support terrorists, organized transnational crime, weapons
of mass destruction proliferators, and other threats to international security through intelligence analysis,
sanctions, and international private-sector cooperation. As previously reported, identifying, disrupting, and
dismantling these networks continue to be challenging as TFI’s economic authorities are key tools to carry
out U.S. policy. Additionally, criminals and other bad actors evolve and continue to develop more
sophisticated money laundering methods in an attempt to avoid detection.
TFI’s authorities are key tools in implementing U.S. policy to pressure foreign countries and regimes, such
as Russia, by using designations and economic sanctions. TFI has significantly increased sanctions against
Russia related to its actions against Ukraine and other malign activities. TFI’s counter-terrorism
designations disrupt the financial networks that support terrorist organizations. Disrupting terrorist financing
depends on a whole-of-government approach and requires collaboration and coordination within Treasury
and with other federal agencies. Collaboration and coordination are key to successfully identifying and
disrupting all of these financial networks and meeting TFI’s mission. This effort requires effective and
efficient working relationships among components within TFI and the Intelligence Community. In an effort
to effectively implement U.S. policy and disrupt these financial networks, officials stated that TFI is moving
towards a more collaborative approach to achieve its mission. Given the criticality of Treasury’s mission
and its role to carry out U.S. policy, we continue to consider anti-money laundering and combating terrorist
financing programs and operations as inherently high-risk.
Data privacy and information sharing are challenges for the Financial Crimes Enforcement Network
(FinCEN), which has experienced unauthorized disclosures of Bank Secrecy Act (BSA) information.
FinCEN is required to maintain a highly secure database for financial institutions to report BSA
information. FinCEN has previously identified that the success of that system depends on the financial
sector’s confidence that those reports are adequately protected, but data breaches threaten to undermine that
confidence. The challenge for FinCEN is to ensure the BSA information remains secure in order to maintain
the confidence of the financial sector, while meeting the access needs of law enforcement, regulatory, and
intelligence partners. FinCEN also faces an additional challenge, to develop and implement a new secure
database for small businesses to report their beneficial ownership information, as required by the Corporate
Transparency Act.36 However, FinCEN does not expect to implement the database until January 2024.
36 Public Law 116-283 (January 1, 2021).
DEPARTMENT OF THE TREASURY 211
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Challenge 4: Information Technology Acquisition and Project Management (Repeat)
The Federal Information Technology Acquisition Reform Act (FITARA), enacted in December 2014, was
the first major overhaul of federal IT management since the passage of the Clinger-Cohen Act of 1996 37
which was designed to improve the Federal Government’s acquisition and management of its resources to
include IT investment. Among other things, it expanded the involvement of Chief Information Officers
(CIO) of federal agencies in IT decision making, including annual and multi-year planning, programming,
budgeting, execution, reporting, management, governance, and oversight functions.38 FITARA is intended
to improve how federal agencies acquire and manage IT, as well as enable Congress to monitor progress
and hold federal agencies accountable for reducing duplication and achieving cost savings. FITARA
includes specific requirements related to seven areas: (1) the federal data center consolidation initiative,
(2) enhanced transparency and improved risk management, (3) agency CIO authority enhancements,
(4) portfolio review, (5) expansion of training and use of IT acquisition cadres, (6) government-wide
software purchasing, and (7) maximizing the benefit of the federal strategic sourcing initiative.
While FITARA is intended for agencies to better manage their IT investments, implementation continues to
be a government-wide challenge. Since February 2015, GAO has included the management of IT
acquisitions and operations on its high-risk list as cost overruns and schedule delays impact mission related
outcomes government-wide.39 In its March 2021 high risk report, GAO acknowledged that the Federal
Government has undertaken numerous initiatives to better manage the more than $90 billion that is invested
annually in IT. However, GAO reported that more needed to be done to improve overall management of IT
acquisitions and operations. In general, federal agencies had not (1) modified their practices to fully address
the role of the CIO, (2) documented modernization plans or included key best practice elements in the plans,
(3) taken further action to reduce duplicative IT contracts, and (4) implemented the remaining 400 open
recommendations related to management of IT acquisitions and operations. For example, 21 of the 24 major
federal agencies, still have not implemented IT management policies that fully addressed the role of their
CIOs consistent with federal laws and OMB’s FITARA guidance. The guidance covers, among other things,
enhancing the authority of federal CIOs and ensuring that program staff have the necessary knowledge and
skills to effectively acquire IT. In addition, progress in establishing key IT workforce planning processes is
also lacking. GAO also noted that the General Services Administration and OMB had fewer funds available
than anticipated to award to new projects for replacing aging IT systems.40 Furthermore, GAO
recommended that, in general, agencies needed to improve CIOs’ authorities, enhance transparency and
improve risk management of IT investments, and consolidate federal data centers.41
The House Oversight and Reform Committee worked with GAO to develop a scorecard to assess federal
agencies’ efforts in implementing FITARA by assigning a grade from A to F based on self-reported data at
the agency level. Agencies are scored on areas of CIO authority enhancements, transparency and risk
management, portfolio review, data optimization, software licensing, and modernizing government
technology. Since the first scorecard was issued in November 2015, Treasury’s overall FITARA score has
wavered between a D- and a B. More recently, in 2021, Treasury received a B for its FITARA
implementation efforts, and dropped to a C in July 2022. Areas needing most improvement were enhanced
transparency and risk management (i.e. IT investment risk), improved cybersecurity, and agency CIO
authority enhancements. The latest scorecard features seven grading categories – down from eight
categories on the December 2021 scorecard due to the sunsetting of the data center optimization category.
212 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
As of March 16, 2022, Treasury reported that approximately $2.56 billion was spent on major IT
investments, which is expected to increase in fiscal year 2023. Given this sizable investment, we are
reporting the Department’s IT acquisition and project management as an ongoing management and
performance challenge distinct from challenge 2 that addresses cybersecurity concerns. Treasury’s bureaus
reported 48 major IT investments. Treasury’s CIO assessed 46 IT investments as having moderately low or
low risk to accomplishing their goals. Two IT investments, which reside at the Bureau of the Fiscal Service
(Fiscal Service), were assessed as having medium risk42 to accomplishing their goals:
Post Payment Services, and
Debt Collection Services (DCS).
Projects identified with medium overall risk in cost and scheduling require special attention from the
highest level of agency management. During fiscal year 2022, some projects within DCS were behind
schedule and over budget. Treasury also identified projects within DCS as having a high risk to
accomplishing their goals. In June 2022, Treasury reported that Fiscal Service has conducted internal “chat
stats” to address project schedule variances for both Post Payment Services and DCS. Treasury is also
meeting about one project within the Post Payment Services investment to prepare an updated plan and
integrated master schedule to address prior schedule and cost variances. Overall, approximately 91 percent
of Treasury’s total IT projects were on schedule and approximately 78 percent were within budget. As of
March 16, 2022, approximately 43 percent of Treasury’s total IT spending is on 48 major investments.
Another major investment of note, Treasury’s Wholesale Securities Services (WSS), includes the Financing
Modernization project, a multi-year program to modernize the debt financing system to align with
Treasury's strategic priorities and long-term business requirements. This modernization will include
development of a new system to support operations, meet customer expectations, become current with
existing technologies, manage technical debt, and improve the delivery of secure, flexible, and resilient
financing services. Fiscal Service expects to complete the project’s network connectivity design by the first
quarter of fiscal year 2023.
37 Public Law 104-106 (February 10, 1996).
38 Public Law 113-291 (December 19, 2014).
39 GAO, High‐ Risk Series, An Update (GAO-15-290; February 11, 2015).
40 GAO, High‐Risk Series, Dedicated Leadership Needed to Address Limited Progress in Most High‐Risk Areas (GAO-21-119SP: March 2020).
41 GAO, High‐Risk Series, Dedicated Leadership Needed to Address Limited Progress in Most High‐Risk Areas
(GAO-21-119SP: March 2021).
42 IT Dashboard, “the Agency CIO rates each investment based on his/her judgment using a set of pre-established criteria. As a rule the evaluation should
reflect the CIO’s assessment of risk and the investment’s ability to accomplish goals.” Evaluation ratings are based on a five-point risk scale as follows:
5=low risk, 4= moderately low risk, 3= medium risk, 2= moderately high risk, and 1=high risk.
DEPARTMENT OF THE TREASURY 213
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
An ongoing initiative to manage and monitor IT investments includes the government-wide adoption of the
Technology Business Management (TBM) framework as reported in the fiscal year 2018 President’s
Management Agenda: Modernizing Government for the 21st Century (March 20, 2018). The TBM
framework consists of layers that represent different views into IT costs and performance, enabling greater
transparency into the true cost of IT and its value to the business. TBM is expected to improve IT spending
data accountability and transparency, empowering agency executive suite leadership from across the
enterprise to drive mission value and improve customer experience through technology. Fiscal Service’s
financial community was trained on TBM and has eliminated all uncategorized IT spending, or spending
that is not categorized into standard IT buckets but are continuing efforts on maturity of that data.
Non-IT related acquisitions also require attention to ensure timely delivery and minimization of cost
overruns for achieving cost savings. The Program Management Improvement Accountability Act of 2016,
P.L. 114-264, was intended to improve program and project management practices across the Federal
Government. Similar to IT projects, other major acquisitions need to be monitored so that the project goals
are met in a timely manner and costs are not allowed to significantly exceed established budgets.
The Bureau of Engraving and Printing (BEP) project to replace its Washington, DC facility with a new
facility was estimated to cost $1.25 billion. However, this cost estimate will be updated to better reflect
supply chain and industry labor limitations as well as further analysis of project cost. The Board of
Governors of the Federal Reserve System (Board) requested a project management assessment be
conducted by MITRE Corporation with specific reporting around costs, schedule, and change management.
43
This report had several recommendations, and BEP has worked with the Board to address them. BEP has
resumed the design and engineering work for the new facility. In fiscal year 2022, BEP continued site
preparation for construction of the new building. Until the estimated completion of the facility in 2027, BEP
will need to ensure it employs effective project oversight for preparation of the land, construction of the
building, purchase of equipment and machinery, and employment of a workforce to produce the new family
of secure notes and maintain confidence in U.S. currency.
43In 2016, BEP provided its Western Currency Facility expansion plans to the Board. According to Board officials, the Board’s role is to reimburse
expenses related to the Western Currency Facility expansion, which did not require a formal approval request or cost justifications from BEP for
initiating the expansion.
214 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Challenge 5: Climate Initiatives Risk (New)
In January 2021, EO 14008, Tackling the Climate Crisis at Home and Abroad, identified the immediate
need for comprehensive action to address the catastrophic impacts of climate change. EO 14008 emphasizes
that U.S. leadership, and that of federal departments and agencies, will be required to significantly enhance
global action and achieve the necessary policy outcomes on climate change. Furthermore, in May 2021, the
White House introduced EO 14030, Climate-Related Financial Risk, which aims to: (a) advance consistent,
clear, intelligible, comparable, and accurate disclosure of climate-related financial risk, including both
physical and transition risks; (b) mitigate that risk and its drivers, while accounting for and addressing
disparate impacts on disadvantaged communities and communities of color and spurring the creation of
well-paying jobs; and (c) achieve the Administration’s target of a net-zero emissions economy by no later
than 2050. The Secretary of the Treasury, as the Chair of the Financial Stability Oversight Council (FSOC),
will lead several efforts related to EO 14030. Taken together, these two EOs place an emphasis on ensuring
climate change is at the forefront of U.S. foreign policy and national security; establishing a government-
wide approach to the climate crisis; and bolstering the resiliency of our communities, States, Tribes,
territories, and financial institutions to position the United States to lead the global economy to a more
prosperous and sustainable future. Treasury will play a significant role working with other federal agencies,
foreign governments, and international financial institutions to stimulate global action on addressing climate
change, environmental justice, and climate change-created economic and financial crises. In 2021, Treasury
created a new Climate Hub and appointed a Climate Counselor to coordinate and lead many of its efforts to
address climate change. The Treasury Climate Hub will coordinate and enhance existing climate-related
activities by utilizing the tools, capabilities, and expertise from across the Department – including officials
from Domestic Finance, Economic Policy, International Affairs, and Tax Policy. With a view of all
Treasury climate initiatives, the Hub will enable Treasury to prioritize climate action.
As stated in its July 2021 Climate Action Plan, Treasury anticipates that climate change will continue to be
a significant global challenge and that aspects of its mission and operations will be impacted by global
warming, sea level rise, increased intensity and frequency of major weather events, and impacts on energy
availability. To manage the process of climate change adaptation and resilience within Treasury’s
operations and its facilities, the Department has developed a comprehensive management framework, in
accordance with the Interim Instructions for Preparing Draft Climate Action Plans under EO 14008.
Treasury’s Departmental Offices and operating bureaus will continually assess changing conditions and
scientific understanding of climate change to adjust policies, programs, and activities to improve resilience
and adaptation. Treasury’s Climate Action Plan establishes the following five priority actions to strengthen
and build upon Treasury’s climate resilience and adaptive capabilities: (1) rebuilding programs and
capabilities that may have atrophied or stagnated in recent years; (2) addressing climate change impacts and
vulnerabilities across the range of Departmental operations, including administrative, manufacturing, and
law enforcement activities; (3) ensuring a climate-focused approach to managing Treasury’s real property
portfolio footprint; (4) enabling procurement management to fully consider climate change realities; and (5)
providing, measuring, and accounting for a financial investment approach appropriate to the Department’s
climate objectives.
DEPARTMENT OF THE TREASURY 215
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Treasury is also engaged in the Administration’s domestic efforts through its role as a leading banking
regulator, with the Office of the Comptroller of the Currency (OCC), and its responsibilities within FSOC.
Internationally, Treasury represents the United States at the G7 and G20, at the Financial Stability Board,
and other institutions and forums such as the International Monetary Fund. In October 2021, FSOC issued
its Report on Climate-Related Financial Risk, as mandated by EO 14030. In it, FSOC details the activities
of each member to date to address climate-related financial risk, including Treasury, the Office of Financial
Research, the Federal Insurance Office, and OCC. The report highlights challenges in efforts to
comprehensively understand and address climate-related financial risk. Those challenges include the types
and quality of available data and measurement tools, the ability to assess climate-related financial risks and
vulnerabilities, and how best to incorporate these risks into management practices and supervisory
expectations as appropriate. FSOC concluded the report with thirty-five recommendations. Many, if not
most, apply to the Department, the Office of Financial Research, the Federal Insurance Office, and OCC. It
will be important that each recommendation be addressed not only timely, but collectively with the other
FSOC members to ensure a cohesive response.
Furthermore, OCC has implemented multiple initiatives to address climate change and climate-related
financial risk. They have partnered with other Federal banking regulators to work collaboratively in
understanding the risks and development of climate-related risk management. OCC has also engaged with
international groups to share best practices. Internally, OCC established a Climate Risk Implementation
Committee chaired by a Climate Change Risk Officer to assess climate risks and advise management on
OCC policy, banking supervision, and research. These collaborations will continue to be important in
developing a common understanding of climate-related financial risks and their impact to ensure the
continued safety and soundness of the banking system. OCC also continues to work with FSOC and other
member agencies to understand the broader implications of climate-related financial risks and their potential
impact on financial stability.
216 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Other Matter of Concern
Although we are not reporting digital assets as a management and performance challenge, we are
highlighting it as an area of concern.
Use of digital assets, including cryptocurrencies, stablecoins, and in some countries, central bank digital
currency (CBDC), has grown significantly over the past several years. As of September 15, 2022, digital
assets reached a combined market capitalization of over $1 trillion, up from approximately $14 billion in
late 2016 but down from $3 trillion during November of 2021.44
Treasury supports responsible innovation and seeks to maximize the gains from this new technology while
protecting against possible risks to consumers, financial stability, and illicit finance. In the absence of
sufficient oversight and regulatory safeguards, the increase in use of digital assets could pose risks to
consumers, investors, and the broader financial system.
In March 2022, President Biden convened experts from across the Administration to ensure a coordinated
and comprehensive approach to digital assets policy and charged Treasury with a leadership role in this
work. EO 14067, Ensuring Responsible Development of Digital Assets, establishes the following policy
objectives with respect to digital assets: (1) protect consumers, investors, and businesses in the United
States; (2) protect the United States and global financial stability and mitigate systemic risk; (3) mitigate the
illicit finance and national security risks posed by misuse of digital assets; (4) reinforce United States
leadership in the global financial system and in technological and economic competitiveness, including
through the responsible development of payment innovations and digital assets; (5) promote access to safe
and affordable financial services; and (6) support technological advances that promote responsible
development and use of digital assets.
In September 2022, Treasury published a report on the future of the U.S. money and payments systems, in
which Treasury encourages continued work on innovations to promote a system that is more competitive,
efficient, and inclusive – and that also helps maintain and build on the United States’ global financial
leadership.45 The report recommends advancing policy and technical work on a potential U.S. CBDC, so
that the United States is prepared if a CBDC is determined to be in the national interest. Treasury also
published a report on the implications of digital assets for consumers, investors and businesses, laid out a
detailed Action Plan to prevent digital assets from being used for financial crimes, such as money
laundering and terrorism financing, and sent a framework to the President for international engagement on
digital asset issues. In October 2022, FSOC released a report on potential financial stability risks, and
recommended steps to address gaps in the regulation of digital assets in the United States.46
Following the publication of these reports, Treasury has a number of responsibilities, including participating
in an interagency working group regarding a potential central bank digital currency and working with other
agencies to prepare resources for consumers. The Office of Domestic Finance, Office of Terrorism and
Financial Intelligence, and Office of International Affairs will be primarily driving this work, in
coordination with other parts of Treasury and the interagency, as appropriate.
