119 NOTES TO THE FINANCIAL STATEMENTS

Note 18. Contingencies 

Loss contingencies are existing conditions, situations, or sets of circumstances involving uncertainty as to possible loss 

to an entity. The uncertainty will ultimately be resolved when one or more future events occur or fail to occur. The 

government is subject to loss contingencies related to: 

 Legal and environmental and disposal; 

 Insurance and guarantees; and 

 Other Contingencies. 

The government is involved in various litigation, including administrative proceedings, legal actions, and tort claims, 

which may ultimately result in settlements or decisions adverse to the government. In addition, the government is subject to 

loss contingencies for a variety of environmental cleanup costs for the storage and disposal of hazardous material as well as 

the operations and closures of facilities at which environmental contamination may be present. Refer to the Legal 

Contingencies and Environmental and Disposal Contingencies section of this note for further details. 

The government provides insurance and guarantees via a variety of programs. At the time an insurance policy or 

guarantee is issued, a contingency arises. The contingency is the risk of loss assumed by the insurer, that is, the risk of loss 

from events that may occur during the term of the policy. For more information, refer to the Insurance and Guarantees 

sections of this note. 

Other contingencies include those related to the government’s establishment of construction budgets without receiving 

appropriations from Congress for such projects, appeals of Medicaid audit and program disallowances by the states, and 

potential draws by GSEs. The government is also a party to treaties and other international agreements. These treaties and 

other international agreements address various issues including, but not limited to, trade, commerce, security, and law 

enforcement that may involve financial obligations or give rise to possible exposure to losses. For a more detailed discussion 

of the government’s other loss contingencies, refer to the Other Contingencies section of this note. 

Financial Treatment of Loss Contingencies 

The reporting of loss contingencies depends on the likelihood that a future event or events will confirm the loss or 

impairment of an asset or the incurrence of a liability and the likelihood of loss can range from probable to remote. SFFAS 

No. 5, Accounting for Liabilities of the Federal Government, identifies the probability classifications used to assess the range 

for the likelihood of loss as probable, reasonably possible, and remote. Loss contingencies where a past event or exchange 

transaction has occurred, and where a future outflow or other sacrifice of resources is assessed as probable and measurable, 

are accrued in the financial statements. Loss contingencies that are assessed to be at least reasonably possible are disclosed in 

this note, and loss contingencies that are assessed as remote are neither reported in the financial statements, nor disclosed in 

the notes. The following table provides criteria for how federal entities are to account for loss contingencies, based on the 

likelihood of the loss and measurability.3

3

 In addition, a third condition must be met to be a loss contingency: a past event or an exchange transaction must occur. 
NOTES TO THE FINANCIAL STATEMENTS 120

Likelihood of future 

outflow or other 

sacrifice of resources 

Loss amount can be 

reasonably measured 

Loss range can be 

reasonably measured 

Loss amount or range 

cannot be reasonably 

measured 

Probable 

Future confirming 

event(s) are more likely 

to occur than not.4

Accrue the liability. 

Report on Balance Sheet 

and Statement of Net 

Cost. 

Accrue liability of best 

estimate or minimum 

amount in loss range if 

there is no best estimate 

and disclose nature of 

contingency and range of 

estimated liability. 

Disclose nature of 

contingency and include 

a statement that an 

estimate cannot be 

made. 

Reasonably possible 

Possibility of future 

confirming event(s) 

occurring is more than 

remote and less than likely.

Disclose nature of 

contingency and 

estimated amount. 

Disclose nature of 

contingency and 

estimated loss range. 

Disclose nature of 

contingency and include 

a statement that an 

estimate cannot be 

made. 

Remote 

Possibility of future 

event(s) occurring is 

slight.

No action is required. No action is required. No action is required. 

Loss contingencies arise in the normal course of operations and their ultimate disposition is unknown. Based on 

information currently available, however, it is management’s opinion that the expected outcome of these matters, individually 

or in the aggregate, will not have a material adverse effect on the financial statements, except for the litigation and insurance 

described in the following sections, which could have a material adverse effect on the financial statements. 

Certain significant consolidation entities apply financial accounting and reporting standards issued by FASB, and such 

entities, as permitted by SFFAS No. 47, Reporting Entity, are consolidated into the U.S. government’s consolidated financial 

statements without conversion to financial and reporting standards issued by FASAB.5 Generally, under FASAB standards, a 

contingency is considered “probable” if the future event or events are more likely than not to occur. Under FASB standards, a 

contingency is considered “probable” if the future event or events are likely to occur. “Likely to occur” is considered to be 

more certain than “more likely than not to occur.” Under both accounting frameworks, a contingency is considered 

“reasonably possible” if occurrence of the future event or events is more likely than remote, but less likely than “probable” 

(“probable” as defined within each corresponding accounting framework). 

4 For pending or threatened litigation and unasserted claims, the future confirming event or events are considered “probable” if such events are likely to 

occur. 

