prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.



Report 2: The United States has many international agreements that require treaty partners to provide certain information to IRS, which can help prevent the use of foreign bank accounts to facilitate tax evasion  FATCA goes much further, requiring FFIs to report more detailed information to IRS about their U S  customers annually  These provisions are important developments in efforts to combat tax evasion by U S  persons holding investments in offshore accounts  FATCA generally requires certain taxpayers to report foreign financial accounts and other specified foreign financial assets whose aggregate value exceeds specified thresholds to IRS on Form 8938  These taxpayers must report these assets and income generated from such assets to IRS with their tax return on Form 8938  These thresholds vary by filing status—such as single or married filing jointly—and by domestic or foreign residency  FATCA also promotes third-party reporting of foreign financial assets by requiring a withholding agent to withhold 30 percent on certain payments to an FFI unless the FFI or the jurisdiction in which the FFI is located has entered into an agreement with the United States to report certain account information of their U S  customers  Under such an agreement, participating FFIs report detailed information to IRS annually about accounts held by their U S  customers using an IRS Form 8966, FATCA Report (Form 8966)  According to IRS, FATCA improves visibility into taxable income from foreign sources, and enhances the agency’s ability to identify and pursue taxpayer noncompliance  For example, FATCA allows IRS to compare information reported by FFIs on Forms 8966 to information reported by U S  persons on Forms 8938  According to IRS, this comparison can be used to ensure taxpayers and FFIs are properly reporting foreign financial assets and income from international investments  This type of comparison is a common IRS enforcement technique  For example, IRS can directly compare information it receives from financial institutions’ IRS Form 1099-INT, Interest Income, against a tax return to determine if the taxpayer reported income generated from interest earned  To facilitate FATCA implementation for FFIs operating in jurisdictions with laws that would prohibit FFIs from complying with the terms of the FFI agreement, Treasury developed two alternative intergovernmental agreements (IGA)—Model 1 and Model 2—to facilitate the effective and efficient implementation of FATCA by removing partner jurisdictions’ legal impediments to comply with FATCA reporting requirements, and reducing burdens on FFIs located in partner jurisdictions  FFIs from countries with Model 1 IGAs report information on U S  persons’ accounts to their respective host country tax authorities (HCTAs)  The HCTAs, in turn, compile the information from FFIs and transmit it to IRS  In contrast, FFIs from countries with Model 2 IGAs, or countries treated as not having an IGA in effect, directly report information on U S  persons’ accounts to IRS  Separate from the FATCA requirements, regulations implementing the Bank Secrecy Act of 1970 (BSA) also impose a separate self-reporting requirement for foreign accounts  Specifically, certain taxpayers and residents are required to file an FBAR with FinCEN annually if they have financial interest or signature or other authority over one or more foreign financial accounts with a total of more than $10,000, regardless of whether they reside within or outside the United States  Federal, state, and local law enforcement agencies can use information from these reports to combat financial crimes, including terrorist financing and tax evasion  Appendix IV provides a comparison of Form 8938 and FBAR reporting requirements  Figure 1 depicts the flow of foreign financial account information from U S  persons and FFIs to IRS and FinCEN through the FATCA and FBAR reporting processes  As part of the FATCA reporting requirements, IRS collects information on financial accounts through forms and reports submitted by both taxpayers and FFIs  As part of this effort, IRS requires taxpayers to identify their TINs on Forms 8938 they submit  IRS also requires participating FFIs to report the TINs of each account holder who is a specified U S  person on Forms 8966  IRS intends to use reported TINs to link Form 8938 data filed by taxpayers to Form 8966 data filed by the FFIs to ensure that taxpayers and FFIs are properly reporting foreign financial assets  However, IRS often could not link account information collected from FFIs to the account’s owner because of incorrect or missing TINs  In July 2018, the Treasury Inspector General for Tax Administration (TIGTA) found that almost half of new Forms 8966 filed by FFIs did not include a TIN or included an invalid TIN  A consulting firm working with FFIs to implement FATCA reporting requirements told us that FFIs encountered significant challenges obtaining accurate TINs from U S  persons as part of the self-certification process  For instance, FFIs encountered situations where U S  persons provided incomplete or inaccurate TINs—such as Social Security Numbers (SSN) with less than nine digits—on forms used to self-certify their status as U S  persons  FFIs also encountered situations where U S  persons may not have obtained TINs or were unwilling to provide them to FFIs  Additionally, banking associations told us that it has taken time, effort, and expense for FFIs to report TINs, as they had to upgrade computer systems to collect and record TINs from U S  customers  Finally, Treasury told us that jurisdictions that have an IGA with the United States but no legal requirement to collect TINs are not in compliance with the requirements of the IGA  Treasury and IRS determined that some FFIs reporting from countries with Model 1 IGAs needed additional time to implement procedures to obtain and report required U S  TINs for preexisting accounts that are U S  reportable accounts  Consequently, IRS provided a transition period, through the end of 2019, for compliance with the TIN requirements for FFIs under Model 1 IGAs  Specifically, in September 2017, IRS issued a notice modifying procedures for FFIs reporting from countries with Model 1 IGAs to become compliant with TIN reporting requirements for preexisting accounts  For calendar years 2017-2019, IRS will not determine that certain FFIs in countries with Model 1 IGAs are significantly noncompliant with their obligations under the IGA solely as a result of a failure to report U S  TINs associated with the FFI’s U S  reportable accounts, providing they (1) obtain and report the date of birth of each account holder and controlling person whose TIN is not reported, (2) make annual requests for missing TINs from each account holder, and (3) search electronically searchable data maintained by such FFIs for missing required U S  TINs before reporting information that relates to calendar year 2017 to a partner jurisdiction  As a result, even without any further extensions, calendar year 2020 is the earliest IRS will be enforcing requirements for FFIs from countries with Model 1 IGAs to provide accurate and complete information on U S  account holders’ TINs to IRS  Without valid TINs on Forms 8966 submitted by FFIs, according to IRS officials, IRS faces significant hurdles in matching accounts reported by FFIs to those reported by individual tax filers on their Forms 8938  As a result, IRS must rely on information such as names, dates of birth, and addresses that the filers and/or FFIs may not consistently report  Without data that can be reliably matched between Forms 8938 and 8966, IRS’s ability to identify taxpayers not reporting accurate or complete information on specified foreign financial assets is hindered, interfering with its ability to enforce compliance with FATCA reporting requirements, and ensure taxpayers are paying taxes on income generated from such assets  In July 2018, TIGTA reported that IRS lacked success in matching FFI and individual taxpayer data because reports FFIs filed did not include or included invalid TINs  This, in turn, affected IRS’s ability to identify and enforce requirements for individual taxpayers  TIGTA recommended, among other things, that IRS initiate compliance efforts to address and correct missing or invalid TINs on Form 8966 filings from FFIs from countries with Model 2 IGAs or without any IGAs with the United States  IRS management said it disagreed with this recommendation because a system to ensure validation of every TIN upon submission of a Form 8966 would be cost prohibitive  However, IRS management said that IRS would address invalid TINs as they are uncovered on other compliance efforts, such as initiating development of a data product to automate risk assessments across the FATCA filing population  IRS also said it continues efforts to systematically match Form 8966 and Form 8938 data to identify nonfilers and underreporting related to U S  holders of foreign accounts  However, IRS management told us they are waiting until they have a full set of data, including TINs, before doing analysis to develop a compliance strategy  According to TIGTA, IRS management believed that having the FFI’s Global Intermediary Identification Number (GIIN) on Form 8938, which is filed by the taxpayer, would help with matching records  However, Form 8938 instructions identify that the field is optional for taxpayers to complete  TIGTA recommended that to reduce taxpayer burden in obtaining GIINs from FFIs, IRS add guidance to Form 8938 instructions to inform taxpayers on how to use the FFI List Search and Download Tool on the IRS’s website to obtain an FFI’s GIIN  IRS agreed with this recommendation  However, even if an individual taxpayer provided GIINs, IRS may continue to have difficulty matching accounts with U S  taxpayers if the TIN and name of the account holder reported on the Form 8966 do not match the TIN and name of the taxpayer on the Form 8938  IRS officials said they are aware of these difficulties and have attempted to match Forms 8938 and 8966 based on other criteria such as dates of birth  In its response to our draft report, IRS said that all financial institutions and foreign tax authorities that file required account information receive a notification listing administrative and other minor errors contained in their reporting  According to IRS, its Large Business and International division follows up with foreign tax authorities regarding these errors to ensure the tax authorities are working with financial institutions to correct these errors in compliance with the countries’ IGAs  IRS added it has initiated a campaign addressing FFIs that do not meet their compliance responsibilities with respect to account opening requirements  Additionally, IRS drafted a risk acceptance form and tool addressing risks in implementing FATCA compliance and business process capabilities  This risk assessment focused on the limitations IRS faces due to budget constraints, but did not address the specific risks it faces from not receiving complete and valid TINs on U S  account holders  We previously reported that risk management could help stakeholders make decisions about assessing risk, allocating resources, and taking actions under conditions of uncertainty  Key management practices for risk management we identified from our prior work include identifying, analyzing, and prioritizing risks; developing a mitigation plan to address identified risks; implementing the plan; and monitoring, reporting, and controlling risks  Without developing a risk mitigation plan to address risks IRS faces from not receiving complete and valid TINs moving forward, IRS may lose opportunities to adjust its compliance programs to better identify U S  persons who are not fully reporting specified foreign financial assets as required under FATCA  Several IRS databases store data collected from individuals’ electronic and paper filings of Form 8938 and/or elements of parent individual tax returns to which the Form 8938 is attached—the filer’s country of residence and filing status—used to determine specified reporting thresholds for Form 8938 filers  Additionally, data from these databases and other sources are transferred downstream to IRS’s Compliance Data Warehouse (CDW)—a database used for research and analytical purposes  We extracted data from copies of Individual Return Transaction File (IRTF) and Modernized Tax Return Database (MTRDB) data copied into CDW to obtain information reported on Forms 8938 and relevant information from parent tax returns, such as filing status and filers’ country of residence  We found that IRTF and MTRDB had inconsistent and incomplete data  For example, neither database had consistent and complete information on foreign financial account and other asset information submitted by Form 8938 filers  While IRS officials told us that IRTF is the authoritative source for filers of Form 8938, it does not store account and other asset information submitted on Forms 8938  Additionally, IRS officials said MTRDB is not designed to store information submitted on paper filings of Forms 8938 and parent tax returns  Officials from IRS’s Research, Applied Analytics and Statistics (RAAS) division also noted that CDW did not have reliable information from Form 8938 paper filings  Because of the lack of foreign financial asset information from such filings, we could not report complete information on assets reported by Form 8938 filers  Further, IRS does not provide instructions to CDW users on how to extract appropriate data from CDW—such as data copied from IRTF and MTRDB—leading to confusion on which databases to use for extracting Form 8938 and relevant parent tax return data  For example, five distinct tables within CDW are required to identify the TIN, parent form, filing status, country of residence, and amount of foreign assets accurately  Without clear explanations of how data in each of these tables relate to each other and to the underlying filings, errors could be introduced into CDW users’ analyses of foreign asset information  Standards for Internal Control in the Federal Government notes that management should use quality information to achieve the entity’s objectives  One attribute of this principle includes processing data into quality information that is appropriate, current, complete, accurate, accessible, and provided on a timely basis  Additionally, the Internal Revenue Manual states that IRS needs to measure taxpayer compliance so that customer-focused programs and services can be enhanced or developed so that compliance information and tools can be improved  According to IRS officials, IRS researchers have been taking additional steps to obtain and review Form 8938 and parent tax return data stored in the Integrated Production Model (IPM) database  They said IPM is the only database that contains complete data from individuals’ electronic and paper filings of Forms 8938 and relevant elements of parent tax returns  IRS officials said that RAAS has been working with IRS’s information technology (IT) division to obtain read-only access to IPM, and import Forms 8938 and 8966 data from IPM into CDW for analysis  However, as of February 2019, this effort has been delayed due to budget constraints  In its response to our draft report, IRS said that obtaining read-only access would require a new technical process and plans to continue working with IT on the feasibility and timeframe for enabling this access  Enabling access to consistent and complete Form 8938 and parent tax return data for compliance staff and researchers from RAAS and other IRS business units would help IRS strengthen its efforts to enforce compliance with FATCA reporting requirements and conduct research to bolster enforcement efforts  However, such efforts may be hampered until IRS can ensure readily available access to such data  We previously recommended that IRS develop a broad strategy, including a timeline and performance measures, for how IRS intends to use FATCA information to improve tax compliance  IRS agreed with this recommendation and developed a strategy for FATCA in July 2013  IRS updated the strategy in 2016 by creating the FATCA Compliance Roadmap as a comprehensive plan to articulate IRS’s priorities to facilitate compliance with FATCA reporting requirements  The roadmap also provided an overview of compliance activities used solely for enforcing FATCA reporting requirements or enhancing existing compliance efforts  However, in July 2018, TIGTA reported that IRS had not updated the FATCA Compliance Roadmap since 2016, and had taken limited or no action on a majority of the planned activities outlined in it  We also found that IRS had not yet evaluated the effects of FATCA, including the effects on voluntary tax compliance  IRS documentation states that only 7 of 31 capabilities outlined in the FATCA Compliance Roadmap were delivered due to funding constraints  As of October 2018, IRS has stopped using the FATCA Compliance Roadmap and has not developed a revised comprehensive plan to manage efforts to leverage FATCA data to improve taxpayer compliance  According to IRS officials, IRS moved away from updating broad strategy documents, such as the FATCA Compliance Roadmap, to focus on individual compliance campaigns  These include a campaign to match individual tax filers to the reports from FFIs, and another campaign to identify FFIs with FATCA reporting requirements who are not meeting all of their obligations  According to what IRS told us, with the passage of time and as FATCA is becoming more integrated into agency operations, it has moved from updating the broad strategy documents focused on FATCA to working on compliance campaigns that incorporate FATCA into overall tax administration  Additionally, IRS and outside researchers plan to study the role of enforcement in driving overall patterns in reporting offshore assets and income generated from such assets  Though IRS maintains that FATCA is more integrated into its operations, TIGTA’s 2018 report concluded that IRS was still unprepared to enforce compliance with FATCA in part because it took limited or no action on the majority of planned activities outlined in the FATCA Compliance Roadmap  Documenting a framework for using FATCA reporting requirements to improve taxpayer compliance and measure their effect is consistent with three steps we found leading public sector organizations take to increase the accountability of their initiatives: (1) define clear missions and desired outcomes; (2) measure performance to gauge progress; and (3) use performance information as a basis for decision-making  We also previously reported that it is important for IRS to use a documented framework that defines a clear strategy, timeline, and plans for assessment  Having such a framework in place can help IRS better allocate resources and avoid unnecessary costs resulting from not having the necessary or appropriate data available to execute its objectives  In light of the challenges IRS faces to collect, manage, and use FATCA data to improve compliance in a resource-constrained environment, employing a comprehensive plan would help IRS maximize the use of collected data and better leverage individual campaigns to increase taxpayer compliance  Without such a plan, IRS’s ability to collect and leverage data collected under FATCA for compliance enforcement and other purposes is constrained  We could not report on total values of foreign financial assets on Forms 8938 in tax years 2015 and 2016  However, we could provide a range of total maximum account values reported on FBARs during the same period  Specifically, we determined that more than 900,000 individuals filed FBARs in calendar years 2015 and 2016, and declared total maximum values of accounts ranging from about $1 5 trillion to more than $2 trillion each year  A little more than one in five—or about 21 7 percent—of the approximately 404,800 Forms 8938 filed with IRS in tax year 2016 were done so from U S  persons living abroad, with the other 78 3 percent living in the United States  Table 1 shows that a higher proportion of Form 8938 filings from U S  persons living abroad for tax year 2016 were filed on paper (43 3 percent) than Form 8938 filings from U S  persons living in the United States during the same period (14 7 percent)  We extracted these data from IRTF, which IRS officials said is the authoritative source for filers of Form 8938  However, we could not report complete information on foreign financial assets reported by Form 8938 filers because such data are incomplete; as noted above, IRS databases we used to extract Form 8938 data—IRTF and MTRDB—do not include asset information reported on paper filings of Forms 8938  Of the approximately 404,800 Forms 8938 filed by individuals for tax year 2016—the most recent data available—we could access information on residency of filers and reported foreign financial assets from about 277,600 Forms 8938 that did not indicate that foreign financial assets and values were declared on other forms besides the Form 8938  Of the subset of these Forms 8938, more than one quarter—or about 73,500— reported foreign financial assets in amounts that indicate the Form 8938 may have been filed unnecessarily, since they reported specified foreign financial assets with aggregate values at or below reporting thresholds as of the last day of the tax year  Based on available Form 8938 data from tax year 2016, table 2 shows that about 61,900 filings from U S  persons living in the United States and about 11,600 filings from U S  persons living abroad during the same tax year reported specified foreign financial assets with aggregate values at or below end of tax year thresholds  These totals likely understate the total number of Forms 8938 that U S  persons may have filed unnecessarily in tax year 2016; due to data limitations, these totals exclude Forms 8938 without asset information stored in IRS’s databases, including most Forms 8938 filed on paper and Forms 8938 where filers identified that they declared foreign financial assets on other forms besides the Form 8938  There is no clear explanation as to why some U S  persons may have filed Forms 8938 unnecessarily  However, we identified a number of potential reasons from focus groups and other interviews with stakeholder groups  In focus groups we conducted, participants expressed confusion about IRS’s instructions for completing the Form 8938 and information provided on IRS’s website  In the instructions for completing Form 8938, IRS described the specific types of foreign financial assets that are to be reported on Form 8938, and the asset value thresholds that must be met for required reporting, depending on the location of residence and filing status of the taxpayer  IRS also posted responses to frequently asked questions on meeting FATCA reporting requirements on its website, and established a separate page on its website comparing foreign financial assets that must be reported on Form 8938 and/or FBAR  Nonetheless, focus group participants reported