44 Please click on the following link for current market capitalization information: Cryptocurrency Prices, Charts, and Crypto Market Cap | CoinGecko
45 Treasury Report, The Future of Money and Payments: Report Pursuant to Section 4(b) of Executive Order 14067 (September 2022).
46 Financial Stability Oversight Council. Report on Digital Asset Financial Stability Risks and Oversight (October 2022).
DEPARTMENT OF THE TREASURY 217
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
TREASURY MANAGEMENT RESPONSE TO THE OFFICE OF INSPECTOR GENERAL (OIG) IDENTIFIED
CHALLENGES
OIG Challenge 1 - COVID-19 Pandemic Relief: The Coronavirus Disease 2019 (COVID-19) pandemic continues to affect the
health and economic stability of communities worldwide. The Department has been instrumental in implementing the
economic relief provisions of the Coronavirus Aid, Relief and Economic Safety (CARES) Act, the Consolidated Appropriations
Act (CAA), 2021, and the American Rescue Plan Act (ARP). As a result, Treasury’s responsibilities and workloads expanded
enormously. Because of this, the Department faced challenges in (1) filling and transitioning key leadership positions for
pandemic programs, (2) establishing internal controls, guidance, and methodologies for monitoring, reporting, and
overseeing funds disbursed, (3) data collection, quality, and reliability, and (4) lack of funding to sustain operations. In
addition, Treasury must carry the administrative and monitoring responsibilities in its new role in resolving Single Audits,
including potentially serving as cognizant agency for a significant number of entities1 under the Office of Management and
Budget’s (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.1
Management Response: As the nation continues to recover from the COVID-19 pandemic, we remain instrumental to
successful implementation of key CARES Act, CAA, and ARP programs that are designed to support communities,
households and small businesses. In response to the size, scope and complexity of these efforts, we created the Office of
Recovery Programs (ORP). Since we established the office in April 2021, ORP built a strong foundation to serve more than
35,000 recipients across the nation, through 10 different programs that support economically disadvantaged small
businesses, households, communities, and individuals. ORP significantly increased capacity over the past year to fulfill its
mission to lead Treasury’s implementation of over $600 billion in economic recovery programs, including the American
Rescue Plan. ORP onboarded over 100 current employees and cumulatively over 175 staff (including detailees), across
policy, reporting, recipient monitoring, compliance, and other key functions.
In contrast to the ad hoc approach to program implementation that characterized the initial period of CARES Act
implementation, creating and building ORP allows Treasury to put in place processes that support responsible, effective
service delivery, including:
more robust communication and engagement with recipients, particularly smaller entities with less experience
working with the federal government;
a focus on equity and access embedded into all programs, including through innovative approaches for outreach,
documentation, and data collection;
the ability to monitor and adjust programs on an ongoing basis using data through the sharing of best practices and
other resources, including updated guidance in programs like the Emergency Rental Assistance Programs (ERA)
and State and Local Fiscal Recovery Fund (SLFRF); and
a strategic data-centric approach to monitoring, compliance, and audit resolution and remediation that focuses on
areas of greatest risk in a resource-constrained environment.
1 https://www.ecfr.gov/current/title-2/part-200
218 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Supported by the robust infrastructure that ORP developed, the CARES Act, CAA, and ARP programs made significant
impacts on leading the federal government’s approach to the economic recovery. Together, these programs helped build an
infrastructure that promotes economic resilience through equitable, effective, and accountable recovery assistance. For
example:
SLFRF is the first program of its kind to provide economic relief to states, localities, and tribes of all sizes. This
program provided flexible funding that allowed communities to put the funds where they were needed most for
relief, including support for housing, water, broadband infrastructure, and small business. We have taken
unprecedented efforts to help deploy these funds to over 30,000 recipients.
ERA provided over seven million payments to households at risk of eviction while helping to keep the average
number of eviction filings since the expiration of federal eviction moratoria below historic averages, contrary to the
eviction tsunami many predicted. At the same time, the program helped build a national infrastructure for eviction
prevention, including lasting initiatives that will continue to help prevent evictions even as funds are ultimately
exhausted.
By September 2022, the Emergency Capital Investment Program (ECIP) deployed over $8.28 billion of investments
in 162 community development financial institutions and minority development institutions to support community
development.
The State Small Business Credit Initiative (SSBCI) approved a majority of state and territorial plans as it obligates
up to $10 billion for small business capital access. These plans support small businesses through a range of
programs that are intended to provide up to $10 of private capital for every $1 of SSBCI capital invested, including
through equity investments and small business loans.
ORP developed a strong foundation for agency wide support for tribes through its Tribal Policy and Engagement
Team, providing the groundwork for a new department-level office called the Office of Tribal and Native Affairs.
Through the Coronavirus Economic Relief for Transportation Services Program, the Payroll Support Program, and
the Airline Loan Program, ORP deployed critical assistance to help companies maintain payrolls and the nation
maintain capacity for airline and critical transportation services while building robust reporting, compliance, and
recipient monitoring structures.
ORP made this significant progress in the last year, as programs established guidance, allocated funds, signed award
agreements, and issued the bulk of payments. In addition, ORP employed innovative approaches to making the most use of
available resources and minimized administrative burden where appropriate while promoting program integrity. For
example, in SLFRF, we created a multi-tier reporting structure to provide balance in our collection of high-quality data,
while being sensitive to administrative burden especially among lower-capacity recipients. Furthermore, in several
programs, such as ERA and the Homeowners Assistance Fund (HAF), we prioritized building dedicated outreach teams that
are tasked with working with grantees to share promising practices and answer grantee questions; including by explaining
guidance through website updates, emails, webinars, and calls. With limited resources in these programs, these same teams
continue to provide support for ongoing program administration.
DEPARTMENT OF THE TREASURY 219
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
However, significant work remains to complete successful implementation with monitoring and oversight until awards are
fully closed out. This includes building and maintaining additional capacity to conduct audit resolution for new recipients
receiving Single Audits for the first time. Proper oversight is critical for us to maintain accountability over funds and spot
emerging risks, as well as for recipients wanting to avoid reputational risk from findings and who seek the prompt resolution
of findings. This work will extend at least a year after each program ends. In addition, we continue to provide information
to grantees to maximize clarity and administrability in programs that are disbursing funds.
Further, we are facing constraints that will put our ability to continue this level of support to recipients at risk. The greatest
impact is likely to be felt by the smallest jurisdictions and Tribal governments, which often rely on more in-depth
engagement with Treasury. Congress appropriated funding to Treasury to administer recovery programs, and some
programs were given more than enough funding to cover their operations. But in the case of several other programs, the
available funding is insufficient to allow us to maintain current levels of administrative support. These programs with
insufficient funding include the SLFRF, the Coronavirus Capital Projects Fund, the ERA, the HAF, and the Local Assistance
and Tribal Consistency Fund programs.
We continue to work with Congress to seek flexibilities in the use of administrative funds across programs, which would
preserve our ability to provide support without impacting operations. These changes would not require Congress to
appropriate any additional funds , but instead would permit us to repurpose some funds from other pandemic programs that
are in later stages of implementation to ARP programs with significant outstanding needs. However, pending those changes,
these funding shortfalls will have a significant impact on our ability to provide support to recipients of its programs. In
October 2022, for example, we closed our call center support, and we are in the process of other changes, including reducing
our reporting and recipient monitoring footprint while slowing our responses to incoming questions from jurisdictions,
among other impacts. Beyond these preliminary steps, without the necessary funding flexibility, we will have to undertake
more significant steps to reduce staffing and service in the weeks ahead.
In addition, as part of the CAA, the Community Development Financial Institutions Fund (CDFI) received supplemental
appropriations for the Rapid Response Program (RRP) and the Economic Recovery Program (ERP). The RRP had a FY 2021
statutory deadline of September 30, 2021 to obligate funding, and therefore received priority in terms of existing staffing,
time, and attention. By contrast, the ERP funding retains no statutory deadline for obligating funds and the funds do not
expire. However, for the ERP program, new staff needed to be hired—the hiring process began in February 2021 and was
not completed until October 2021—and applications could not be completed until we made final decisions about key program
design elements. The CDFI Fund released the ERP Notice of Funding Availability on June 23, 2022. The applications are
under review and we will make awards in early 2023.
Separately, although no federal funding will be associated with a Minority Lending Institution (MLI) designation at this
time, the CDFI Fund seeks to implement the designation for those CDFIs that wish to be recognized for their high levels of
service and accountability to minority populations, as well as to identify any unique barriers CDFIs experience in providing
access to capital.
On July 28, 2022, the CDFI Fund published a Request for Public Comment related to this MLI designation. Through this
RFC, the CDFI Fund seeks feedback from the public on certain aspects of the criteria and process the CDFI Fund will use to
designate a CDFI as an MLI. The CDFI Fund also seeks any additional information beyond these questions that members of
the public believe would assist the CDFI Fund in establishing policies and procedures related to MLI designation. The CDFI
Fund will consider the feedback received through this RFC prior to establishing a final definition and MLI designation.
220 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
OIG Challenge 2 Cyber Threats: Cybersecurity remains a long-standing and serious challenge facing the nation as reported
by GAO as a government-wide issue in its 2021 high- risk list published biennially.2 A reliable critical infrastructure,
including information systems and networks, is vital to our national security and economic stability. Cyber threats remain a
persistent concern as Treasury’s information systems are critical to the core functions of government and the nation’s
financial infrastructure, along with the financial sector it oversees. In addition, there is continuing concern over foreign
adversaries creating and exploiting vulnerabilities in the nation’s supply chain for information and communication
technology and services. As cyber threats continue to evolve and become more sophisticated, subtle, and easier to perform,
Treasury must fortify and safeguard its internal systems and operations while modernizing and maintaining them. Given
the stress that the global COVID-19 pandemic and the conflict in Ukraine place on financial institutions and the financial
sector, it is important that the Department monitors cyber risks in these areas as well. Treasury must also be ready to
reinforce and redirect cybersecurity efforts when unforeseen events occur.
Management Response: While cybersecurity remains a long-standing and serious challenge, we continue, as part of our
broader cybersecurity strategy, to transition duplicative, decentralized, cybersecurity services to shared enterprise
capabilities. This drives not only operational efficiencies but also enables our stakeholders to obtain robust services with
defined outcomes at competitive costs, all while helping develop a common operating environment to increase agility to
respond to high-velocity threats. Additionally, the Office of Terrorism and Financial Intelligence (TFI) monitors the
cybersecurity infrastructure of the high-side classified network for any hostile intrusion attempts or potential data breaches.
Under TFI, the Office of Intelligence and Analysis (OIA) fulfills these responsibilities in its Cyber Security and Support and
Technology Divisions.
In response to the data breach of the federal government using SolarWinds software in 20203, Treasury implemented
numerous changes to improve its ability to identify and detect, protect from, respond to, and recover from significant
cybersecurity threats or incidents. These broadly include:
increasing the stringency of protections around our electronic mail systems, which were a deliberate target of the
threat actors behind the 2020 incident;
expanding enterprise security operations capabilities to increase the level of observability of potentially malicious
activity in Treasury operating environments;
leveraging outside equities (both government and commercial) to routinely perform independent assessments
(penetration testing, threat hunting) of our cybersecurity posture, with a focus on confirming/denying the existence
of ongoing intrusion activity; and
focusing network defense efforts on High Value Assets, which are information systems that directly support our
mission essential functions and often contain our most sensitive information.
In addition, we have made strategic investments in evolving our cybersecurity infrastructure to mitigate risks associated
with the modern threat landscape, transitioning to a “zero trust” approach that conjoins devices with multi-factor
authentication, supported by strong encryption, to form the basis for systems access and authorization. These investments
are directly aligned to Executive Order (EO) 14028, Improving the Nations Cybersecurity.4
2 GAO, High-Risk Series, Dedicated Leadership Needed to Address Limited Progress in Most High-Risk Areas
(GAO-21-119SP: March 2021).
3 https://www.cisa.gov/uscert/ncas/current-activity/2020/12/13/active-exploitation-solarwinds-software
4 https://www.whitehouse.gov/briefing-room/presidential-actions/2021/05/12/executive-order-on-improving-the-nations-cybersecurity/
DEPARTMENT OF THE TREASURY 221
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
The Office of Cybersecurity and Critical Infrastructure Protection (OCCIP) continues to advocate that the financial services
sector adopt the National Institute of Standards and Technology (NIST) Cybersecurity Framework and the included
Financial Sector Profile. We continue to work with private sector and regulatory partners to identify how adoption of the
framework could be quantifiably measured. OCCIP hosted a widely attended virtual outreach session for small- to mid-sized
financial firms that enabled NIST to receive sector input regarding the upcoming revisions to the Framework. OCCIP
continues to work with the sector to improve the Financial Sector Profile with actionable and specific best practices that
enhances the value to the sector, while increasing the likelihood that the financial sector adopt the profile.
Recognizing the impact of supply chain risks, the Bureau of the Fiscal Service implemented processes to maintain
inventories of software in use on systems and embedded into custom developed code. These processes allowed us to quickly
identify instances of impacted software during incidents such as the Log4j supply chain risk event in 2021 and support
ongoing updates to the Cybersecurity and Infrastructure Security Agency’s Known Exploitable Vulnerability catalog. This
quick identification of impacted assets during the Log4j event enabled the remediation of 23 custom-coded applications
within a two-week period, thus mitigating risks of the supply chain threat.
The Fiscal Service also integrated threat intelligence and attack surface assessments into its ongoing continuous monitoring
processes. By understanding the vulnerabilities present in systems and tactics, and the techniques and procedures threat
actors who may target our systems use, we can use risk-based decision making and approach cybersecurity investments
strategically and tactically, improving both protection against attacks and optimizing processes for detection, response, and
recovery.
Lastly, the Fiscal Service has begun the Security Fusion Center (SFC) initiative, which is operationalizing a centralized,
intelligence-driven decision-making entity to correlate and enrich technical and non-technical threat information for
actionable insights. The SFC enables us to proactively identify, contain, mitigate, and recover from security-related
incidents, and identify vulnerabilities and weaknesses upstream to apply countermeasures before exploits occur. This is
achieved by formalizing a centralized risk-identification approach that integrates Cyber Threat Intelligence, Attack Surface
Assessment, Advanced Threat Hunt, Vulnerability Management, and related mission support efforts such as asset
protection, infrastructure management, emergency, and security programs to provide a comprehensive, real-time, and
historical perspective on contextualized threats facing the Fiscal Service. This effort is building the foundation for
managing, curating, and delivering enterprise-wide situational awareness to inform threat and risk-based mitigation
decisions, reducing the time to identify and respond to events and issues, and improving internal and external SFC
stakeholder collaboration, communication, and operational efficiency.
OIG Challenge 3-Anti-Money Laundering/Terrorist Financing and Bank Secrecy Act Enforcement: Over the past year, the
Office of Terrorism and Financial Intelligence (TFI) has remained dedicated to countering the ability of financial networks
that support terrorists, organized transnational crime, weapons of mass destruction proliferators, and other threats to
international security through intelligence analysis, sanctions, and international private-sector cooperation. As criminals
and other bad actors evolve and continue to develop more sophisticated money laundering methods in an attempt to avoid
detection, identifying, disrupting, and dismantling these financial networks that support rogue regimes, terrorist
organizations, transnational criminal organizations, and other threats to the national security of the United States and our
allies continues to be challenging. In addition, the Financial Crimes and Enforcement Network (FinCEN) faces the
challenge of ensuring the Bank Secrecy Act (BSA) information remains secure to maintain the confidence of the financial
sector, while meeting the access needs of law enforcement, regulatory, and intelligence partners, and to develop and
implement a new secure database for small businesses to report their beneficial ownership information, as required by the
Corporate Transparency Act.
222 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Management Response: TFI continues to lead Treasury’s efforts formulating and coordinating policies for anti-money
laundering and combatting the financing of terrorism (AML/CFT) in addition to developing strategies to deploy the full range
of financial authorities to combat national security threats. To achieve this end, TFI employs a highly collaborative
approach among its components to ensure we establish and implement AML/CFT programs that meet the Administration’s
goals.
FinCEN continues to prioritize efforts to maintain our unclassified systems at the stringent Federal Information System
Modernization Act (FISMA) high levels of security, and take all steps required to conform with our security standards and
programs. While FinCEN had unauthorized disclosures of sensitive data three years ago, which it pursued aggressively, it
has since had no known system breaches that compromised BSA data.
In FY 2022, FinCEN published the Beneficial Ownership Reporting Notice of Proposed Rulemaking (NPRM), and then spent
several months reviewing the extensive comments we received. These comments informed the final Beneficial Ownership
Reporting Rule, which was published in the Federal Register on September 30, 2022. Following the Reporting Rule, FinCEN
is on track to publish the Access Rule NPRM—which seeks to govern access to Beneficial Ownership Information (BOI) by
law enforcement, national security agencies, and financial institutions—and issue a final rule in FY 2023. The third and
final necessary beneficial ownership regulation is a revised Customer Due Diligence regulation, which is on schedule per
timelines provided in the Corporate Transparency Act. The President’s FY 2023 budget for FinCEN requests an increase of
$49 million and 45 full-time equivalent staff to further support FinCEN’s important efforts to implement the Anti-Money
Laundering and Corporate Transparency Acts.
OIG Challenge 4-Information Technology Acquisition and Project Management: The Federal Information Technology
Acquisition Reform Act (FITARA), enacted in December 2014, was the first major overhaul of federal Information
Technology (IT) management since the passage of the Clinger-Cohen Act of 1996, 5 which was designed to improve the
federal government’s acquisition and management of its resources to include IT investments. Among other things, it
expanded of Chief Information Officers (CIO) of federal agencies involvement in IT decision making, including annual and
multi-year planning, programming, budgeting, execution, reporting, management, governance, and oversight functions.6
While FITARA is intended for agencies to better manage their IT investments, implementation continues to be a
government-wide challenge.
