Treasury OIG, Management and Performance Challenges Facing the Department of the Treasury, OIG-CA-22-002 (Oct. 14, 2021)
Summary
An information memorandum dated October 14, 2021, from Richard K. Delmar, Acting Inspector General of the Department of the Treasury, to Secretary Yellen, on the Management and Performance Challenges Facing the Department of the Treasury (OIG-CA-22-002), under the Reports Consolidation Act of 2000. It reports six challenges: COVID-19 Pandemic Relief, Transition of New Administration (new), Cyber Threats, Anti-Money Laundering/Terrorist Financing and Bank Secrecy Act Enforcement, Efforts to Promote Spending Transparency and to Prevent and Detect Improper Payments, and Information Technology Acquisition and Project Management. It also reports concerns about the coin redemption program at the United States Mint, managerial cost accounting, and internal control matters at the Bureau of Engraving and Printing. An appendix lists acronyms and abbreviations.
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
Cite this document
“Treasury OIG, Management and Performance Challenges Facing the Department of the Treasury, OIG-CA-22-002 (Oct. 14, 2021).”
Original at www.oversight.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/treasury-oig-management-and-performance-challenges-facing-the-departme-f68104d27f/
, SHA-256 7795d885104d92932d086dac50d88610c0a3603fed8ee7c2f4a65c3e32961078.Full text
DEPARTMENT OF THE TREASURY
W ASHINGTON, D.C. 20220
October 14, 2021
OFFICE OF
INSPECTOR GENERAL
INFORMATION MEMORANDUM FOR SECRETARY YELLEN
FROM: Richard K. Delmar
Acting Inspector General
SUBJECT: Management and Performance Challenges Facing the
Department of the Treasury (OIG-CA-22-002)
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 (hereinafter Treasury or the Department). In this year’s memorandum, my office is
reporting six challenges, one of which is new and reports on the challenges faced with the
transition of the new Administration in filling key senior leadership positions and the rise of new
initiatives. As shown below, five 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 at the forefront of the Nation, as well as its impacts on related
workforce and work streams.
• COVID-19 Pandemic Relief (Repeat)
• Transition of New Administration (New)
• Cyber Threats (Repeat)
• Anti-Money Laundering/ Terrorist Financing and Bank Secrecy Act Enforcement (Repeat)
• Efforts to Promote Spending Transparency and to Prevent and Detect Improper Payments
(Repeat)
• Information Technology Acquisition and Project Management (Repeat)
In addition to the above challenges, we are reporting our concerns about the following matters:
(1) the coin redemption program at the United States Mint (2) managerial cost accounting, and
(3) internal control matters at the Bureau of Engraving and Printing.
We identified challenges and concerns 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 has caused a global health emergency and an ensuing economic crisis that Treasury has
been tackling. Furthermore, with the enactment of new legislation, 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 in some cases,
draw on its existing resources to meet the recent economic needs.
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
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: Trevor Norris
Acting Assistant Secretary for Management
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Contents
Challenge 1: COVID-19 Pandemic Relief (Repeat) ____________________________________ 1
Financial Assistance for Air Carrier Worker Support and Other Transportation Service
Providers .................................................................................................................................... 1
Air Carrier Worker Support _________________________________________________ 1
Coronavirus Economic Relief for Transportation Services _________________________ 2
Financial Assistance to State, Local, Tribal, and U.S. Territorial Governments....................... 2
Coronavirus Relief Fund ____________________________________________________ 2
Coronavirus State and Local Fiscal Recovery Funds ______________________________ 4
Emergency Rental Assistance and Homeowner Assistance Fund ____________________ 5
State Small Business Credit Initiative__________________________________________ 6
Community Development Investment Programs ....................................................................... 7
Emergency Capital Investment Program _______________________________________ 7
CDFI Rapid Response Program ______________________________________________ 8
Accountability and Transparency .............................................................................................. 8
Challenge 2: Transition of New Administration (New) ________________________________ 10
Challenge 3: Cyber Threats (Repeat) ______________________________________________ 12
Challenge 4: Anti-Money Laundering/Terrorist Financing and Bank Secrecy Act Enforcement
(Repeat)______________________________________________________________________ 15
Challenge 5: Efforts to Promote Spending Transparency and to Prevent and Detect Improper
Payments (Repeat) _____________________________________________________________ 16
Detect Improper Payments _________________________________________________ 17
Challenge 6: Information Technology Acquisition and Project Management (Repeat) ______ 20
Other Matters of Concern _______________________________________________________ 23
Coin Redemption ________________________________________________________ 23
Managerial Cost Accounting _______________________________________________ 23
Internal Control Issues at BEP ______________________________________________ 24
Appendix A: Acronyms and Abbreviations __________________________________________ 25
FINAL REPORT NO. OIG-CA-22-002
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
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. Since reporting this challenge last year, more than 37 million
people have been infected with reported deaths of more than 684,000 in the United States as of
this writing. 1 In the early stages of the COVID-19 outbreak in March 2020, Congress passed three
key pieces of 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. 2 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. 3 The
Coronavirus Aid, Relief, and Economic Security Act (CARES Act) 4 passed on March 27, 2020.
The CARES Act 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 the new year, Congress legislated additional relief in passing the
Consolidated Appropriations Act, 20215 (CAA, 2021) on December 27, 2020, and the American
Rescue Plan Act of 20216 (ARP) on March 11, 2021. These laws provided another $900 billion
and $1.9 trillion of economic stimulus, respectively.
As reported in my prior memorandum, the Department of the Treasury (hereinafter Treasury or the
Department) has been instrumental to the implementation of economic relief provisions of the
CARES Act. Since then, Treasury’s responsibilities and workloads have expanded enormously as
several CARES Act provisions were extended under CAA, 2021 and ARP in addition to new
programs being established within Treasury. As such, 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.
Financial Assistance for Air Carrier Worker Support and Other Transportation Service
Providers
Air Carrier Worker Support
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 $32 billion of direct
financial assistance for passenger air carriers ($25 billion), cargo air carriers ($4 billion), and
contractors ($3 billion). Financial assistance is to ensure the continuation of workers’ payroll and
benefits with the stipulation that employees are not involuntarily furloughed and do not receive
reductions in pay and benefits. Using existing resources and contractor support, Treasury quickly
stood up the Payroll Support Program (PSP1) and made direct payments of $28.6 billion to 613
1
CDC COVID Data Tracker.
2
Public Law 116-123 (March 6, 2020).
3
Public Law 116-127 (March 18, 2020).
4
Public Law 116-136 (March 27, 2020).
5
Public Law 116-260 (December 27, 2020).
6
Public Law 117-2 (March 11, 2021).
FINAL REPORT NO. OIG-CA-22-002 1
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
applicants as of February 24, 2021. 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 $15 billion and $14 billion, respectively. Using the mechanisms to establish
PSP1, Treasury implemented PSP2 and PSP3 to make corresponding payments. As of this writing,
Treasury disbursed $15.6 billion to 518 applicants under PSP2 and $14.6 billion to 482 applicants
under PSP3.