confusion on whether and how to report investment and retirement accounts and compulsory savings plans managed by their country of residence  In a meeting we convened with an organization representing tax attorneys, they told us taxpayers are unsure about what account values to report on the Form 8938  Tax practitioners participating in another focus group added that they filed Forms 8938 regardless of the aggregate value of the assets because it was too cumbersome for them to identify whether the assets exceeded reporting thresholds as of the end of the year or at any time during the year  IRS officials also cited a number of possible reasons why U S  persons may be filing Forms 8938 unnecessarily  For example, it may be easier for U S  persons to report all specified foreign financial assets they hold on the Form 8938, rather than determine whether the value of such assets met applicable thresholds  IRS officials also said that U S  persons might complete a Form 8938 for reasons besides meeting tax-filing requirements, such as providing evidence of assets for a loan application  IRS’s Taxpayer Bill of Rights states that taxpayers are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence  Furthermore, one of IRS’s strategic goals is to empower taxpayers by making it easier for them to understand and meet their filing, reporting, and payment obligations  IRS officials said they hosted sessions for tax practitioners at IRS Nationwide Tax Forums to address FATCA reporting requirements  However, they said IRS has not taken direct steps to identify or implement actions to further clarify instructions and related guidance on IRS’s website for completing Form 8938, such as information on which foreign financial assets to report, how to calculate asset values, and determine whether such values exceed required reporting thresholds  Additionally, IRS officials said they have not conducted additional outreach to educate taxpayers on required reporting thresholds under FATCA, or notify Form 8938 filers of instances where aggregate values of specified foreign financial assets reported on Forms 8938 were below reporting thresholds  IRS officials said they have not made efforts to determine whether there is a pattern of unnecessary Form 8938 filings that they could address  Rather, they said they believed resources should be devoted to FATCA implementation in general  However, as shown above, we have identified many tens of thousands of instances where U S  persons may have filed Forms 8938 unnecessarily  Without assessing factors contributing to unnecessary Form 8938 reporting—and identifying or implementing actions to further clarify and educate taxpayers on FATCA reporting requirements—IRS is missing opportunities to help taxpayers understand their filing and reporting obligations and minimize their compliance burdens while properly meeting their tax obligations  Additionally, IRS may be missing opportunities to reduce costs in processing forms that taxpayers did not need to file  Because of overlapping statutory reporting requirements, IRS and FinCEN—both bureaus within Treasury—collect duplicative foreign financial asset data using two different forms (Form 8938 and FBAR)  Our evaluation and management guide for fragmentation, overlap, and duplication states that overlap occurs when multiple agencies or programs have similar goals, engage in similar activities or strategies to achieve them, or target similar beneficiaries  Table 3 shows that individuals required to report foreign financial assets on Form 8938, in many cases, also must meet FBAR reporting requirements  For example, specified individuals with foreign financial accounts exceeding $50,000 in aggregate value on the last day of the tax year must file both Form 8938 and FBAR if such values exceed the minimum Form 8938 thresholds; these thresholds depend on the filing status and address of specified individuals  Table 3 also shows that, in many cases, specified interests in foreign financial assets as defined in Form 8938 instructions are the same as the financial interest in such assets under FBAR  Further, as noted in table 3, the overlapping requirements lead to IRS and FinCEN collecting the same information on certain types of foreign financial assets  For example, both Form 8938 and FBAR collect information on foreign financial accounts for which a person has signature authority and a financial interest in the account  Form 8938 and FBAR also both collect duplicative information on several other types of foreign financial assets, such as foreign mutual funds and accounts at a foreign financial institution that include foreign stock or securities  Overlapping reporting requirements result in most Form 8938 filers also filing an FBAR during the same reporting year  Table 4 shows that close to 75 percent of Form 8938 filers in tax years 2015 and 2016 percent also filed an FBAR for the same year using the same TIN  Overlapping requirements to file both Form 8938 and FBAR increases the compliance burden on U S  persons and adds complexity that can create confusion, potentially resulting in inaccurate or unnecessary reporting  Focus group participants in all five countries included in our study affirmed that U S  persons experienced confusion and frustration with having to report duplicative foreign financial asset information on both forms  Focus group participants and others we interviewed also noted that U S  persons incurred additional financial costs to complete and file both Form 8938 and FBAR  For instance, one tax practitioner in Canada said the charge was about $190 to report four-to-five accounts on an FBAR in addition to charging about $540 for basic tax return packages  An accounting firm based in Japan typically charged between $300 and $800 to complete a Form 8938 and between $150 and $500 to complete an FBAR, depending on the number of accounts reported on the forms  Proposed revisions to regulations implementing BSA proposed by FinCEN may also increase the number of duplicative foreign financial accounts reported on Form 8938 and FBAR  Currently, U S  persons must report detailed information on all foreign financial accounts on Form 8938 if the value of such accounts and other specified foreign financial assets reaches applicable reporting thresholds  In contrast, U S  persons are generally exempted from reporting detailed account information on FBARs if they report having signature or other authority over 25 or more foreign financial accounts  FinCEN’s proposed revisions to BSA regulations would eliminate the exemption, requiring U S  persons to report detailed information on all foreign financial accounts in which he or she has a financial interest if the value of such accounts exceed FBAR’s $10,000 reporting threshold  FinCEN estimated that it will receive account information for the first time on about 5 4 million foreign financial accounts if it finalizes the proposed revisions  In turn, these revisions may lead to increased filings of duplicative asset data on both Form 8938 and FBAR, as U S  persons may have to report detailed information on all foreign financial accounts using both forms  U S  persons also face exposure to two different penalty regimes for any failures in accurately and completely reporting foreign financial asset information to two bureaus within Treasury—IRS and FinCEN  Officials from one organization representing U S  persons living abroad said penalties due to failure to report certain accounts on one or both forms can be significant, even if little or no taxes are owed on those accounts  The duplicative reporting of foreign financial asset data on two different forms also creates additional costs to the government to process and store the same or similar information twice, and enforce reporting compliance with both requirements  In 2012, we recommended that Treasury direct the Office of Tax Policy, IRS, and FinCEN to determine whether the benefits of implementing a less duplicative reporting process exceed the costs and, if so, implement that process  Treasury did not implement our recommendation  While we continue to believe that the agencies should have considered whether less duplicative reporting could have been implemented, we do recognize that FATCA and FBAR were enacted under two different statutes to serve different purposes  As mentioned above, according to IRS, FATCA improves visibility into taxable income from foreign sources and enhances the agency’s ability to identify and pursue taxpayer noncompliance  In contrast, the information reported on the FBAR is collected to identify money laundering and other financial crimes; law enforcement agencies can use BSA information—including information collected from FBARs— to aid regulatory and criminal investigations  Additionally, data collected from Form 8938 and FBAR are used in different systems for use by different bureaus within Treasury  Fully addressing issues stemming from overlapping reporting requirements and the resulting collection of duplicative information—while at the same time ensuring that such information can be used for tax compliance and law enforcement purposes—can only be done by modifying the statutes governing the requirements  Further, IRS and FinCEN have varying degrees of access to foreign financial asset information collected from Form 8938 and FBAR to enforce tax compliance and financial crime laws  FATCA was enacted, in part, to improve visibility into taxable income from foreign sources  However, information provided on Forms 8938 is taxpayer return information protected by section 6103 of the Internal Revenue Code (IRC), which generally prohibits IRS from disclosing information provided on Forms 8938  IRS can share return information with other government agencies and others when it is allowed by statute  For example, under section 6103, IRS may disclose return information related to taxes imposed under the IRC—such as self-employment income tax, Social Security and Medicare tax and income tax withholding—to the Social Security Administration (SSA) as needed to carry out its responsibilities under the Social Security Act  However, according to FinCEN officials, FinCEN, law enforcement, and regulators often cannot access information submitted on Forms 8938  While section 6103 provides other exceptions to disclosure prohibitions—such as allowing IRS to share return information with law enforcement agencies for investigation and prosecution of nontax criminal laws—such information is generally only accessible pursuant to a court order  As noted above, information reported on the FBAR can be used by law enforcement agencies to aid regulatory and criminal investigations  This includes IRS, which has been delegated responsibility from FinCEN to enforce compliance with FBAR reporting requirements  IRS has used FBAR information in addressing taxpayer noncompliance with reporting and paying taxes on foreign assets and income  For example, taxpayers accepted into one of IRS’s offshore voluntary disclosure programs must have filed amended or late FBARs as part of their program applications  Investigators from IRS’s Criminal Investigation division generally reviewed applications to determine if the taxpayer has made a complete and truthful disclosure  IRS examiners can also use information from case files of program participants—such as information disclosed on FBARs— to identify new groups of taxpayers suspected of hiding income offshore  IRS can then choose to continue offering offshore programs and encourage these newly identified groups of taxpayers, as well as all taxpayers with unreported offshore accounts, to disclose their accounts voluntarily  In addition to eliminating overlapping reporting requirements, harmonizing statutes governing foreign financial asset reporting and use of information collected on such assets to make such statutes fully consistent could yield additional benefits to both IRS and the law enforcement community  Specifically, and as shown in appendix IV, there are specified foreign financial assets reported on Form 8938—such as foreign hedge funds and foreign private equity funds—that are not required to be reported on an FBAR  In contrast, there are other specified foreign financial assets reported on an FBAR—such as indirect interests in foreign financial assets through an entity—that are not required to be reported on Form 8938  Without congressional action to address overlap in foreign financial asset reporting requirements, IRS and FinCEN will neither be able to coordinate efforts to collect and use foreign financial asset information, nor reduce unnecessary burdens faced by U S  persons in reporting duplicative foreign financial asset information  Two reporting systems for sharing foreign account information from foreign financial institutions are in operation globally—FATCA and the Common Reporting Standard (CRS)  According to officials from banking associations and a consulting firm, FFIs in the countries where we examined FATCA implementation encountered challenges implementing and now maintaining two overlapping reporting systems for collecting and transmitting account information to other countries for a seemingly similar purpose, and collecting sufficient information from customers to ensure they meet the requirements of both systems  As noted above, we previously identified overlap as occurring when multiple agencies or programs have similar goals, engage in similar activities or strategies to achieve them, or target similar beneficiaries  According to an IRS official, collecting account information under FATCA ushered in an era of greater transparency; as noted above, FATCA’s passage sought to reduce tax evasion by creating greater transparency and accountability with respect to offshore accounts and other assets held by U S  taxpayers  When FATCA was first introduced, there was no international platform to share account information between countries  The United States and other countries worked together to reach an agreement on the electronic formatting that would be used to share the information  Other countries tax authorities’ became more interested in understanding the financial assets held abroad by their residents through an exchange of account information among themselves  In response, the Organisation for Economic Co-operation and Development (OECD) established the CRS reporting system for automatic exchange of information among member countries  According to the OECD, CRS was developed with a view to maximize efficiency and reduce cost for financial institutions  Thus, CRS drew extensively on the intergovernmental approach used to implement FATCA reporting requirements for FFIs  Countries participating in CRS exchange account information with each other using OECD’s Common Transmission System, which was modeled on FATCA’s International Data Exchange System  Figure 2 depicts the flow of account information between countries under FATCA and CRS  CRS reporting requirements are in many ways similar to FATCA, including required reporting of the account holders’ name and address, taxpayer identification number, account number, account balance, and income and sales proceeds  However, the requirements differ in significant ways  The biggest differences in requirements are driven by the nature of the U S  tax system  The United States, like many countries, generally taxes citizens and resident aliens on their worldwide income regardless of where that income is earned  However, the United States differs from other countries because it generally subjects U S  citizens who reside abroad to U S  taxation in the same manner as U S  residents  In contrast to U S  policy, most other countries do not tax their citizens if they reside in a country other than their country of citizenship  Further, IGAs implementing FATCA require FFIs to report the foreign-held accounts of U S  citizens and residents—including resident aliens—while CRS requires financial institutions in jurisdictions participating in CRS to report on almost all accounts held by nonresidents of the reporting country  Appendix V provides more detailed information on differences in reporting requirements, due diligence requirements, and definitions under FATCA and CRS  These differences in tax systems drive variations in due diligence procedures between FATCA and CRS  For example, FATCA aims to identify whether an account holder at a foreign institution is a U S  person based on citizenship and tax residency information  In contrast, CRS aims to identify the tax residency of all account holders of a financial institution, and does not consider citizenship  Due to the multilateral nature of CRS, if an account holder is determined on the basis of the due diligence procedures to have residency in two or more countries, information would be exchanged with all jurisdictions in which the account holder is determined a resident for tax purposes  Under CRS rules, information about foreign accounts held by a U S  citizen with a tax residence abroad would not be reported to IRS, but rather to the jurisdiction in which they were a resident for tax purposes  Because the United States taxes the worldwide income of U S  citizens, CRS rules would need to require identification of account holders’ citizenship in member countries where they are residents if FATCA were to be aligned with CRS  Table 5 shows a comparison of individuals reported to IRS under FATCA and hypothetically under CRS  Treasury and IRS, as part of its 2017-2018 Priority Guidance Plan, are considering modifying certain elements of the existing FATCA regulations  For instance, Treasury and IRS are considering coordinating certain documentation requirements for participating FFIs with the requirements under IGAs  In December 2018, Treasury and IRS also proposed regulations intended, in part, to reduce the burdens of FATCA  The proposed regulations included a clarification of the definition of an investment entity that is similar to the guidance published by OECD interpreting the definition of a “managed by” investment entity under CRS  If the United States wanted to adopt CRS, some of the key differences between FATCA and CRS—as outlined above and in appendix V—could be aligned through regulation while others would require legislation  According to Treasury officials, to align FATCA and CRS, Congress would need to revise statutes to: provide for the collection of information for accounts that residents of partner jurisdictions maintain at U S  financial institutions; require certain U S  financial institutions to report the account balance (including, in the case of a cash value insurance contract or annuity contract, the cash value or surrender value) for all financial accounts maintained at a U S  office and held by foreign residents; expand the current reporting required with respect to U S  source income paid to accounts held by foreign residents to include similar non-U S  source payments; require financial institutions to report the gross proceeds from the sale or redemption of property held in, or with respect to, a financial account; and require financial institutions to report information with respect to financial accounts held by certain passive entities with substantial foreign owners  While better aligning FATCA and CRS to some extent is possible, anything short of the United States fully adopting CRS would not fully eliminate the burdens of overlapping requirements that FFIs must currently meet under the two different systems  While having the United States adopt the CRS reporting system in lieu of FATCA could benefit FFIs that may otherwise have to operate two overlapping reporting systems, it would result in no additional benefit to IRS in terms of obtaining information on U S  accounts  Additionally, it could generate additional costs and reporting burdens to U S  financial institutions that would need to implement systems to meet CRS requirements  The extent of these costs is unknown  Further, adoption of CRS would create the circumstance where foreign accounts held by U S  citizens with a tax residence in partner jurisdiction—including U S  citizens who have a U S  tax obligation—would not be reported to IRS  Tax practitioners and others we interviewed said that U S  persons living abroad—whether or not they are required to complete a Form 8938—risk being denied access to foreign financial services  U S  persons and tax practitioners located in four of the five countries where we conducted focus groups and interviews reported that some U S  persons and U S - owned businesses encountered difficulties opening bank accounts with FFIs after FATCA was enacted, with some FFIs closing U S  persons’ existing accounts or denying them opportunities to open new accounts  One focus group participant, for example, said that the financial institution closed down all accounts including business checking, savings, and money market accounts after FATCA was implemented, requiring this individual to find a local resident who could co-sign on a new account  Costs FFIs would incur from implementing FATCA were cited as a significant factor in increasing barriers faced by U S  persons in accessing foreign financial services  Officials from one organization representing tax attorneys said that as a result of costs associated with FATCA implementation, FFIs have found it less burdensome to close accounts of U S  persons or require the accounts to be moved to a Securities and Exchange Commission registered affiliate than comply with FATCA  Tax practitioners and an official from a bankers association added that because FFIs may gain only small margins of profit from U S  persons, FFIs may believe it is too troublesome to do business with them  Additionally, officials from a foreign government agency told us that because FATCA is expensive for FFIs to continue implementing, banks in their country might charge U S  persons seeking access to financial services additional fees to account for FATCA implementation costs  Tax practitioners, consultants working with FFIs to implement FATCA reporting requirements, and the National Taxpayer Advocate told us that FFIs with smaller asset sizes such as smaller trust companies were more prone to decline business with U S persons  Officials from an advocacy group representing U S  persons living abroad told the National Taxpayer Advocate that some smaller banks declined U S  persons as customers as a business decision, believing it would cost more for them to comply with FATCA reporting requirements than maintain U S  expatriates’ accounts  Banking associations we interviewed said that decisions made by FFIs on whether to accept U S  persons as customers also depends on the overall risks and benefits of taking on individual U S