Management Response: As enshrined in the Federal Information Technology Acquisition Reform Act (FITARA), which
Congress passed in December 2014, and later memorialized in OMB Memorandum M-15-14: Management and Oversight of
Federal Information Technology, the Treasury Chief Information Officer (CIO) is required to review and approve all our
information technology acquisitions. Prior to FITARA, IT acquisitions largely rested with each departmental component.
This has provided us the opportunity to evolve and further develop shared services, optimize technology spending through
centralized capabilities, eliminating duplicate common platforms, using service providers for commodity technology services,
and generally obtaining services at competitive price points. As we look to the future, particularly with the recent passage of
the Inflation Reduction Act, which provides a windfall of funding to the IRS for modernization, using enterprise services will
become all the more important.
5 Public Law 104-106 (February 10, 1996).
6 Public Law 113-291 (December 19, 2014).
DEPARTMENT OF THE TREASURY 223
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
In addition to the progress we made in IT-related acquisitions and project management, the Bureau of Engraving and
Printing (BEP) has implemented formal project governance and a change management structure for replacing its
Washington, D.C. facility. The BEP effectively responded to the recommendations cited in the MITRE Corporation report on
reporting on costs, schedule, and change management, to the satisfaction of the Federal Reserve Board (FRB) and has
resumed the design and engineering work for the new facility. In September 2022, the U.S. Army Corps of Engineers
(USACE), working in coordination with BEP, awarded a contract to finish 100 percent of the design, architect, and
engineering work for the DC Replacement Facility (DCRF). The BEP anticipates completing the design by the end of FY
2023 and anticipates that USACE will award a contract for and commence construction of the DCRF during FY 2024. The
current schedule anticipates the DCRF construction will be completed by calendar year 2027.
In FY 2022, the Fiscal Service also improved transparency of IT and non-IT program and project performance through
establishing and implementing a pilot of the Program Management Improvement Accountability Act (PMIAA) framework.
The framework includes policy; standards; a formalized process designed to identify issues and risks and assist with the
formulation of actionable recommendations to improve program or project outcomes; and a Governance Enterprise
Marketplace tool, enabling full integration of enterprise planning, governance, enterprise architecture, and IT portfolio
financials to ensure appropriate investment lifecycle management and business value-outcomes. We produce an executive
dashboard monthly, as a single source of truth to report on the performance of the Fiscal Service’s projects, presenting trend-
over-time views of individual project performance on scope, cost, schedule, efficiency, and quality, along with calculated
project health scores and self-assessed stakeholder ratings. In support of our PMIAA program, the Fiscal Service is working
to improve program and project management (P/PM) workforce capabilities through targeted training and development
based on PMIAA P/PM workforce competency assessment results.
Additionally, the Fiscal Services’ Financing Modernization (FinMod) project completed the Scaled Agile Framework (SAFe)
training to prepare the team to deliver a modernized system using a new development methodology. The SAFe method
guides the agile development progress and communication events. FinMod has adopted SAFe to establish project guidelines
for defining the high-level product roadmap, defining targets for program increments, and conducting review sessions to
evaluate project efficiency and effectiveness. A key aspect of SAFe implementation was the creation of an architectural
runway that provided a smooth transition to the development phase of the project. The runway is an important part of our
planning and will continue throughout agile development lifecycle.
The Fiscal Service continues to make significant progress implementing the Technology Business Management Framework
(TBM), including improving both data maturity and automation. The Fiscal Service was the first Treasury bureau to
implement Apptio, the new Treasury enterprise TBM solution, in May 2022. This initial implementation resulted in access
to federal IT financials, labor, and acquisition reports. TBM is expected to improve IT spending data accountability and
transparency, empowering agency executive leadership to drive mission value and improve customer experience through
technology. Data maturity metrics are in place and improving. Going forward, the Fiscal Service will continue to mature
the use of TBM.
OIG Challenge 5-Climate Initiatives Risk (NEW): In January 2021, EO 14008, Tackling the Climate Crisis at Home and
Abroad, identified the immediate need for comprehensive action to address the catastrophic impacts of climate change. EO
14008 emphasizes that U.S. leadership, and that of federal departments and agencies, will be required to significantly
enhance global action and achieve the necessary policy outcomes on climate change. Treasury will play a significant role
working with other federal agencies, foreign governments, and international financial institutions to stimulate global action
on addressing climate change, environmental justice, and climate change-created economic and financial crises. In 2021,
Treasury created a new Climate Hub and appointed a Climate Counselor to coordinate and lead many of its efforts to
address climate change.
224 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Management Response: The Financial Stability Oversight Council (FSOC), of which the Secretary serves as its chair,
published its Report on Climate-Related Financial Risk in October 2021. Since the publication of that report, FSOC and its
member agencies have made considerable progress in advancing the report’s recommendations, including significant actions
to address capacity building, disclosure, data, and assessment and mitigation of risks. The FSOC also established a new
staff-level interagency committee to serve as a coordinating body to share information, facilitate the development of common
approaches and standards, and foster communication across FSOC members. Additionally, our Office of Financial Research
conducted a data and analytics hub pilot to help FSOC assess climate-related risks to financial stability. Specific progress
across FSOC members can be reviewed in the FSOC’s July 2022 biannual update on climate-related financial risk efforts.
In line with EO 14030, Climate-Related Financial Risk, the Federal Insurance Office recently issued a request for public
comments on a proposed collection of data from property and casualty insurers regarding current and historical
underwriting data on homeowners’ insurance. More information on this request can be reviewed here.
In FY 2022, the Office of the Comptroller of the Currency (OCC) issued “Principles for Climate-Related Financial Risk
Management for Large Banks” for public feedback and completed the range of practice review of the large banks on their
management of climate-related financial risks. In addition, OCC started climate risk management reviews of banks with
over $100 billion in total consolidated assets to develop in depth understanding of these banks’ practices on a wide range of
areas related to climate risk management such as corporate governance, reporting, metrics, data, risk identification and
management, and scenario analysis. OCC is currently engaged in an interagency effort with the FRB and the Federal
Deposit Insurance Corporation to provide guidance on climate-related financial risk management.
In line with EO 14008, Tackling the Climate Crisis at Home and Abroad, we have has helped to renew U.S. leadership on
international climate finance and increased global climate ambition. In 2021, for example, we helped launch the first U.S.
International Climate Finance Plan; developed new policies to phase out international financing of unabated fossil fuels at
the multilateral development banks; helped launch a multilateral framework (Just Energy Transition Partnership, or JETP)
with South Africa to accelerate its transition to a clean energy future; negotiated a landmark agreement ending support for
coal-fired power generation export credits at the Organization for Economic Cooperation and Development (OECD); and co-
chaired the development of a Sustainable Finance Roadmap for the Group of 20 (G20). This year, we have continued to
support increased global ambition on climate change. For example, we continue to work extensively with those Multilateral
Development Banks in which the U.S. is a major shareholder to discuss how to scale climate finance and how to increase
work on adaptation and resilience; we are leading the development of a new JETP with Indonesia, we continue to co-chair
the G20 Sustainable Finance Working Group; and Treasury signed a $950 million dollar loan agreement for the Clean
Technology Fund (CTF), a multilateral trust fund which helps to scale up low carbon technologies in developing countries.
In collaboration with National Oceanic and Atmospheric Administration, we are developing a climate literacy curriculum
that will provide basic education on the causes and effects of climate change, alongside strategies for building resilience
throughout the Department. Resilience-building will focus on the main priority action areas identified in the Climate Action
Plan, such as financial investment, real property weatherization, and procurement. Examples include incorporation of
climate risk considerations in our retrofitting and new construction efforts. Additionally, purchasing renewable energy
credits and energy-savings performance contracts will be critical in meeting the administration’s requirements to convert our
operations to cleaner sources of electricity in the coming years and reduce reliance on the fossil-fuel energy market.
DEPARTMENT OF THE TREASURY 225
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
A major project includes operational fortification through the planned investments to expand and support the IRS’s presence
in Puerto Rico. Due to its geographic location, the island is particularly vulnerable to disruption from hurricanes, which
cause widespread destruction and impose a disproportionate economic, environmental, and public health burden on the
American citizens living there. This investment is expected to not only mitigate the risk of damages from extreme weather
events, but also to create jobs and allow for increased taxpayer access to bilingual services. An estimated 2,000 new federal
positions will be created on the island, which has a median household income of less than $21,000 (or 32 percent of the U.S.
median household income). Thus, it is both an operational win and a crucial step forward toward equity.
Further examples of operational resilience-building include the BEP’s construction of a new, weather-resilient production
facility in Maryland, greatly reducing operational risks associated with the current older Washington D.C. facility.
Additionally, the Main Treasury building is undergoing extensive repair and restoration work to weatherize and update its
exterior façade, preventing water intrusion. Expansion of telework capabilities will allow the workforce to continue essential
functions if the Main Treasury building is catastrophically impacted by a climate-related event such as major flooding or
power disruptions.
Because our bureaus have diverse missions and operations, Departmental Offices issued broad guidelines rather than overly
restrictive instructions for conducting climate risk assessments. However, to provide more quantitative strategic planning
support for adaptation and resilience of its facilities, we have considered the growing need for ready access to a central
repository of climate-related data (quantitative, machine-readable information) in multiple formats, as well as data analysts
and subject matter experts who can understand and use the data to propose and support operational decisions. Closing this
data and personnel gap will not only allow for more effective adaptation efforts of operations, but also help achieve goals set
for the other priority action areas in the CAP, particularly financial investment and policy.
Other Matter of Concern
Digital Assets (NEW)-Use of digital assets, including cryptocurrencies, stablecoins, and in some countries, central bank
digital currency, has grown significantly over the past several years. The U.S. has an interest in responsible financial
innovation and technological advances, but must protect its consumers, investors, and businesses. Additionally, it must
protect the U.S. and global financial stability, mitigating systemic risk in the absence of sufficient oversight.
Management Response: Treasury has been charged with a leadership role to ensure a coordinated and comprehensive
approach to digital assets policy. Treasury supports responsible innovation and seeks to maximize the gains from new
technology while protecting against possible risks to consumers, financial stability, and illicit finance. These efforts will
include:
The Office of Domestic Finance, along with the Office of General Counsel and Legislative Affairs, will identify
potential legislative changes necessary to mitigate consumer protection and financial stability risks of digital assets.
As appropriate, the Office of Domestic Finance and other offices across Treasury will support our efforts to promote
greater coordination among U.S. regulatory agencies on issues related to digital assets.
In work following from the reports Treasury published in 2022 as charged by EO 14067, Ensuring Responsible
Development of Digital Assets, Treasury will:
226 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
o Participate in an interagency working group to support the advancement of policy and technical work on a
potential U.S. Central Bank Digital Currency (CBDC), so that the United States is prepared if a CBDC is
determined to be in the national interest. This work will be led by the Office of Domestic Finance.
o Collaborate with other agencies to prepare resources for consumers and retail investors related to
participation in the digital asset market. This work will be led by the Office of Domestic Finance.
o Continue collaborating with international partners regarding digital asset opportunities and risks. This
work will be led by the Office of International Affairs.
o Continue to monitor illicit finance risks related to digital assets. This work will be led by the Office of
Terrorism and Financial Intelligence.
OCC has established a process pursuant to OCC Interpretive Letter #11797 for banks intending to launch crypto-
asset products and services to obtain a prior written supervisory non-objection.
FinCEN will address select high-risk issues in the evolving digital asset domain through rulemakings and
interpretive guidance.
OCC is working to improve interagency information sharing and coordination, including with the other federal
banking agencies, the FSOC, market regulators and state supervisors along with continued internal capacity
building, which includes working groups, written internal guidance/exams, and procedures/training initiatives.
7 https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2021/int1179.pdf
DEPARTMENT OF THE TREASURY 227
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION MANAGEMENT CHALLENGES
U.S. DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20024
TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
October 13, 2022
MEMORANDUM FOR SECRETARY YELLEN
FROM: J. Russell George
Inspector General
SUBJECT: Management and Performance Challenges Facing the
Internal Revenue Service for Fiscal Year 2023
228 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
The Reports Consolidation Act of 20001 requires that the Treasury Inspector General for Tax Administration
(TIGTA) summarize, for inclusion in the annual Department of the Treasury Agency Financial Report, its
perspective on the most serious management and performance challenges confronting the Internal
Revenue Service (IRS).
Each year, TIGTA evaluates IRS programs, operations, and management functions
to identify the most vulnerable areas in the Nation’s tax system. For Fiscal Year (FY) 2023, the passage of
the Inflation Reduction Act of 20222 (IRA) will provide the IRS with approximately $79 billion in funding that
will remain available through the end of FY 2031. This funding supplements the IRS’s annual
appropriations. In addition, the IRA contains numerous tax provisions. It will be a significant challenge for
the IRS to administer these provisions and effectively use the additional funding to address the challenges
of improving taxpayer service, modernizing outdated technological infrastructure, and increasing equity in
the tax system through added enforcement actions.
As in years past, the IRS must balance its tax compliance activities against the rights of taxpayers to receive
fair and equitable treatment. Protecting taxpayer rights, such as the right to be informed, the right to
quality service, the right to challenge the IRS’s position and be heard, and the right to privacy and
confidentiality, are interconnected with the management and performance challenges outlined in this
memorandum. In addition, as required by the IRS Restructuring and Reform Act of 1998,3 TIGTA performs
audits of certain taxpayer rights provisions and reports whether the IRS complied with those provisions.
However, we are mindful of the IRS’s need to protect the rights of taxpayers in all of our oversight work.
For FY 2023, we have identified the IRS’s top management and performance challenges as:
Improving Taxpayer Service;
Protecting Taxpayer Data and IRS Resources;
Modernizing IRS Operations;
Administering Tax Law Changes;
Increasing Domestic and International Tax Compliance and Enforcement; and
Reducing Tax Fraud and Improper Payments.
1 31 U.S.C. § 3516(d) (2006).
2 Pub. L. No. 117-169.
3 Pub. L. No. 105-206, 112 Stat. 685 (codified as amended in scattered sections of Titles 2, 5, 16, 19, 22, 23, 26, 31, 38, and 49 U.S.C.).
DEPARTMENT OF THE TREASURY 229
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Although not listed separately, human capital is also a significant concern and it affects the IRS’s ability to
address the above challenges. It remains a serious, underlying issue with
wide-ranging implications for both the IRS and taxpayers. At a time when the IRS is taking on new
challenges, such as implementation of the IRA, the recruitment of new employees and retention of existing
employees are critical to ensuring the maintenance of a quality workforce capable of meeting the needs of
the American public.
The following information detailing the management and performance challenges is provided to promote
the economy, efficiency, and effectiveness of the IRS’s administration of the Nation’s tax laws.
IMPROVING TAXPAYER SERVICE
As the IRS prepares for the 2023 Filing Season, it continues to struggle with eliminating the backlog of
unprocessed tax returns and other types of tax account work from prior filing seasons. The pandemic,
pandemic-related tax law changes, and significant staffing shortages hampered the IRS’s efforts to address
the backlog inventories, resulting in millions of tax returns not being timely processed, refunds not being
timely issued, the Federal Government paying interest on delayed refunds, and taxpayers not timely
receiving assistance with their tax account issues. As of August 12, 2022, the IRS had more than 14 million
individual and business paper returns waiting to be processed.
Figure 1: Status of Paper Returns Waiting to Be Processed as of August 12, 2022
Returns
Category
Individual Business Unspecified Total
Received in Calendar Year 2021 0 135,240 0 135,240
Received in Calendar Year 2022 7,560,022 6,531,163 259,754 14,350,939
Totals 7,560,022 6,666,403 259,754 14,486,179
Source: IRS Submission Processing Weekly Inventory Report, as of August 12, 2022.
The IRS Accounts Management function, which is responsible for assisting individual and business
taxpayers with tax law and tax account inquiries, including making adjustments to taxpayer accounts, is also
dealing with correspondence backlogs. The IRS requires taxpayers to use written correspondence as the
primary method when responding to an IRS notice or letter; however, TIGTA reported that the IRS has not
taken any significant actions to address the continued lack of quality customer service it offers taxpayers
corresponding with the IRS.4
In addition to the processing delays, during the 2022 Filing Season, the IRS saw the number of calls
answered and Level of Service (i.e., how many of those who call are able to speak to a Customer Service
Representative) for its toll-free telephone lines decline, and wait times increase. Figure 2 shows a
comparison for Calendar Years 2021 and 2022.
4 TIGTA, Report No. 2022-46-027, Program and Organizational Changes Are Needed to Address the Continued Inadequate Tax
Account Assistance Provided to Taxpayers (Mar. 2022).
230 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Figure 2: Toll-Free Performance Statistics for Calendar Years 2021 and 2022
Calendar Year
Performance Statistics
2021 2022
Assistor Calls Answered 15,400,000 7,783,000
Level of Service 16.4% 14.1%
Average Speed of Answer (Minutes) 20 30
Level of Access5 23.8% 28.0%
Source: IRS management information reports (as of August 14, 2021, for Calendar
Year 2021 and as of August 13, 2022, for Calendar Year 2022).