As you are aware, the CARES Act and CAA, 2021 require my office to audit the certifications of
sworn financial data submitted to Treasury by passenger and cargo carriers that do not report
financial information to the Department of Transportation (referred to as non-241 carriers) and
contractors. Additionally, CAA, 2021 requires that my office audit contractors’ certifications of
insufficient funds under the PSP1 to recall employees involuntarily between March 27, 2020 and
January 4, 2021. Treasury has authority to waive the requirement for a contractor to recall
employees if the contractor certifies that it will have insufficient funds remaining under PSP1 to
keep recalled employees employed for more than two weeks upon returning to work. My office
will continue audits of PSP1 recipients’ certifications and initiate audits of certifications submitted
by PSP2 recipients in fiscal year 2022. My office was 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 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. To be a
qualifying transportation provider, an applicant must demonstrate eligibility as a motor coach,
school bus, passenger vessel, or pilotage vessel transportation service. It is expected that up to
5,000 service providers will apply for support. While Treasury has acted swiftly to establish
CERTS Program requirements, ongoing administration of grants and monitoring recipient
compliance with grant agreements will be challenging with an expected recipient pool in the
thousands. 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 to State, Local, Tribal, and U.S. Territorial 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
FINAL REPORT NO. OIG-CA-22-002 2
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Department and my office. The Department disbursed 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. That is, payments to States and
local units of government were formula-driven and based on the 2019 U.S. Census, while other
payments were based on consultations with the Department of the Interior and Tribal governments
and other information obtained by the Department. As you are aware, the CARES Act created a
unique challenge in distinguishing between the programmatic administrative responsibility for
payments made from the CRF and the Treasury Office of Inspector General’s (OIG) independent
oversight. Although Treasury was 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 was given 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. 7
Given the direct oversight authorities of the Treasury OIG, the Department did not establish an
administrative program to ensure recipient compliance. Recipients were not bound to detailed
terms and conditions for the receipt of funds, which we reported in our first audit of CRF
regarding the lack of terms and conditions and accountability and transparency of funds. 8 While
this is unusual for a federal agency that administers financial assistance programs, Treasury
officials have committed to supporting our oversight role for ensuring transparency,
accountability, and adherence to all statutory requirements and will continue to collaborate with us
to ensure compliance by recipients. This continued collaboration has been critical for overseeing
such a large and widely dispersed recipient population given the ongoing challenges of defining
and interpreting eligible uses of CRF proceeds. That said, it is crucial that the Department
maintain its fundamental role to clarify its policy 9 over the uses of funds when interpretation
matters arise. As recipients are still in the process of using these funds, we anticipate that
questions will continue to arise that will require interpretation. In addition, the litigation over the
eligibility of Alaskan Native Corporations (ANC) for receiving CRF payments settled in the
ANCs’ favor in June 2021. Treasury must make payments to ANCs from the nearly $533 million
of CRF proceeds set aside until a court ruling was made. ANCs will have a short window to use
funds by the December 31, 2021 deadline. We anticipate that eligible use questions will arise
regarding ANCs’ use of their CRF proceeds. Providing as much clarity as possible over allowable
uses 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 200
complaints regarding recipient, and in some instances sub-recipient, uses of CRF proceeds that
require continued collaboration between our offices.
7
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.
8
OIG, Interim Audit Update–Coronavirus Relief Fund Recipient Reporting (OIG-20-036; May 27, 2020).
9
Coronavirus Relief Fund Guidance for State, Territorial, Local, and Tribal Governments Federal Register, Vol. 86,
No. 10; January 15, 2021).
FINAL REPORT NO. OIG-CA-22-002 3
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
As part of my office’s monitoring and oversight function, we established a portal using
GrantSolutions 10 for recipients to report their uses of funds on a quarterly basis that started in
September 2020. The data received is reviewed and approved by my office prior to being extracted
for display on the Pandemic Response Accountability Committee 11 (PRAC) website
(https://pandemicoversight.gov). 12 CAA, 2021 extended the covered period for recipients to use
CRF payments through December 30, 2021, and now requires funding agencies under Division A
of the CARES Act to report recipient obligation and expenditure data required under sections
15010 and 15011 of CARES Act Division B. This transferred the CRF recipient reporting
responsibility to Treasury. While the responsibility is Treasury’s, we continue to administer the
GrantSolutions portal under an Economy Act Agreement. As of this writing, my office received
and reviewed recipient data comprised of approximately $139 billion in cumulative obligations
and $132 billion in cumulative expenditures covering the period of March 1, 2020 through June
30, 2021, that was exported to the PRAC for public display.
Coronavirus State and Local Fiscal Recovery Funds
While disbursing CRF payments was an enormous undertaking for the Department, the
Coronavirus State and Local Fiscal Recovery Funds provisions of ARP require Treasury to
disburse another $362 billion to State, Local, Territorial, and Tribal governments under the
Coronavirus State Fiscal Recovery Fund ($219.8 billion) and the Coronavirus Local Fiscal
Recovery Fund ($130.2 billion) (together referred to as SLFRF), Coronavirus Capital Projects
Fund (CCPF)($10 billion), and Local Assistance and Tribal Consistency Fund (CTCF)
($2 billion).
To tackle the $350 billion of SLFRF, Treasury established allocation methodologies, and the
Interim Final Rule establishing program requirements to include the uses of funds. Unlike the
CRF, recipients may now use funds for a variety of needs to include revenue replacement.
Treasury has disbursed approximately $205 billion as of this writing through non-competitive
grants. Administering SLFRF will pose 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 30,000 non-entitlement
units of local governments. Treasury must establish a compliance monitoring function to ensure
recipient compliance with uses of funds requirements, as well as mechanisms to capture recipient
obligation and expenditure data.
As of September 2021, Treasury developed allocation methodologies and guidance for distributing
up to $10 billion of CCPF as noncompetitive grants to States, U.S. Territories, and Tribal
governments, to address infrastructure challenges, such as reliable internet that low to moderate
income and rural communities have experienced during the COVID-19 pandemic. 13 Treasury also
began accepting applications through its application submission portal from States and U.S.
Territories in September 2021 and plans to open the portal to Tribal governments beginning
10
GrantSolutions is a grant program management Federal Shared service provider under the U.S. Department of
Health and Human Services.
11
The PRAC, created within the Council of Inspectors General on Integrity and Efficiency, is comprised of Inspectors
General of agencies involved in the COVID-19 response to include Treasury OIG, Treasury Inspector General for Tax
Administration, and the Special Inspector General for Pandemic Recovery (SIGPR).
12
Of the 939 recipients of CRF payments, 861 recipients meet the threshold for receiving large covered funds of
$150,000 or more.
13
https://www.govinfo.gov/content/pkg/FR-2021-05-17/pdf/2021-10283.pdf.
FINAL REPORT NO. OIG-CA-22-002 4
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
October 2021. Although Treasury has developed CCPF program requirements and a means to
apply for funds, recipient compliance and reporting requirements are still forthcoming. Treasury
will need to develop these requirements expeditiously so that they are incorporated into the terms
and conditions of CCPF grant agreements.
Under the CTCF, Treasury was appropriated an additional $2 billion for fiscal years 2022 and
2023, for COVID-19 assistance payments to eligible revenue sharing counties and Tribes.
Eligibility for counties (to include parishes and boroughs) is based on poverty rates, household
income, land values, unemployment rates, and other economic indicators, over a 20-year period
ending September 30, 2021. Tribal government eligibility is based on economic conditions of each
Tribe. Funds under the CTCF may be used for any governmental purpose other than lobbying.
With the overlap of recipients of CRF, SLFRF, CCPF, and CTCF, we expect that there will be
confusion between the uses of funds requirements, and reporting mechanisms for recipients that
may be a challenge 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 now have cognizance over many local governments. 14
Emergency Rental Assistance and Homeowner Assistance Fund
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.
According to CAA, 2021, Treasury established ERA1 to provide up to $25 billion in assistance to
States (including Washington, DC), US 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. ERA1 funds are to be available for eligible renter households negatively impacted by
the COVID-19 pandemic to pay for rent, utilities, and other housing-related expenses and arrears.