Report 2: gov for disbursements use the 3-day advanced rate exclusively and one uses the 5-day advanced rate  The official noted that a technical issue within ITS gov has restricted the disbursing office currently using the 5-day advanced rate from choosing any other rate, but that the service was further assessing options to correct the issue  In our conversations with an official in OUSD(C) about why the other services had not reviewed the foreign currency rates used for disbursements to determine what was being paid through ITS gov and whether there was an opportunity for savings, the official commented that OUSD(C) had not directed the services to conduct any reviews in this area  This official was unaware that different foreign currency rates were used to make disbursements, and assumed that the military services all make disbursements in the same way  However, as discussed above, the services are using different rates resulting in inconsistency across the department  The official further indicated that DOD could perform a review to determine the cost differences of using one disbursement rate over another  Absent a review of the rates the services are using in making disbursements and whether cost savings could be achieved by more consistently selecting the most cost-effective foreign currency rates available for use at disbursement, DOD is at risk for paying more to convert U S  Dollars for overseas expenditures than would otherwise be required  In fiscal years 2009 through 2016, DOD used the FCFD account to cover losses that the services experienced due to foreign currency fluctuations in 6 of the 8 years we reviewed  However, DOD does not effectively manage the FCFD account balance based on projected gains or losses  Transfers of expired unobligated balances from MILPERS and O&M accounts into the FCFD account have been made to replenish the account balance to the statutory limit of $970 million, without consideration of projected losses due to foreign currency fluctuations  Furthermore, DOD’s financial reporting on foreign currency fluctuations for fiscal years 2009 through 2016 contains incomplete and inaccurate information  In fiscal years 2009 through 2016, DOD transferred approximately $1 92 billion out of the FCFD account to cover losses that the services experienced due to foreign currency fluctuations in 6 of the 8 years we reviewed  For these years, DOD transferred funds from the FCFD account to the services’ MILPERS and O&M accounts during the fiscal year in which the funds were obligated for overseas expenses  The transfer amounts were based on both losses realized from actual disbursements and projected losses for any remaining obligations to be liquidated  The projected losses were calculated based on the current foreign currency market rates as of the time of the calculation  Based on the service-level data we reviewed, all of the services reported that they experienced losses in at least 5 of the fiscal years we reviewed  For example, the Army reported that it experienced losses in its MILPERS account for 5 of 8 years, while the Marine Corps reported that it experienced losses in its O&M and MILPERS accounts in each of the 8 years  In addition to the transfers to cover losses within the services’ MILPERS and O&M accounts, in fiscal year 2013 DOD transferred an additional $969 million to the Defense Working Capital Fund to offset fuel cost losses  Since fiscal year 2012, DOD has maintained the FCFD end-of-year account balance at $970 million—the maximum allowed by statute  To replenish the funds that were transferred out of the FCFD account, DOD transferred unobligated balances to the FCFD account from the services’ O&M and MILPERS accounts  While DOD can also replenish the FCFD account or absorb foreign currency losses in certain currencies by transferring to the FCFD account any gains experienced by the services, our analysis found that DOD did not transfer any gains into the FCFD account for fiscal years 2009 through 2016  Figure 3 shows the transfers into and out of the FCFD account and the end-of-year FCFD account balance for fiscal years 2009 through 2016  Our analysis also shows that DOD transferred funds to maintain the FCFD account at its maximum balance since 2012, despite experiencing fewer losses due to foreign currency fluctuations than it had experienced in fiscal years 2009 to 2011  Of the $1 92 billion transferred from the FCFD account to the services’ MILPERS and O&M accounts to cover losses, $464 5 million was transferred since fiscal year 2012, when DOD began maintaining its FCFD account at the maximum level  During that time, some of the services experienced foreign currency gains, while others experienced losses  For example, at the end of fiscal year 2013 the Navy reported a total realized and projected cumulative gain for its O&M and MILPERS accounts of about $98 6 million  In that same year, the Marine Corps reported a cumulative realized and projected loss for its O&M and MILPERS accounts of approximately $12 7 million  Had DOD not transferred unobligated funds back into the FCFD account, it would have retained a positive balance of approximately $505 5 million  However, DOD maintained the account balance at $970 million by transferring approximately $495 3 million in unobligated balances into the account  As part of its management of the FCFD account balance, DOD analyzes data on realized and projected losses as the basis for transferring funds from the FCFD account to the services’ MILPERS and O&M accounts to cover losses  However, DOD does not consider projected losses when making transfers of unobligated O&M and MILPERS balances into the FCFD account  Figure 4 below shows the FCFD account balance that DOD has maintained in relation to the transfers out of the account to cover losses  Specifically, according to the OUSD(C) official responsible for managing the FCFD account, DOD maintains the FCFD account balance at $970 million to maximize unobligated balances within the military services’ O&M and MILPERS accounts before they are canceled and are no longer available to DOD  In addition, this official stated that DOD prefers to maintain the maximum balance in case it is needed due to sudden, unfavorable swings in foreign currency exchange rates  Our review of the documentation used to make transfers into and out of the FCFD account corroborates that DOD maintains the FCFD account balance to maximize the retention of unobligated balances  Specifically, we found instances in which the documentation states that the transfers of unobligated balances into the FCFD account were made for the purpose of replenishing the account balance to the statutory limit  For example, DOD transferred $89 million from the FCFD account to the Army for losses it had realized and projected in fiscal year 2014, and later transferred unobligated balances of the same amount back into the account  DOD’s documentation states that this transfer of unobligated balances was made for the purpose of replenishing the account to $970 million in order to finance estimated foreign currency losses resulting from the decline in value of the U S  Dollar  However, the transfer to the Army already covered the realized losses and projected losses for any remaining disbursements  In other words, estimated foreign currency losses had already been accounted for at the time of the transfer to the Army  In addition, based on data reported by the Air Force, Marine Corps, and Navy, DOD had an estimated cumulative gain of about $30 million for fiscal year 2014 based on the other services’ gains and losses, which could have been transferred to the FCFD account to absorb any additional foreign currency losses elsewhere  However, DOD did not transfer those gains to the FCFD account  Similarly, based on data reported by these services, DOD experienced cumulative realized and projected gains of more than $200 million in fiscal year 2013 and about $92 6 million in fiscal year 2015, but it did not transfer any gains to the FCFD account because the account balance had already reached its maximum using transferred unobligated balances  Despite replenishing the account balance to the maximum amount for the purpose of covering additional losses, the FCFD transfers have not been made to fully offset losses in some years, further raising questions about the need to maintain the balance at the statutory cap of $970 million annually  Specifically, in 3 of the 6 years in which DOD transferred funds from the FCFD account to the services’ MILPERS and O&M accounts, DOD did not use the FCFD account to fully cover the losses that the Air Force, Marine Corps, and Navy experienced  In fiscal year 2011, for example, DOD’s transfers out of the FCFD account to these services covered about 88 percent of the reported MILPERS and O&M losses that these services had realized and projected to lose by the end of the fiscal year  In fiscal year 2012, FCFD transfers covered almost 72 percent of the MILPERS and O&M realized and projected losses reported by the Air Force, Marine Corps, and Navy, as of the end of the fiscal year  In fiscal year 2016, DOD FCFD transfers to these services covered approximately 55 percent of their reported MILPERS and O&M realized and projected losses by the end of the fiscal year  The OUSD(C) official we spoke with stated that FCFD transfers to cover losses begin with a request from the services, and the OUSD(C) office and the services then coordinate on the final transfer amount  In addition, some service officials told us that they try to cover their losses using each service’s available funding before reaching out for assistance from the FCFD account  Therefore, based on a service’s ability to cover the loss, it may not always request an FCFD transfer to cover the full amount of realized and projected losses  Further, according to an OUSD(C) official, the timing of a service’s request for an FCFD transfer may also affect any differences between the amount transferred and the actual losses experienced  Specifically, if a service requests a transfer early in the fiscal year based on realized and projected losses, actual losses experienced as of the end of the fiscal year may be greater than or less than the transfer amount due to foreign currency fluctuations  Using transfers of unobligated balances, DOD has maintained its FCFD account balance at the maximum level allowed by statute because it has not analyzed realized and projected losses to determine what size account balance is necessary to meet the intended purpose of the account  In our prior work, we have developed key questions for evaluating federal account balances that agencies may use to identify the amount of the balance necessary to maintain agency or program operations  Through examination of carryover balances, oversight of agencies’ management of federal funds may be enhanced  Specifically, we reported that understanding an agency’s processes for estimating and managing carryover balances provides information to assess how effectively agencies anticipate program needs, and ensure the most efficient use of resources  To estimate and manage carryover balances, agencies may consider such factors as future needs of the account, economic indicators, and historical data  If an agency does not have a robust strategy in place to manage carryover balances or is unable to adequately explain or support the reported carryover balance, then a more in-depth review is warranted  In those cases, balances may either fall too low to efficiently manage operations or rise to unnecessarily high levels, producing potential opportunities for those funds to be used more efficiently elsewhere  When asked about maintaining the balance at a level necessary to cover losses, rather than at the maximum level allowed by statute, the OUSD(C) official indicated that the OUSD(C) takes a cautious approach and prefers to have the additional flexibility allowed by the higher balance  Further, the official stated that it would be difficult for DOD to attempt to base its unobligated balance transfers and the FCFD account balance on analysis and evaluation, given the unpredictable nature and constant volatility of foreign currency rates  Our guidelines on evaluating carryover balances acknowledge that external events beyond an agency’s control can dramatically affect carryover balances  However, the challenges that are inherent in predicting foreign currency rates do not preclude DOD from conducting analysis to glean insight as to the appropriate size for the balance of the account and what potential opportunities for savings might exist  Specifically, our guidelines suggest that agencies would benefit from considering the sources and fiscal characteristics of an account with carryover balances  In this case, the FCFD account can receive funds from transfers of unobligated balances and realized foreign currency gains  In addition, DOD can make multiple transfers throughout a fiscal year and can transfer funds from the FCFD to and from the services’ O&M and MILPERS accounts simultaneously, if necessary  These characteristics of the FCFD account already provide the department with flexibility, indicating that DOD may be positioned to manage the FCFD balance in a more analytical manner based on any projected losses  Without analyzing any realized or projected losses to determine what balance may be needed to meet the FCFD account’s intended purpose, the account balance may be kept at a higher level than is necessary  As a result, although an exact amount is unknown, DOD may be maintaining balances in the FCFD account that are hundreds of millions of dollars higher than needed to cover any losses it has experienced, and these funds may have been more efficiently used in supporting other defense activities or returned to Treasury after the account is canceled by law  DOD prepares financial reports to monitor the status of its foreign currency funds, but some of DOD’s financial reporting on foreign currency fluctuations for fiscal years 2009 through 2016 is incomplete and inaccurate  DOD’s Financial Management Regulation establishes reporting requirements specifically for tracking all transactions that increase or decrease the FCFD  In accordance with that guidance, the services provide data from their accounting systems to the Defense Finance and Accounting Service to generate reports that are used as a tool with which the services and OUSD(C) can monitor how they are expending funds appropriated for overseas expenditures  For O&M appropriations, the Foreign Currency Fluctuations, Defense (O&M) report provides data on foreign currency gains and losses for each service, by currency, including data on projected gains or losses for any remaining obligations that have not yet been disbursed at the time of the report  The Foreign Currency Fluctuations, Defense Report (MILPERS) provides similar information for the MILPERS appropriation  We reviewed end-of-year Foreign Currency Fluctuations, Defense (O&M) and (MILPERS) reports for fiscal years 2009 through 2016 and found that some of the reporting for O&M was incomplete and inaccurate, which hampers the quality of information available to manage the FCFD account  For instance, we found the following: Incomplete data in the Foreign Currency Fluctuations Defense (O&M) reports: In our review of the end-of-year Foreign Currency Fluctuations Defense (O&M) and (MILPERS) reports we observed several instances of incomplete data in the O&M reports, and these affect managers’ ability to make sound decisions to manage foreign currency gains and losses  First, for the Navy, we found that the report data showed, for multiple currencies across fiscal years 2011 through 2016, values in the realized variance column, indicating that the service had experienced a gain or loss in a particular currency; however, the reports showed values of zero in other columns that are necessary for calculating the gain or loss  Second, the Air Force data for the Turkey Lira, in fiscal year 2012, showed a gain or loss without any data indicating what would have driven the gain or loss  Third, in one instance, Marine Corps data on obligations for fiscal year 2011 were missing from the end-of-year reports until 2014  Missing obligation data for these end-of-year reports indicate a limitation in using these reports for tracking actual gains and losses  Inaccurate data in the Army’s Foreign Currency Fluctuations Defense (O&M) reports: The Army’s Foreign Currency Fluctuation Defense (O&M) reports are inaccurate and cannot be used to reliably track gains or losses, and this hinders managers from making sound decisions regarding the Army’s foreign currency gains and losses  The reports are inaccurate in that the Army’s accounting system charges disbursements to the current fiscal year appropriation rather than to the fiscal year appropriation that incurred the obligation, as required by the Financial Management Regulation  According to officials from the Army Budget Office, the Army designed its General Fund Enterprise Business System (GFEBS) to record disbursements to the current fiscal year based on differing interpretations of a previous version of the Regulation  Because the Army is not recording its disbursements to the fiscal year appropriation as the other services are, Army data are inaccurate and cannot be used by the OUSD(C) official responsible for overseeing DOD’s foreign currency program to track the Army’s foreign currency transactions and maintain full visibility of DOD’s overall gains and losses in a given fiscal year  Army Budget Office officials acknowledged that the Army will need to modify its system to record disbursements consistent with Financial Management Regulation guidance, but it has not developed a plan or timeline for doing so  Without accurate reporting of the Army’s foreign currency transactions, DOD lacks information for tracking and helping to manage the Army’s foreign currency gain and losses  DOD’s Financial Management Regulation specifies the data that must be included in the Foreign Currency Fluctuations Defense (O&M) and (MILPERS) reports and the roles and responsibilities of the services as well as the Defense Finance and Accounting Service for ensuring the quality of those data  However, we identified data issues in our analysis that indicate that quality is inconsistent  For example, officials from the Navy stated that they had observed the incomplete data for some currencies and speculated that the incompleteness was attributable to data entry errors  Similarly, according to an OUSD(C) official, the Defense Finance and Accounting Service is notified when discrepancies are found in the reports and the Defense Finance and Accounting Service officials coordinate with the services to correct the data  However, neither Navy nor the Defense Finance and Accounting Service officials have corrected the data  Although DOD’s Financial Management Regulation specifies the data that are to be included, as well as roles and responsibilities of the services and the Defense Finance and Accounting Service, it does not identify who is responsible for correcting erroneous or missing data  According to an OUSD(C) official, correcting reporting issues is an area that OUSD(C), the Defense Finance and Accounting Service, and the services can improve on, and they would benefit from guidance in the Financial Management Regulation that establishes the steps that should be taken for making such corrections  Further, GAO’s Standards for Internal Control in the Federal Government and the Federal Accounting Standards Advisory Board’s Handbook of Federal Accounting Standards and Other Pronouncements, as Amended, both establish the importance of using reliable and complete information for making decisions  In addition, DOD’s Financial Management Regulation establishes responsibilities for both the DOD components and the Defense Finance and Accounting Service to establish appropriate internal controls to ensure that financial reporting data are complete, accurate, and supportable, in order for managers to make sound decisions and exercise proper stewardship over these resources  Effectively managing foreign currency gains and losses as well as any projected gains or losses for any remaining obligations that have not yet been liquidated through disbursement requires complete and accurate data  OUSD(C) and service officials recognize the importance of reliable data, as well as the need to take steps to improve the quality of the foreign currency gains and losses data  Without OUSD(C) establishing guidance to ensure that the Foreign Currency Fluctuation Defense (O&M) report data that tracks foreign currency gains and losses are complete, DOD and Congress do not have information to make sound decisions and exercise proper stewardship over resources due to foreign currency fluctuations  Furthermore, until the Army establishes a plan and timeline for modifying its system to record foreign currency disbursements in an accurate manner, the Army and DOD will lack quality information for tracking and helping to manage the Army’s and DOD’s foreign currency gain and losses  Congress provides DOD with a significant amount of funding each year to purchase goods and services overseas and to pay service-members stationed abroad  DOD develops and can revise foreign currency budget rates to determine its funding needs and calculate any gains or losses that result from DOD’s overseas expenditures  The Army has estimated potential cost savings that would result from more consistently selecting a more cost-effective foreign currency rate for making disbursements to liquidate its overseas O&M obligations  However, DOD has not fully determined whether additional cost-saving opportunities exist because the services have not reviewed the rates used for foreign currency disbursements  Absent a review of the foreign currency rates the services are using at disbursement, including whether cost-saving opportunities exist, by more consistently selecting cost-effective foreign currency rates, DOD risks paying more than would be required otherwise  Further, while DOD has used the FCFD account to cover losses that resulted from foreign currency fluctuations, it has not managed the FCFD account balance by basing the transfers of unobligated balances into the FCFD account on an analysis of realized and projected losses  Without basing its FCFD account balance on such analyses, DOD may be maintaining balances in the FCFD account that are hundreds of millions of dollars higher than needed to cover any losses it has experienced, and these amounts may have been more efficiently used supporting other defense activities or ultimately returned to Treasury, once expired  Moreover, DOD has not established guidance and other procedures to ensure that complete and accurate data are included in financial reporting on foreign currency funds, and this limits the quality of information available to effectively manage the FCFD account  We are making the following four recommendations to DOD  The Secretary of Defense ensures that: The Under Secretary of Defense (Comptroller), in coordination with the U S  Army, Air Force, Navy, and Marine Corps, should conduct a review of the foreign currency rates used at disbursement to determine whether cost-saving opportunities exist by more consistently selecting cost- effective rates at disbursement  (Recommendation 1) The Under Secretary of Defense (Comptroller) should analyze realized and projected losses to determine the necessary size