Significant staffing shortages have hampered the IRS’s efforts to address the backlog inventories and
provide the level of customer service expected by taxpayers. Demand for IRS toll-free telephone assistance
has increased each year since November 2018, which directly correlates with the increase in tax law
changes in recent years, including the tax law changes related to the pandemic. However, TIGTA reported
that many Accounts Management employees split their time between working Accounts Management
cases and answering IRS toll-free telephone calls.6
To address the backlogs and staffing shortages, the IRS announced its Get Healthy Plan on March 10, 2022.
The Get Healthy Plan is an effort to return the IRS to pre-pandemic inventory levels by the end of Calendar
Year 2022. As shown in Figure 1, as of August 12, 2022, the IRS had processed all of the individual paper
tax returns received in 2021. While this is a step in the right direction, the IRS still has a significant backlog
of returns received during the 2022 Filing Season that needs to be worked. Additionally, as the IRS
develops and deploys more automated tools for taxpayers, it will need to ensure that the tools are
operating as intended and improving the quality of its customer service.
In the IRS’s Strategic Plan FY 2022-2026,7 providing quality and accessible services to enhance the taxpayer
experience is the IRS’s top strategic goal. The IRS notes in its plan that it will continue to be challenged to
meet this goal due to insufficient funding, a shrinking workforce, hiring difficulties, and reliance on paper
processes. The passage of the IRA will provide the IRS with an additional $3.2 billion through FY 2031 to
improve customer service, representing a 9 percent increase over current budget projections.8
5 A TIGTA calculated telephone measure determined by taking the sum of all assistor and automated calls answered divided by the
total number of call attempts made while the various toll-free help lines are open. The hours each
toll-free help line are open vary by line.
6 TIGTA, Report No. 2022-46-027, Program and Organizational Changes Are Needed to Address the Continued Inadequate Tax
Account Assistance Provided to Taxpayers (Mar. 2022).
7 Strategic Plan FY 2022-2026, IRS Pub. 3744 (Rev. 7-2022).
8 Congressional Research Service, IRS-Related Funding in the Inflation Reduction Act (Updated August 9, 2022).
DEPARTMENT OF THE TREASURY 231
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
PROTECTING TAXPAYER DATA AND IRS RESOURCES
The trillions of dollars that flow through the IRS each year make it an attractive target for criminals who
want to exploit the tax system for personal gain. The proliferation of stolen Personally Identifiable
Information poses a significant threat to tax administration by making it difficult for the IRS to distinguish
legitimate taxpayers from fraudsters. Tax-related scams, and the methods used to perpetrate them, are
continually changing and require constant monitoring by the IRS. The IRS’s ability to continuously monitor
and improve its approach to taxpayer authentication is a critical step in defending the agency against
evolving cyber threats and fraud schemes and in protecting trillions of taxpayer dollars. According to the
Commissioner of Internal Revenue, the IRS was experiencing just over 1 million cyberattacks per day in
2017. Currently, the IRS sustains more than 1.5 billion attacks each year.9
Security controls provide a range of safeguards and countermeasures for organizations and information
systems to protect information during processing, while in storage, and during transmission. However,
TIGTA reported that the IRS’s mainframe computer platforms did not satisfy the minimum mainframe
security requirements in several key areas, which can have serious adverse effects on tax administration and
the protection of taxpayer data.10 The failure to timely remediate high-risk and medium-risk security
vulnerabilities could compromise the security posture of the mainframe platform and could lead to
unauthorized accesses, increased vulnerability to attacks, and unauthorized data sharing, all of which
compromise the integrity, confidentiality, and availability of the platform.
In addition, the failure to resolve or track existing computer vulnerabilities compromises the security
posture of an organization, potentially exposing taxpayer data and information to unnecessary risks.
Vulnerability scanners are commonly used in organizations to identify known vulnerabilities on hosts and
networks and on commonly used operating systems and applications. Scanning tools can proactively
identify vulnerabilities, provide a fast and easy way to measure exposure, identify out-of-date software
versions, validate compliance with an organizational security policy, and generate alerts and reports about
identified vulnerabilities. In December 2021, TIGTA reported that the IRS does not effectively oversee
vulnerability remediation across the enterprise.11 For example, the IRS did not verify or monitor the
remediation efforts for all vulnerabilities or consistently track and report vulnerability remediation metrics.
The protection of taxpayer data will continue to be a top priority for the IRS as it tries to leverage
technology to be responsive to taxpayers’ needs for its services, while minimizing the risks from
cyberattacks and insider threats. For the 2022 Filing Season, the IRS initially required taxpayers to use a
third-party service, ID.me, to help authenticate individuals creating online accounts by using facial
recognition to verify their identity. The IRS adopted the technology as a way to enhance the security of
taxpayer information. However, in response to privacy concerns related to taxpayers providing biometric
data to a private company, the IRS announced in February 2022 that taxpayers could sign up for IRS online
accounts with ID.me without the use of any biometric data. In addition, the IRS stated that it would shift
from ID.me to the General Services Administration's Login.gov identity authentication service after the
current tax filing season.
9 Testimony of Charles P. Rettig, Commissioner of Internal Revenue, On the Filing Season and the IRS Budget, House
Appropriations Committee, Subcommittee on Financial Services and General Government (May 18, 2022).
10 TIGTA, Report No. 2022-20-050, Mainframe Platform Configuration Compliance Controls Need Improvement (Sept. 2022).
11 TIGTA, Report No. 2022-20-006, Vulnerability Scanning and Remediation Processes Need Improvement (Dec. 2021).
232 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
IRS systems are often prime targets that are exploited both internally and externally in an effort to steal
taxpayer data. Individuals constantly attempt to corrupt or impede tax administration through the
manipulation and the unauthorized access of IRS systems. The IRS continually works with application
developers and third-party contractors who assist in the taxpayer identity verification process known as the
Secure Access Digital Identity initiative. This program is an effort to be compliant with new Federal
mandates and regulations governing the protection of Personally Identifiable Information.
In addition to safeguarding taxpayer data, the IRS also faces the daunting task of protecting its employees
and facilities. Recent incidents involving taxpayers who threatened or assaulted IRS employees underscore
the dangers that these employees face. As reported by the IRS, threat-related reports have rapidly
increased. TIGTA attributes this to the increased presence of IRS personnel returning to the office, as well
as recent legislation that directly impacts the IRS. After passage of the IRA, threats directed at the IRS and
its employees increased. As a result, the Commissioner of Internal Revenue announced efforts to perform a
comprehensive review of existing IRS safety and security measures. Threats and assaults directed at IRS
employees, facilities, and infrastructure impede the effective and safe administration of the Federal tax
system and the IRS’s ability to collect tax revenue.
Funding provided to the IRS by the IRA is expected to significantly increase IRS staffing levels over the
course of the next 10 years. As a result, the IRS should anticipate the potential for increased employee
misconduct allegations. The IRA also includes funding for the IRS to study the cost and feasibility of
creating a free direct e-file program, which would expand the overall scope and control of the current IRS
Free File Program. The implementation of such a system will create additional avenues for malicious actors
looking to exploit the IRS network and its online portals.
MODERNIZING IRS OPERATIONS
Successful modernization of systems and the development and implementation of new information
technology applications are critical to meeting the IRS’s evolving business needs and enhancing services
provided to taxpayers. The IRS uses different legacy case management systems that vary widely in
complexity, size, and customization to support tax administration. Modernization is necessary to deliver
efficient taxpayer services and enforcement with enhanced user experiences. Modernizing the IRS’s
computer systems has been a persistent challenge for many years and will likely remain a challenge for the
foreseeable future.12
According to the Commissioner of Internal Revenue, delays in updating the IRS’s information technology
system have resulted in the IRS’s continued use of certain paper-based processes.13 These paper processes
can result in significant delays, contributing to IRS backlogs and limiting taxpayers’ ability to know the
status of their cases. The Commissioner testified that this will continue to present challenges because the
IRS has not sustained sufficient multi-year investment for information technology modernization. As part
of the IRA, the IRS will receive an additional $4.7 billion for modernization efforts through FY 2031,
representing a 153 percent increase over current budget projections.
12 TIGTA, Report No. 2022-20-005, Annual Assessment of the IRS’s Information Technology Program for Fiscal Year 2021 (Dec.
2021).
13 Written testimony of Charles P. Rettig, Commissioner of Internal Revenue, On the Filing Season and IRS Operations, House
Oversight and Reform Committee, Subcommittee on Government Operations (April 21, 2022).
DEPARTMENT OF THE TREASURY 233
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
One of the most complex modernization programs in the Federal Government is the IRS’s Customer
Account Data Engine 2 (CADE 2) Program, which involves major changes to core IRS tax processing
systems. One of the goals of CADE 2 is to reengineer core components of the Individual Master File. The
IRS currently has a project that is converting lines of legacy code to a modern software language. The code
conversion is a major milestone towards retiring the Individual Master File. TIGTA reported that the IRS has
taken steps to improve the process for estimating the development time required to convert the lines of
code and that the IRS’s methodology is consistent with industry best practices.14 However, due to
completing an extensive analysis to account for the project’s complexity and capturing all required work,
the IRS determined in September 2019 that the development end date for the project should be moved
from August 2021 to September 2022. In August 2020, the IRS extended the development end date again
from September 2022 to April 2023.
TIGTA reported that more effective program management would help the IRS coordinate information
technology investments in a cost-effective and efficient manner. Specifically, the Next Generation
Infrastructure program is part of the IRS Integrated Modernization Business Plan that emphasizes
modernizing core tax administration systems, operations, and cybersecurity to improve the taxpayer
experience. The Plan is a road map for achieving necessary modernization of systems and taxpayer services
in two three-year phases that are comprised of a series of discrete projects and programs. Although TIGTA
determined the IRS implemented several capabilities of the Next Generation Infrastructure program in
Calendar Years 2019 and 2020, no clear or comprehensive program management structure was established.
This decentralized approach makes it difficult to determine ultimate responsibility and accountability over
the Next Generation Infrastructure program.15
Successful modernization of systems and the development and implementation of new information
technology applications will continue to be a critical challenge for the IRS to meet its evolving business
needs and enhance services provided to taxpayers.
ADMINISTERING TAX LAW CHANGES
One of the continuing challenges the IRS faces each year in processing tax returns is the implementation of
new tax law changes as well as changes resulting from expired tax provisions. Legislative actions
generating the changes often occur late in the year, shortly before the filing season begins. The recently
passed IRA includes numerous tax provisions, including the creation of a corporate alternative minimum tax
and tax incentives for companies and consumers who make cleaner energy choices. This will require the
IRS to act quickly to assess the change and determine the necessary actions to ensure that all legislative
requirements are satisfied. These actions may require revisions to various tax forms, instructions, and
publications, as well as reprogramming computer systems to ensure that tax returns are accurately
processed based on the changes. Errors in the IRS’s tax return processing systems may delay tax refunds,
affect the accuracy of taxpayer accounts, or result in incorrect taxpayer notices.
The primary legislation affecting the 2022 Filing Season was the American Rescue Plan Act of 2021
(ARPA),16 signed into law on March 11, 2021, which included approximately $1.9 trillion in economic relief
and stimulus to address the continuing impact of the pandemic on the economy, public health, State and
local governments, individuals, and businesses. It also contained numerous tax-related provisions
intended to provide relief to individuals and businesses. The ARPA modified several credits, including the
Child and Dependent Care Credit (CDCC) and Child Tax Credit (CTC), as well as creating a third Recovery
Rebate Credit.
234 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
One key provision in the ARPA is the expanded CTC. Determining eligibility for and the amount of the CTC
is a complex process. As of March 2, 2022, the IRS processed more than 14.9 million tax returns claiming
$82.7 billion in CTCs, of which $33.7 billion was paid in advance. This required a significant undertaking on
the IRS’s part as it needed to develop processes and procedures to determine eligibility, compute advance
payment amounts, and develop an online portal and nonelectronic assistance options for taxpayers to
provide the IRS with updates to key information used to compute the advance payment amounts.
TIGTA reported that the IRS established controls to track advance CTC updates and detect potentially
fraudulent tax returns.17 Although the IRS also developed a process to identify discrepancies between the
advance payments reported on the tax return and advance payments recorded on the taxpayer’s account,
the process did not account for undelivered checks. In these situations, taxpayers do not receive their
payments and need to work with the IRS, after filing their tax returns, to recover them. TIGTA
recommended that the IRS develop a process to continue to proactively identify and correct accounts with
undelivered advance CTCs that post to accounts after the IRS processes the Tax Year 2021 tax return.
In addition to legislative changes, the IRS must frequently issue additional guidance to taxpayers on
emerging trends that impact tax administration, such as cryptocurrencies and gig work. Expanding access
to information about new or expiring tax legislation is a critical step in improving voluntary compliance. In
the IRS’s Strategic Plan FY 2022-2026, the IRS noted that it needs to engage with more segments of the
population, like those with limited English proficiency, that face unique challenges in accessing the
information, forms, or services they need.
INCREASING DOMESTIC AND INTERNATIONAL TAX COMPLIANCE AND ENFORCEMENT
One of the IRS’s key responsibilities is to ensure that taxpayers comply with the tax law. Sustaining and
improving taxpayer compliance is important because small declines in compliance cost the Nation billions
of dollars in lost revenue and shift the tax burden from those who do not pay their taxes to those who pay
their taxes on time every year. If the IRS can increase the rate of voluntary compliance, it can reduce the
Tax Gap. The Tax Gap is defined as the difference between the estimated amount taxpayers owe and the
amount they voluntarily and timely pay for a tax year.
However, the IRS has indicated that insufficient funding remains a constraint to address its operations.18
Specifically, the Commissioner of Internal Revenue indicated the IRS’s budget has decreased by more than
15 percent in real dollars over the past decade. Because of this decrease, the IRS indicates its staffing is
close to 1974 levels. Over the next six years, the IRS estimates it will need to hire 52,000 employees just to
maintain its current staffing levels.19 As part of the IRA, the IRS will receive an additional $45.7 billion for
enforcement activities through FY 2031, representing a 69 percent increase over current budget
projections. Although increased funding will assist the IRS in replacing employees lost through attrition,
14 TIGTA, Report No. 2022-25-029, The Individual Tax Processing Engine Project’s Estimation Methodology Aligns with Best
Practices and the Project Addressed the Independent Verification and Validation Recommendations (Mar. 2022).
15 TIGTA, Report No. 2022-20-001, Some Next Generation Information Technology Infrastructure Capabilities Were Implemented,
but Program Management Improvements Are Needed (Nov. 2021).
16 Pub. L. No. 117-2, 135 Stat 4 (codified in scattered sections of Titles 7, 12, 15, 19, 20, 26, 29, 42, and 45 U.S.C.).
17 TIGTA, Report No. 2022-47-042, American Rescue Plan Act: Assessment of the Child Tax Credit Update Portal’s Capabilities and
Related Processes (July 2022).
18 Testimony of Charles P. Rettig, Commissioner of Internal Revenue, On the Filing Season and the IRS Budget, Senate Finance
Committee (April 7, 2022).
19 Testimony of Charles P. Rettig, Commissioner of Internal Revenue, On the Filing Season and the IRS Budget, House
Appropriations Committee, Subcommittee on Financial Services and General Government (May 18, 2022).
DEPARTMENT OF THE TREASURY 235
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
onboarding, training, and assimilating large numbers of employees will create its own challenges for the
IRS.
The IRS’s research shows that examinations have a strong positive impact on voluntary compliance.20
Comparing FYs 2016 and 2020, there were 55 percent fewer correspondence examinations and 59 percent
fewer field examinations conducted in FY 2020.21 The decrease in staffing within the Examination functions
has contributed to the decline in examinations. Specifically, the number of Examination staff decreased
9.9 percent from 10,101 in FY 2017 to 9,116 in FY 2020. The trending decline in enforcement activity is
likely causing growth in the overall Tax Gap as taxpayers are less likely to be subject to an examination.
While examinations have declined over the years, the Secretary of the Treasury has directed that any
additional resources not be used to increase the share of small business or households below the
$400,000 threshold that are audited relative to historical levels.
The IRS will continue to be challenged to enforce international tax compliance. U.S. taxpayers, regardless of
whether they live in the U.S. or abroad, are required to report and pay applicable taxes on worldwide
income to the IRS, including income from offshore accounts and other assets. While taxpayers can hold
offshore accounts for a number of legitimate reasons, some taxpayers have used such accounts to hide
income and evade taxes, and the IRS has not developed a reliable estimate of the international tax gap.
The Tax Gap is estimated using statistics from the IRS’s National Research Program data that does not
measure international noncompliance.22 Complexity and change in the international tax environment will
continue to challenge the IRS in enforcing compliance in this area.
The Foreign Account Tax Compliance Act (FATCA) was intended to reduce tax evasion by creating greater
transparency and accountability with respect to offshore accounts and other assets held by U.S. taxpayers.23
However, TIGTA reported that due to resource limitations, the IRS has significantly departed from its
original comprehensive FATCA Compliance Roadmap in favor of a more limited compliance effort.24
Continued emphasis by the IRS will be necessary to address offshore tax noncompliance.
To ensure confidence in the tax system, American taxpayers expect that everyone pays their Federal tax
obligations. This includes entities receiving the benefits of contracts and grants from the Federal
Government. Starting with the Consolidated and Further Continuing Appropriations Act, 2015,25 Congress
now prohibits Federal agencies from using appropriated funds to award a contract or grant to a
corporation that owes any amount of delinquent Federal tax, unless suspension or debarment is
considered. Congress provided the IRS $30 million to establish an application through which entities could
request from the IRS a certification that the entity did or did not owe seriously delinquent taxes.