Under ERA1, an eligible household may receive funds for up to a 12 month period unless the
grantee determines an extension is necessary to ensure housing stability for the household; then
funds may be made available for up to 15 total months. Additionally, ARP extended ERA1 funds’
availability until September 30, 2022. Treasury has sent payments of ERA1 funds to government
14
Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, §200.513
Responsibilities .(a)(1) Cognizant agency for audit responsibilities. A non-federal entity expending more than
$50 million a year in federal awards must have a cognizant agency for audit. The designated cognizant agency for
audit must be the federal awarding agency that provides the predominant amount of funding directly (direct funding)
(as listed on the Schedule of expenditures of federal awards, see §200.510(b)) to a non-federal entity unless OMB
designates a specific cognizant agency for audit. When the direct funding represents less than 25 percent of the total
expenditures (as direct and subawards) by the non-federal entity, then the federal agency with the predominant amount
of total funding is the designated cognizant agency for audit. (https://www.ecfr.gov/cgi-
bin/retrieveECFR?gp=&SID=e78c6acc3819f56b44027416dc151015&mc=true&n=sp2.1.200.f&r=SUBPART&ty=H
TML#se2.1.200_1513).
FINAL REPORT NO. OIG-CA-22-002 5
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
recipients, provided guidance on fund usage, and set up a Portal where 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.
ARP authorized an additional $21.55 billion of ERA funds to remain available until September 30,
2027, referred to as ERA2. 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. Instead, ERA2 earmarks $2.5 billion specifically for high-
need grantees which are eligible grantees in jurisdictions with a high number of very low-income
renter households. ARP designates that an eligible household may receive ERA for up to 18 total
months (this includes ERA1 and ERA2 funding). Treasury has provided ERA2 guidance and
allocated funds 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.
ARP also created HAF which authorized $9.961 billion 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. HAF provides funds for 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. Treasury has provided guidance to
HAF participants and allocated funds for each state and territory recipient based on homeowner
need. 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.
Both the ERA programs and HAF require that Treasury provides guidance to supplement the
statutes that created the programs. 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 disperse 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. Such
FINAL REPORT NO. OIG-CA-22-002 6
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
programs may include those that finance loan loss reserves, and those that provide loan insurance,
loan guaranties, venture capital funds, and collateral support. States, U.S. Territories, and Tribal
governments who apply for SSBCI must provide Treasury with plans for using their funding
allocations for review and approval and report quarterly and annually on results. Treasury will
distribute funds in three different tranches over 10 years.
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 are in compliance 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 Programs 15
Emergency Capital Investment Program
Authorized under CAA, 2021, Treasury established the Emergency Capital Investment Program
(ECIP) to provide up to $9 billion in capital to low-to-moderate income community financial
institutions that support small businesses and consumers. Under ECIP, certified community
development financial institutions (CDFI) and minority depository institutions may provide loans,
grants, and forbearance for small businesses, minority-owned businesses, and consumers in
communities disproportionately impacted by the COVID-19 pandemic. Treasury was to begin
accepting applications for investments on January 26, 2021, but did not establish initial program
application materials and guidance requirements until March 2021. The application portal opened
on March 4, 2021. Since that time, Treasury has experienced challenges in fully implementing
ECIP. In April 2021 Treasury extended the initial application deadline from May 7, 2021 to
July 6, 2021. Then, on July 1, 2021, Treasury had to extend the application window again,
pending additional guidance. On August 11, 2021, Treasury issued additional guidance and
15
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.
FINAL REPORT NO. OIG-CA-22-002 7
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
announced an application deadline of September 1, 2021; after which, Treasury plans to begin
making investment decisions within 120 days. Because of the demands for resources within the
Office of Recovery Programs, Treasury may experience further delays and challenges
administering the ECIP.
CDFI Rapid Response Program
CAA, 2021 also authorized $3 billion to the CDFI Fund to deliver immediate assistance to low-
income communities through competitive grants to CDFIs. The CDFI Rapid Response Program
(RRP) was established to award $1.25 billion in fiscal year 2021. Treasury officials developed
application guidance, leveraging the existing CDFI Fund and Native CDFI programs. In
June 2021, Treasury awarded $1.25 billion to 863 institutions, including 58 CDFIs, which serve
Native communities. It will be more challenging for the CDFI Fund to establish the Emergency
Support and Minority Lending Program in fiscal year 2022 to deliver the remaining $1.75 billion
reserved for low- or moderate-income minority communities. The program introduces a new
requirement to make $1.2 billion available for awards to minority lending institutions. CDFI Fund
officials acknowledged that it would take time to develop a compliant program. At the same time,
the CDFI Fund must monitor the CDFI RRP award recipients for use of funds compliance, while
administering several other non-pandemic grant programs.
Accountability and Transparency
Over the past year, Treasury accomplished much in helping to alleviate hardships of families and
industry sectors to include delivering more than $400 billion of Economic Impact Payments under
ARP to workers and households through the Internal Revenue Service (IRS) and Bureau of the
Fiscal Service (Fiscal Service). Through the IRS, Treasury helps to protect workers and jobs
through the Employee Retention Tax Credit and Payroll Tax Deferral authorized by the CARES
Act. Treasury also assisted the Small Business Administration in carrying out the Paycheck
Protection Program and the Economic Injury Disaster Loans authorized by the CARES Act to
support payroll, benefits, and other operating costs of small businesses. Under the Emergency
Relief and Taxpayer Protections (commonly referred to as Section 4003), Treasury was authorized
to make loans, loan guarantees, and other investments to eligible businesses, states, and
municipalities. The Emergency Relief and Taxpayer Protections provisions also authorized the
establishment of the Special Inspector General for Pandemic Recovery (SIGPR) within Treasury
to oversee loans, loan guarantees, and other investments provided by Treasury. Although some of
the aforementioned CARES Act provisions do not fall under the oversight jurisdiction of my
office, the payment work streams and mechanisms administered by the Fiscal Service do.
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. In addition to my
office’s ongoing work on pandemic programs, Treasury is subject to a number of additional
oversight bodies. As mentioned above, SIGPR was created to oversee loans, loan guarantees, and
other investments provided by Treasury 16 and must report to congress quarterly on SIGPR’s
activities and Treasury’s loan programs. A Congressional Oversight Commission was established
16
SIGPR terminates five years after enactment of the CARES Act (March 27, 2025).
FINAL REPORT NO. OIG-CA-22-002 8
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
to report to Congress on Treasury’s and the Federal Reserve Board’s implementation activities
under Title IV, Subtitle A, “Coronavirus Economic Stabilization Act of 2020.” Moreover, the
commission is required to report every 30 days on the use of contractors and administration of
loan programs, the impact of programs on the Nation’s financial wellbeing, whether required
disclosures of the CARES Act provide market transparency, and the effectiveness of maximizing
benefits and minimizing costs to taxpayers, among other things. 17 Furthermore, the Government
Accountability Office (GAO) has ongoing work evaluating the federal response to the COVID-19
pandemic and the effects of the pandemic on federal programs and operations.
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. Furthermore, Treasury must provide public reports quarterly on the use
of funds under its ERA program. 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 COVID-19 pandemic continues, Treasury must persevere in navigating this challenging
time. Treasury has leveraged its existing workforce, hired contractors, and obtained detailees from
other Federal agencies to address the demands of the new programs created by pandemic
legislation. Going forward, Treasury may experience difficulties in balancing its new
responsibilities and workloads while managing several ongoing challenges as described
throughout this memorandum. While I am hopeful that fiscal year 2022 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
The Congressional Oversight Commission issued its fourteenth report on June 30, 2021
(https://coc.senate.gov/sites/default/files/2021-06/June%20Report%20Final.pdf).