of the FCFD account balance and use the results of this analysis as the basis for transfers of unobligated balances to the account  (Recommendation 2) The Under Secretary of Defense (Comptroller) should revise the Financial Management Regulation to include guidance on ensuring that data are complete and accurate, including assignment of responsibility for correcting erroneous data in its Foreign Currency Fluctuations Defense (O&M) reports  (Recommendation 3) The Secretary of the Army should develop a plan with timelines for implementing changes to its General Fund Enterprise Business System to accurately record its disbursements, consistent with DOD Financial Management Regulation guidance  (Recommendation 4) We provided a draft of this report to DOD for review and comment  In its written comments, reproduced in appendix II, DOD concurred with our first, third, and fourth recommendations and outlined its plan to address them  DOD partially concurred with our second recommendation that the Under Secretary of Defense (Comptroller) analyze realized and projected losses to determine the necessary size of the FCFD account balance and use the results of the analysis as the basis for transfers of unobligated balances to the account  DOD also provided technical comments, which we incorporated in the report, where appropriate  In partially concurring with our second recommendation, DOD stated that projecting foreign currency gains or losses can be difficult given that foreign currency rates can be volatile due to various factors, such as trade balances, money supply, and national income, as well as arbitrary disturbances that affect foreign currency rates that cannot be predicted or forecasted, such as the departure of the United Kingdom from the European Union  DOD noted that because of the risk and volatility associated with foreign currency rates, the Congress established the FCFD account  We agree that forecasting foreign currency rates is challenging due to market volatility and include examples in our report of the effect of foreign currency rate fluctuations on DOD’s planned foreign currency obligations  Our report also describes the relationship between gains and losses and foreign currency fluctuations, and the movement of funds from the FCFD account to offset any losses  As our report also discusses, DOD calculates actual and projected losses due to foreign currency fluctuations and uses those projections as the basis, at least in part, for any transfers out of the FCFD account to cover losses experienced in the military services’ O&M and MILPERS appropriations  However, our report also notes that DOD does not consider its calculations of actual and future projected losses when making transfers of unobligated O&M and MILPERS balances to replenish the FCFD account  Instead, since fiscal year 2012, DOD has kept the FCFD account balance at the maximum level allowed by statute by using unobligated balances before they are canceled and are no longer available to DOD, regardless of whether the funds were needed in the account to offset any projected losses  DOD’s comments also stated that projecting gains or losses for foreign currency to determine the size of the FCFD account opens the door to greater uncertainty and risk at a time when the department is working to rebuild readiness and implement the National Defense Strategy  Our report describes the characteristics of the FCFD account that provide DOD with flexibility to manage market volatility, thereby helping to address uncertainty and reduce risk  For example, DOD can make multiple transfers of funds to the FCFD account throughout a fiscal year in response to unforeseen foreign currency fluctuations  The FCFD account can also receive funds from transfers of actual foreign currency gains and/or unobligated balances  As we also noted, DOD made use of its authority to transfer expired unobligated MILPERS and O&M amounts into the FCFD account in the event that actual losses exceeded the projected amounts and additional transfers were deemed necessary  We continue to believe that by analyzing actual and projected losses and basing the transfer of any unobligated balances on these losses, DOD would be better positioned to determine the size of the FCFD account balance that is necessary to meet its intended purpose  Further, such analyses would provide opportunities to more efficiently use unobligated balances for other defense activities or return the balances to Treasury  We are sending copies of this report to the Secretary of Defense, the Under Secretary of Defense (Comptroller), the Secretary of the Army, the Secretary of the Navy, the Secretary of the Air Force, the Commandant of the Marine Corps, and appropriate congressional committees  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-5431 or russellc@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  Key contributors to this report are listed in appendix III  To describe the Department of Defense’s (DOD) revised foreign currency budget rates since 2009 and the relationship between the revised budget rates and DOD’s projected Operation and Maintenance (O&M) and Military Personnel (MILPERS) funding needs, we reviewed DOD’s foreign currency budget rates for the period of fiscal years 2009 through 2017, and we identified any years during which DOD revised the initial budget rates  We compared DOD’s initial foreign currency budget rates and revised foreign currency budget rates with rates published by the U S  Treasury Department (Treasury) for fiscal years 2009 through 2017  This period corresponded with data available to us on DOD’s initial and revised rates and allowed for use of the most current data available, since DOD had not yet decided whether or not to revise the fiscal year 2018 budget rates, while we were conducting our audit work  We chose rates published by Treasury for this comparison because Treasury has the sole authority to establish for all foreign currencies or credits the exchange rates at which such currencies are to be reported by all agencies of the government  Because Treasury rates are issued quarterly, we averaged Treasury’s first and second quarter rates for each currency and compared the Treasury average with DOD’s initial budget rates  Similarly, we computed an average of the third and fourth quarter Treasury rates for each currency and compared them with the DOD initial or revised budget rates, where applicable  These comparisons are meant to show the difference between DOD’s budget rates and Treasury rates for the first 6 months of the fiscal year, and the difference between DOD’s revised exchange rates and Treasury rates for the last 6 months of the fiscal year  Further, we analyzed the extent to which DOD’s budget rates were within 10 percent of Treasury rates during these same years  We chose 10 percent as the basis for our analysis because Treasury’s guidance states that amendments to the quarterly rates will be published during the quarter to reflect significant changes in the quarterly data, such as rate changes of 10 percent or more  Additionally, to understand the effect that revising the budget rates had on DOD’s O&M and MILPERS funding estimates and on potential gains or losses due to foreign currency fluctuations, we used a three-step approach  First, we identified the amount of O&M and MILPERS funds DOD requested for each currency  We converted the U S  Dollars requested to the total amount of foreign currency needed by multiplying the U S  Dollars requested by DOD’s initial budget rate  Second, we determined the total amount of U S  Dollars required using the revised rates by dividing the total amount of foreign currency needed using DOD’s initial budget rate by DOD’s revised budget rate  We used this same approach to determine the total amount of U S  Dollars required using the average Treasury rates  Third, we computed the differences in DOD’s O&M and MILPERS foreign currency funding needs by subtracting the U S  Dollars required to meet its foreign currency needs based on the average Treasury rates from the amounts required based on DOD’s initial budget rates and DOD’s revised budget rates, respectively  We discussed further with officials from the Office of the Under Secretary of Defense, Comptroller (OUSD(C)) the factors considered in revising the rates and whether those factors are communicated within and outside of the department  To evaluate the extent to which DOD has taken steps to reduce costs in selecting foreign currency rates at which to make disbursements and determine whether opportunities exist to gain additional savings, we reviewed accounting standards and any guidelines that exist regarding disbursements and calculations of foreign currency gains and losses, such as DOD’s Financial Management Regulation 7000 14-R, which calls for the use of prevailing foreign currency rates to make disbursements  We also discussed with agency officials how those guidelines are being carried out, and whether DOD or the services have developed guidance that instructs the services in selecting rates used for disbursements in foreign currencies  Additionally, we examined a non-generalizable selection of data for DOD disbursements made during the months June and July 2017 from Treasury’s International Treasury Service (ITS gov) system to determine which rates DOD used during this period and what savings might be achievable from using alternate rates  We chose data from those 2 months because it was the most recent data available on disbursements at the time Treasury provided the data for our review  Additionally, we discussed with officials from OUSD(C) and the services any analysis and ongoing efforts to transition to more cost-effective rates, including savings that may result  To assess the extent to which DOD has effectively managed the Foreign Currency Fluctuations, Defense (FCFD) account to cover losses, and maintained quality information to manage these funds, we analyzed DOD data for fiscal years 2009 through 2016 on foreign currency gains and losses reported by each of the services as reported in their Foreign Currency Fluctuation, Defense (O&M) and (MILPERS) reports; movements of funds between the FCFD account and the services’ O&M and MILPERS accounts; and the end-of-year FCFD account balances  We chose this time period in order to capture years in which both gains and losses were experienced, and for which DOD had complete data on gains and losses, fund transfers, and end-of-year balances for the FCFD account  Because the Army charges disbursements to the current fiscal year appropriation instead of the fiscal year appropriation that incurred the obligation, we requested that the Army adjust its reported data on foreign currency gains and losses and provide information consistent with how the other services report them, and with DOD’s Financial Management Regulation  However, the Army was unable to provide us with data that were consistent with what was provided by the other services at the time of our review  We, therefore, were unable to use Army data for purposes of comparison with data provided by the other services  We compared the end-of-year FCFD account balances and the use of the account with guidelines established in our prior work on the importance of examining unobligated balances  Additionally, we reviewed and analyzed DOD financial reports on foreign currency gains or losses and compared the reports, including any identified discrepancies, against best practices and standards on accurate reporting and maintaining quality information, such as those in GAO’s Standards for Internal Control in the Federal Government, and the Federal Accounting Standards Advisory Board’s Handbook of Federal Accounting Standards and Other Pronouncements, as Amended  To determine the reliability of the data used in addressing these objectives, we analyzed DOD and Treasury foreign currency rates, data on DOD foreign currency disbursements, and DOD financial reporting data on foreign currency gains and losses to identify any missing or inaccurate information, and we discussed with agency officials any identified abnormalities and how the information was extracted from systems, when appropriate  We found the data to be sufficiently reliable for the purposes of our reporting objectives, with the exception of the financial reporting on financial gains and losses  Specifically, based on problems with the completeness and accuracy of DOD’s financial reporting on foreign currency gains and losses, we found that these data were not sufficiently reliable for the purpose of computing exact totals for the gains and losses DOD experienced  However, because DOD uses these data as the basis for decisions related to management of the FCFD account, we included the data in our analysis to provide insight into the scope of gains and losses experienced  We also spoke with OUSD(C), military service, and Treasury officials regarding the process and systems used to input the reviewed data and generate the foreign currency reports we reviewed  We conducted this performance audit from February 2017 to April 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In addition to the contact named above, Matt Ullengren, Assistant Director; and Tulsi Bhojwani, Justin Bolivar, Carol Bray, Amie Lesser, Kelly Liptan, Felicia Lopez, Leah Nash, Randy Neice, Jacqueline McColl, Mike Silver, Roger Stoltz, Susan Tindall, John Trubey, Elaine Vaurio, and Cheryl Weissman made key contributions to this report 

ground_truth: The Trump Administration submitted to Congress its FY2019 budget request on February 12, 2018. The proposal included $41.86 billion for the Department of State, Foreign Operations, and Related Programs (SFOPS). Of that amount, $13.26 billion was for State Department operations, international broadcasting, and related agencies, and $28.60 billion for foreign operations. With the enactment of the Bipartisan Budget Act of 2018 (BBA; P.L. 115-123, February 9, 2018), which raised discretionary spending limits set by the Budget Control Act of 2011 (BCA; P.L. 112-25), the Administration's FY2019 foreign affairs funding request was entirely within enduring (base) funds; no Overseas Contingency Operations (OCO) funding was included the SFOPS request for the first time since FY2012. The FY2019 request would have represented a 23.3% decrease in SFOPS funding compared with FY2018 actual funding levels. The proposed State and related agency funding would have been 18.7% below FY2018 funding and the foreign operations funding would have been reduced by 25.2%. In the State and related programs budget, cuts were proposed for several accounts, including the diplomatic security accounts, contributions to international organizations, and contributions for international peacekeeping activities. In the foreign operations budget, cuts would have been applied across all accounts, with disproportionately large cuts proposed for humanitarian assistance, multilateral assistance, and funding for bilateral development programs focused on agriculture, education, and democracy promotion. Both the House and Senate appropriations committees approved FY2019 SFOPS bills that included funding at higher levels than the Administration requested and closer to FY2018 funding. H.R. 6385, approved by the House appropriations committee on June 20, 2018, would have funded SFOPS accounts at $54.177 billion. S. 3108, approved by the Senate appropriations committee on June 21, 2018, would have provided $54.602 billion for SFOPS accounts. FY2019 began with seven appropriations bills, including SFOPS, unfinished. Congress and the President approved continuing resolutions to fund the affected federal agencies through December 21, 2018 at the FY2018 level (P.L. 115-245, Division C and P.L. 115-298). After December 21, a partial shutdown of the government, including SFOPS funded agencies, occurred. On January 25, 2019, an agreement was reached to continue funding for SFOPS and other appropriations that had lapsed through February 15, at the FY2018 level (P.L. 116-5). On February 14, Congress passed, and the President later signed into law, a full year omnibus appropriation that included SFOPS funding (P.L. 116-6, Division F). P.L. 116-6 included a total of $54.377 billion for SFOPS accounts in FY2019, a 0.3% decrease from the FY2018 funding level and about 30% more than the Administration's request. Of that enacted total, $8.0 billion, or 14.7%, was designated as OCO. This report provides an account-by-account comparison of the FY2019 SFOPS request, House and Senate SFOPS legislation and the final FY2019 SFOPS appropriation to FY2018 funding in Appendix A. The International Affairs (function 150) budget in Appendix B provides a similar comparison. This report will not be further updated unless there is further congressional activity on FY2019 appropriations.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: On February 12, 2018, the Trump Administration submitted to Congress its FY2019 budget request, which included $41 86 billion of base (or enduring) funds for the Department of State, Foreign Operations, and Related Programs (SFOPS)  Of that amount, $13 26 billion would have been for State operations, international broadcasting, and related agencies and $28 60 billion for foreign operations  Comparing the request with the FY2018 actual SFOPS funding levels, the FY2019 request represented a 23 3% decrease in SFOPS funding  The proposed State and related agency funding would have been 18 7% below FY2018 funding levels, and the foreign operations funding would have been reduced by 25 2%  The Consolidated Appropriations Act, 2019 ( P L  116-6 ), signed into law on February 15, included a total of $54 377 billion for SFOPS accounts, a 0 3% decrease over the FY2018 funding level and about 30% more than the Administration's request  An account-by-account comparison of the SFOPS request with the FY2018 actual funding and FY2019 enacted appropriation is provided in Appendix A   International Affairs 150 function funding levels are detailed in Appendix B   A chart depicting the components of the SFOPS appropriations bill is in Appendix C   A glossary is provided in Appendix D   The appropriations process for FY2019 was shaped by the Bipartisan Budget Act of 2018 (BBA, H R  1892 , P L  115-123 ), which Congress passed on February 9, 2018  The act raised the overall revised discretionary spending limits set by the Budget Control Act of 2011 (BCA, P L  112-25 ) from $1 069 trillion for FY2017 to $1 208 trillion for FY2018 and to $1 244 trillion for FY2019  The BBA increased FY2019 defense funding levels by $85 billion, from $562 billion to $647 billion, and nondefense funding (including SFOPS) by $68 billion, from $529 billion to $597 billion  It also extended direct spending reductions from FY2021 in the original BCA through FY2027, as amended  Every year since FY2012, the Administration has distinguished SFOPS spending as either enduring (base) funds or those to support overseas contingency operations (OCO)  The OCO designation gained increased significance with enactment of the BCA, which specified that emergency or OCO funds do not count toward the spending limits established by the act  In early years of requesting OCO funds, the Obama Administration described OCO requests for "extraordinary, but temporary, costs of the Department of State and USAID in Iraq, Afghanistan, and Pakistan " Syria and other countries were added in later years, and the Trump Administration expanded OCO use in its first budget request in FY2018 to be available for longer-term, core activities and more countries  For FY2019, because the BBA raised spending limits, the Administration did not seek foreign affairs OCO funds, but requested the entire SFOPS budget within base funds  The final legislation, P L  116-6 , included $8 0 billion designated as OCO, or about 15% of enacted SFOPS funding  For funding trends, see Table 1   House and Senate SFOPS Legislation   FY2019 SFOPS legislation was introduced and approved by the full appropriations committee in each chamber  The House legislation, H R  6385 , included total SFOPS funding of $54 18 billion, 0 6% lower than FY2018 funding and 29% more than requested  The Senate proposal, S  3108 , would have provided $54 602 billion for SFOPS accounts, which is about 0 1% more than FY2018 funding and 30% more than requested  Neither bill received floor consideration in its respective chamber  Continuing Resolutions   On September 28, 2018, the President signed into law P L  115-245 , legislation which included the Continuing Appropriations Act, 2019 (CR) to continue funding for SFOPS accounts (among seven other appropriations that were not completed by the start of FY2019) at a prorated 2018 funding level through December 7, 2018  Funds designated as OCO in 2018 appropriations continued to be so designated for SFOPS in the CR  On December 3, 2018, Congress and the Administration extended funding through December 21, 2018 by enacting P L  115-298   After December 21, funding lapsed and a partial shutdown of the government occurred  On January 25, an agreement was reached to continue funding for SFOPS and other appropriations that had lapsed through February 15, at the FY2018 level ( P L  116-5 )  Enacted Legislation   On February 14 Congress passed, and the President later signed into law, a full year appropriation ( P L  116-6 , Division F) that included $54 38 billion in total SFOPS funding, a 0 3% decrease from the FY2018 funding level and about 30% more than the Administration's request  Of that total, $16 46 billion was for State Department operations and related agencies; $37 92 billion for foreign operations accounts  About 14 7%, or $8 0 billion, was designated as OCO  The State Department sought to cut funding for the Department of State and Related Agency category by 19% in FY2019 from FY2018 funding levels, to $13 26 billion  Conversely, both the House and Senate committee bills sought to maintain funding near previous fiscal year levels  The House committee bill would have increased funding in this category to $16 38 billion, or 0 4% above the FY2018 funding level  The Senate committee bill would have raised funding to $16 34 billion, around $40 million less than the House committee bill and approximately 0 1% more than the FY2018 funding level  Similar to the House and Senate committee bills, the FY2019 enacted appropriation ( P L  116-6 ) maintained funding for the State Department and Related Agency category slightly above FY2018 funding level  It provided $16 46 billion for this category, or 0 9% more than the F2018 level  The State Department's request sought to fund the entirety of this category through base (or enduring) funding  Following passage of the BBA and the resulting increase in discretionary spending cap levels for FY2018 and FY2019, the State Department moved the $3 69 billion request for Overseas Contingency Operations (OCO) in this category into the base budget request  Both the House and Senate committee bills sought to retain OCO funding within the Department of State and Related Agency category  The House committee bill would have provided $3 03 billion for OCO, or around 28% less than the FY2018 figure of $4 18 billion  The Senate committee bill would have provided $4 11 billion, which constituted about 2% less than FY2018 level  While the House committee bill would have afforded approximately $1 08 billion less for OCO than the Senate committee bill, the House committee bill provided around $1 12 billion more in enduring funding ($13 35 billion) than the Senate committee bill ($12 23 billion)  As with the House and Senate committee bills, P L  116-6 retained OCO funding for the Department of State and Related Agency category  The law provided a total of $4 37 billion for OCO, or 4 5% more than the FY2018 funding level  While the law provided more for OCO than either the Senate or House committee bills, it provided less in enduring funding ($12 09 billion)  Areas where the State Department's proposed cuts were focused included the diplomatic security accounts (the Worldwide Security Protection programmatic allocation within the Diplomatic Programs account and, separately, the Embassy Security, Construction, and Maintenance account), Contributions to International Organizations, and Contributions for International Peacekeeping Activities  In most cases, P L  116-6 , in a manner similar to the House and Senate committee bills, maintained annual budget authority for these accounts closer to the FY2018 funding levels than the Administration requested (see following sections for more detailed analysis)  The State Department also requested $246 2 million to implement the Leadership and Modernization Impact Initiative, which serves as the implementation phase of the department's "Redesign" efforts  While neither the House nor the Senate committee bill directly addressed the Impact Initiative, both included provisions enabling Congress to conduct oversight of any broader reorganization efforts at the department  The enacted legislation, P L  116-6 , took the same approach  Table 3 provides an overview of proposed changes to selected accounts within the State Department and Related Agency category  Under the State Department's budget request, the Diplomatic Programs account, which is the State Department's principal operating appropriation, would have declined by 11% from the FY2018 funding level of $8 82 billion, to $7 81 billion  According to the State Department, this account provides funding for "core people, infrastructure, security, and programs that facilitate productive and peaceful U S  relations" with foreign governments and international organizations  The House and Senate committee bills would have provided $8 80 billion and $8 92 billion, respectively, for Diplomatic Programs  For FY2019 enacted, P L  116-6 provided $9 17 billion, or 4% more than the FY2018 funding level and 17% more than the State Department's request  In Section 7081 of the Consolidated Appropriations Act, 2017 ( P L  115-31 ), Congress authorized the establishment of a new "Consular and Border Security Programs" (CBSP) account into which consular fees shall be deposited for the purposes of administering consular and border security programs  As a result, consular fees retained by the State Department to fund consular services will be credited to this new account  The State Department thus requested that Congress rename the former Diplomatic and Consular Programs account "Diplomatic Programs " However, because many consular fees are generated and retained by the State Department to administer consular programs, they do not comprise part of the department's annual appropriations and therefore do not count against overall funds appropriated annually for this account  The FY2019 enacted legislation, P L  116-6 , authorized the renaming of Diplomatic and Consular Programs to Diplomatic Programs, as did the House and Senate committee bills  The Diplomatic Programs account provides funds for a large share of U S  direct hire positions, including but not limited to State Department Foreign Service and Civil Service officers  Although the Trump Administration lifted the federal hiring freeze upon issuance of OMB M-17-22 on April 12, 2017, the State Department elected to keep its own hiring freeze in place  The Department of State released guidance in May 2018 lifting the hiring freeze and allowing the department to increase staffing to December 31, 2017 levels  Some Members of Congress expressed concern with the hiring freeze and the continued impacts of perceived personnel shortages at the Department of State  Both the House and Senate committee bills, and the committee reports accompanying those bills, included oversight provisions pertaining to State Department personnel levels  In this vein, Section 7073 of P L  116-6 required that no appropriated funds may be used to expand or reduce the size of the State Department and USAID's Civil Service, Foreign Service, eligible family member, and locally employed staff workforce from the on-board levels as of December 31, 2017 without consultation with the Committees on Appropriations and Foreign Relations of the Senate and the Committees on Appropriations and Foreign Affairs of the House of Representatives  Section 7073 also required the Secretary of State to submit reports to Congress, beginning 60 days after enactment of the law, and every 60 days thereafter until September 30, 2020, regarding the State Department's on-board personnel levels, hiring, and attrition of the Civil Service, Foreign Service, eligible family member, and locally employed staff workforce  These reports were also required to include a hiring plan for maintaining Foreign Service and Civil Service personnel numbers at not less than December 31, 2017, levels through FY2019  Among other personnel-related provisions, the joint explanatory statement accompanying this law noted that keeping personnel at these levels reflected "minimum necessary hiring" and encouraged the Secretary of State to work with Congress to increase hiring above such levels as appropriate  The Human Resources funding category within Diplomatic Programs provides funding for the Charles B  Rangel International Affairs and Thomas R  Pickering Foreign Affairs fellowship programs to promote greater diversity in the Foreign Service, as authorized by Section 47 of the State Department Basic Authorities Act (P L  84-885)  While Congress required the State Department to expand the number of fellows participating in the Rangel and Pickering programs by 10 apiece pursuant to Section 706 of the Department of State Authorities Act, 2017 ( P L  114-323 ), it has provided the department the discretion to fund these programs at levels it deems appropriate from monies appropriated for Human Resources  P L  116-6 , like the House and Senate committee bills, continued to provide such discretion to the State Department  In addition, the House committee report indicated support for department efforts to increase diversity in hiring, including through the Rangel and Pickering programs  It also encouraged the Secretary of State to explore more opportunities to further the goal of increasing workforce diversity  The Senate committee report recommended the continued expansion of the department's workforce diversity programs and directed that qualified graduates of the Rangel and Pickering programs shall be inducted into the Foreign Service  While neither P L  116-6 nor the accompanying joint explanatory statement addressed the Rangel and Pickering programs specifically or Foreign Service diversity more generally, the joint explanatory statement did not negate any of the language in the House and Senate committee reports  The Diplomatic Programs account also provides funding for a number of overseas programs  These include programs carried out by the Bureau of Conflict and Stabilization Operations and the department's regional bureaus  Activities of the department's Bureau of Medical Services, which is responsible for providing health care services to U S  government employees and their families assigned to overseas posts, are also funded through this account  Public diplomacy programs are among the overseas programs funded through Diplomatic Programs, which include the Global Engagement Center's (GEC's) countering state disinformation (CSD) program  According to the State Department, planned CSD activities, for which $20 million was requested, included "coordinating U S  government efforts in specific sub-regions; enhancing the capacity of local actors to build resilience against disinformation, including thwarting attacks on their IT systems; providing attribution of adversarial disinformation; and convening anti-disinformation practitioners, journalists, and other influencers to exchange best practices, build networks, and generate support for U S  efforts against disinformation " The House committee report registered concern regarding "foreign propaganda and disinformation that threatens United States national security, especially as carried out by China, Russia, and extremists groups" and asserted that the GEC "is expected to use a wide range of technologies and techniques to counter these campaigns," consistent with its statutory mandate  The Senate committee report recommended up to $75 4 million for the GEC, including up to $40 million for countering foreign state propaganda and disinformation  The joint explanatory statement accompanying for the FY2019-enacted legislation ( P L  116-6 ) included up to $55 4 million for the GEC and up to $20 million for CSD, a funding level for CSD identical to the department's request  Section 1284 of the National Defense Authorization Act for Fiscal Year 2019 ( P L  115-232 ) authorized the Department of Defense (DOD) to transfer not more than $60 million to the GEC for each of FY2019 and FY2020; DOD has previously transferred funds to the GEC under similar authorities  The State Department's FY2019 budget request sought to provide approximately $5 36 billion for the department's key embassy security accounts: $3 70 billion for the Worldwide Security Protection (WSP) programmatic allocation within the Diplomatic Programs account and $1 66 billion for the Embassy Security, Construction, and Maintenance (ESCM) account  The House committee bill would have provided $3 76 billion for WSP and $2 31 billion for ESCM, for a total funding level of $6 07 billion for these accounts  While the House bill would have funded the ESCM account exclusively through the base budget, it would have provided approximately $2 38 billion of overall funding for WSP through OCO  The Senate committee bill would have provided $3 82 billion for WSP and $1 92 billion for ESCM, for a total funding level of $5 74 billion  As with the House committee measure, the Senate committee bill would have funded the ESCM account with base budget funds only  For WSP, the Senate committee measure, like the House committee bill, would provide $2 38 billion of total account funds through OCO  The FY2019 enacted appropriations provided a total of $4 10 billion for WSP and $1 98 billion for ESCM, for a total funding level of $6 08 billion in budget authority for these accounts  Like the House and Senate committee bills, P L  116-6 funded ESCM exclusively through the base budget  Of the $4 10 billion provided for WSP in the law, $2 63 billion was done so through OCO  Had the Administration's request been enacted, it would have marked a decline of 2% for WSP and 28% for ESCM relative to the FY2018 figures of approximately $3 76 billion and $2 31 billion, respectively  The enacted legislation provided 9% more funding for WSP and 15% less for ESCM relative to FY2018 levels  Over the past several years, Congress has provided no-year appropriations for both WSP and ESCM, thereby authorizing the State Department to indefinitely retain appropriated funds beyond the fiscal year for which they were appropriated  As a result, the department has carried over large balances of unexpired, unobligated funds each year that it is authorized to obligate for programs within both accounts when it deems appropriate to do so  For example, for FY2018, the State Department carried over more than $7 6 billion in previously appropriated funds for ESCM  Both the House and Senate committee bills would have continued this practice with respect to WSP, and the Senate committee bill would have continued with respect to ESCM, as well  The House committee bill, if enacted, would have provided that all funds appropriated for ESCM remained available until September 30, 2023, rather than indefinitely  P L  116-6 provided no-year appropriations for WSP  For ESCM, the law stipulated that while funds for worldwide security upgrades and for purposes of acquisition and construction would remain available until expended, all other monies within this account (such as funds for preserving, maintaining, repairing, and planning for real property that State Department owns) would remain available only until September 30, 2023  The Worldwide Security Protection (WSP) allocation within the Diplomatic Programs account supports the Bureau of Diplomatic Security's (DS's) implementation of security programs located at over 275 overseas posts and 125 domestic offices of the State Department, including a worldwide guard force protecting overseas diplomatic posts, residences, and domestic offices  The State Department revisited previous assumptions for funding for the U S  security presence, which prompted it to ask for a rescission of $301 20 million for WSP OCO funds provided through the Further Continuing and Security Assistance Appropriations Act, 2017 (SAAA) ( P L  114-254 )  State Department officials noted that this funding was "intended to support diplomatic reengagements in Syria, Libya, and Yemen that were predicated on different security and political conditions " The department maintained that this proposed cancellation was based on evolving security and political conditions, and would not affect DS operations  While neither the House nor the Senate committee bill included a rescission, P L  116-6 provided for a rescission of $301 2 million of SAAA funds appropriated for Diplomatic Programs and designated them more generally for OCO  The Embassy Security, Construction, and Maintenance (ESCM) account funds the Bureau of Overseas Building Operations (OBO), which is responsible for providing U S  diplomatic and consular missions overseas with secure, safe, and functional facilities  The State Department's request included $869 54 million to provide its share of what it maintains is the $2 20 billion in annual funding that the Benghazi Accountability Review Board (ARB) recommended for the Capital Security Cost Sharing (CSCS) and Maintenance Cost Sharing (MCS) programs (the remainder of the funding is provided through consular fee revenues and contributions from other agencies)  These programs are used to fund the planning, design, and construction of new overseas posts and the maintenance of existing diplomatic facilities  The House committee report maintained that funds the House bill made available for ESCM would allow for the State Department's CSCS and MCS contributions, when combined with those from other agencies and consular fees, to exceed the ARB's annual recommended funding and support " the accelerated multi-year program to construct new secure replacement facilities for the most vulnerable embassies and consulates " The Senate committee bill stipulated that of funds made available for ESCM by it and prior acts making appropriations for SFOPS, not less than $1 02 billion shall be made available for the department's FY2019 CSCS and MCS contributions; the joint explanatory statement accompanying P L  116-6 indicated that Congress provided the same amount for this purpose for FY2019  In FY2019, OBO intended to fund four CSCS projects and one MCS project (see Table 4 )  The House committee report noted concern with the cost of new embassy and consulate compound projects, including ongoing projects in Beirut, Lebanon; Mexico City, Mexico; New Delhi, India; Erbil, Iraq; and Jakarta, Indonesia  Like Section 7004(h) of the House bill, as noted in the joint explanatory statement accompanying P L  116-6 , Congress mandated that the State Department provide more detailed reports regarding the costs of these projects than previously required  The State Department maintained that the "construction of a new U S  Embassy facility in Jerusalem is a high priority for the Administration     planning and interagency coordination for the Jerusalem Embassy move is ongoing and the department intends to realign CSCS project funding, as necessary, to execute this project " It later attached a timeframe to its intent, and the United States opened a new U S  embassy in Jerusalem in May 2018  This new embassy is located in a building that housed consular operations of the former U S  Consulate General in Jerusalem  The State Department has said that one of its next steps would be to construct an embassy annex to the current building, while also considering options for a permanent embassy over the long term  The department could choose to draw upon the unexpired, unobligated funds previously appropriated by Congress to the ESCM account for any construction expenses related to interim and permanent embassy facilities in Jerusalem  The Senate committee report requires the Secretary of State to "regularly inform the Committee" on the status of plans for a permanent New Embassy Compound in Jerusalem  Neither P L  116-6 nor its joint explanatory statement addresses this issue or negates the Senate committee report language  The State Department's FY2019 budget request included a combined request of $2 29 billion for the Contributions to International Organizations (CIO) and Contributions for International Peacekeeping Activities (CIPA) accounts, a 20% reduction from the FY2018 funding levels for these accounts  The CIO account is the source for funding for annual U S  assessed contributions to 45 international organizations, including the United Nations and its affiliated organizations and other international organizations, including the North Atlantic Treaty Organization (NATO)  The State Department's FY2019 request for CIO totaled approximately $1 10 billion  Following passage of the BBA, the department increased its request for CIO by approximately $100 million to fund a higher U S  contribution to the U N  regular budget at a rate of 20% of the overall U N  budget (the U S  assessment is 22%)  According to the department, U N  assessments of U S  contributions to the United Nations and its affiliated agencies exceeded the request for funds to pay these contributions  Therefore, if the department's request was enacted, the United States may have accumulated arrears to some organizations  The Contributions for International Peacekeeping Activities (CIPA) account provides U S  funding for U N  peacekeeping missions around the world that the State Department says "seek to maintain or restore international peace and security " The State Department's FY2019 request for CIPA totaled $1 20 billion  According to the department, this request "reflects the Administration's commitment to seek reduced costs by reevaluating the mandates, design, and implementation of peacekeeping missions and sharing the funding burden more fairly among U N  members " Under this request, no U S  contribution would have exceeded 25% of all assessed contributions for a single operation, which is the cap established in Section 404(b) of the Foreign Relations Authorization Act, Fiscal Years 1994 and 1995 ( P L  103-236 )  The State Department maintained that it expected that the "unfunded portion of U S  assessed expenses will be met through a combination of a reduction in the U S  assessed rate of contributions, reductions in the number of U N  peacekeeping missions, and significant reductions in the budgets of peacekeeping missions across the board " The department also requested that Congress provide two-year funds for CIPA (in other words, that Congress make funds available for both the fiscal year for which the funds were appropriated and the subsequent fiscal year) "due to the demonstrated unpredictability of the requirements in this account from year to year and the nature of multi-year operations that have mandates overlapping U S  fiscal years " The House committee bill would have provided $1 36 billion for CIO and $1 59 billion for CIPA, for a combined total of $2 95 billion for these accounts, which was 29% higher than the department's request and 4% higher than the FY2018 funding levels  The Senate committee bill would have provided $1 44 billion for CIO and $1 68 billion for CIPA, for a combined total of $3 12 billion  This figure was 36% higher than the department's request and 9% higher than the FY2018 level  The Senate committee bill included a provision not present in recent appropriations laws mandating that funds appropriated for CIO "are made available to pay not less than the full fiscal year 2019 United States assessment for each respective international organization " With regard to CIPA, both the House and Senate committee reports noted that appropriated monies were intended to support an assessed peacekeeping cost at the statutory level of 25% rather than the U N  assessed rate for the United States of 28 4%  Both committee reports called on the department to review peacekeeping missions for cost savings and work to renegotiate rates of assessment  For FY2019, P L  116-6 provided $1 36 billion for CIO and $1 55 billion for CIPA, for a total of $2 91 billion—slightly less than both the House and Senate committee bills  This figure was still 2% higher than the FY2018 figure and 27% higher than the department's request  While the law did not include the aforementioned Senate committee bill provision regarding payment of full U S  assessments for organizations funded through the CIO account, the law's joint explanatory statement noted that it assumed the payment of the full United States assessment for each relevant organization (with some exceptions, including organizations from which the United States has withdrawn) and required the Secretary of State to consult with the Committees on Appropriations with respect to any decision not to provide the full assessment for any such organization  With respect to CIPA, the joint explanatory statement noted that sufficient funds are provided for contributions to peacekeeping missions at the statutory level of 25%  The enacted legislation, like the House and Senate committee bills, provided a share of CIPA funds as two-year funds, as requested by the department  The State Department requested $246 2 million for FY2019 to implement the Leadership and Modernization Impact Initiative (hereinafter, the Impact Initiative)  The Impact Initiative constitutes the implementation phase of the State Department's "Redesign" project  Former Secretary Tillerson initiated the redesign in 2017 to implement Executive Order 13781 and Office of Management and Budget (OMB) Memorandum M-17-22, which aim to "improve the efficiency, effectiveness, and accountability of the executive branch " The Impact Initiative constitutes 16 keystone