20 IRS, The Impact of the IRS on Voluntary Tax Compliance: Preliminary Empirical Results (Nov. 2002).
21 TIGTA, Report No. 2022-30-033, Trends in Compliance Activities Through Fiscal Year 2020 (May 2022).
22 TIGTA, Report No. 2009-IE-R001, A Combination of Legislative Actions and Increased IRS Capability and Capacity Are Required to
Reduce the Multi-Billion Dollar U.S. International Tax Gap (Jan. 2009).
23 Pub. L. No. 111-147, Subtitle A, 124 Stat 97 (2010) (codified in scattered sections of 26 U.S.C.).
24 TIGTA, Report No. 2022-30-019, Additional Actions Are Needed to Address Non-Filing and Non-Reporting Compliance Under
the Foreign Account Tax Compliance Act (Apr. 2022).
25 Pub. L. No. 113-235, 128 Stat. 2130 (2014).
236 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
However, TIGTA reported that Federal agencies across the Government awarded contracts and grants to
entities that owed millions in delinquent Federal taxes.26 Between October 2018 and December 2019, the
Federal Government awarded 2.1 million Federal contracts and grants to more than 83,000 awardees. Of
these, 3,040 contractors received almost $10.2 billion in Federal contracts while owing $621.8 million in
delinquent Federal taxes. Figure 3 depicts the amounts of contracts and grants the Federal Government
awarded to entities with delinquent taxes between October 2018 and December 2019.
Figure 3: Federal Contracts and Grants
Awarded to Entities With Delinquent Taxes
Source: TIGTA analysis of entity data from the System for Award Management, contracts data from
the Federal Procurement Data System, grants data from USAspending.gov, and tax data from the
IRS’s Transaction Category Reports.
Increasing voluntary taxpayer compliance and reducing the Tax Gap will remain a persistent challenge
facing the IRS. As such, the IRS will need to stay committed to a strong, visible, and robust tax enforcement
presence to support voluntary compliance and protect the integrity of the tax system.
26 TIGTA, Report No. 2022-10-066, Reliance on Self-Certifications Resulted in Federal Agencies Awarding Contracts and Grants to
Entities With Delinquent Federal Taxes; However, the IRS Is Making Progress on Establishing the Federal Contractor Tax Check
(Sept. 2022).
DEPARTMENT OF THE TREASURY 237
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
REDUCING TAX FRAUD AND IMPROPER PAYMENTS
Identity theft tax refund fraud involves the use of another person’s name and Taxpayer Identification
Number27 to file a fraudulent tax return reporting false income and withholding in an effort to receive a
fraudulent tax refund. The IRS continues to increase the number of fraudulent tax returns detected and
stopped from entering the tax processing system (i.e., rejecting e-filed tax returns and preventing paper tax
returns from posting).28 For the 2022 Filing Season, the IRS used 168 filters to identify potential identity
theft tax returns and prevent the issuance of fraudulent refunds. In comparison, the IRS used 155 filters for
the 2021 Filing Season. These filters incorporate criteria based on characteristics of confirmed identity theft
tax returns, including amounts claimed for income and withholding, filing requirements, prisoner status,
taxpayer age, and filing history. Tax returns identified by these filters are held during processing until the
IRS can verify the taxpayer’s identity.
Identity theft not only affects individuals, it can also affect businesses. The IRS defines business identity
theft as creating, using, or attempting to use a business’s information without authority to obtain tax
benefits. The IRS continues to improve and expand its detection capabilities to include additional types of
business tax returns. During Processing Year 2021, the IRS used 84 selection filters to identify business tax
returns claiming refunds for potential fraud. These filters identified and selected for review 62,096 business
returns as potentially fraudulent.
However, TIGTA’s assessment of the IRS’s efforts to combat business identity theft and assist these types of
victims identified that efforts can be improved if the IRS adopts successful taxpayer detection and
assistance options, similar to what it provides to individual taxpayers. These include developing clustering
filters for business identity theft detection and expanding Identity Protection Personal Identification
Numbers to business taxpayers.29
In addition, TIGTA continues to find that IRS processes and procedures do not ensure that Individual
Taxpayer Identification Numbers (ITIN) are issued only to individuals who have a Federal income tax need.30
An ITIN is a tax processing number issued by the IRS for certain resident and nonresident aliens, their
spouses, and their dependents who are not eligible to obtain a Social Security Number from the Social
Security Administration. Only individuals who have a valid filing requirement, who are filing a return to
claim a refund, or who are claiming reduced withholding under an applicable income tax treaty are eligible
to receive an ITIN. TIGTA made several recommendations to improve administration of the ITIN program,
such as ensuring that the IRS receives complete data extracts for identifying ITIN applications with
duplicate entity information or supporting documents, regularly identifying and addressing retroactive
claims that were processed incorrectly, and updating programming to systemically identify and deactivate
all ITINs when required.
27 A nine-digit number assigned to taxpayers for identification purposes. Depending upon the nature of the taxpayer, it can be an
Employer Identification Number, a Social Security Number, or an Individual Taxpayer Identification Number.
28 TIGTA, Report No. 2022-40-035, Interim Results of the 2022 Filing Season (May 2022).
29 TIGTA, Report No. 2022-40-041, Successful Detection and Assistance Processes Used to Combat Individual Identity Theft Should
Be Implemented for Business Identity Theft (July 2022).
30 TIGTA, Report No. 2022-40-013, Administration of the Individual Taxpayer Identification Number Program (Jan. 2022).
238 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
The IRS continues to work diligently to combat various scams designed to steal taxpayers’ money or
personal information. Compiled annually, the IRS’s “Dirty Dozen” lists a variety of common scams that
taxpayers may encounter. In 2022, the IRS added pandemic–related scams to its list. These scams involve
the theft of a person’s money and identity with bogus e-mails, social media posts, and unexpected
telephone calls, among other things. The scams can take a variety of forms, including using
unemployment information and fake job offers to steal money and information from people. All of these
efforts can lead to sensitive personal information being stolen, with scammers using it to try filing a
fraudulent tax return as well as harming victims in other ways.
Improper payments (i.e., payments that should not have been made, were made in an incorrect amount, or
were made to an ineligible recipient) continue to be a challenge facing the IRS. TIGTA found that the IRS
inaccurately assessed the risk for the U.S. Coronavirus Economic Impact Payment program as not
susceptible to improper payments despite reports issued by TIGTA suggesting otherwise.31
In addition, the IRS continues not to be in compliance with the goal of reducing the overall improper
payment rate for the Earned Income Tax Credit (EITC), the Additional Child Tax Credit (ACTC), and the
American Opportunity Tax Credit (AOTC) to less than 10 percent. The IRS estimates it issued approximately
$26.1 billion in potentially improper EITC, ACTC, and AOTC payments in FY 2021. As shown below, this
represents a significant loss to the Federal Government:
EITC – The IRS estimates 28 percent ($19.0 billion) of the total EITC payments of $68.3 billion were
improper.
ACTC – The IRS estimates 13 percent ($5.2 billion) of the total ACTC payments of $39.4 billion were
improper.
AOTC – The IRS estimates 26 percent ($1.9 billion) of the total AOTC payments of $7.1 billion were
improper.
Further, the passage of the ARPA temporarily expands the CDCC. Beginning on January 1, 2021, the credit
is fully refundable and the amount of the credit and the income phase-out limits have significantly
increased. The unintended consequence of refundable credits is that they can result in the issuance of
improper payments and can be the targets of unscrupulous individuals.
TIGTA’s review of nearly 6.3 million Tax Year 2019 tax returns that received the CDCC identified a number of
weaknesses in the controls over the processing of CDCC claims.32 Although IRS management agreed to
take actions to address some of these processing weaknesses, the IRS is not taking actions to address all
deficiencies identified by TIGTA. This includes not taking the steps needed to ensure that requirements to
claim the CDCC are met at the time tax returns are processed. In addition, the IRS is not taking actions to
update its filing instructions and publications to provide additional guidance to taxpayers or revising
programming and processes to identify potentially erroneous CDCC claims. As a result, the IRS may
potentially allow improper payments associated with erroneous CDCC claims.
CONCLUSION
31 TIGTA, Report No. 2022-40-037, Programs Susceptible to Improper Payments Are Not Adequately Assessed and Reported (May
2022).
32 TIGTA, Report No. 2022-47-023, American Rescue Plan Act: Assessment of Processes to Identify and Address Improper Child and
Dependent Care Credit Claims (Mar. 2022).
DEPARTMENT OF THE TREASURY 239
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
This memorandum is provided as our annual summary of the most serious major management and
performance challenges confronting the IRS in FY 2023. TIGTA’s Fiscal Year 2023 Annual Audit Plan and
Fiscal Year 2023 Inspections and Evaluations Program Plan contain our proposed reviews. If you have any
questions or wish to discuss our views on the challenges in greater detail, please contact me at
(202) 622-6500.
cc: Deputy Secretary of the Treasury
Acting Assistant Secretary for Management
Deputy Chief Financial Officer
Commissioner of Internal Revenue
240 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
IRS MANAGEMENT RESPONSE TO TIGTA IDENTIFIED CHALLENGES
The IRS appreciates TIGTA's management and performance challenges as valuable feedback to improving administrative
processes and accomplishing our mission. Currently, the IRS is moving quickly to begin implementing the Inflation
Reduction Act (IRA) signed into law in August 2022, which provides the resources needed to address many of the issues
addressed in TIGTA’s report. The IRA funding will help provide resources for tax enforcement, taxpayer service and
technology. The funding will also ensure that a steady flow of resources will be in place to protect the nation’s future
revenue needs. Many of the employee gains will occur in future years of the IRS plan, and we will continue to focus on
retaining existing employees to share knowledge and help train new staff. The IRS created a new centralized IRA
Transformation & Implementation Office which will oversee the implementation of all IRS -related provisions in the IRA.
TIGTA Challenge 1: Improving Taxpayer Service
In FY 2022, the IRS took aggressive actions to address challenges related to pandemic recovery and new tax laws that led to
an unprecedented amount of unprocessed tax returns and correspondence that contributed to an extraordinarily high level of
call volumes and related taxpayer inquiries. To improve the overall level of customer service and processing of tax returns,
we implemented mandatory overtime, increased access to online self-service tools, and deployed surge teams, consisting of
employees with relevant experience from other operations, to work on reducing inventory levels.
The IRS obtained direct hiring authority through OPM and the Consolidated Appropriations Act of 2022 to reach a broader
applicant pool and reduce the number of days to hire. We used these authorities to hire personnel, such as tax examiners,
clerks, customer service representatives and critical operations support positions.
The IRS also deployed technology to aid in processing returns and improving the toll-free experience, to include:
deploying an automated tool to process many of the Error Resolution System cases;
expanding voicebot options to help taxpayers with general payment and notice questions, to get answers quickly and
avoid waiting; and
expanding customer callback, which saved taxpayers over 3.4 million hours of hold time in FY 2022.
The IRS will continue to pursue technology to improve paper processing and the toll-free experience, and will continue to
evaluate processes for improvement, including the appropriate resources and staffing allocation.
TIGTA Challenge 2: Protecting Taxpayer Data and IRS Resources
The IRS is committed to improving information technology configuration compliance controls and making significant
progress in FY 2023. The IRS will:
continue to address additional improvements to mainframe platform configuration compliance controls in several
key areas, including logical partition configuration compliance controls, vulnerability age tracking and remediation,
and compliance with required checklists; and
implement a monitoring process for all production z/Series Operating System (z/OS ) logical partitions and formalize
the checklist adjudication process for z/OS to align with the current process for Tier II devices.
In FY 2022, the IRS took the following critical steps to improve the overall effectiveness of vulnerability remediation:
DEPARTMENT OF THE TREASURY 241
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
We established a forum for sharing across the agency to ensure rightful ownership of the remediation responsibility
to address security risk management issues within required timeframes. Identified owners will continue performing
weekly scans for vulnerabilities and prioritizing the remediation of those identified vulnerabilities based on a risk
model formula. For vulnerabilities exceeding remediation time frames, the IRS will remedy the vulnerabilities
and/or create a Plan of Action and Milestones or Risk-Based Decisions to establish prioritization for the remediation
of vulnerabilities.
We implemented a process to ensure we properly communicate network updates related to vulnerability scanning.
We deployed enterprise vulnerability scanning tool agents to ensure that we complete privileged access scans on
required devices to determine the full extent of vulnerabilities affecting the installed operating systems and
applications.
We revised current guidance on conducting periodic reviews of the scanning exception list to ensure we properly
document vulnerability scanning exceptions and add devices lacking the required documentation to the
vulnerability scanning footprint.
TIGTA Challenge 3: Administering Tax Law Changes
The IRS implemented controls to track advance Child Tax Credit (CTC) updates and detect potentially fraudulent tax
returns. A TIGTA review shows an accuracy rate of 98 percent on these payments. To address undelivered checks, the IRS
updated programming to generate a new internal account transcript when a taxpayer returns an advance CTC payment (or
Economic Impact Payment) after the tax return is posted. This allows the IRS to proactively adjust the account without the
taxpayer having to contact the IRS. We updated our website to ensure accuracies in information on the CTC and Credit for
Other Dependents.
The IRS is committed to improve the tax system and to serve taxpayers, ensuring they have a positive experience when
interacting with the IRS. In FY 2022, the IRS released Form 1040 in Spanish, completed the conversion of 34 Spanish notice
inserts to Braille, text, audio and large print, and converted Form 1040 and its main schedules, Form 1040 NR , Form 1040
SR , Form W-4 and six IRS publications into Spanish Braille, text and large print. The IRS also developed a new Schedule
LEP (Limited English Proficiency) for taxpayers to indicate their preferred contact language other than English.
TIGTA Challenge 4: Modernizing IRS Operations
The nation’s tax system has changed significantly since the IRS was established more than 150 years ago, and over time, the
agency harnessed the opportunity to leverage technology and provide services the public needs to fulfill their tax obligations.
The IRS continues to implement modernization efforts to improve the taxpayer experience by modernizing core tax
administration systems, IRS operations, and cybersecurity. In FY 2022, the IRS published the IT Strategic Plan FY 2022-
2026, which is structured to address key factors, such as meeting the public’s expectations, simplifying the existing IRS
technology base, adopting emerging technology trends, staying ahead of cybersecurity threats, continually driving the
adoption of new ways of working, complying with federal mandates and guidelines, and supporting the workforce with
advanced technology training to enhance their skills. Technology innovation and the multi-year funding required to
modernize the legacy systems and technology at the IRS will be critical to improving the taxpayer experience and protecting
the integrity of our nation’s tax system.
242 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
The IRS is building the foundation to become a digital-first agency with the ability to unlock the power of data, adapt to
evolving taxpayer expectations, and create innovative tools to match the pace of change throughout the technology
landscape. The IRS will transform with automated digital workflows, real-time access to impactful data, and intelligently
automated submission reviews, all of which take the foundational modernization steps to support this future vision. The IRS
will also continue to make progress toward quickly implementing tax law changes and responses to legislation and
mandates, which requires an increasingly agile organization.
TIGTA Challenge 5: Increasing Domestic and International Tax Compliance and Enforcement
The IRS develops and implements international compliance workstreams for the many groups of taxpayers, including U.S.
citizens living or working abroad or in a U.S. Territory, U.S. citizens or resident aliens who hold income producing assets in
a foreign country or claim the foreign earned income exclusion or foreign tax credit, and permanent residents and non-
resident aliens who have a U.S. filing requirement. In addition, the Foreign Payments Practice and Automatic Exchange of
Information operation interacts with and monitors a variety of entities and individuals who have reporting and payment
requirements under Chapter 3 (Withholding of Tax on Nonresident Aliens and Foreign Corporations) and Chapter 4 (Taxes
to Enforce Reporting on Certain Foreign Accounts) of the Internal Revenue Code and collaborates with treaty partners in
automatically exchanging data used for tax compliance purposes. Some of the workstreams include Virtual Currency,
Offshore Service Providers, Section 965 for Individuals, Voluntary Disclosures, Offshore Private Banking, Form 1042
Compliance, and Foreign Account Tax Compliance Act (FATCA) Filing Accuracy campaigns. Since the start of the campaign
compliance program, IRS has initiated over 70 compliance campaigns.
Processing information under the FATCA and identifying individual offshore and foreign financial entity noncompliance
remain a resource intensive undertaking. FATCA is an information reporting regime designed to encourage reporting of
foreign bank and brokerage accounts of U.S. persons and closely held entities. As such, FATCA is a data source that is
woven into the IRS ’s enforcement framework throughout the organization. The IRS will continue to increase analytics
around comparing submissions it receives on Form 8938, Statement of Specified Foreign Financial Assets, that U.S. persons
file, and Form 8966, FATCA Report, that foreign financial institutions file to identify both substantial discrepancies in
individual reporting and individuals potentially failing to report their foreign financial accounts or not providing appropriate
customer information to their foreign financial institution.
The IRS implemented a multi-pronged compliance approach around this analysis, which includes the issuance of soft letters,
education letters, civil and criminal examinations, penalty consideration when appropriate, termination of the Global
Intermediary Identification Numbers for foreign financial institutions, and a Horizontal Scan Project geared towards
emerging tax risks and trends in FATCA compliance.
The IRS is ensuring its compliance workforce is well prepared to examine complex tax returns, especially those with offshore
compliance and transfer pricing issues, through a continued emphasis on training and knowledge sharing. The IRS has
faced challenges in hiring revenue agents who specialize in cross border tax issues. Because of this and the relatively few
numbers of specialists in this and other international areas, the IRS ’s hiring challenges have impacted the ability to enforce
international tax compliance. In providing directives to the IRS on the implementation of the IRA, Secretary Yellen
emphasizes the priority to hire and invest in training employees for identifying the most complex tax evasion schemes.