FINAL REPORT NO. OIG-CA-22-002 9
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Challenge 2: Transition of New Administration (New)
As characteristic with incoming Presidential Administrations, the Departmental Offices, and
Treasury bureaus and agencies are challenged with filling and transitioning numerous key senior
leadership positions, as well as implementing new executive orders and White House initiatives.
As of this writing, 17 senior leadership positions are vacant including, among others, the
Undersecretary for International Affairs, the Undersecretary for Terrorism and Financial
Intelligence, the Comptroller of the Currency, the General Counsel, and the Inspector General.
Also of note, are Executive Orders (EO) 13985, Advancing Racial Equity and Support for
Underserved Communities Through the Federal Government; 18 EO 13988, Preventing and
Combating Discrimination on the Basis of Gender Identity or Sexual Orientation; 19 EO 14031,
Advancing Equity, Justice, and Opportunity for Asian Americans, Native Hawaiians, and Pacific
Islanders’; 20 and EO 14035, Diversity, Equity, Inclusion, and Accessibility in the Federal
Workforce. 21 EO 13985, establishes policy to pursue a comprehensive approach to advancing
equity for all, including people of color and others who have been historically underserved,
marginalized, and adversely affected by persistent poverty and inequality. EO 13988, seeks to
prevent and combat discrimination on the basis of gender identity or sexual orientation, and to
fully enforce Title VII and other laws that prohibit discrimination on the basis of gender identity
or sexual orientation. EO 14031, seeks to address and confront racism, xenophobia, and
intolerance. To further advance equity within the Federal Government, EO 14035 establishes
policy to cultivate a workforce that draws from the full diversity of the Nation.
Additionally, the White House introduced EO 14008, Tackling the Climate Crisis at Home and
Abroad, to ensure climate considerations are an essential element of U.S. foreign policy and
national security. The Secretary of State and the Secretary of the Treasury will lead several efforts
related to EO 14008 in coordination with the Special Presidential Envoy for Climate. Furthermore,
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, will lead several efforts
related to EO 14030.
While Treasury continues transitioning key senior leadership positions and implementing these
and other new initiatives and programs going into fiscal year 2022, other previously reported
uncertainties have yet to be resolved. In addition to working through the unforeseen challenges
presented by the COVID-19 pandemic discussed in Challenge 1, Treasury must also operate in the
18
Executive Order 13985, Advancing Racial Equity and Support for Underserved Communities Through the Federal
Government (January 20, 2021).
19
Executive Order 13988, Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual
Orientation (January 20, 2021).
20
Executive Order 14031, Advancing Equity, Justice, and Opportunity for Asian Americans, Native Hawaiians, and
Pacific Islanders (May 28, 2021).
21
Executive Order 14035, Diversity, Equity, Inclusion, and Accessibility in the Federal Workforce (June 25, 2021).
FINAL REPORT NO. OIG-CA-22-002 10
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
repeated cycle of budget and debt ceiling stopgaps. As conveyed in prior years’ memoranda, a
long-term solution has yet to be found. On August 2, 2019, the President signed the Bipartisan
Budget Act of 2019, which suspended the statutory debt limit through July 31, 2021. 22 This
legislation offered a temporary solution to allow Congress to resolve unfinished business when it
comes to the Nation’s debt, and address long-term sustainability of large programs.
On May 5, 2021, Treasury released its Quarterly Refunding Statement which noted that substantial
COVID-19 related uncertainty about receipts and outlays create difficulty in estimating how long
extraordinary measures, if invoked, will last. Additionally, although not included as a top open
recommendation in its June 2021 letter to the Department,23 GAO raised concerns to Congress in
its July 2015 report 24 with the approach to managing the federal debt limit and its impact on
Treasury’s borrowing costs and the need for alternative approaches. With that said, Fiscal Service
has ongoing communication with the Department, particularly the Office of Fiscal Projections
(OFP). OFP provides Treasury decision‐makers with information on current and predicted cash
balances. As the Federal Government's financial manager, Fiscal Service plays a unique role in
ensuring that OFP has current and accurate federal financial data.
The debt ceiling suspension ended on July 31, 2021, resulting in it being reinstated to
$28.4 trillion on August 1, 2021. As you are aware, Treasury began employing certain
extraordinary measures to prevent the United States from defaulting on its obligations, as there is
still no clear plan for averting default later this year. 25 On July 30, 2021, Treasury suspended sales
of securities that help states and municipalities invest bond proceeds. On October 12, 2021, as a
short-term measure, Congress acted to extend the debt limit by $480 billion to $28.9 trillion until
early December 2021. With that said, Congress will need to act to raise or suspend the limit again
to prevent default.
Dealing with the transition of key senior leadership positions, new initiatives, additional
workloads, and other critical matters such as the budget and debt ceiling stopgaps during the
COVID-19 pandemic continues to be more challenging than usual. The impact of this challenge
and the uncertainties require the Department to continue to focus its resources on programs that
are in the highest need to citizens and/or where there is a unique federal role. It is essential that
new initiatives, programs, and reforms be managed and communicated effectively for achieving
performance and accountability.
22
Public Law 116-37 (August 2, 2019).
23
GAO, Priority Open Recommendations: Department of the Treasury (June 16, 2021).
24
GAO, Debt Limit: Market Response to Recent Impasses Underscores Need to Consider Alternative Approaches
(GAO-15-476; July 9, 2015).
25
Extraordinary measures have been taken in the past. Specifically, the U.S. debt limit was reinstated at $22 trillion on
March 2, 2019. At that time, Treasury immediately implemented extraordinary measures to prevent the United States
from defaulting on its obligations. Measures included (1) suspending State and Local Government Series securities
sales, (2) declaring a “debt issuance suspension period” which suspended additional investments in the Civil Service
Retirement and Disability Fund and Postal Retiree Health Benefits Fund, and (3) suspending investment in the
Government Securities Investment Fund of the Federal Employees’ Retirement System Thrift Savings Plan. In July
2019, Treasury informed Congress that these extraordinary measures would be exhausted before September 2019.
FINAL REPORT NO. OIG-CA-22-002 11
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Challenge 3: Cyber Threats (Repeat)
Cybersecurity is a long-standing and serious challenge facing the Nation. 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. The cyber threats continue to evolve and become more
sophisticated, subtle, and easier to perform, which poses ongoing challenges for Treasury to
fortify and safeguard its internal systems and operations while modernizing and maintaining them.
While 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 and the more recent SolarWinds attack. 26
Attackers 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 cyber information sharing, federal
agencies are better prepared to thwart potential attacks to the cyber infrastructure of the Federal
government and the financial sector that it serves. In its 2021 high risk list published biennially,
again GAO reported the Nations’ cybersecurity as a government-wide issue. 27
Long-standing cyber threats pose increased risks to networks and information systems during the
ongoing COVID-19 global health pandemic as more opportunities are available for bad actors to
stage cyber-attacks. As the tools used to perpetrate cyber-attacks become easier to use and more
widespread, less technological knowledge and fewer resources are needed to launch successful
attacks of increasing sophistication. Such attacks include distributed denial of service, phishing or
whaling, fraudulent wire payments, malicious spam (malspam), ransomware, and compromise of
supply chains (both hardware and software). The COVID -19 pandemic has shifted the federal
workforce to a primarily telework status which has provided attackers with more possibilities to
disrupt services. Increased network traffic from remote sources provides cover for attackers to
blend in with the federal workforce and launch cyber assaults. Attackers may take advantage of
the increased demand for information on COVID-19 by crafting highly attractive phishing,
whaling, and malspam attacks that are more likely to succeed by luring workers in with promises
of information related to COVID-19. These opportunities may allow hackers to launch a denial of
service attack upon a network that can prevent remote workers from performing their duties and
disrupt operations. Furthermore, information systems and its users are at heightened risk of
COVID-19 related exploitation such as stimulus check scams, tax-fraud schemes, and fraudulent
coronavirus testing kit scams, among other things.