modernization projects in three focus areas: Modernizing Information Technology and Human Resources Operations; Modernizing Global Presence, and Creating and Implementing Policy; and Improving Operational Efficiencies (see Table 5 )  According to the State Department, these focus areas and modernization projects are derived from the results of the listening tour that former Secretary Tillerson launched in May 2017, which included interviews conducted with approximately 300 individuals that the department said comprised a representative cross-section of its broader workforce, and a survey completed by 35,000 department personnel that asked them to discuss the means they use to help complete the department's mission and obstacles they encounter in the process  Of the $246 2 million requested, $150 0 million was requested from the IT Central Fund (which is funded through funds appropriated by Congress to the Capital Investment Fund account and, separately, expedited passport fees) and $96 2 million from the D&CP account to implement modernization projects  Proceeds from the IT Central Fund were intended to implement projects focused on IT, including modernizing existing IT infrastructure, systems, and applications based on a roadmap to be created in FY2018 and centralizing management of all WiFi networks  Funds from the D&CP account were intended to implement modernization projects focusing on Human Resources issues, including leadership development, management services consolidation, data analytics, and workforce readiness initiatives  Like the House and the Senate committee bills and reports, neither P L  116-6 nor the joint explanatory statement accompanying the law specifically mentioned the Impact Initiative by name  However, both the law and the joint explanatory statement included provisions explicitly prohibiting the Department of State from using appropriated funds to implement a reorganization without prior consultation, notification, and reporting to Congress (for example, see Section 7073 of P L  116-6 )  Like the Senate committee bill, P L  116-6 stated that no funds appropriated for SFOPs may be used to "downsize, downgrade, consolidate, close, move, or relocate" the State Department's Bureau of Population, Refugees, and Migration  Foreign operations accounts, together with food aid appropriated through the Agriculture appropriations bill, constitute the foreign aid component of the international affairs budget  These accounts fund bilateral economic aid, humanitarian assistance, security assistance, multilateral aid, and export promotion programs  For FY2019, the Administration requested $28 60 billion for foreign aid programs within the international affairs (function 150) budget, about 28% less than the FY2018 actual funding level  None of the requested funds were designated as OCO  The FY2019 enacted appropriation provided $37 92 billion for foreign operations account, including $3 63 billion designated as OCO  Together with food aid accounts in the Agriculture appropriation, total enacted foreign aid within the international affairs budget was $39 85 billion, or 0 7% below the FY2018 actual funding level and 39% above the FY2019 request  Table 6 shows foreign aid funding by type for FY2017 and FY2018 actual, and the FY2019 request, committee-approved legislation, and enacted legislation  Account Mergers and Eliminations   The Administration aimed to simplify the foreign operations budget in part by channeling funds through fewer accounts and eliminating certain programs  These account mergers and eliminations were also proposed in the FY2018 budget request Under bilateral economic assistance, the Development Assistance (DA), Economic Support Fund (ESF), Assistance to Europe, Eurasia and Central Asia (AEECA) and Democracy Fund (DF) accounts were zero funded in the FY2019 request  Programs currently funded through these accounts would have been funded through a new Economic Support and Development Fund (ESDF) account  The proposed funding level for ESDF, $5 063 billion, was more than 36% below the FY2018 funding for the accounts it would have replaced  Fifteen countries that received DA, ESF, or AEECA in FY2017 would no longer have received funding from these accounts or from ESDF under the FY2019 request  Within multilateral assistance, the International Organizations & Programs (IO&P) account, which funds U S  voluntary contributions to many U N  entities, including UNICEF, U N  Development Program, and UN Women, would also have been zeroed out  Budget documents suggested that some unspecified activities currently funded through IO&P could have received funding through the ESDF or other accounts  Related to humanitarian assistance, the P L  480 Title II food aid account in the Agriculture appropriation would have been zero-funded and all food assistance would have been funded through the International Disaster Assistance (IDA) account, which would have nevertheless declined by about 17% from FY2018 actual funding (see " Humanitarian Assistance " section below)  The Emergency Refugee and Migration Assistance (ERMA) account would have been subsumed into the Migration and Refugee Assistance (MRA) account  Closeout of Inter-American Foundation and U S -Africa Development Foundation   The FY2019 request proposed to terminate the Inter-American Foundation (IAF) and the U S -Africa Development Foundation (ADF), independent entities that implement small U S  assistance grants, often in remote communities  The Administration proposed to consolidate all small grant programs aimed at reaching the poor under USAID, as a means of improving their integration with larger development programs and U S  foreign policy objectives, as well as improving efficiency  Funds were requested for IAF and ADF only for the purposes of an orderly closeout  Development Finance Institution   The Administration requested, for the first time in FY2019, the consolidation of the Overseas Private Investment Corporation (OPIC) and USAID's Development Credit Authority (DCA) into a new standalone Development Finance Institution (DFI)  The request called for $96 million for administrative expenses and $38 million for credit subsidies for DFI, but assumed that these expenses would be more than offset by collections, resulting in a net income of $460 million (based on OPIC's projected offsetting collections)  In addition, $56 million in ESDF funds would have been used to support DFI activities  The Administration sought congressional authority for the new standalone entity, which it described as a means of incentivizing private sector investment in development and improving the efficiency of U S  development finance programs  Both the House and Senate committee bills, as well as the enacted FY2019 appropriation, rejected these account changes, with the exception of the elimination of the ERMA account, which the House bill eliminated and the Senate and final bill funded with $1 million  All the FY2019 SFOPS legislation, including P L  116-6 , used the same bilateral account structure used for FY2018, not a new ESDF, and funded IAF and ADF at the FY2018 levels  Prior to enactment of the final FY2019 SFOPS appropriation, Congress passed the BUILD Act ( P L  115-254 ), which authorized the establishment of a new International Development Finance Corporation (IDFC), consistent with the Administration's DFI proposal  The IDFC is expected to become operational near the end of FY2019, and P L  116-6 made FY2019 appropriations for OPIC and DCA using the same account structure as in prior years, but authorized $5 million in the OPIC noncredit account to be used for transition costs  Top Country Recipients   Under the FY2019 request, top foreign assistance recipients would not have changed significantly, continuing to include strategic allies in the Middle East (Israel, Egypt, Jordan) and major global health and development partners in Africa (see Table 7 )  Israel would have seen an increase of $200 million from FY2017, reflecting a new 10-year security assistance Memorandum of Understanding  Zambia and Uganda would both have seen an 11% increase  All other top recipients would have seen reduced aid in FY2019 compared with FY2017 (comprehensive FY2018 country allocations were not yet available), though unallocated global health and humanitarian funds (added to the request after passage of the Bipartisan Budget Act of 2018) may have changed these totals  Figure 1 and Table 7 show the requested FY2019 foreign operations budget allocations by region and country  Under the FY2019 request, foreign assistance for every region would have been reduced compared to FY2018 funding  The Middle East and North Africa (MENA) region and Sub-Saharan Africa would continue to be the top regional recipients, together comprising nearly 80% of aid allocated by region ( Figure 2 )  Proposed cuts ranged from 61% in Europe and Eurasia to 2% in the MENA  Aid to Sub-Saharan Africa would have declined by 31%, aid to East Asia and Pacific by approximately half (51%), aid to South and Central Asia by about 4%, and aid to Western Hemisphere by 35%  The House bill ( H R  6385 ) and accompanying report did not provide comprehensive country and regional allocations, but did specify aid levels for some countries and regional programs, including Israel ($3 300 billion), Egypt ($1 457 billion), Jordan ($1 525 billion), Ukraine ($441 million), the U S  Strategy for Engagement in Central America ($595 million), and the Countering Russian Influence Funds ($250 million)  The Senate bill ( S  3108 ) and report specified aid allocations for several countries and regional programs, including Israel ($3 300 billion), Egypt ($1 082 billion), Jordan ($1 525 billion), Iraq ($429 million), West Bank & Gaza ($286 million), Afghanistan ($698 million), Pakistan ($271 million), Colombia ($391 million), Ukraine $426 million), U S  Strategy for Engagement in Central America ($515 million) and the Countering Russian Influence Fund ($300 million)  The enacted legislation, P L  116-6 , and the accompanying explanatory statement, specified FY2019 aid levels for several countries, including Israel ($3 300 billion), Egypt ($1 419 billion), Jordan ($1 525 billion), Iraq ($407 million), Colombia ($418 million), Mexico ($163 million), and Ukraine ($446 million), as well as for the U S  Strategy for engagement in Central America ($528 million) and the Countering Russian Influence Fund ($275 million)  The budget submission did not identify any new foreign assistance initiatives  The FY2019 request called for decreases in foreign aid funding generally while continuing to prioritize the aid sectors that have long made up the bulk of U S  foreign assistance: global health, humanitarian, and security assistance  The Administration requested $6 70 billion for global health programs in FY2019  This was a 23% reduction from the FY2018 funding level, yet global health programs would have increased slightly as a proportion of the foreign aid budget, from 22% of total aid in FY2018 to 23% in the FY2019 request, due to deeper proposed cuts elsewhere  HIV/AIDS programs, for which funding would have been cut about 27% from FY2018 actual levels, would have continued to make up the bulk (69%) of global health funding, as they have since the creation of the President's Emergency Plan for AIDS Relief (PEPFAR) in 2004  Family planning and reproductive health services (for which the Administration proposed no funding for FY2018) would have received $302 million, a 42% reduction from FY2018 funding  Assistance levels would have been reduced for every health sector compared to FY2018, including maternal and child health (-25%), tuberculosis (-31%), malaria (-11%), neglected tropical diseases (-25%), global health security (-0 1%, funded through a proposed repurposing of FY2015 Ebola emergency funds), and nutrition (-37%)  The House committee bill included $8 69 billion for global health programs, the same as FY2018 funding  While total funding would remain the same, the House proposal would have reduced funding for family planning and reproductive health by about 12% compared to FY2018, while slightly increasing funding for polio, nutrition, and maternal and child health, and more than doubling funding for global health security and emerging threats  The Senate committee bill would have funded global health programs $8 792 billion, 1 2% above the FY2018 level  No subsectors would have received reduced funding and allocations for tuberculosis, HIV/AIDS, family planning, nutrition, neglected tropical diseases and vulnerable children would all have increased slightly  While both bills included long-standing language preventing the use of appropriated funds to pay for abortions, the House bill, but not the Senate bill, also included a provision prohibiting aid to any foreign nongovernmental organizations that "promotes or performs" voluntary abortion, with some exceptions, regardless of the source of funding for such activities  P L  116-6 provides $8 84 billion for global health programs for FY2019, a 1 7% increase over FY2018 funding  Every health subsector was funded at the same or slightly higher level than in FY2018  The Trump Administration's FY2019 budget request for humanitarian assistance totaled $6 358 billion, which was roughly 32% less than FY2018 actual funding ($9 37 billion) and about 22% of the total FY2019 foreign aid request  The request included $2,800 4 million for the Migration and Refugee Assistance (MRA) account (-17% from FY2018) and $3,557 4 million for the International Disaster Assistance (IDA) account (-17%) ( Figure 2 )  As in its FY2018 request, the Administration proposed to eliminate the Food for Peace (P L  480, Title II) and Emergency Refugee and Migration Assistance (ERMA) accounts, asserting that the activities supported through these accounts can be more efficiently and effectively funded through the IDA and MRA accounts, respectively  (Congress did not adopt the proposed changes to Food for Peace for FY2018, appropriating $1 716 billion for the account through the Agriculture appropriation, but did appropriate only $1 million for ERMA, a 98% reduction from FY2017 funding ) The Administration also sought authority to transfer and merge IDA and MRA base funds (current authority only applies to OCO-designated funds)  The Administration described its IDA request as focused "on crises at the forefront of U S  security interests, such as Syria, Iraq, Yemen, Nigeria, Somalia, and South Sudan " The MRA request focused on "conflict displacement in Afghanistan, Burma, Iraq, Somalia, South Sudan, Syria and Yemen," as well as strengthening bilateral relationships with "key refugee hosting countries such as Kenya, Turkey, Jordan, Ethiopia and Bangladesh " Consistent with last year, the request suggested that the proposed funding reduction assumes that other donors will shoulder an increased share of the overall humanitarian assistance burden worldwide  The House committee bills proposed $9 145 billion for humanitarian assistance accounts, about 2% less than FY2018 funding  The total included $1 5 billion for Food for Peace from the Agriculture appropriation but would not have funded the ERMA account  The Senate committee bills proposed $9 534 billion for humanitarian assistance, about 2% more than FY2018 funding  The total included $1 716 billion for Food for Peace and $1 million for the ERMA account  Neither bill included language authorizing broad transfers and mergers between the IDA and MRA base funding account, though both bills include provisions allowing for the transfer and merger of funds from several accounts, including IDA and MRA, as an extraordinary measure in response to a severe international infectious disease outbreak  As in FY2018, Congress did not adopt the significant humanitarian aid changes proposed by the Administration  P L  116-6 provided a total of $9 534 billion for humanitarian assistance in FY2019, almost level with FY2018 funding (-0 5%), of which about 21% was designated as OCO  This total included $3 434 billion in MRA funds, $1 million for ERMA, and $4 385 billion for IDA in the SFOPS division of the bill, as well as $1 716 billion for Food for Peace in the Agriculture division  The FY2019 security assistance request within foreign operations accounts totaled $7 304 billion, a 19% reduction from the FY2018 actual funding level and about 26% of the total foreign aid request  Consistent with recent years, 63% of the entire security assistance request was for FMF aid to Israel and Egypt  However, six countries were identified in the request as joint Department of Defense (DOD) and State Department security sector assistance priorities: Philippines, Vietnam, Ukraine, Lebanon, Tunisia, and Colombia  The International Narcotics Control and Law Enforcement (INCLE) account would have been reduced by about 36% from FY2018 actual levels, Nonproliferation, Antiterrorism, Demining and Related (NADR) by 21%, and International Military Education and Training (IMET) by about 14%  In each of these cases, the Administration described the proposed reductions as concentrating resources where they offer the most value and U S  national security impact  As in the FY2018 request, the Peacekeeping Operations (PKO) account, which supports most non-U N  multilateral peacekeeping and regional stability operations, including U S  training and equipment for African militaries and funding for the U N  Support Office in Somalia (UNSOS), would have seen the biggest reduction (-46%) under the FY2019 request  This is because Administrations generally request UNSOS funds through the CIPA account, while Congress usually funds the office through the PKO account  The Foreign Military Financing (FMF) account would have been reduced by 13% compared to FY2018, with specific allocations for 11 countries and a proposed $75 million Global Fund to be allocated flexibly  This was a notable change from the FY2018 FMF request, in which funds were allocated to four countries and a larger global fund, and from FY2018-enacted funding, for which allocations were specified for more than 20 countries  The House committee bill would have provided $9 274 billion for security assistance, a 3% increase over FY2018 funding, with funding increases proposed for the INCLE (+7%) and FMF (+4%) accounts and a reduction proposed for the PKO account (-9%)  Consistent with the request, and in contrast to recent year appropriations, no security assistance funding in the House committee bill was designated as OCO  The Senate committee bill included $8 789 billion for security assistance programs, a 2 6% total decrease from FY2018 funding  The INCLE account would have increased by 2 6% while the FMF and PKO accounts would be reduced by 3% and 11%, respectively  About 16% of the security assistance funding in the Senate bill was designated as OCO  In the final FY2019 appropriation, P L  116-6 , security assistance funding totaled $9 153 billion, a 1 4% increase from FY2018  Of the total, $555 million within the PKO and FMF accounts (6% of total security funding) was designated as OCO  Funding provided for most accounts was similar to FY2018 levels, with the exception of INCLE, which increased by 9 4% in part to support increased efforts to address the flow of illegal opioids, and PKO, for which funding decreased by about 9 2%  Bilateral economic development assistance is the broad category that includes programs focused on education, agricultural development and food security, good governance and democracy promotion, microfinance, environmental management, and other sectors  While the majority of this aid is implemented by USAID, it also includes the programs carried out by the independent Millennium Challenge Corporation (MCC), Peace Corps, Inter-American Foundation and the U S -Africa Development Foundation  Excluding global health assistance, bilateral economic development assistance in the Administration's FY2019 request totaled $6 354 billion, a 33% reduction from FY2018 funding levels  Proposed FY2019 allocations for key sectors, compared with FY2018 levels prescribed in legislation, included the following: food security, $518 million (-48% from FY2018); democracy promotion programs, $1,235 million (-47% from FY2018); and education, $512 million (-51% from FY2018)  The Administration requested $800 million for MCC and $396 million for Peace Corps, representing cuts of 12% and 3%, respectively  As discussed above, the budget request also proposed to merge I-AF and USADF into USAID, and requested only small amounts of funding to close out their independent activities  The House committee bill would have provided $9 383 billion for economic development assistance and specified allocations for several development sectors, including education ($1 035 billion), conservation programs ($360 million), food security and agricultural development ($1 001 million), microenterprise and microfinance ($265 million), water and sanitation ($400 million) and democracy programs ($2 4 billion)  The Senate committee bill would have provided $9 764 billion for economic development activities and specifies allocations for education ($750 million), environment and renewable energy ($943 million), food security and agricultural development ($1 001 billion), small and micro credit ($265 million), water and sanitation ($435 million), and democracy programs ($2 4 billion), among others  Both the House and Senate bills would have funded the I-AF, USADF, Peace Corp, and MCC at the FY2018 funding level, and both bills explicitly rejected the Administration's proposal to merge I-AF and USADF into USAID  The enacted appropriation for FY2019, P L  116-6 , provided about $9 239 billion for nonhealth economic development aid  Minimum allocations specified for key sectors included $1 035 billion for education (basic and higher), $285 million for biodiversity conservation, $125 million for sustainable landscapes, $1 001 billion for food security and agricultural development, $265 million to support micro and small enterprises, $67 million to combat trafficking in persons, and $435 million for water and sanitation programs  The independent agencies were all funded at the same level as in FY2018  Appendix A  State Department, Foreign Operations, and Related Agencies Appropriations, by Account Appendix B  International Affairs Budget The International Affairs budget, or Function 150, includes funding that is not in the Department of State, Foreign Operations, and Related Programs appropriation: foreign food aid programs (P L  480 Title II Food for Peace and McGovern-Dole International Food for Education and Child Nutrition programs) are in the Agriculture Appropriations, and the Foreign Claim Settlement Commission and the International Trade Commission are in the Commerce, Justice, Science appropriations  In addition, the Department of State, Foreign Operations, and Related Programs appropriation measure includes funding for certain international commissions that are not part of the International Affairs Function 150 account  Appendix C  SFOPS Organizational Chart Appendix D  Glossary