DEPARTMENT OF THE TREASURY 243
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
The IRS continues to prioritize development of its cross-functional Federal Contractor Tax Check System (FCTCS). Its
FCTCS working group is coordinating with Treasury and the OMB to resolve legislative and regulatory requirements
necessary to obtain approval for further development, deployment and use. The FCTCS technology solution is on track for a
foundational release in November 2022, which will automate the rules that perform a tax check at the request of
authenticated business taxpayers and has the capability of identifying whether a business has a seriously delinquent tax
debt pursuant to legislative mandate of the Consolidated Appropriations Act. The IRS technology solution satisfies the
requirements of the Act and Congressional intent and can be implemented without further legislative changes or any
dependence on updates to the System for Award Management by the General Services Administration.
TIGTA Challenge 6: Reducing Tax Fraud and Improper Payments
Reducing improper payments continues to be a top priority for the IRS. The IRS improper payment strategy is to intervene
early to ensure compliance with the law. In FY 2022, the IRS addressed improper payments through its compliance
programs as well as expansive outreach and education efforts to taxpayers and preparers. Programs that contribute to the
IRS ’s strategy of identifying and reducing improper refund claims associated with various refundable tax credits include
examinations, math error notices, document matching, utilizing two- and ten-year bans, identity theft and fraud, criminal
investigations, and soft notices.
To reduce improper payments and protect taxpayers from tax-related identity theft, the IRS included Form 8849, Claim for
Refund of Excise Taxes, in the 2021 Business Identity Theft Risk Assessment. The IRS is currently conducting an analysis
to determine the feasibility of assigning Identity Protection Personal Identification Numbers (IP PINs) to business taxpayers
since it presents numerous challenges that are not associated with the assignment of IP PINs to individual taxpayers.
The IRS will also evaluate various common tax return characteristics to determine if clustering filters should be developed
for business tax returns and will explore opportunities to reduce improper payments while promoting the availability of
refundable credits to eligible taxpayers.
The IRS continues to improve processes associated with erroneous Child and Dependent Care Credit (CDCC) claims. For
Processing Year 2022, the IRS developed a compliance filter to identify tax returns claiming CDCC for an adult dependent
who may not be disabled for possible post-refund treatment. Also, returns that claim the CDCC for further review per the
duplicate TIN process when any child has been claimed as a dependent by more than one taxpayer.
For tax year 2021, the IRS revised the Instructions for Form 2441, Child and Dependent Care Expenses, by adding a caution
paragraph to address the issue of potentially ineligible individuals being listed as qualifying individuals. Further, to better
educate taxpayers, the IRS added examples to Publication 503, Child and Dependent Care Expenses, to help clarify the
requirements for qualifying care and expenses.
For tax year 2022, the IRS will revise Form 2441 by adding a checkbox to indicate whether a taxpayer or their spouse was a
student or disabled during the tax year and they intend to enter deemed income on Form 2441. Form 2441 will also include
a new question to identify disabled individuals. Once adequate data is available, the IRS will assess the effectiveness of
these changes and evaluate the population of returns with couples who filed using the Married Filing Separately status on at
least one of the tax returns and claimed more than the maximum amount of the credit per family.
The IRS will work with the Office of Tax Policy to identify issues with CDCC for consideration of legislative changes.
244 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
SECTION D: PAYMENT INTEGRITY
We currently report erroneous payments for refundable tax credits (RTCs) within this section in accordance with the
improper payment reporting requirements of the Payment Integrity Information Act of 2019 (PIIA) and OMB Circular A-
123, Appendix C, Requirements for Payment Integrity Improvement (OMB Appendix C) as well as part of the tax gap
estimate program (see Part 3, Section B: Tax Gap and Tax Burden). However, we have long held that these RTCs are not
“payments” as intended under the improper payments legislation but are more appropriately addressed in the tax gap
estimate. Erroneous claims for RTCs are more appropriately referred to as “overclaims.” As such, we report error rates as
outlined in the PIIA and OMB Appendix C, for four1 refundable tax credits—the EITC, AOTC, ACTC, and net PTC—which
have error rates similar in concept to “significant improper payments.” Current and prior year Payment Integrity
information can now be accessed at https://paymentaccuracy.gov/.
As discussed below, the root cause of the errors in the EITC, AOTC, ACTC, and net PTC RTCs, is not the result of internal
control deficiencies and, as such, the IRS has continuously deployed costly enforcement tools to lower the error rate.
Deployment of these enforcement tools has had minimal impact on lowering the error rate. Between FY 2006 and FY 2022,
our error rates for EITC have ranged from 22.8 percent to 31.6 percent. As such, we have long held that focusing
enforcement resources on the larger tax gap is a more efficient and cost-effective way to minimize the tax gap and maximize
tax collections. We continue to support the reporting of RTC errors as part of the tax gap estimate as a better reflection of
how the IRS approaches taxpayer compliance relative to the U.S. tax system.
Notwithstanding the above discussion, and as noted previously, these RTCs are not “payments” as intended under the
improper payments legislation, as the tax system is a collection system rather than a payment system. Whereas a payment
system is generally designed to implement internal controls that provide for appropriate verification and validation prior to
payments being made, the statutory structure and design for administering refundable tax credit refunds prevents the IRS
from verifying or validating such amounts prior to making a refund. Consequently, errors are not the result of internal
control weaknesses that we can remediate internally but are, in fact, the result of factors beyond our control under current
law and existing authority. Even if we could obtain legislative changes and invest in additional resources and verification
solutions that would ultimately reduce errors, the benefits derived would be marginal relative to the costs. As such, it is our
position that RTC refunds that result in errors should not be reported under the improper payments framework. Rather
they are more appropriately addressed in the tax gap estimate, which is how we manage noncompliance. The following
provides an in-depth discussion of the factors presented in this summary.
RTC CLAIMS SHOULD NOT BE CONSIDERED PAYMENTS
The RTC refunds are a fundamental part of the U.S. income tax system, and only result when a taxpayer’s liability is
reduced below zero. We believe that RTC refunds are not true “payments” as intended by the improper payment statute.
The PIIA (P.L. 116-117) defines a payment as “any transfer or commitment for future transfer of federal funds, such as cash,
securities, loans, loan guarantees, and insurance subsidies to any non-federal person or entity, that is made by a federal
agency, a federal contractor, a federal grantee, or a governmental or other organization administering a federal program or
activity.” Tax refunds are reimbursements of amounts taxpayers overpay and are not considered “payments” as intended by
improper payment statutes. Similarly, the Internal Revenue Code (IRC) also considers RTC refunds to be amounts overpaid
by the taxpayer, stating that if the RTC amount allowed exceeds the tax imposed, the excess amount of RTC should be
considered an overpayment. As such, since there is no basis to distinguish between tax refunds and RTC refunds, our
1 In FY 2021, the IRS US Coronavirus Payments and IRS US Coronavirus Refundable Credits were determined to be susceptible to significant
improper payments through the risk assessment process. However, Treasury notified OMB in August 2022 that we will not be reporting improper
payment estimates for these programs due to the limitations inherent in quantifying the improper payment amount and rate of short-term COVID-19
programs.
DEPARTMENT OF THE TREASURY 245
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
position is that RTC refunds should also not be considered a “payment” and accordingly, we do not consider RTC errors to be
improper payments as intended by PIIA. RTCs are an inherent part of the tax system which relies heavily on voluntary
reporting. Payment systems are generally designed to provide for appropriate verification and validation that payments are
authorized, paid to the right entity, and paid in the correct amount. Inherent in these payment systems is the reliance on
this verification and validation before the paying entity makes payment. By contrast, the U.S. income tax system is
fundamentally different from a payment program in numerous and significant ways. The tax system is a collection system
in which the individual taxpayer self-certifies information the taxpayer used to calculate income tax withholdings. Tax filers
then voluntarily declare the amount of tax liability due and pay any remaining balances or request that any excess amounts
withheld be refunded. The IRS issues refunds primarily on the basis of the tax return as submitted.
Furthermore, treating the outlay portion of tax credits as payments ignores the interrelated nature of other components of
the tax system and provides no additional information that would help the IRS or Treasury address RTC errors. Continuing
to report outlays as payments could lead to inefficient and skewed application of limited enforcement resources whereas the
IRS’ tax gap estimate and enterprise risk management (ERM) framework better equip the IRS to analyze and address
noncompliance throughout the federal tax system.
INTERNAL CONTROL ISSUES ARE NOT THE ROOT CAUSE OF RTC ERRORS
The PIIA’s enactment was intended to reduce the U.S. government’s
wasteful spending by increasing agencies’ accountability for preventing and
recovering improper payments. Improper payment reporting requirements
link the reduction of improper payment rates with agency efforts to
establish or enhance internal controls for ensuring we accurately calculate
payments and make them to the correct recipient. The OMB Appendix C
also states that agencies should approach improper payments with an
internal control framework that is integrated with ERM for
purposes of managing payment integrity risk and reducing improper
payment rates. However, as we have determined repeatedly through
qualitative risk assessments, RTC errors are not primarily rooted in
internal control deficiencies; instead, they are the result of factors beyond
QUOTEINSPECTOR.COM
our control, such as the statutory design of the RTCs, the complexity of the
eligibility requirements, the reliance on taxpayers’ self-certification of the
accuracy of their returns, and the lack of third-party data for verification. A Primary Causes of RTC Errors
challenging distinction of RTC errors as compared to other programs is
Complex statutory eligibility rules
generally the lack of an application process that would allow the IRS to pre-
Inability to verify taxpayer-provided
qualify the taxpayer for RTCs, as is the case with most healthcare and other information prior to refunding due to
benefits, Social Security payments, veterans’ compensation, and so on. The lack of independent data sources
Lack of correctable error authority
tax code relies on taxpayer ex post self-certification as opposed to a • Statutory requirement to issue tax
preapproval screening process. Databases containing all the third-party refunds within 45 days of the filing
data the IRS needs for independent verification do not exist and would deadline without paying interest
present a substantial privacy challenge to construct. Government Accountability Office (GAO) and Inspector General for Tax
Administration audits have concluded that RTC errors are largely due to the statutory design and complexity of the RTC
programs, not internal control weaknesses, financial management deficiencies, or reporting failures as PIIA guidelines are
intended to address. To learn more about the RTCs and the challenges of compliance, see Part 3, Section B: Tax Gap and
Tax Burden.
246 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
UNIQUE CHALLENGES IN VALIDATING RTCS
Much of the information necessary to validate the accuracy of an RTC claim before issuing a tax refund is not
comprehensively available in any U.S. government database. The IRS runs various automated checks of certain data on a
tax return before paying a refund but is otherwise limited in its ability to question and correct the taxpayer’s claim. The IRS
must deploy a variety of costly enforcement tools, including audits, to verify the information on the tax return prior to paying
tax refunds or collecting any tax due. As a result, the IRS allocates a disproportionate amount of its enforcement resources
to audit returns that claim one or more RTCs. This creates several problems. Because lower-income taxpayers make up the
majority of those claiming RTCs, they are subjected to a disproportionate number of audits (RTC claimants are audited
about three times the rate of other taxpayers). Since lower-income taxpayers make up a significant portion of taxpayers
claiming RTCs, auditing these taxpayers can lead to a negative perception of the IRS’s treatment of taxpayers. This runs
counter to the IRS’s mission of fairness to all. Finally, the U.S. government may incur interest costs by delaying the
issuance of refunds to taxpayers. As a result of not processing these returns until an audit is completed, we conservatively
estimate the U.S. government will incur an additional interest expense annually ranging from $20.8 million to $41.6 million
for delayed refunds of accurate returns.
More than 50 percent of taxpayers claiming refundable tax credits use paid preparers. Preparer education and outreach are
major components of the IRS’s overall strategy to address the tax gap and to reduce errors. The IRS’s education and
outreach efforts seek to inform preparers about the availability of the credits and about the eligibility requirements that
taxpayers must meet to claim the credits. The IRS uses many communication vehicles to send important and useful
messages to the return preparer community. Table 1 highlights other tax administration strategies.
DEPARTMENT OF THE TREASURY 247
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
TABLE 1:
Other Tax Administration Strategies
Nationwide Tax Forum The annual tax forum offers three full days of seminars with the latest news
from the IRS leadership and experts. More than 8,300 preparers attended the
seminar entitled Looking to Tax Year 2022: American Rescue Plan Tax Changes
to the Earned Income Tax Credit and Other Child-Related Credits at the 2022
virtual Nationwide Tax Forums.
Interactive Due Diligence The training module on IRS.gov covers the technical aspects of the due diligence
Training Module requirements. In FY 2022, more than 10,400 preparers received a certificate of
completion.
Tax Preparer Toolkit The Tax Preparer Toolkit on IRS.gov has resources to assist tax return
preparers with the EITC, ACTC, AOTC, as well as other credits and tax
benefits.
Software Developers The IRS meets with members of tax preparation companies and software
Working Group industry representatives to identify software enhancements that can help
reduce errors taxpayers and paid preparers make and to assist paid preparers in
meeting their due diligence requirements.
Due Diligence Webinars The IRS hosts discussions and provides instructions and demonstrations over
the internet. In FY 2022, nearly 900 preparers attended the virtual webinar on
due diligence requirements entitled Keys to Mastering Due Diligence
Requirements and What to Expect During a Due Diligence Audit.
Tax Preparer Alerts Alerts on IRS.gov provide return preparers with updated news and information
on key refundable credit and return filing topics.
Refundable Credits In FY 2022, the IRS held its annual summit to provide a forum for interested
Summit internal and external stakeholders to discuss opportunities to reduce improper
payments, ease taxpayer burden, and mitigate compliance risks. The IRS held
an additional summit to discuss administering the advance child tax credit
provisions in the American Rescue Plan.
Further improving the integrity of RTC programs will take actions beyond our control. We have proposed various legislative
changes over the years aimed at providing more effective tools for managing RTCs. For FY 2023, the Administration
included the following proposals in its Budget submission:
Expand and increase Penalties for Return Preparation and E-filing - The proposal would increase and expand the
IRS’s authority to address noncompliance or inappropriate behavior by paid tax return preparers and e-file
providers. First, it would increase the penalty amounts that apply to paid tax return preparers for willful, reckless
or unreasonable understatements, as well as for forms of noncompliance that do not involve an understatement of
tax. Second, the proposal would establish new penalties for the appropriation of Preparer Tax Identification
Numbers (PTINs) and Electronic Filing Identification Numbers (EFINs) and for failing to disclose the use of a paid
tax return preparer. Third, the proposal would increase the limitations period during which the penalty for a
failure to furnish the preparer’s identifying number may be assessed from three years to six years. Fourth, the
248 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
proposal would clarify the Secretary’s authority to regulate the conduct and suitability of persons who participate in
the authorized e-file program, including setting standards and imposing sanctions to protect the integrity of the e-
file program.
Increase Oversight of Paid Tax Return Preparers - The proposal would amend Title 31, U.S. Code (Money and
Finance) to provide the Secretary with explicit authority to regulate all paid preparers of federal tax returns,
including by establishing mandatory minimum competency standards.
These statutory changes may help reduce RTC errors to some degree. However, a meaningful reduction in the estimated
error rate is unlikely without independent data sources through which the IRS can verify taxpayer-provided information and
additional time and resources for the IRS to address any issues identified.
REDUCING RTC ERRORS DIVERTS VALUABLE RESOURCES FROM OTHER TAX GAP ELEMENTS
Compliance with the improper payment legislation and OMB reporting guidance requires reducing each program’s improper
payment rate to 10 percent or less. In an FY 2020 study to reduce error rates to less than 10 percent, to meet PIIA
compliance standards, the IRS estimated that it would need additional or reallocated resources of $2.5 billion to audit 4.2
million additional RTC returns in the pre-refund environment. If the IRS were to reallocate enforcement resources to be
compliant with PIIA, a substantial loss in enforcement revenue, estimated at $6.4 billion, would result because the IRS
would have to divert resources from programs with higher returns and tax gap elements to audits of RTC returns. Moreover,
such enforcement actions would place substantial burden on low-income taxpayers through increased audits and delayed
refunds, violating the IRS requirement to enforce the tax law with integrity and fairness. To meet OMB’s metric of reducing
the improper payment rate to 10 percent or less for FY 2022, RTC programs would need to reduce erroneous payments by
$16.2 billion), based on FY 2022 estimates. Table 2 illustrates this data.
TABLE 2:
Reduction of Improper
Payments to 10% of claims
RTC Claims and Improper Payments, TY 20201 (dollars in billions) value
Reduction
Improper 10% of needed for ≤
Program Claims Improper Payments Payment Rate claims value 10%
EITC $57.5 $18.2 31.6% 5.7 $12.5
ACTC 32.8 5.2 15.8% 3.3 1.9
AOTC 5.6 2.0 36.1% 0.6 1.4
net PTC3 2.1 0.6 27.4% 0.2 0.4
Total $98.0 $26.0 26.5% 2 $9.8 $16.2
(1) In FY 2022, Treasury begins reporting improper payment amounts and rates on a tax year basis rather than fiscal year basis. For FY 2022,
Treasury is reporting on claims and improper payments associated with tax year 2020 tax returns filed in 2021 and 2022.
(2) Total improper payments ÷ Total RTC claims ($26.0 ÷ $98.0).
(3) Includes amounts for federal and state exchanges.