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
26
The SolarWinds attack, reported in December 2020, was a supply chain attack that used the update mechanism for
legitimate software to distribute malicious software.
27
GAO, High-Risk Series, Dedicated Leadership Needed to Address Limited Progress in Most High-Risk Areas
(GAO-21-119SP: March 2020).
FINAL REPORT NO. OIG-CA-22-002 12
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
by the SolarWinds attack that affected many federal agencies and private sector companies.
Executive Order 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 owned or controlled by governments defined as
hostile to the United States. 28 On May 11, 2021, this Executive Order was extended again for 1
year. 29 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
monitor developments in this area closely and plan for the possibility that its current supply chain
may no longer be available. Furthermore, Executive Order 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, 30 among other things. In response to our prior year memorandum, Treasury reported
that Fiscal Service continues to modify current contracts to include clauses in support of Executive
Order 13873, by requiring all solicitations to adhere to Treasury’s security requirements and
leveraging the Federal Risk and Authorization Management Program 31 to accelerate the
authorization of cloud-based systems and services. Treasury needs to prioritize cloud adoption and
zero-trust architecture among its other component bureaus and offices. 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.
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. There have been ongoing issues
related to management of cloud systems reported in four consecutive Federal Information Security
Modernization Act of 2014 32 audits (fiscal years 2015, 2016, 2017, and 2018) with some
recommendations not implemented by the fiscal years 2019 and 2020 audits.
28
Executive Order 13873, Securing the Information and Communications Technology and Services Supply Chain
(May 15, 2019).
29
Notice on the Continuation of the National Emergency with Respect to Securing the Information and
Communications Technology and Services Supply Chain (May 11, 2021).
30
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.
31
The Federal Risk and Authorization Management Program is a government-wide program that provides a
standardized approach to security assessment, authorization, and continuous monitoring for cloud products and
services.
32
Public Law 113-283 (December 18, 2014).
FINAL REPORT NO. OIG-CA-22-002 13
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
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 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 continues to place on financial institutions and the financial sector as a whole, 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. 33 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. 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 June 16, 2021 letter 34 regarding its top open recommendations, GAO noted
that Treasury had established ongoing initiatives such as developing common terminology for
cyber terms, but had not developed methods to determine the level and type of framework
adoption; the recommendation remained open. GAO acknowledged that Treasury had developed a
cybersecurity risk management strategy, which included key elements identified in federal
guidance and established a process for conducting an organization-wide cybersecurity risk
assessment.
The Department continues to report progress in its risk-based approach to cybersecurity by
establishing the Enterprise Cyber Risk Management program to manage vulnerabilities and threats
that can cause disruption in the delivery of services. In response to our prior year memorandum,
the Department reported that it created a centralized Risk Reporting Analytical Cybersecurity
System, and developed the Supply Chain Risk Management program for cybersecurity in fiscal
year 2020. Treasury also reported prior progress in risk management by identifying High Value
Assets, 35 and examining the security architectures of systems and performing risk and
vulnerability assessments. While addressing increases in cyber threats during the COVID-19
global pandemic, Treasury will need to continue to balance cybersecurity demands while
modernizing and maintaining Information Technology (IT) systems. To this end, Treasury must
ensure that cyber security is fully integrated into its IT investment decisions as discussed in
challenge 6.
33
NIST, Framework for Improving Critical Infrastructure Cybersecurity (Version 1.0, February 12, 2014; superseded
by Version 1.1; April 16, 2018).
34
GAO, Treasury Priority Recommendations (GAO-21-549PR; June 16, 2021)
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.
FINAL REPORT NO. OIG-CA-22-002 14
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Challenge 4: 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 the 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 as TFI’s role to
counter these financial networks and threats has grown because its 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, through the use of designations and economic sanctions. TFI has
significantly increased sanctions against Russia related to malign activities and human rights
violations. 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 security and information sharing are challenges for the Financial Crimes Enforcement
Network (FinCEN), which has experienced unauthorized disclosures of Bank Secrecy Act
information. FinCEN is required to maintain a highly secure database for financial institutions to
report suspicious activity. 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. FinCEN is also required to maintain a
government-wide data access service to make information available and useful to federal, state,
local, and foreign law enforcement agencies and appropriate regulators and to support intelligence
and counterintelligence activities and anti-money laundering initiatives. The challenge for FinCEN
is to ensure the Bank Secrecy Act data remains secure in order to maintain the confidence of the
financial sector while meeting the access needs of law enforcement, regulatory, and intelligence
partners.
FINAL REPORT NO. OIG-CA-22-002 15
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Challenge 5: Efforts to Promote Spending Transparency and to Prevent and
Detect Improper Payments (Repeat)
Given the broad implications and critical roles assigned to Treasury by the Digital Accountability
and Transparency Act of 2014 (DATA Act), we note the renewed challenges facing the
Department given the need to ensure transparency to the taxpayer and other stakeholders on the
use of funds distributed under economic relief packages enacted to address individuals and
industry sectors impacted by the COVID-19 global pandemic. As noted in Challenge 1, over the
past year, Treasury delivered more than $400 billion of Economic Impact Payments under ARP to
workers and households through IRS and Fiscal Service. Treasury is also accountable for
providing transparency over the expenditure of pandemic relief funds.
DATA Act reporting is seen as one of the means to ensure transparency into the use of federal
funds related to COVID-19 expenditures. In it April 2020 memorandum, Implementation
Guidance for Supplemental Funding Provided in Response to the Coronavirus Disease 2019
(COVID-19) 36 the Office of Management and Budget (OMB) requires that agencies leverage
existing financial accountability and transparency mechanisms. In part, OMB requires (1) tracking
of COVID-19 expenditures with usage of a Disaster Emergency Fund Code; (2) reporting
financial assistance recipient information within two weeks of issuance, with the exception of
loans; and (3) reporting outlay information at the financial award transaction level. As discussed in
Challenge 1, many reporting requirements of sections 15010 and 15011 of the CARES Act were
extended under the CAA, 2021, PRAC amendments. Furthermore, Treasury must provide public
reports quarterly on the use of funds under its Emergency Rental Assistance program, among
others. With that said, the Department must balance its ongoing response to the financial impacts
of the public health emergency with its responsibility to respond to oversight bodies and
stakeholders.
To further enhance transparency, Treasury has devoted significant resources and leveraged
existing financial reporting systems to promote spending transparency and use of federal financial
data in order to strengthen Government-wide decision-making. Treasury has also shifted from
quarterly to monthly reporting and certification of data beginning with the period ending June
2020, and has added a program activity attribute beginning with the first quarter of fiscal
year 2021. The speed in which supplemental funding was distributed created new data
management needs for Treasury along with labor intensive ingestion of data associated with the
application for, and issuance of, economic relief. The rapid delivery of funds within short
timeframes may create opportunities and risks for illicit activity by anyone attempting to misuse or
abuse funds that were intended for COVID-19 relief. Considering the challenges and risks
associated with ensuring economic relief is deployed and used for intended purposes, Treasury
should continue to address reporting and data quality issues noted in DATA Act audits and
intensify efforts to reduce improper payments.
Given the data-centric aspects of the Foundations for Evidence-Based Policymaking Act of 2018 37
(Evidence Act), it is critical that data is of high quality to be useful. In accordance with the
OMB M-20-21, Implementation Guidance for Supplemental Funding Provided in Response to the
36
Coronavirus Disease 2019 (April 10, 2020).
37
Public Law 115-435; (January 14, 2019).