Report 2:  persons, shaped in part from risks in not meeting FATCA reporting requirements  Representatives of a banking association and an advocacy group told us that some FFIs decided to avoid doing business with U S  persons after they became concerned about potential penalties for failure to comply—either willfully or in error—with FATCA reporting requirements  One banking association added that such errors could affect other aspects of FFIs’ relationships with the U S  government, such as nonprosecution agreements made with the U S  Department of Justice  Officials from one consulting firm that helped FFIs meet FATCA reporting requirements added that FFIs’ determination of risk depends on many layers, such as the value of clients’ assets or the country in which clients reside or possess citizenship  After FATCA’s implementation, according to officials from the consulting firm, FFIs decided to turn away U S  persons in some cases because the benefits of doing business with U S  persons were less than the potential risks  For example, if a U S  person only maintained a payroll account, the FFI may determine it would not make enough money to account for risks in incorrectly identifying the status of the customer as a U S  or non-U S  person  However, focus group participants from two countries said that FFIs may agree to accept U S persons as customers if they have higher account balances that offset risks from FATCA reporting requirements  One focus group participant, for instance, said banks in his country will do business with a U S  person if he or she has more than $500,000 in assets  Additionally, U S  persons and tax practitioners we interviewed said that other factors such as language barriers and U S  regulations designed to prevent money laundering may also inhibit U S  persons’ access to brokerage accounts while overseas  Focus group participants and others we interviewed said that Form 8938 reporting requirements contributed to denials of employment and promotion opportunities for U S  persons living abroad  Treasury officials noted that requirements imposed by FATCA do not directly hinder U S  persons from gaining employment or promotion opportunities overseas  However, focus group participants, a consulting firm, and a foreign government agency noted that foreign-owned companies and nonprofit organizations such as churches did not want to hire or promote U S  persons because they wanted to avoid exposing information to the U S  government on their organizations’ accounts and client trust accounts where the U S  person would have signature authority  As noted above, a U S  person is generally required to report on the Form 8938 foreign financial accounts for which the person has signature authority if he or she has a financial interest in the account  Focus group participants and others noted that such requirements have adversely affected the ability of U S  persons to serve on a corporate board or in a nonprofit organization, or maintain business relationships  Treasury and Department of Commerce officials stationed in one country included in our review added that FATCA implementation has played a role in dissuading foreign-owned corporations in some Asian countries from considering U S  persons for corporate leadership positions such as directorships  This is in part because FATCA has triggered additional paperwork burden and operating costs for onboarding U S  employees since they have had to help them meet Form 8938 reporting requirements  Two advocacy groups representing U S  persons living abroad added that it is also harder for U S -based companies to justify relocating U S  persons overseas and paying for such relocations since they also have had to help their U S  employees meet Form 8938 reporting requirements in addition to meeting other tax filing requirements  U S  embassy documents indicate there was increased demand for Social Security Numbers (SSN) since FATCA’s passage in 2010, driven in part by U S  citizens applying for an SSN to gain access to foreign financial services or resolve outstanding U S  tax obligations before completing renunciation  However, officials from two organizations representing Americans living abroad cited significant challenges faced by some U S  persons living abroad in obtaining SSNs required to meet their U S  tax obligations or obtain financial services  U S  persons living abroad might not possess an SSN because their parents did not obtain one for them as a minor  Often, this may have been due to the parents leaving the United States when the child was young  State officials also said that U S  citizens applying for U S  passports while overseas frequently forget their SSNs or do not know if their parents ever applied for an SSN on their behalf  Officials from organizations representing U S  persons living abroad added that without an SSN, these persons are unable to claim refunds or other tax benefits when filing their tax returns, or participate in IRS programs to voluntarily disclose previously unreported tax liabilities and assets  Additionally, some might be unable to gain or maintain access to financial accounts or other assets in their countries of residence without an SSN  According to these officials and tax practitioners we interviewed, U S  persons living abroad face greater challenges in obtaining SSNs than those living in the United States  For instance, they faced difficulties obtaining documentation from the United States that the Social Security Administration (SSA) requires with SSN applications; traveling to Social Security offices and U S  embassies or consulates to certify documents or submit applications in person; and receiving valid SSNs from SSA in a timely manner to file tax returns or participate in offshore disclosure programs  SSA officials also identified several challenges U S  persons experience when applying for an SSN from abroad  For instance, SSA officials said that efforts to authenticate documents submitted with SSN applications can cause delays for U S  persons living abroad in obtaining an SSN  Additionally, SSN applicants living abroad face significantly longer wait times than applicants living in the United States once their applications are processed  According to SSA officials, after an application is processed, it can take 3 to 6 months–-depending on the country’s mail service–-for an individual to receive a Social Security Card  This is significantly longer than the 2-week period it takes SSN applicants to receive a card after mailing in their applications from within the United States  According to Department of State (State) data, the annual number of approvals of requests for renunciations of U S  citizenships increased nearly 178 percent during a 6-year period, from 1,601 in 2011—the year after FATCA was enacted—to 4,449 in 2016, the most recent year to which full data on renunciations were available  According to U S  embassy documents and information provided by focus group participants and interviewees across all the countries we examined, FATCA was the reason or a contributing factor in some of these decisions and the resulting increase in total renunciations  Specific effects of FATCA implementation contributing to decisions to renounce U S  citizenship included reduced access to foreign financial services and employment or promotion opportunities in a foreign-owned company—as identified above from our document reviews, focus groups, and interviews—and burdens in meeting FATCA reporting requirements  However, the extent to which FATCA implementation contributed to increased renunciations is unclear  State officials said that data are unavailable to determine the extent to which these renunciation decisions were the direct result of FATCA because State has no legal obligation to collect information on the motivation behind renunciation of citizenship  In response to concerns about the availability of foreign financial services, Treasury implemented regulations that allow certain low-risk local FFIs to be deemed compliant with FATCA, but only if the FFIs do not implement policies or practices that discriminate against opening or maintaining accounts for specified U S  persons  Treasury and State also previously established joint strategies to address these challenges  For instance, Treasury and State developed guidance on FATCA that was posted on embassy websites to educate U S  persons and others  Additionally, Treasury and State officials conducted outreach events and workshops through U S  embassies and American chambers of commerce worldwide to provide information on FATCA and other tax filing requirements, According to State officials, the U S  embassies in at least two countries—Switzerland and France—also worked with foreign officials and/or FFIs to increase access to financial services for U S  citizens residing in those countries  For instance, Treasury and State officials reached agreements with FFIs in Switzerland to provide a wider range of financial services to U S  persons  Similarly, in 2017, SSA and State implemented an interagency agreement to streamline processes for providing SSNs to U S  persons living abroad after FATCA’s implementation in 2010  SSA officials said they are also in discussions with State on improving SSA’s website to include more transparent, specific information for SSN overseas applicants about SSA documentation requirements  Tax practitioners, advocacy groups, and Treasury officials we interviewed said FFIs have become more willing to accept U S  persons as customers compared to when FATCA was enacted in 2010  However, U S  persons living abroad continue to face issues gaining access to foreign financial services  For example, in a September 2018 letter sent by the Chair of the Finance Committee of the Netherlands House of Representatives to a member of Congress, U S  citizens born outside the United States and who have never lived, studied, or worked in the United States are effectively being denied access to financial services in the Netherlands  Focus group participants added that some banks will reject U S  clients or charge heavy fees for them to open an account  Agencies have ongoing efforts to address FATCA-related issues, as listed below, but some are ad hoc, fragmented, or otherwise not part of a broader effort between Treasury and other agencies such as State or SSA to use ongoing collaborative mechanisms to monitor and share information on such issues, and jointly develop and implement steps to address them: Treasury officials said they are participating in discussions with FFIs to address residual issues with access to foreign financial services  However, they said they have not involved other agencies in these discussions  IRS officials, in response to concerns from the French government, said they are developing a program to help streamline foreign asset- related tax compliance requirements for a small group of U S  born citizens that have been French residents most of their lives without an SSN, and—according to State officials—did not wish to take the necessary steps to renounce their citizenship  However, no effort has been made to address these issues more broadly  State encouraged U S  citizens to alert the nearest U S  embassy of any practices they encounter with regard to the provision of financial services  State documents noted that some Americans have been turned away by banks or required to meet a higher deposit threshold in part because of FATCA reporting requirements  State documentation also noted that there have been cases of U S  citizens with existing bank accounts who have been asked to close them  However, State documentation we reviewed does not highlight collaborative efforts currently underway with Treasury or other agencies to address banking access issues U S  persons living abroad are presently encountering worldwide  As described above, SSA and State streamlined processes and policies for U S  persons abroad seeking to obtain SSNs  However, SSA officials said they have not been involved in any ongoing efforts involving Treasury to identify systemic issues and related solutions involving SSNs for the purposes of tax compliance and citizenship renunciations  Treasury officials said they spoke with SSA officials about problems U S  persons living abroad face in obtaining SSNs, but SSA believed that cycle times for processing SSN applications submitted by U S  persons living abroad were not significantly greater than for applications submitted by U S  persons living in the United States, although mailing times could vary significantly and take up to 3 to 6 months  We have previously identified key practices to enhance and sustain interagency collaboration, including defining and articulating a common outcome, establishing mutually reinforcing or joint strategies, and developing mechanisms to monitor, evaluate, and report on results  One goal in IRS’s strategic plan is to collaborate with external partners proactively to improve tax administration, while objectives in SSA’s strategic plan include improving service delivery and expanding service delivery options  Additionally, according to State’s Bureau of Consular Affairs website, one of State’s key priorities is to protect the interests of U S  citizens overseas, such as through ensuring responsive and efficient provision of consular services overseas  As noted above, there are a host of ongoing issues and challenges for U S  persons living abroad from implementation of FATCA, such as loss of access to foreign financial services, denial of employment and promotion opportunities overseas, and difficulty obtaining SSNs from abroad  However, Treasury currently lacks a collaborative mechanism to coordinate efforts with other agencies to address these issues, and Treasury officials said they do not plan to establish them  Without effective collaborative mechanisms to monitor and share information and implement cross-agency solutions, future efforts to address such issues will continue to be fragmented and less effective than they otherwise could be  In enacting FATCA, Congress sought to reduce tax evasion by creating greater transparency and accountability over offshore assets held by U S  taxpayers  Because of FATCA, IRS receives information on foreign financial assets from hundreds of thousands of filers annually  IRS could use this information to help ensure taxpayers holding offshore assets report and pay taxes owed on income generated from such assets  However, to take full advantage of the information, IRS must address key challenges  Specifically, Taxpayer Identification Numbers (TIN) reported by FFIs are often inaccurate or incomplete, which makes it difficult for IRS to match information reported by FFIs to individual taxpayers  As such, IRS must develop a plan to mitigate the risks that these data issues pose to agency efforts to identify and combat taxpayer noncompliance  Lack of consistent, complete, and readily available Form 8938 and related parent individual tax return data also affects IRS’s compliance activities, making it more difficult for IRS business units to extract and analyze FATCA data to improve tax compliance efforts and reduce tax revenue loss from income generated from offshore assets  At the same time, IRS has stopped following its FATCA Compliance Roadmap it developed in 2016 because, according to IRS officials, IRS moved away from updating broad strategy documents to focus on individual compliance campaigns  However, in light of the challenges IRS continues to face in fully integrating FATCA information into its compliance programs, it will not maximize use of such information and effectively leverage individual compliance campaigns unless it employs a comprehensive plan that enables IRS to better leverage such campaigns to improve taxpayer compliance  Our analysis of available data indicates that many of the Forms 8938 filed in tax year 2016 may have been filed unnecessarily  Factors that are contributing to this unnecessary reporting are unclear  While IRS has provided instructions and guidance on its website for completing Form 8938, focus group participants and tax practitioners reported confusion on whether and how to report investments in foreign accounts  Taking steps to identify and address factors contributing to unnecessary Form 8938 reporting would help reduce taxpayer burden and reduce processing costs for IRS  Reporting requirements for foreign financial assets under FATCA overlap with reporting requirements under FBAR  These overlapping requirements—implemented under two different statutes—have resulted in most taxpayers filing Forms 8938 also filing FBARs with FinCEN  Duplicative filings on foreign financial assets cause confusion, frustration, and compliance burdens for taxpayers  Duplicative filings also increased costs to the government to process and store the same or similar information  Modifying the statutes governing the requirements can fully address the issues outlined above, and can allow for the use of FATCA information for prevention and detection of financial crimes  This is similar to other statutory allowances for IRS to disclose return information for other purposes, such as for determining Social Security income tax withholding  Lastly, FATCA has created challenges for some U S  persons living abroad that go beyond increasing their tax compliance burdens  Some U S  persons living abroad are still facing issues accessing financial services and employment and obtaining SSNs  Treasury, State, and SSA have taken some steps to address these issues both separately and in coordination with each other  However, Treasury, as the agency ultimately responsible for effective administration of FATCA, currently lacks a collaborative mechanism with State and SSA to address ongoing issues  Establishing a formal means to collaboratively address burdens faced by Americans abroad from FATCA can help agencies develop effective solutions to mitigate such burdens  We are making the following matter for congressional consideration: Congress should consider amending the Internal Revenue Code, Bank Secrecy Act of 1970, and other statutes, as needed, to address overlap in foreign financial asset reporting requirements for the purposes of tax compliance and detection, and prevention of financial crimes, such as by aligning the types of assets to be reported and asset reporting thresholds, and ensuring appropriate access to the reported information  We are making the following four recommendations to IRS: The Commissioner of Internal Revenue should develop a plan to mitigate risks with compliance activities due to the lack of accurate and complete TINs of U S  account holders collected from FFIs  (Recommendation 1) The Commissioner of Internal Revenue should ensure that appropriate business units conducting compliance enforcement and research have access to consistent and complete data collected from individuals’ electronic and paper filings of Form 8938 and elements of parent individual tax returns  As part of this effort, the Commissioner should ensure that IRS provides clear guidance to the business units for accessing such data in IRS’s Compliance Data Warehouse  (Recommendation 2) The Commissioner of Internal Revenue should employ a comprehensive plan for managing efforts to leverage FATCA data in agency compliance efforts  The plan should document and track activities over time to ensure individuals and FFIs comply with FATCA reporting assess and mitigate data quality risks from FFIs; improve the quality, management, and accessibility of FATCA data for compliance, research, and other purposes; and establish, monitor, and evaluate compliance efforts involving FATCA data intended to improve voluntary compliance and address noncompliance with FATCA reporting requirements  (Recommendation 3) The Commissioner of Internal Revenue should assess factors contributing to unnecessary Form 8938 reporting and take steps, as appropriate, to address the issue  Depending on the results of the assessment, potential options may include: identifying and implementing steps to further clarify IRS Form 8938 instructions and related guidance on IRS’s website on determining what foreign financial assets to report, and how to calculate and report asset values subject to reporting thresholds; and conducting additional outreach to educate taxpayers on required reporting thresholds, including notifying taxpayers that may have unnecessarily filed an IRS Form 8938 to reduce such filings  (Recommendation 4) We are also making the following recommendation to Treasury: The Secretary of the Treasury should lead efforts, in coordination with the Secretary of State and Commissioner of Social Security, to establish a formal means to collaboratively address ongoing issues— including issues accessing financial services and employment and obtaining SSNs—that U S  persons living abroad encounter from implementation of FATCA reporting requirements  (Recommendation 5) We are also making the following recommendation to State: The Secretary of State, in coordination with the Secretary of the Treasury and Commissioner of Social Security, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U S  persons living abroad encounter from implementation of FATCA reporting requirements  (Recommendation 6) We are also making the following recommendation to SSA: The Commissioner of Social Security, in coordination with the Secretaries of State and Treasury, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U S  persons living abroad encounter from implementation of FATCA reporting requirements  (Recommendation 7) We provided a draft of this report to the Secretaries of State and the Treasury, Commissioner of Internal Revenue, and Acting Commissioner of Social Security  IRS provided written comments that are summarized below and reprinted in appendix VI  IRS did not state whether it agreed or disagreed with our four recommendations but otherwise provided responses  Regarding our recommendation to develop a plan to mitigate risks with compliance activities due to the lack of accurate and complete TINs of U S  account holders collected from FFIs (recommendation 1), IRS reiterated that it provided a transition period, through the end of 2019, for compliance with the TIN requirements for FFIs in countries with Model 1 IGAs with the United States  IRS also said that it continued to make progress on improving FATCA filing compliance, citing efforts such as initiating a campaign addressing FFIs that do not meet their compliance responsibilities  While these efforts may help IRS obtain more accurate and complete information from financial accounts, IRS did not specify how it will mitigate the ongoing hurdles it faces in matching accounts reported by FFIs without valid TINs to accounts reported by individual tax filers and ensure compliance  Regarding our recommendation that appropriate business units have access to consistent and complete data collected from Forms 8938 and tax returns filed by individuals (recommendation 2), IRS reiterated that RAAS has been working to obtain read-only access to the IPM database but that limited budgetary resources are delaying implementation  Enabling access to consistent