DEPARTMENT OF THE TREASURY 249
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
The Patient Protection and Affordable Care Act (PPACA) established the Health Insurance Marketplace through which
qualified individuals and qualified employers can purchase health insurance coverage. The Premium Tax Credit (PTC) is a
refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased
through the Marketplace. PTC can be paid in advance directly to the consumer’s Qualified Health Plan insurer. Consumers
then claim the premium tax credit on the federal tax returns, reconciling the credit allowed with any advance payments
made throughout the year. The PTC program is operationally divided between the Department of Health and Human
Services (HHS) and Treasury. The HHS, through the Centers for Medicare & Medicaid Services (CMS), administers advance
payments to insurance providers on behalf of applicants/taxpayers through the federally facilitated exchange. These
payments are referred to as advance payments of the Premium Tax Credit (advance PTC or APTC). Treasury and the IRS
administer the federal income tax return process where a tax credit (repayment or zero are other possibilities) is based on
reconciliation of APTC amounts with final allowable PTC determined in tax filing. Payment of this credit is referred to as
net PTC. As PTCs have been determined to be susceptible to significant improper payments, we collaborated with HHS to
develop a joint methodology for reporting improper payment information for PTC.
We report net PTC for both the federal and state exchanges in our improper payment table within our Agency Financial
Report (AFR) (see Table 2 above). HHS reports APTC in its improper payment table within its AFR2. Both departments
disclose the combined advance and net PTC rates in their AFRs. To satisfy reporting to OMB and PaymentAccuracy.gov
requirements, CMS reports disbursements/outlays, estimated error rate, and other data for APTC. The IRS similarly
reports estimated overclaims and error rate for net PTC. The combined advance and net PTC rates are for informational
purposes only and will not be included in either Department’s overall improper payment rate and will not be reported to
PaymentAccuracy.gov. For Tax Year 2020, CMS reported APTC outlays of $41.3 billion and improper payments of $255.8
million. For Tax Year 2020, IRS reported net PTC claims of $1.2 billion and improper payments of $342.1 million. The
combined APTC and net PTC improper payment estimate is $597.9 million out of $42.5 billion total Premium Tax Credit
outlays/claims, or 1.4 percent.3
2
Please also see the Fiscal year 2022 U.S. Department of Health and Human Services Agency Financial Report for more information.
3
The combined APTC and net PTC improper payment amounts in this paragraph reflects payment amounts for taxpayers using the federal exchange
only.
250 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
The current improper payment statutory framework does not consider recoveries of improper payments as reductions to the
error rate. Therefore, remediation efforts would need to be preventative in nature, which creates challenges given the tax
framework and the need to process returns timely or incur interest payment obligations. Accordingly, all enforcement
activity would need to be in the pre-refund environment to be counted as a reduction of errors. The control activities specific
to reducing the improper payment rate to less than 10 percent are the
same as those being deployed to reduce the RTC portion of the tax gap:
additional audits, system buildouts or enhancements (upgrades),
increased outreach, third party databases to verify taxpayer data, and
others. The IRS would have to increase these control activities
significantly in an entirely pre-refund environment to reduce the
erroneous RTC payments, which would come with highly diminishing
returns.
The error rate for EITC has averaged 25.3 percent from FY 2006 to FY
2022 despite the on-going base enforcement and EITC compliance
DEPARTMENT OF THE TREASURY
strategies. This rate excludes funds recovered through post-refund
enforcement activity, because improper payment reporting does not take
Estimated Errors Have Remained Steady Despite
into account recoveries after the refunds are issued. As discussed, Efforts to Reduce Error Rates
reducing RTC errors to meet the improper payment rate of 10 percent
EITC estimated error rates have ranged from 22.8
would divert valuable resources from other tax gap elements. percent to 31.6 percent between FY 2006 and FY 2022,
with an average annual error rate estimate of 25.3
The estimated improper payment rate for the EITC was 31.6 percent in percent.
FY 2022, which is not statistically different from the estimated rate of
27.8 percent for FY 2021. The estimated improper payment rate for the ACTC was 15.8 percent in FY 2022, which is not
statistically different from the estimated rate of 13.3 percent for FY 2021. The FY 2022 estimated rates for EITC and ACTC
fall within sample precision margins of +/- 5.83 percent and +/- 5.09 percent, respectively. The wider sample precision
margins are the result of a reduction in the number of returns sampled that was necessitated by the significant reduction in
the IRS’s budget over the last decade along with the resulting decrease in the IRS’s examination staff.
The IRS designed the initial TY 2018 NRP Individual Income Tax Reporting Compliance sample, upon which the FY 2022
estimates are based, to include the original sample of 11,080 returns, a 20 percent decrease compared to study years prior to
the TY 2016 NRP sample. Due to a continued decline in enforcement staff, the IRS further reduced the sample to 4,000
returns, which were drawn from the original sample; these returns are representative of the entire sampling frame,
including returns that did not claim RTCs subject to improper payments reporting. The differences in the EITC and ACTC
point estimates are not statistically significant because the FY 2021 estimates fall within the wider FY 2022 statistical
margin of error. Accordingly, one cannot conclude that the true population estimated improper payment rates for ACTC and
EITC has changed based upon these samples. The margin of error for the refundable AOTC remained about the same as
prior years due to improvements in the sample designs for TY 2017 (+/- 5.51 percent) and TY 2018 (+/- 6.18 percent).
Although the FY 2022 estimated AOTC improper payment rate (based on data from the TY 2018 NRP sample) and the FY
2021 estimated refundable AOTC improper payment rate (based on data from the TY 2017 NRP sample) are technically
statistically significantly different, we cannot conclude that the improper payment rates are actually different because of
changes in the NRP classification and examination procedures beginning with the TY 2018 NRP study that impacted
examinations of refundable AOTC.
DEPARTMENT OF THE TREASURY 251
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
SECTION E: CIVIL MONETARY PENALTIES INFLATION ADJUSTMENT
The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Act) amended the Federal Civil
Penalties Inflation Adjustment Act of 1990 (Inflation Adjustment Act), to improve the effectiveness of civil monetary
penalties (CMPs) and to maintain their deterrent effect. The 2015 Act requires agencies to annually adjust the level of
CMPs for inflation and report annually in AFRs. The 2015 Act requires that agencies make annual inflation adjustments
based on annual OMB guidance and publish the latest penalty levels in the Federal Register no later than January 15 each
year. The Inflation Adjustment Act and the 2015 Act exclude penalties under the IRC and the Tariff Act of 1930. The table
below depicts the covered CMPs that are under our purview.
Latest Year of Current Penalty
Sub‐Agency
Penalty (Name or Year Adjustment (via Level ($ Location for Penalty
Statutory Authority Bureau/
Description) Enacted Statute or Amount or Update Details
(1) Entity
Regulation) Range)
87 Federal Register
DO (Office of 7369 (February 9,
50 USC App. 16(b)(1)
Foreign Assets 2022)
Trading with the Enemy Act, Sanctions violation 1917 2022 $97,529
Control https://www.govinfo.g
Section 16(b)
(OFAC)) ov/content/pkg/FR‐
2022‐02‐09/pdf/2022‐
02736.pdf
The greater of
50 USC 1705 $330,947 or
International Emergency twice the value
Sanctions violation 1977 2022 DO (OFAC) Same as above
Economic Powers Act, Section of the
206 underlying
transaction
The greater of
$87,361 or twice
the amount of
18 USC 2339B(b) which a financial
Antiterrorism and Effective Sanctions violation 1996 2022 institution was DO (OFAC) Same as above
Death Penalty Act of 1996 required to
retain
possession or
control
21 USC 1906(b)
Foreign Narcotics Kingpin Sanctions violation 1999 2022 $1,644,396 DO (OFAC) Same as above
Designation Act, Section 807
19 USC 3901‐3913
Sanctions violation 2003 2022 $14,950 DO (OFAC) Same as above
Clean Diamond Trade Act
Failure to furnish
50 USC 1701 ‐ 1706 information pursuant to 31
International Emergency CFR 501.602 irrespective of 2008 2022 $25,542 DO (OFAC) Same as above
Economic Powers Act whether any other violation
is alleged
252 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Latest Year of Current Penalty
Sub‐Agency
Penalty (Name or Year Adjustment (via Level ($ Location for Penalty
Statutory Authority Bureau/
Description) Enacted Statute or Amount or Update Details
Entity
Regulation) Range) (1)
Failure to furnish
information pursuant to 31
CFR 501.602 where OFAC
has reason to believe that
50 USC 1701 ‐ 1706
the apparent violation(s)
International Emergency 2008 2022 $63,855 DO (OFAC) Same as above
involves a transaction(s)
Economic Powers Act
valued at greater than
$500,000, irrespective of
whether any other violation
is alleged
Late filing of a required
report, whether set forth in
50 USC 1701 ‐ 1706
regulations or in a specific
International Emergency 2008 2022 $3,192 DO (OFAC) Same as above
license, if filed within the
Economic Powers Act
first 30 days after the report
is due
Late filing of a required
report, whether set forth in
50 USC 1701 ‐ 1706
regulations or in a specific
International Emergency 2008 2022 $6,386 DO (OFAC) Same as above
license, if filed more than
Economic Powers Act
30 days after the report is
due
Late filing of a required
report, whether set forth in
regulations or in a specific
50 USC 1701 ‐ 1706
license, if the report relates
International Emergency 2008 2022 $1,278 DO (OFAC) Same as above
to blocked assets, an
Economic Powers Act
additional CMP for every 30
days that the report is
overdue, up to five years
Failure to maintain records
50 USC 1701 ‐ 1706 in conformance with the
International Emergency requirements of OFAC’s 2008 2022 $63,973 DO (OFAC) Same as above
Economic Powers Act regulations or of a specific
license
86 Federal Register
12537 (March 4, 2021)
15 USC 6701 note DO (Federal
https://www.govinfo.g
Terrorism Risk Insurance Act, as Civil Penalty 2002 20213 $1,436,220 Insurance
ov/content/pkg/FR‐
amended Office)
2021‐03‐04/pdf/2021‐
04377.pdf
87 Federal Register
3433 (January 24,
2022)
12 USC 1829b(j) Recordkeeping Violations
1988 2022 $23,011 FinCEN https://www.govinfo.g
Bank Secrecy Act, as amended for Funds Transfers
ov/content/pkg/FR‐
2022‐01‐24/pdf/2022‐
01284.pdf
12 USC 1955 Willful/Grossly Negligent
1988 2022 $23,011 FinCEN Same as above
Bank Secrecy Act, as amended Recordkeeping Violations
Failure to Terminate
31 USC 5318(k)(3)(C)
Correspondent Relationship 2001 2022 $15,565 FinCEN Same as above
Bank Secrecy Act, as amended
with Foreign Bank
31 USC 5321(a)(1) General Civil Penalty $62,689 to
1986 2022 FinCEN Same as above
Bank Secrecy Act, as amended Provision for Willful $250,759
DEPARTMENT OF THE TREASURY 253
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Latest Year of Current Penalty
Sub‐Agency
Penalty (Name or Year Adjustment (via Level ($ Location for Penalty
Statutory Authority Bureau/
Description) Enacted Statute or Amount or Update Details
Entity
Regulation) Range) (1)
Violations of Bank Secrecy
Act Requirements
Foreign Financial Agency
31 USC 5321(a)(5)(B)(i)
Transaction ‐ Non‐Willful 2004 2022 $14,489 FinCEN Same as above
Bank Secrecy Act, as amended
Violation of Transaction
Foreign Financial Agency
31 USC 5321(a)(5)(C)(i)(l)
Transaction ‐ Willful 2004 2022 $144,886 FinCEN Same as above
Bank Secrecy Act, as amended
Violation of Transaction
Negligent Violation by
31 USC 5321(a)(6)(A)
Financial Institution or Non‐ 1986 2022 $1,253 FinCEN Same as above
Bank Secrecy Act, as amended
Financial Trade or Business
Pattern of Negligent Activity
31 USC 5321(a)(6)(B) by Financial Institution or
1992 2022 $97,529 FinCEN Same as above
Bank Secrecy Act, as amended Non‐Financial Trade or
Business
Violation of Certain Due
Diligence Requirements,
31 USC 5321(a)(7) Prohibition on
2001 2022 $1,556,481 FinCEN Same as above
Bank Secrecy Act, as amended Correspondent Accounts for
Shell Banks, and Special
Measures
Civil Penalty for Failure to
31 USC 5330(e)
Register as Money 1994 2022 $9,250 FinCEN Same as above
Bank Secrecy Act, as amended
Transmitting Business
87 Federal Register
1657 (January 12,
12 USC 93(b) Tier 1 Violation of Various 2022)
Section 5239(b) of the Revised Provisions of the National 1978 2022 $11,011 OCC https://www.govinfo.g
Statutes Bank Act ov/content/pkg/FR‐
2022‐01‐12/pdf/2022‐
00109.pdf
12 USC 93(b) Tier 2 Violation of Various
Section 5239(b) of the Revised Provisions of the National 1978 2022 $55,052 OCC Same as above
Statutes Bank Act
12 USC 93(b) Tier 3 Violation of Various
Section 5239(b) of the Revised Provisions of the National 1978 2022 $2,202,123 OCC Same as above
Statutes Bank Act
12 USC 164
Tier 1 Violation of Reporting
Section 5213 of the Revised 1869(2) 2022 $4,404 OCC Same as above
Requirements
Statutes
12 USC 164
Tier 2 Violation of Reporting
Section 5213 of the Revised 1869(2) 2022 $44,043 OCC Same as above
Requirements
Statutes
12 USC 164
Tier 3 Violation of Reporting
Section 5213 of the Revised 1869(2) 2022 $2,202,123 OCC Same as above
Requirements
Statutes
12 USC 481 Refusal of Affiliate to
Section 5240 of the Revised Cooperate in Examination 1864(2) 2022 $11,011 OCC Same as above
Statutes (National Banks)
12 USC 504 Tier 1 Violation of Various
Section 29 of the Revised Provisions of the Federal 1978 2022 $11,011 OCC Same as above
Statutes Reserve Act
254 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Latest Year of Current Penalty
Sub‐Agency
Penalty (Name or Year Adjustment (via Level ($ Location for Penalty
Statutory Authority Bureau/
Description) Enacted Statute or Amount or Update Details
Entity
Regulation) Range) (1)
12 USC 504 Tier 2 Violation of Various
Section 29 of the Revised Provisions of the Federal 1978 2022 $55,052 OCC Same as above
Statutes Reserve Act
12 USC 504 Tier 3 Violation of Various
Section 29 of the Revised Provisions of the Federal 1978 2022 $2,202,123 OCC Same as above
Statutes Reserve Act
12 USC 1817(j)(16)
Tier 1 Violation of Change in
Section 7(j)(16) of the Federal 1978 2022 $11,011 OCC Same as above
Bank Control Act
Deposit Insurance Act
12 USC 1817(j)(16)
Tier 2 Violation of Change in
Section 7(j)(16) of the Federal 1978 2022 $55,052 OCC Same as above
Bank Control Act
Deposit Insurance Act
12 USC 1817(j)(16)
Tier 3 Violation of Change in
Section 7(j)(16) of the Federal 1978 2022 $2,202,123 OCC Same as above
Bank Control Act
Deposit Insurance Act
Tier 1 Violation of Law,
12 USC 1818(i)(2)
Unsafe or Unsound
Section 8(i)(2) of the Federal 1978 2022 $11,011 OCC Same as above
Practice, or Breach of
Deposit Insurance Act
Fiduciary Duty
Tier 2 Violation of Law,
12 USC 1818(i)(2)
Unsafe or Unsound
Section 8(i)(2) of the Federal 1978 2022 $55,052 OCC Same as above
Practice, or Breach of
Deposit Insurance Act
Fiduciary Duty
Tier 3 Violation of Law,
12 USC 1818(i)(2)
Unsafe or Unsound
Section 8(i)(2) of the Federal 1978 2022 $2,202,123 OCC Same as above
Practice, or Breach of
Deposit Insurance Act
Fiduciary Duty
12 USC 1820(k)(6)(A)(ii)
Violation of Post‐
Section 10(k)(6)(A)(ii) of the 2004 2022 $362,217 OCC Same as above
Employment Restrictions
Federal Deposit Insurance Act
Violation of Withdrawals by
Negotiable or Transferable
12 USC 1832(c)
Instrument for Transfers to 1973 2022 $3,198 OCC Same as above
Section 2 of Public Law 93‐100
Third Parties (National
Banks)
Violation of Withdrawals by
Negotiable or Transferable
12 USC 1832(c)
Instrument for Transfers to 1973 2022 $2,907 OCC Same as above
Section 2 of Public Law 93‐100
Third Parties (Federal
Savings Associations)
12 USC 1884
Violation of the Bank
Section 5 of the Bank 1968 2022 $320 OCC Same as above
Protection Act
Protection Act of 1968
Tier 1 Violation of Anti‐
12 USC 1972(2)(F) Tying Provisions Regarding
Section 106(b)(2)(F) of the Bank Correspondent Accounts,
1978 2022 $11,011 OCC Same as above
Holding Company Act Unsafe or Unsound
Amendments of 1970 Practices, or Breach of
Fiduciary Duty
DEPARTMENT OF THE TREASURY 255
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Latest Year of Current Penalty
Sub‐Agency