FINAL REPORT NO. OIG-CA-22-002 16
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Evidence Act and OMB’s M-19-23, 38 the Department is implementing Government-wide reforms
for making data accessible and useful for decision-making. Under Title I of the Evidence Act, also
known as Federal Evidence Building Activities, federal agencies, among other things, must submit
annually to Congress and OMB, an evidence-building plan for identifying and addressing policy
questions relevant to programs, policies, and regulations. Under Title II of the Evidence Act, also
known as the Open, Public, Electronic, and Necessary Government Data Act or the “OPEN
Government Data Act,” Federal agencies must develop a strategic information resources
management plan that includes, among other things, an open data plan that requires agencies to
develop processes and procedures making data collection mechanisms created on or after
enactment available in an open format. The strategic information resources management plan and
open data plan must be updated annually and made publicly available on agency websites. Federal
agencies must also develop and maintain a data inventory to be included in the Federal Data
Catalog39 (www.Data.gov) developed and maintained by the General Services Administration.
Since the law was enacted, Treasury leveraged the Department-wide Strategic Objective Annual
Review that the Office of Strategic Planning and Performance Improvement leads to
collaboratively identify a preliminary set of research questions as a primary means of gathering
relevant policy questions for each of the Department’s strategic objectives. Treasury has worked
with Treasury’s Federally Funded Research Development Center 40 to identify existing research
efforts that align closely with the Department’s research priorities. Under Phase 1 of its
implementation efforts, Treasury’s Assistant Secretary for Management established an Office of
the Chief Data Officer and appointed an interim Chief Data Officer and interim Deputy Chief Data
Officer. The Chief Data Officer’s goals are to ensure data is used as a strategic asset, increase use
of data in decision-making and evidence building, and increase coordination of data collection and
use. Prior to the enactment of the Evidence Act, Treasury had already started developing a data
governance framework in alignment with Evidence Act Title II requirements. At that time,
Treasury’s Deputy Chief Financial Officer began a Data Governance and Analytics project
designed to identify a data governance structure, develop standards, and increase the department’s
analytic capabilities through infrastructure and visualization improvements. Since that time, the
Executive Steering Committee, which includes the Deputy Chief Financial Officer, Chief
Information Officer (CIO), and the Office of Strategic Planning and Performance Improvement,
was expanded to include Treasury’s designated Statistical Official and the Deputy Assistant
Secretary for Privacy, Transparency, and Records. Currently, this group is developing
recommendations for the mission and goals of the Data Governance Body, along with
recommendations for initial broader membership.
Detect Improper Payments
In light of the continuing government-wide problem with improper payments (estimated at
$206.4 billion or 3 percent of all program outlays for fiscal year 2020), 41 the federal agencies
38
OMB M-19-23, Phase 1 Implementation of the Foundations for Evidence-Based Policymaking Act of 2018:
Learning Agendas, Personnel, and Planning Guidance.
39
A single public interface on-line as a point of entry for sharing data assets with the public.
40
Federally Funded Research and Development Centers are unique organizations that assist the Federal Government
with scientific research and analysis, among other things. Treasury engaged MITRE Corporation as the agency’s
Federally Funded Research Development Center.
41
National Aeronautics and Space Administration OIG, NASA’s Compliance with the Payment Integrity Information
Act of Fiscal Year 2020 (IG-21-020; May 18, 2021), percentage based on total Government outlays of 6.6 billion
(https://www.fiscal.treasury.gov/files/reports-statements/mts/mts0920.pdf).
FINAL REPORT NO. OIG-CA-22-002 17
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
intensified efforts to reduce improper payments in major federal programs. The Do Not Pay
(DNP) Initiative and Fiscal Service’s DNP Business Center are chief components of efforts
designed to prevent and detect improper payments to individuals and entities.
The DNP Business Center is comprised of the DNP Portal and the Data Analytics Services. The
DNP Portal is intended to provide users with a single entry point to search data sources such as the
Social Security Administration’s (SSA) publicly available Death Master File, the Department of
Health and Human Service Office of Inspector General’s List of Excluded Individuals/Entities, the
General Services Administration’s System for Award Management, and Treasury’s Debt Check
Database. However, as we reported in November 2014, the effectiveness of the DNP Business
Center as a tool to prevent and detect improper payments is hindered because the center does not
have access to, among other things, SSA’s full death data. 42 Since our May 2016 report, that
challenge continues to exist in obtaining better death information.43 In October 2016, GAO
reported that restrictions on the center’s access to SSA’s full death data remained in place.44 In
June 2020, GAO issued its initial report examining key actions the Federal Government has taken
to address the COVID-19 pandemic and evolving lessons learned relevant to the Nation’s response
to the pandemic. In its report, GAO recommended that Congress take legislative action to provide
Treasury with access to the SSA’s full set of death records, and require that Treasury use it, to help
reduce improper payments. 45 Subsequently, the DNP Business Center received temporary access
to SSA’s full death data to support Economic Impact Payment screening for deceased individuals.
In response to the Federal Improper Payments Coordination Act of 2015,46 Fiscal Service entered
into agreements with the Department of Defense and the Department of State in 2016 to
incorporate death data collected by these agencies into the DNP Business Center Working System,
which began receiving data in September 2017. In November 2017, OMB designated six
additional databases for inclusion in the DNP Business Center Working System to help agencies
address a broader range of improper payments beyond what can be detected through DNP
Business Center's previously existing data sources. 47 Moreover, in May 2021, OMB designated 12
additional databases for inclusion in the DNP Business Center Working System. 48 There have also
42
OIG, Fiscal Service Successfully Established the Do Not Pay Business Center But Challenges Remain
(OIG-15-006; November 6, 2014).
43
OIG, Fiscal Service Faces Challenges in Obtaining Better Death Information for the Do Not Pay Business
Center, but Alternatives Exist (OIG-16-042; May 18, 2016).
44
GAO, Improper Payments, Strategy and Additional Actions Needed to Help Ensure Agencies Use the Do Not
Pay Working System as Intended (GAO-17-15; October 14, 2016).
45
GAO, COVID-19: Opportunities to Improve Federal Response and Recovery Efforts (GAO-20-625; June 25, 2020).
46
Public Law 114-109 (December 18, 2015).
47
The following databases were added: (1) Treasury’s Office of Foreign Assets Control’s Specially Designated
National list, (2) the General Services Administration’s System for Award Management, (3) the IRS’ Automatic
Revocation of Exemption List, (4) the IRS’ Exempt Organizations Select Check, (5) the IRS’ e-Postcard database, and
(6) commercial database American InfoSource Deceased Data.
48
The following databases were added: (1) the United States Postal Service Delivery Sequence File, (2) the Census
Bureau Federal Audit Clearinghouse, (3) the DNP Agency Adjudication Data, (4) Fiscal Service’s Payments, Claims,
and Enhanced Reconciliation database, (5) Bureau of Prisons Incarceration Data, (6) DATA Act data, (7) Census
Bureau’s American Communities Survey Annual State and County Data Profiles, (8) Veterans Affairs’ Beneficiary
Identification Records Locator Service, (9) Department of Agriculture’s National Disqualified List, (10) Center for
Medicare and Medicaid Services National Plan and Provider Enumeration System, (11) IRS Statistics of Income
Annual Individual Income Tax ZIP Code Data, and (12) the U.S. Securities and Exchange Commission’s Electronic
Data Gathering, Analysis, and Retrieval System.