and complete Form 8938 and tax return data would help IRS better target compliance initiatives and leverage limited available enforcement resources  While IRS continues to work on enabling access to IPM, it could still provide clear guidance to its business units for accessing Form 8938 and tax return data in IRS’s Compliance Data Warehouse, as we recommended  Regarding our recommendation to employ a comprehensive plan for managing efforts to leverage FATCA data in agency compliance efforts (recommendation 3), IRS said the resources that would be required to develop a comprehensive plan would be better spent on enforcement activities  While implementing enforcement activities could increase compliance with FATCA reporting requirements, it risks not maximizing the value of such efforts without a comprehensive plan to manage and address the myriad of challenges discussed in this report  Further, it is our belief that IRS’s failure to execute the FATCA roadmap is not justification for abandoning a strategic approach going forward  Regarding our recommendation to assess factors contributing to unnecessary Form 8938 reporting and take appropriate steps to address the issue (recommendation 4), IRS said it will continue to observe filings of Form 8938 and, to the extent that there are unnecessary filings, assess options to inform account holders to reduce reporting and filing burdens followed by appropriate steps to implement any selected options  Our analysis of available data indicates that many Forms 8938 may have been filed unnecessarily  Implementing our recommendation reduces the risk that taxpayers file—and IRS processes—forms unnecessarily  Treasury provided written comments but did not state whether it agreed or disagreed with our recommendation that it lead efforts, in coordination with State and SSA, to establish a formal means to collaboratively address ongoing issues that U S  persons living abroad encounter from implementation of FATCA reporting requirements (recommendation 5)  Treasury said it will work collaboratively with State and SSA to answer questions that Americans abroad have regarding their tax obligations and, where appropriate, to direct U S  citizens to resources that will help them understand the procedures applied by SSA to apply for an SSN  However, Treasury said it is not the appropriate agency to lead coordination efforts involving foreign employment issues and issues regarding access to foreign financial services and obtaining SSNs  As we noted above, Treasury is ultimately responsible for effective administration of FATCA  As such, it is in a better position than State or SSA to adjust regulations and guidance implementing FATCA to address burdens FFIs and foreign employers face from FATCA implementation while ensuring tax compliance  Additionally, Treasury has an interest in helping U S  persons receive valid SSNs from SSA in a timely manner to meet their tax obligations  Treasury’s written response is reprinted in appendix VII  State and SSA also provided written comments in which they concurred with our recommendations to establish a formal means to address collaboratively together with Treasury ongoing issues that U S  persons living abroad encounter with FATCA (recommendations 6 and 7)  State and SSA’s written comments are reprinted in appendices VIII and IX, respectively  Treasury, State, and SSA provided technical comments, which we incorporated as appropriate  We are sending copies of this report to the appropriate congressional committees, the Secretaries of State and the Treasury, Commissioner of Internal Revenue, Acting Commissioner of Social Security, and other interested parties  In addition, the report will be available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-9110 or mctiguej@gao gov  Contact points for our offices of Congressional Relations and Public Affairs are on the last page of this report  GAO staff who contributed to this report are listed in appendix X  The objectives of this report are to (1) assess the Internal Revenue Service’s (IRS) efforts to use information collected under the Foreign Account Tax Compliance Act (FATCA) to improve taxpayer compliance; (2) examine available foreign financial asset reports submitted by U S  persons, including submissions that were below required filing thresholds; (3) examine the extent to which the Department of the Treasury (Treasury) administers overlapping reporting requirements on foreign financial assets; (4) describe similarities and differences between FATCA and Common Reporting Standard (CRS) reporting requirements; and (5) examine the effects of FATCA implementation that are unique to U S  persons living abroad  For our first objective, we reviewed Treasury Inspector General for Tax Administration reports and collected information from Treasury and IRS to summarize efforts to collect complete and valid Taxpayer Identification Numbers (TIN) from foreign financial institutions (FFI)  We identified criteria from our prior work identifying key practices for risk management  The key practices are derived from the Software Engineering Institute’s Capability Maturity Model® Integration for Development and Office of Management and Budget guidance  We applied these criteria to assess steps IRS has taken to manage risks in not receiving complete and valid TIN information from FFIs  We also applied criteria from our prior work on use of documented frameworks to IRS documentation on FATCA compliance activities to determine the extent to which IRS implemented a comprehensive plan to maximize use of collected data to enforce compliance with FATCA  For our second objective, we identified total maximum account values reported by individual filers of Financial Crimes Enforcement Network (FinCEN) Form 114s (commonly known as the Report of Foreign Bank and Financial Accounts, or FBAR) in calendar years 2015 and 2016  See appendix III for more details on our methodology to evaluate these data  We also summarized the numbers of IRS Forms 8938, Statement of Specified Foreign Financial Assets (Form 8938) filed in tax year 2016, accounting for the data limitations described below  We also identified Forms 8938 filed in tax year 2016—the most recent year for which data were available—with available residency and asset information that reported specified foreign financial assets with aggregate values at or below end-of-year tax thresholds, which vary depending on the location of residence and filing status of such filers  For our third objective, we reviewed IRS and FinCEN documentation, and applied criteria from Fragmentation, Overlap, and Duplication: An Evaluation and Management Guide to identify the extent to which IRS and FinCEN were engaged in overlapping activities, and collecting duplicative information on foreign financial assets held by U S  persons  We assessed the extent to which individual filers who submitted a Form 8938 in 2015 and 2016 also submitted an FBAR for the same year by determining the number and percentage of Forms 8938 with TINs that also match the TIN listed on the corresponding FBAR for the same year  For the three objectives described above, we assessed the reliability of data submitted on Forms 8938 filed by individuals for tax years 2015 and 2016, the most recent data available  These data were extracted from IRS’s Individual Return Transaction File (IRTF) and Modernized Tax Return Database (MTRDB) through IRS’s Compliance Data Warehouse (CDW)  We also assessed the reliability of data from FBARs for calendar years 2015 and 2016 by (1) reviewing documentation about the data and the systems that produced them; (2) conducting electronic tests, such as identifying data with significant numbers of missing Form 8938 or FBAR records, or values of foreign financial assets reported outside an expected range; (3) tracing selections or random samples of data to source documents; and (4) interviewing IRS and FinCEN officials knowledgeable about the data  We also reviewed Form 8938 and relevant parent tax return data stored in IRS databases to determine whether IRS management is using quality information collected from Forms 8938 to achieve its objectives, as defined in our Standards for Internal Control in the Federal Government  We determined that data extracted from IRTF on characteristics of Form 8938 filers and from FBAR filings was sufficiently reliable for our purposes, subject to caveats identified in this report  However, we determined we could not obtain complete data on foreign financial assets reported on Forms 8938 filed on paper  For our fourth objective, we reviewed model international agreements and other documentation, and interviewed officials from Treasury, IRS, and the Organisation for Economic Co-operation and Development to compare and contrast FATCA and CRS reporting requirements  We also used the collected information to identify what changes, if any, the United States and other countries could implement to align FATCA and CRS reporting requirements  For our fifth objective, we collected documentation and conducted focus groups and semi-structured interviews with 21 U S  persons living abroad that were subject to FATCA reporting requirements  We also conducted focus groups and interviews with tax practitioners, banking and CPA organizations, government agencies, advocacy groups representing Americans living abroad, and other organizations from the United States and five other countries (Canada, Japan, Singapore, Switzerland, and the United Kingdom)  We selected these countries based on geography, relatively high numbers of U S  expatriates and Form 8938 filers, tax information sharing agreements, and other tax treaties with the United States  The findings from the focus groups and interviews are not generalizable to other U S  persons, tax practitioners or organizations, but were selected to represent the viewpoints of U S  persons, FFIs, and host country tax authorities required to transmit information on foreign accounts and other specified foreign financial assets to IRS  We conducted a thematic analysis of the focus groups and interviews, and reviewed cables from U S  embassies to identify the unique effects of FATCA implementation on U S  persons living abroad  We collected documentation from and interviewed Treasury, IRS, Department of State, and Social Security Administration officials on steps to monitor and mitigate such effects  We also identified criteria from our prior work on key practices to enhance and sustain interagency collaboration and mechanisms to facilitate coordination  We applied the criteria to agencies’ collaborative efforts addressing issues U S  persons living abroad faced from FATCA’s implementation, and identified the extent to which agencies established effective collaborative mechanisms to identify, assess, and implement cross-agency solutions to such issues  We conducted this performance audit from August 2017 to April 2019 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  The following IRS databases store data collected from individuals’ electronic and paper filings of Forms 8938 and/or elements of individual parent tax returns—the filer’s address and filing status—used to determine specified reporting thresholds for Form 8938 filers: Individual Master File (IMF), which serves as IRS’s system for processing individual taxpayer account data  Using this system, accounts are updated, taxes are assessed, and refunds are generated as required during each tax-filing period  Individual Returns Transaction File (IRTF), which stores edited, transcribed, and error-corrected data from the Form 1040 series and related forms for the current processing year and two prior years  Modernized Tax Return Database (MTRDB), which serves as the official repository of all electronic returns processed through IRS’s Modernized e-File system  Tax return data is stored immediately after returns are processed  International Compliance Management Model (ICMM)-FATCA International Returns (ICMM-FIR), which collects, parses, and stores data from incoming form reports–such as Forms 8938 and 8966–into the FATCA Database (FDB), which serves as the repository where ICMM-FIR stores data and from which downstream applications can pull data  Integrated Production Model (IPM), which is a downstream data repository that houses IMF data, information returns, and other data  According to IRS officials, data from IPM are consolidated and made available to a variety of downstream, security certified, systems for use in conducive analysis, case selection, and report preparation  Additionally, data from these and other IRS databases are copied to IRS’s Compliance Data Warehouse (CDW) periodically, which captures data from multiple production systems and organizes the data in a way that is conductive to analysis  Table 6 highlights several problems with the consistency and completeness of Form 8938 and relevant parent tax return data stored across the listed databases  Inconsistent and incomplete data on address and filing status of Form 8938 filers: As noted above, elements of parent tax returns— specifically the filer’s country of residence and filing status—are used to determine specified reporting thresholds for Form 8938 filers  However, IRTF and MTRDB have inconsistent and incomplete data on addresses linked to Form 8938 filers, and report inconsistent numbers of Forms 8938 filed from a U S  residence  For example, the variable identified as containing data on foreign countries of residence in IRTF shows approximately 8,100 foreign filers in tax years 2015 and 2016, whereas a similar variable in MTRDB shows approximately 89,000 foreign filers for those same years  Additionally, FDB does not contain country codes from paper filings of Form 8938  ICCM-FIR stores information from some elements from parent tax returns—such as TINs and document locator numbers  According to IRS officials, however, ICMM-FIR lacks data on country codes and filing status of Form 8938 filers  IRS officials said that ICMM-FIR was not designed or intended to store data on Form 8938 filers; rather, it was designed to be a database for use in comparing Form 8938 and 8966 data  In general, IRS officials indicated that they would like to adjust the way ICMM-FIR stores data, but that would require modifying the way the database was established  Incomplete data on assets reported on Forms 8938: MTRDB contains detailed information on specified foreign financial assets submitted on electronic filings of Form 8938 and the country code from which the Form 8938 was filed  IRS officials said it is not designed to store information submitted on paper filings of Forms 8938 and parent tax returns  IRS officials said that while IMF processes information transcribed from individual income tax returns, there is no requirement to cross-reference information from the tax return with information submitted with an accompanying Form 8938  Additionally, while IRS officials told us that IRTF is the authoritative source for filers of Form 8938, it does not store account and other asset information submitted from Forms 8938  When asked whether there is any move to store account and other asset information collected from Forms 8938 into IRTF, IRS officials said that the decision on what returns or portions of returns are transcribed are subject to resource constraints and are prioritized from year to year  Table 7 shows that more than 900,000 individuals filed Financial Crimes Enforcement Network (FinCEN) Form 114s (commonly known as the Report of Foreign Bank and Financial Accounts, or FBAR) in calendar years 2015 and 2016, and declared total maximum values of accounts ranging from about $1 5 trillion to more than $2 trillion each year  We are providing a range of estimates because we found a large number of filings made potentially in error  In some cases, for instance, FBAR filers reported more than $100 trillion in foreign financial accounts  We assume many of these filings are likely made in error, but have only limited means to determine which filings have errors, and which filings have accurate information  Because we cannot independently verify the accuracy of all self-reported FBAR data, we decided to present a range of data with (1) a lower bound discarding all FBAR filings reporting total values of reported foreign financial accounts at or above $1 billion; and (2) an upper bound discarding all filings reporting total values of such accounts at or above $5 billion  Table 2 excludes amended and duplicated FBAR filings  This table also excludes FBAR filings that reported a financial interest in 25 or more financial accounts, but reported total maximum account values of $0 from parts II and III of the FBAR  Although we identified problems with the data, we determined they were reliable enough to provide an estimated range of asset values to report the scale of foreign financial accounts held by U S  persons  Table 8 shows a detailed breakdown of 2015 and 2016 FBAR filings by residence and categories of total maximum account values reported on the FBARs  Appendix IV: Detailed Comparison of Individual Foreign Financial Asset Reporting Requirements 26 U S C  § 6038D; 26 C F R  §§ 1 6038D-1 to 1 6038D-8  26 C F R  § 1 6038D-2  Filers in this category include those who identify as single, married filing separately, “head of household,” or “qualifying widow(er) ” Includes maximum value of specified foreign financial assets (Form 8938) or maximum value of financial accounts maintained by a financial institution physically located in a foreign country (FBAR)  Under FATCA, any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account are or would be required to be reported, included, or otherwise reflected on a person’s income tax return  Under FBAR reporting requirements, a person has signature or other authority if he or she has the authority (alone or in conjunction with another) to control the disposition of money, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained  The account itself is subject to reporting, but the contents of the account do not have to be separately reported  In addition to the contact named above, Brian James (Assistant Director), Mark Ryan (Analyst-in-Charge), Ariana Graham, George Guttman, Krista Loose, Daniel Mahoney, Cynthia Saunders, A J  Stephens, and Elwood White made key contributions to this report  Michael John Bechetti, Ted Burik, and Jacqueline Chapin also provided assistance 

ground_truth: Concerns over efforts by U.S. taxpayers to use offshore accounts to hide income or evade taxes contributed to the passage of FATCA in 2010, which sought to create greater transparency and accountability over offshore assets held by U.S. taxpayers. House Report 114-624 included a provision for GAO to evaluate FATCA implementation and determine the effects of FATCA on U.S. citizens living abroad. GAO—among other things—(1) assessed IRS's efforts to use FATCA-related information to improve taxpayer compliance; (2) examined the extent to which Treasury administers overlapping reporting requirements on financial assets held overseas; and (3) examined the effects of FATCA implementation unique to U.S. persons living abroad. GAO reviewed applicable documentation; analyzed tax data; and interviewed officials from IRS, other federal agencies and organizations, selected tax practitioners, and more than 20 U.S. persons living overseas. Data quality and management issues have limited the effectiveness of the Internal Revenue Service's (IRS) efforts to improve taxpayer compliance using foreign financial asset data collected under the Foreign Account Tax Compliance Act (FATCA). Specifically, IRS has had difficulties matching the information reported by foreign financial institutions (FFI) with U.S. taxpayers' tax filings due to missing or inaccurate Taxpayer Identification Numbers provided by FFIs. Further, IRS lacks access to consistent and complete data on foreign financial assets and other data reported in tax filings by U.S. persons, in part, because some IRS databases do not store foreign asset data reported from paper filings. IRS has also stopped pursuing a comprehensive plan to leverage FATCA data to improve taxpayer compliance because, according to IRS officials, IRS moved away from updating broad strategy documents to focus on individual compliance campaigns. Ensuring access to consistent and complete data collected from U.S. persons—and employing a plan to leverage such data—would help IRS better leverage such campaigns and increase taxpayer compliance. Due to overlapping statutory reporting requirements, IRS and the Financial Crimes Enforcement Network (FinCEN)—both within the Department of the Treasury (Treasury)—collect duplicative foreign financial account and other asset information from U.S. persons. Consequently, in tax years 2015 and 2016, close to 75 percent of U.S. persons who reported information on foreign accounts and other assets on their tax returns also filed a separate form with FinCEN. The overlapping requirements increase the compliance burden on U.S. persons and add complexity that can create confusion, potentially resulting in inaccurate or unnecessary reporting. Modifying the statutes governing the requirements to allow for the sharing of FATCA information for the prevention and detection of financial crimes would eliminate the need for duplicative reporting. This is similar to other statutory allowances for IRS to disclose return information for other purposes, such as for determining Social Security income tax withholding. According to documents GAO reviewed, and focus groups and interviews GAO conducted, FFIs closed some U.S. persons' existing accounts or denied them opportunities to open new accounts after FATCA was enacted due to increased costs, and risks they pose under FATCA reporting requirements. According to Department of State (State) data, annual approvals of renunciations of U.S. citizenship increased from 1,601 to 4,449—or nearly 178 percent—from 2011 through 2016, attributable in part to the difficulties cited above. Treasury previously established joint strategies with State to address challenges U.S. persons faced in accessing foreign financial services. However, it lacks a collaborative mechanism to coordinate efforts with other agencies to address ongoing challenges in accessing such services or obtaining Social Security Numbers. Implementation of a formal means to collaboratively address burdens faced by Americans abroad from FATCA can help federal agencies develop more effective solutions to mitigate such burdens by monitoring and sharing information on such issues, and jointly developing and implementing steps to address them. GAO is making one matter for congressional consideration to address overlap in foreign asset reporting requirements. GAO is making seven recommendations to IRS and other agencies to enhance IRS's ability to leverage FATCA data to enforce compliance, address unnecessary reporting, and better collaborate to mitigate burdens on U.S. persons living abroad. State and Social Security Administration agreed with GAO's recommendations. Treasury and IRS neither agreed nor disagreed with GAO's recommendations.