Penalty (Name or Year Adjustment (via Level ($ Location for Penalty
Statutory Authority Bureau/
Description) Enacted Statute or Amount or Update Details
Entity
Regulation) Range) (1)
Tier 2 Violation of Anti‐
12 USC 1972(2)(F) Tying Provisions Regarding
Section 106(b)(2)(F) of the Bank Correspondent Accounts,
1978 2022 $55,052 OCC Same as above
Holding Company Act Unsafe or Unsound
Amendments of 1970 Practices, or Breach of
Fiduciary Duty
Tier 3 Violation of Anti‐
12 USC 1972(2)(F) Tying Provisions Regarding
Section 106(b)(2)(F) of the Bank Correspondent Accounts,
1978 2022 $2,202,123 OCC Same as above
Holding Company Act Unsafe or Unsound
Amendments of 1970 Practices, or Breach of
Fiduciary Duty
Violation of Various
12 USC 3110(a)
Provisions of the
Section 16(a) of the
International Banking Act 1991 2022 $50,326 OCC Same as above
International Banking Act of
(Federal Branches and
1978
Agencies)
Tier 1 Violation of Reporting
12 USC 3110(c)
Requirements of the
Section 16(c) of the
International Banking Act 1991 2022 $4,027 OCC Same as above
International Banking Act of
(Federal Branches and
1978
Agencies)
Tier 2 Violation of Reporting
12 USC 3110(c)
Requirements of the
Section 16(c) of the
International Banking Act 1991 2022 $40,259 OCC Same as above
International Banking Act of
(Federal Branches and
1978
Agencies)
Tier 3 Violation of Reporting
12 USC 3110(c)
Requirements of the
Section 16(c) of the
International Banking Act 1991 2022 $2,013,008 OCC Same as above
International Banking Act of
(Federal Branches and
1978
Agencies)
12 USC 3909(d)(1)
Section 910(d)(1) of the Violation of International
1983 2022 $2,739 OCC Same as above
International Lending Lending Supervision Act
Supervision Act of 1983
Tier 1 (natural person)
Violation of Various
15 USC 78u‐2(b) Provisions of the Securities
Section 21B(b) of the Securities Act, the Securities Exchange 1990 2022 $10,360 OCC Same as above
Exchange Act of 1934 Act, the Investment
Company Act, or the
Investment Advisers Act
Tier 1 (other person)
Violation of Various
15 USC 78u‐2(b) Provisions of the Securities
Section 21B(b) of the Securities Act, the Securities Exchange 1990 2022 $103,591 OCC Same as above
Exchange Act of 1934 Act, the Investment
Company Act, or the
Investment Advisers Act
Tier 2 (natural person)
15 USC 78u‐2(b) Violation of Various
Section 21B(b) of the Securities Provisions of the Securities 1990 2022 $103,591 OCC Same as above
Exchange Act of 1934 Act, the Securities Exchange
Act, the Investment
256 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Latest Year of Current Penalty
Sub‐Agency
Penalty (Name or Year Adjustment (via Level ($ Location for Penalty
Statutory Authority Bureau/
Description) Enacted Statute or Amount or Update Details
Entity
Regulation) Range) (1)
Company Act, or the
Investment Advisers Act
Tier 2 (other person)
Violation of Various
15 USC 78u‐2(b) Provisions of the Securities
Section 21B(b) of the Securities Act, the Securities Exchange 1990 2022 $517,955 OCC Same as above
Exchange Act of 1934 Act, the Investment
Company Act, or the
Investment Advisers Act
Tier 3 (natural person)
Violation of Various
15 USC 78u‐2(b) Provisions of the Securities
Section 21B(b) of the Securities Act, the Securities Exchange 1990 2022 $207,183 OCC Same as above
Exchange Act of 1934 Act, the Investment
Company Act, or the
Investment Advisers Act
Tier 3 (other person)
Violation of Various
15 USC 78u‐2(b) Provisions of the Securities
Section 21B(b) of the Securities Act, the Securities Exchange 1990 2022 $1,035,909 OCC Same as above
Exchange Act of 1934 Act, the Investment
Company Act, or the
Investment Advisers Act
15 USC 1639e(k) First Violation ‐ Violation of
Section 129E(k) of the Truth in Appraisal Independence 2010 2022 $12,647 OCC Same as above
Lending Act Requirements
Subsequent Violations ‐
15 USC 1639e(k)
Violation of Appraisal
Section 129E(k) of the Truth in 2010 2022 $25,293 OCC Same as above
Independence
Lending Act
Requirements
42 USC 4012a(f)(5)
Section 102(f)(5) of the Flood Flood Insurance 1994 2022 $2,392 OCC Same as above
Disaster Protection Act of 1973
12 USC 1464(v)
Tier 1 Reports of Condition ‐
Section 5(v) of the Home 1989 2022 $4,404 OCC Same as above
Savings Associations
Owners' Loan Act
12 USC 1464(v)
Tier 2 Reports of Condition ‐
Section 5(v) of the Home 1989 2022 $44,043 OCC Same as above
Savings Associations
Owners' Loan Act
12 USC 1464(v)
Tier 3 Reports of Condition ‐
Section 5(v) of the Home 1989 2022 $2,202,123 OCC Same as above
Savings Associations
Owners' Loan Act
12 USC 1467(d)
Refusal of Affiliate to
Section 9(d) of the Home 1989 2022 $11,011 OCC Same as above
Cooperate in Examination
Owners' Loan Act
12 USC 1467a(r)
Tier 1 Late/Inaccurate
Section 10(r) of the Home 1989 2022 $4,404 OCC Same as above
Reports (Savings and Loans)
Owners' Loan Act
DEPARTMENT OF THE TREASURY 257
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Latest Year of Current Penalty
Sub‐Agency
Penalty (Name or Year Adjustment (via Level ($ Location for Penalty
Statutory Authority Bureau/
Description) Enacted Statute or Amount or Update Details
Entity
Regulation) Range) (1)
12 USC 1467a(r)
Tier 2 Late/Inaccurate
Section 10(r) of the Home 1989 2022 $44,043 OCC Same as above
Reports (Savings and Loans)
Owners' Loan Act
12 USC 1467a(r)
Tier 3 Late/Inaccurate
Section 10(r) of the Home 1989 2022 $2,202,123 OCC Same as above
Reports (Savings and Loans)
Owners' Loan Act
87 Federal Register
27 USC 218
8947 (February 17,
Federal Alcohol Administration
2022)
Act, as amended; Section 207
Violation 1988 2022 $22,979 TTB https://www.govinfo.g
of the Alcohol Beverage
ov/content/pkg/FR‐
Labeling Act of 1988, P.L. 100‐
2022‐02‐17/pdf/2022‐
690
03410.pdf
86 Federal Register
31 USC 333 12537 (March 4, 2021)
Prohibition of Misuse of Misuse of Treasury name or Department https://www.govinfo.g
1994 20213 $8,212
Department of the Treasury symbol Wide ov/content/pkg/FR‐
Names, Symbols, etc. 2021‐03‐04/pdf/2021‐
04377.pdf
31 USC 333
Misuse of Treasury name or
Prohibition of Misuse of Department
symbol in broadcast or 1994 20213 $41,056 Same as above
Department of the Treasury Wide
telecast
Names, Symbols, etc.
31 USC 3802
Program Fraud Civil Department
Program Fraud Civil Remedies 1986 20213 $8,212 Same as above
Remedies Act Wide
Act
(1) Current penalty level amounts represent the maximum penalty amounts.
(2) For purposes of calculating the appropriate inflation factor, OMB’s guidance issued February 24, 2016 uses the calendar year 1914 CMP Catch-
Up Adjustment Multiplier for all penalties enacted prior to 1914.
(3) The regulation for the inflation adjustment to this CMP will be updated in 2023.
258 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
SECTION F: GRANTS PROGRAMS
The summary table below shows the total number and balances of federal grants and cooperative agreements that we
awarded for which closeout has not yet occurred and the period of performance has elapsed by more than two years.
CATEGORY 2‐3 Years 4‐5 Years More than 5 Years
Number of Grants/Cooperative Agreements with Zero Dollar
Balances 195 3 ‐
Number of Grants/Cooperative Agreements with Undisbursed
Balances 43 2 ‐
Total Amount of Undisbursed Balances $ 745,929 $ 34,713 $ ‐
These awards are with the IRS Low Income Tax Clinics (LITC) program and the Volunteer Income Tax Assistance (VITA)
program. The IRS continues making the closeout of awards a priority every fiscal year. Due to the two-year cycle of the
VITA grants, the IRS did see an increase in the number of grants and cooperative agreements with period of performance
over two years from 81 in FY 2021 to 243 in FY 2022. Grant recipients not correctly completing and submitting all progress
reporting forms and financial forms in the Payment Management System, competing priorities, employee turnover, and
integrating a new grants management system continue to be challenges preventing closeout of awards. The program offices
are reviewing closeout procedures and are dedicated to closing out the remaining accounts in FY 2023.
DEPARTMENT OF THE TREASURY 259
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
SECTION G: CLIMATE-RELATED FINANCIAL RISK
Treasury is committed to using our broad and far-reaching policy influence to lead and support Executive Order 14008,
Tackling the Climate Crisis at Home and Abroad. We will play a significant role working with other federal agencies, foreign
governments, and international financial institutions to stimulate global action on addressing climate change,
environmental justice, and working to prevent climate change-created economic and financial crises.
Our latest Climate Action Plan can be found on our website: https://home.treasury.gov/about/budget-financial-reporting-
planning-and-performance/climate-action-plan.
260 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
APPENDIX: GLOSSARY OF ACRONYMS
Abbreviation Description
2015 Act Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015
ACTC Additional Child Tax Credit
AFR Agency Financial Report
AGI Adjusted Gross Income
AML/CFT Anti-Money Laundering and Combating the Financing of Terrorism
AOTC American Opportunity Tax Credit
APG Agency Priority Goal
APR Annual Performance Report
ARC Administrative Resource Center
ARP American Rescue Plan Act of 2021
ARRA American Recovery and Reinvestment Tax Act of 2009
ASM Assistant Secretary for Management
BEP Bureau of Engraving and Printing
BSA Bank Secrecy Act
CAA Consolidated Appropriations Act, 2021
CARES Act Coronavirus Aid, Relief, and Economic Security Act
CCF Corporate Credit Facilities, LLC
CDFI Community Development Financial Institutions
CDFI RRP CDFI Rapid Response Program
CERTS Coronavirus Economic Relief for Transportation Services
CFIUS Committee on Foreign Investment in the United States
CFO Chief Financial Officer
CIFS Critical Individual Filing Season
CIO Chief Information Officer
Civil Service Fund Civil Service Retirement and Disability Trust Fund
CMP Civil Monetary Penalties
Compliance Framework FFMIA Compliance Determination Framework
COVID-19 Coronavirus Disease 2019
CPF Coronavirus Capital Projects Fund
CPFF Commercial Paper Funding Facility II LLC
CPI Consumer Price Index
CRF Coronavirus Relief Fund
CRO Chief Risk Officer
CSRS Civil Service Retirement System
CTC Child Tax Credit
D.C. District of Columbia
D.C. Federal Pension Fund D.C. Teachers’, Police Officers’, and Firefighters’ Federal Pension Fund
DEIA Diversity, Equity, Inclusion, and Accessibility
DO Departmental Offices
DOJ Department of Justice
DEPARTMENT OF THE TREASURY 261
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Abbreviation Description
DOL Department of Labor
ECIP Emergency Capital Investment Program
EIP Economic Impact Payment
EITC Earned Income Tax Credit
EO Executive Order
ERA Emergency Rental Assistance
ERM Enterprise Risk Management
ESA Exchange Stabilization Agreement
ESF Exchange Stabilization Fund
Evidence Act Foundations for Evidence-Based Policymaking Act of 2018
Fannie Mae Federal National Mortgage Association
FARS Financial Analysis and Reporting System
FASAB Federal Accounting Standards Advisory Board
FATCA Foreign Account Tax Compliance Act
FCDA Foreign Currency Denominated Assets
FCRA Federal Credit Reform Act
FDC Funds from Dedicated Collections
FECA Federal Employees’ Compensation Act
Federal Reserve Board or Board Federal Reserve Board of Governors
FEGLI Federal Employees Group Life Insurance
FEHBP Federal Employees Health Benefits Program
FERS Federal Employees’ Retirement System
FEVS Federal Employee Viewpoint Survey
FFB Federal Financing Bank
FFMIA Federal Financial Management Improvement Act of 1996
FHFA Federal Housing Finance Agency
FICA Federal Insurance Contributions Act
Financial Report Financial Report of the U.S. Government
FinCEN Financial Crimes Enforcement Network
Fiscal Service Bureau of the Fiscal Service
FISMA Federal Information Security Management Act
FITARA Federal Information Technology Acquisition Reform Act
FMFIA Federal Managers’ Financial Integrity Act
FOMC Federal Open Market Committee
FR System Federal Reserve System
FRB Federal Reserve Bank
FRBB Federal Reserve Bank of Boston
FRBNY Federal Reserve Bank of New York
Freddie Mac Federal Home Loan Mortgage Corporation
FRN Floating Rate Note
FTO Fine Troy Ounce
FY Fiscal Year
262 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Abbreviation Description
G Fund Government Securities Investment Fund
G-7 Group of Seven
G20 Group of 20
GAAP Generally Accepted Accounting Principles
GAO U.S. Government Accountability Office
General Fund General Fund of the U.S. Government
GPRA Government Performance and Results Act of 1993
GSA General Services Administration
GSE Government Sponsored Enterprise
HAF Homeowner Assistance Fund
HERA Housing and Economic Recovery Act
HFA Housing Finance Agency
HHS Department of Health and Human Services
HINF High-Income Nonfiler
IAP International Assistance Programs
IMF International Monetary Fund
Inflation Adjustment Act Federal Civil Penalties Inflation Adjustment Act of 1990
IRA Inflation Reduction Act
IRC Internal Revenue Code
IRS Internal Revenue Service
IT Information Technology
Judicial Retirement Fund District of Columbia Judicial Retirement and Survivors’ Annuity Fund
LLC Limited Liability Company
LOS Level of Service
MALSPAM Malicious Spam
MDB Multilateral Development Bank
MDI Minority Deposit Institution
MLF Municipal Liquidity Facility LLC
MMLF Money Market Mutual Fund Liquidity Facility
MSF Main Street Facilities LLC
NAB New Arrangements to Borrow
NAFA North American Framework Agreement
NIBP New Issue Bond Program
NIST National Institute of Standards and Technology
NRP National Research Program
OAS International Assistance Programs
OCC Office of the Comptroller of the Currency
OCRD Office of Civil Rights and Diversity
ODCP Office of D.C. Pensions
ODEIA Office of Diversity, Equity, Inclusion, and Accessibility
OFAC Office of Foreign Assets Control
OFR Office of Financial Research
DEPARTMENT OF THE TREASURY 263
FY 2022 AGENCY FINANCIAL REPORT | OTHER INFORMATION
Abbreviation Description
OFS Office of Financial Stability
OIG Office of the Inspector General
OMB Office of Management and Budget
OMWI Office of Minority and Women Inclusion
OPEB Other Post-Employment Benefits
OPM Office of Personnel Management
OPM Funds Civil Service Fund and Postal Benefits Fund
ORB Other Retirement Benefits
ORM Office of Risk Management
ORP Office of Recovery Programs
P.L. Public Law
PIIA Payment Integrity Information Act of 2019
PIK Payment-in-Kind
PIO Performance Improvement Officer
PMIAA Program Management Improvement Accountability Act
Postal Benefits Fund Postal Service Retiree Health Benefits Fund
PP&E Property, Plant, and Equipment
PPS Post Payment Services
PRAC Pandemic Response Accountability Committee
PSP Payroll Support Program
PSPA Payroll Support Program Agreement
PTC Premium Tax Credit
PTIN Preparer Tax Identification Number
RPA Robotic Process Automation
RRC Recovery Rebate Credit
RRTA Railroad Retirement Tax
RTC Refundable Tax Credits
SBLF Small Business Lending Fund
SBR Statement of Budgetary Resources
SDR Special Drawing Rights
Secretary Secretary of the Treasury
SEDI Socially and Economically-Disadvantaged Individuals
SFFAS Statement of Federal Financial Accounting Standards
SIGPR Special Inspector General for Pandemic Recovery
SIGTARP Special Inspector General for the Troubled Asset Relief Program
SLFRF Coronavirus State and Local Fiscal Recovery Funds
SLGS State and Local Government Series
SOAR Strategic Objective Annual Review
SOMA System Open Market Account
SPSPA Senior Preferred Stock Purchase Agreements
SPV Special Purpose Vehicle
SSBCI State Small Business Credit Initiative
264 DEPARTMENT OF THE TREASURY
OTHER INFORMATION | FY 2022 AGENCY FINANCIAL REPORT
Abbreviation Description
SSN Social Security Number
TALF Term Asset-Backed Securities II LLC
TARP Troubled Asset Relief Program
TBM Technology Business Management
TFF Treasury Forfeiture Fund
TFI Terrorism and Financial Intelligence
TFS TIER Financial Statements
TGA Treasury General Account
TIER Treasury Information Executive Repository
TIGTA Treasury Inspector General for Tax Administration
TIPS Treasury Inflation-Protected Securities
TRIP Terrorism Risk Insurance Program
TSP Thrift Savings Plan
TTB Alcohol and Tobacco Tax and Trade Bureau
TY Tax Year
U.S. United States
U.S. Mint United States Mint
USC United States Code
USPS United States Postal Service
USSGL United States Standard General Ledger
VITA Volunteer Income Tax Assistance
WSS Wholesale Securities Services
DEPARTMENT OF THE TREASURY 265
This Page Intentionally Left Blank
REPORT WASTE, FRAUD, AND ABUSE
Submit a complaint regarding Treasury OIG Treasury Programs and Operations
using our online form: https://oig.treasury.gov/report-fraud-waste-and-abuse
TREASURY OIG WEBSITE
Access Treasury OIG reports and other information online: https://oig.treasury.gov/
File and source
- File
- 16-Employee-Retention-Credit-Treasury-OIG-Audit-Report-OIG-23-007.pdf
- Size
- 11,659,054 bytes
- SHA-256
- 9bc17266bc439239a81bc569be35084a3c647fa8d0d8c8d03b0b8bdc70eb1c9f
- Original
- oig.treasury.gov