FINAL REPORT NO. OIG-CA-22-002 18
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
been legislative proposals in January 2017, February 2017, February 2018, and May 2019 to
obtain authorization to use both the SSA's full death file as well as the National Directory of New
Hires. 49 Furthermore, Fiscal Service included legislative proposals in its fiscal year 2021 budget
justification that included, among other things, that Treasury is granted access to SSA’s full Death
Master File for purposes of administering the DNP Business Center and preventing, identifying,
and recovering improper payments for federal agencies and federally funded state programs. In
December 2020, CAA, 2021 authorized the DNP Business Center access to SSA’s full death data
for a 3-year period beginning in December 2023. Given that the access is only temporary, Fiscal
Service will continue encouraging Congress to renew the temporary access or provide permanent
access.
In addition to the Do Not Pay Portal, the DNP Data Analytics Service supports agencies’ efforts to
identify and prevent improper payments. The DNP Data Analytics Service identifies trends and
patterns in agency payment and other information that may be indicative of improper payments.
The results of these analyses are provided to agencies at no cost for further study so they can
prevent future improper payments. We assessed the services provided to agencies by the DNP
Data Analytics Service and found that performance metrics developed by Fiscal Service to
measure the effectiveness of the DNP Data Analytics Service need to be strengthened. 50
Altogether, the DNP Business Center works to identify and prevent improper payments in
federally funded programs by providing access to relevant data and analytic services. Fiscal
Service plans to leverage the DNP Initiative to assist programs making certain pandemic payments
in the identification and prevention of improper payments and will continue to seek additional
ways to improve improper payment prevention and detection. In this regard, the DNP Business
Center has worked with Federal Communications Commission, the IRS, the Small Business
Administration, and the Small Business Administration’s Office of Inspector General to match
certain pandemic payments against DNP’s data sets to help prevent and identify improper
payments. Fiscal Service also meets regularly with the PRAC, GAO, and other stakeholders to
obtain feedback about COVID-19 spending data to ensure that the data is available for oversight
entities.
With its potential to reduce improper payments, the DNP Business Center is a major and
important undertaking by Treasury and critical to ensuring COVID-19 economic support funds are
properly spent. As part of our ongoing audit work in this area, we will continue to monitor the
steps taken by Fiscal Service to improve the effectiveness of the DNP Business Center.
49
The National Directory of New Hires is a national database of wage and employment information operated by the
Federal Office of Child Support Enforcement. The Federal Office of Child Support Enforcement uses the National
Directory of New Hires primarily to assist states administering programs that improve States’ abilities to locate
parents, establish paternity, and collect child support. The information in this database is only available to authorized
persons or entities for authorized purposes.
50
OIG, Performance Metric Policy Needed for the Fiscal Service Do Not Pay Business Center’s Data Analytics
Services (OIG-20-025; January 28, 2020).
FINAL REPORT NO. OIG-CA-22-002 19
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Challenge 6: 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 51 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 CIOs of federal agencies in IT decision making, including annual and multi-year
planning, programming, budgeting, execution, reporting, management, governance, and oversight
functions. 52 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. 53 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
Service Administration and OMB had fewer funds available than anticipated to award to new
projects for replacing aging IT systems. 54 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. 55
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
51
Public Law 104-106 (February 10, 1996).
52
Public Law 113-291 (December 19, 2014).
53
GAO, High- Risk Series, An Update (GAO-15-290; February 11, 2015).
54
GAO, High-Risk Series, Dedicated Leadership Needed to Address Limited Progress in Most High-Risk Areas
(GAO-21-119SP: March 2020).
55
GAO, High-Risk Series, Dedicated Leadership Needed to Address Limited Progress in Most High-Risk Areas
(GAO-21-119SP: March 2021).
FINAL REPORT NO. OIG-CA-22-002 20
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
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 December 2020, Treasury received a B for its FITARA implementation efforts, and
remained a B in July 2021. Areas needing most improvement were enhanced transparency and risk
management (i.e. IT investment risk), improved cybersecurity, and agency CIO authority
enhancements. Furthermore, the FITARA Enhancement Act of 2017 56 extended the sunset date for
full implementation of the data center optimization requirements of FITARA from October 1,
2018 to October 1, 2020. As reported in the December 2020 scorecard, Treasury scored an A in
this area after meeting its remaining targets, including virtualization and advanced energy
metering.
In fiscal year 2021, Treasury reported approximately $2 billion in non-IRS IT investment, which
is expected to increase in fiscal year 2022. 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 3 that addresses cybersecurity concerns. Treasury’s non-IRS
bureaus reported 23 major IT investments. Treasury’s CIO assessed 19 IT investments as having
moderately low or low risk to accomplishing their goals. One project, Pay.gov, did not include a
ranking. The remaining three IT investments, which reside at Fiscal Service, were assessed as
having medium risk 57 to accomplishing their goals:
• Electronic Federal Tax Payment System, 58
• Post Payment Services, and
• Wholesale Securities Services (WSS).
During fiscal year 2021, some projects within the Electronic Federal Tax Payment System, WSS
and Post Payment Services, specifically the Payment Information View of Transactions (PIVOT)
were behind schedule and over budget. Although projects identified with medium overall risk in
cost and scheduling require special attention from the highest level of agency management, they
are not necessarily at risk for failure. We plan to initiate an audit of these IT acquisitions. Overall,
82 percent of Treasury’s total IT projects were on schedule and 58 percent were within budget.
During fiscal year 2021, Treasury spent 36 percent of its total IT spending on 42 major
investments. A major WSS investment includes the Treasury Automated Auction Processing
System (TAAPS), used by Fiscal Service for the announcement, auction, and issuance of
marketable Treasury bills, notes, bonds, Treasury inflation-protected securities, and floating rate
notes. In fiscal year 2017, Fiscal Service started a multi-year project to modernize the TAAPS
application software and associated technology components to ensure that critical auction
processes continue to work flawlessly, remain secure, and operate without service disruptions.
However, in January 2020, Fiscal Service terminated its TAAPS application software project due
to contractor delays and other challenges involving (1) application code quality issues; (2) project
56
Public Law 115-88 (November 21, 2017).
57
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.
58
Renamed Tax Collections Services in fiscal year 2021.
FINAL REPORT NO. OIG-CA-22-002 21
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
leadership that did not include sufficient IT support; and (3) governance bodies relying on
representations that the project was succeeding, despite some warning signs. It was not until third
party reviews were conducted that the full extent of the project’s challenges became clear. In fiscal
year 2021, Fiscal Service will complete the Financing Modernization Discovery Phase to
determine which approach to take to move forward with the Financing Modernization effort.
Financing Modernization is a multi-year program dedicated to creating a modernized financing
operations system, which will align with Treasury's strategic priorities and long-term business
requirements.
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 goal is to improve outcomes through federal IT spending transparency with
the adoption of TBM government-wide by fiscal year 2022. 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. 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.
Fiscal Service’s financial community was trained on TBM and has reduced uncategorized IT
spending, or spending that is not categorized into standard IT buckets, by 60 percent. In early
fiscal year 2021, Fiscal Service expects to see further reductions in IT portfolio spending.
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 2015, 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 is estimated to cost $1.25 billion. BEP is conducting a suitability assessment of the
parcel of land transferred from U.S. Department of Agriculture to Treasury in Beltsville, Maryland
with the support from the U.S. Army Corps of Engineers for the design review, construction, and
contract administration for the new facility. In fiscal year 2021, BEP has initiated early site
development construction activities estimated at $34 million and is challenged with several issues
including potential ecological, water, public health and safety, traffic and other effects associated
with the proposed construction. Until the estimated completion of the facility in 2025, 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.
FINAL REPORT NO. OIG-CA-22-002 22
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Other Matters of Concern
Although we are not reporting these as management and performance challenges, we are
highlighting three areas of concern: (1) coin redemption, (2) managerial cost accounting, and
(3) internal control at BEP.
Coin Redemption
As reported in prior years, the United States Mint (Mint) continues to address internal control
issues to ensure the integrity of U.S. coinage in its coin redemption program. The Mint has
since made progress in addressing the risk of accepting genuine coins through its redemption
program with such actions as considering the establishment of limited quantities accepted into
the program, scrutinizing the sources of the coins, and enhancing its examination of coins
being accepted into the program. As the Mint finalizes policies and procedures and
recommences its program, we will continue to monitor the implementation of these controls to
ensure they are sufficient to properly safeguard U.S. coinage.
Managerial Cost Accounting
Managerial cost accounting continues to be a fundamental part of a financial performance
management system. It involves the accumulation and analysis of financial and nonfinancial
data, resulting in the allocation of costs to organizational pursuits, such as performance goals,
programs, activities, and outputs. We have reported concerns that were identified in our audit
of the Departmental Offices’ Office of Budget and Travel (OBT) controls over its overhead 59
process and compliance with the Economy Act. 60 Specifically, we identified internal control
weaknesses within OBT’s overhead process and composite methodology used during fiscal
years 2015 through 2018 to charge reimbursable customers. That is, OBT’s methodology to
accumulate, allocate, and charge overhead costs to reimbursable customers was not
appropriate and consistently followed and the salaries and expenses directly charged to
reimbursable customers through the composite methodology lacked adequate support.
Therefore, we also concluded that OBT violated the Economy Act and potentially augmented
its fiscal year 2015 appropriation by recovering indirect costs in excess of actual costs from
reimbursable customers. These concerns, in turn, could also potentially be violations of the
Anti-deficiency Act.
In response to our concerns, OBT management implemented a new overhead process
beginning with fiscal year 2019 and subsequently hired a consultant to review and improve the
process. After implementing a new process, OBT management made further changes to the
overhead process for fiscal year 2020. Additionally, based on the consultant’s recent report,
OBT management implemented a number of the consultant’s recommendations to improve the
process going forward, which we plan to review during our ongoing audit.
59
Overhead, also known as indirect costs, include items that are commonly recognized as elements of cost that may
not have resulted in direct expenditures related to a product, activity, or project. It covers the cost of administrative
expenses associated with financial management, human resources, information technology, general counsel and other
support costs that are allocated to products, activities, or projects based on an established methodology.
60
Public Law 73-2 (March 20, 1933).
FINAL REPORT NO. OIG-CA-22-002 23
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Internal Control Issues at BEP
Internal control is a process put in place by management to safeguard assets, promote
accountability, and increase efficiency and effectiveness of operations. It helps an entity report
reliable information about its operations and comply with applicable laws and regulations. The
fiscal year 2020 BEP financial statement audit identified 12 deficiencies in internal control. 61
Although the number of deficiencies in internal control identified decreased from 22 in fiscal
year 2019 to 12 in fiscal year 2020, three of the deficiencies were collectively reported as a
significant deficiency related to information technology controls. The remaining nine
deficiencies related to journal entries; financial reporting; inventory; and property, plant, and
equipment were reported in a management letter.62 Six of the prior year’s deficiencies were re-
issued in fiscal year 2020. While we are reporting this as a concern, it should be noted that as
part of the fiscal year 2020 financial statement audit, the independent auditors issued an
unmodified opinion on the effectiveness of BEP’s internal controls over financial reporting.
The control issues identified continue to be attributed to resource constraints, employee
turnover, and increased workloads for key accounting personnel. BEP continues its efforts to
address the deficiencies noted during the audits and has hired external contractors to assist
with the remediation of the deficiencies, provide financial support services, and to assist with
conducting internal control reviews in accordance with OMB Circular A-123. In addition, BEP
has hired additional personnel in key positions responsible for the issues noted. My office will
continue to monitor BEP’s progress in strengthening its financial management and reporting
process.
As another matter, my office has an ongoing corrective action verification of recommendations
related to a 2013 audit report that identified numerous deficiencies in BEP’s contracting
practices. 63 While this verification is nearing completion, we noted that contract file
management continued to be a systemic issue at BEP as evidenced by our follow-up work and
other third-party assessments of BEP’s acquisitions program conducted from December 2014
through March 2018. We expect to issue our verification audit in early fiscal year 2022. Given
our concerns, we initiated an audit of BEP’s transition from hard copy contract files to an
electronic filing system beginning in fiscal year 2016 and plan to issue an audit report in fiscal
year 2022.
61
OIG, Audit of the Bureau of Engraving and Printing’s Financial Statements for Fiscal Years 2020 and 2019 (OIG-
21-022; February 12, 2021).
62
OIG, Management Letter for the Audit of the Bureau of Engraving and Printing’s Financial Statements for Fiscal
Years 2020 and 2019 (OIG-21-023, February 12, 2021).
63
OIG, BEP’s Administration of the Burson-Marsteller Public Education Awareness Contract Was Deficient (OIG-
13-046; August 13, 2013).
FINAL REPORT NO. OIG-CA-22-002 24
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
Appendix A: Acronyms and Abbreviations
ANC Alaskan Native Corporations
ARP American Rescue Plan Act of 2021
BEP Bureau of Engraving and Printing
CAA, 2021 Consolidated Appropriations Act, 2021
CARES Act Coronavirus Aid, Relief, and Economic Security Act
CCPF Coronavirus Capital Projects Fund
CDFI Community Development Financial Institutions
CERTS Coronavirus Economic Relief for Transportation Services
CIO Chief Information Officer
COVID-19 Coronavirus Disease 2019
CRF Coronavirus Relief Fund
CTCF Local Assistance and Tribal Consistency Fund
DATA Act Digital Accountability and Transparency Act of 2014
Department Department of the Treasury
DNP Do Not Pay
ECIP Emergency Capital Investment Program
EO Executive Order
ERA Emergency Rental Assistance
ERA1 Emergency Rental Assistance Program 1
ERA2 Emergency Rental Assistance Program 2
Evidence Act Foundations for Evidence-Based Policymaking Act of 2018
FINCEN Financial Crimes Enforcement Network
Fiscal Service Bureau of the Fiscal Service
FITARA Federal Information Technology Acquisition Reform Act
GAO Government Accountability Office
HAF Homeowner’s Assistance Fund
IRS Internal Revenue Service
IT Information Technology
MINT United States Mint
NIST National Institute of Standards and Technology
OBT Office of Budget and Travel
OFP Office of Fiscal Projections
OIG Office of Inspector General
OMB Office of Management and Budget
PRAC Pandemic Response Accountability Committee
PSP1 Payroll Support Program
PSP2 Payroll Support Program 2
PSP3 Payroll Support Program 3
RRP Rapid Response Program
SEDI Socially and Economically-Disadvantaged Individuals
SIGPR Special Inspector General for Pandemic Recovery
SLFRF Coronavirus State and Local Fiscal Recovery Funds
SSA Social Security Administration
SSBCI State Small Business Credit Initiative
TAAPS Treasury Automated Auction Processing System
FINAL REPORT NO. OIG-CA-22-002 25
US DEPARTMENT OF THE TREASURY OFFICE OF INSPECTOR GENERAL
TBM Technology Business Management
TFI Office of Terrorism and Financial Intelligence
Treasury Department of the Treasury
WSS Wholesale Securities Services
FINAL REPORT NO. OIG-CA-22-002 26
File and source
- File
- OIG-CA-22-002-management-and-performance-challenges-facing-the-department-of-the-treasury.pdf
- Size
- 485,026 bytes
- SHA-256
- 7795d885104d92932d086dac50d88610c0a3603fed8ee7c2f4a65c3e32961078
- Our copy
- OIG-CA-22-002-management-and-performance-challenges-facing-the-department-of-the-treasury.pdf
- Original
- www.oversight.gov