5 Significant consolidation entities that apply FASB standards without conversion to FASAB standards are FDIC, PBGC, FCSIC, TVA, Smithsonian 

Institution, NRRIT, and USPS.
 121 NOTES TO THE FINANCIAL STATEMENTS

Legal Contingencies and Environmental and Disposal Contingencies 

 

Legal Contingencies and Environmental and Disposal Contingencies as of 

September 30, 2019, and 2018 Restated 

2019 2018 

Estimated Range of Loss Estimated Range of Loss 

for Certain Cases 2 for Certain Cases 2

Restated Restated

Accrued Accrued 

(In billions of dollars) Liabilities 1 Lower End Upper End Liabilities 1 Lower End Upper End 

Probable ............................ 38.4 37.4 39.1 41.2 40.0 43.8 

Reasonably possible ............ N/A 6.7 29.2 N/A 8.1 29.1 

1 Accrued liabilities are recorded and presented in other liabilities on the Balance Sheet. 

2 Does not reflect the total range of loss; many cases assessed as reasonably possible of an unfavorable outcome did not include 

estimated losses that could be determined. 

Notes: "N/A" indicates not applicable. 

Management and legal counsel have determined that it is “probable” that some legal actions, litigation, tort claims, and 

environmental and disposal contingencies will result in a loss to the government and the loss amounts are reasonably 

measurable. The estimated liabilities for “probable” cases against the government are $38.4 billion and $41.2 billion as of 

September 30, 2019, and 2018, respectively, and are included in “Other Liabilities” on the Balance Sheet. For example, the 

U.S. Supreme Court 2012 decision in Salazar v. Ramah Navajo Chapter, and subsequent cases related to contract support 

costs have resulted in increased claims against the Indian Health Service, which is a component within HHS. As a result of 

this decision, many tribes have filed claims. Some claims have been paid and others have been asserted but not yet settled. It 

is expected that some tribes will file additional claims for prior years. The estimated amount recorded for contract support 

costs is $5.2 billion in fiscal year 2019 and $4.8 billion in fiscal year 2018. 

There are also administrative claims and legal actions pending where adverse decisions are considered by management 

and legal counsel as “reasonably possible” with an estimate of potential loss or a range of potential loss. The estimated 

potential losses reported for such claims and actions range from $6.7 billion to $29.2 billion as of September 30, 2019, and 

from $8.1 billion to $29.1 billion as of September 30, 2018. Amounts reported for 2018 have been restated to correct DOE’s 

estimated range of loss for reasonably possible contingencies. The restatement increased the lower end range of loss by $0.5 

billion and the upper end range of loss increased by $2.0 billion. For example, as of September 30, 2019, EPA has received 

claims under the Federal Tort Claims Act in regards to the Gold King Mine, from individuals and businesses situated on or 

near affected waterways alleging lost wages, loss of business income, agricultural and livestock losses, property damage, 

diminished property value, and personal injury. The amounts estimated related to the Gold King Mine are $2.0 billion but 

they are only reasonably possible, and the final outcomes are not probable. 

In accordance with the NWPA, DOE entered into more than 68 standard contracts with utilities in which, in return for 

payment of fees into the Nuclear Waste Fund, DOE agreed to begin disposal of SNF by January 31, 1998. Because DOE has 

no facility available to receive SNF under the NWPA, it has been unable to begin disposal of the utilities’ SNF as required by 

the contracts. Therefore, DOE is subject to significant SNF litigation claiming damages for partial breach of contract as a 

result of this delay. Based on settlement estimates, the total liability estimates as of September 30, 2019 is $36.5 billion. After 

deducting the cumulative amount paid of $8.0 billion as of September 30, 2019 under settlements, and as a result of final 

judgments, the remaining liability is estimated to be approximately $28.5 billion, compared to approximately $28.1 billion as 

of September 30, 2018. 

A number of class action and/or multiple plaintiff tort suits have been filed against current and former DOE contractors 

in which the plaintiffs seek damages for alleged exposures to radioactive and/or toxic substances as a result of the historic 

operations of DOE’s nuclear facilities. Collectively, damages in excess of $1.1 billion are currently being sought in these 

cases. 
NOTES TO THE FINANCIAL STATEMENTS 122

Numerous litigation cases are pending where the outcome is uncertain or it is reasonably possible that a loss has been 

incurred and where estimates cannot be made. There are other litigation cases where the plaintiffs have not made claims for 

specific dollar amounts, but the settlement may be significant. The ultimate resolution of these legal actions for which the 

potential loss could not be determined may materially affect the U.S. government’s financial position or operating results. 

A number of plaintiffs filed claims in the U.S. Court of Federal Claims requesting that Treasury redeem matured 

savings bonds not possessed by the applicable states, but which have registered owners with last known addresses in those 

states. Treasury informed the applicable states it would not redeem these savings bonds since those states are not registered 

owners of the bonds. On August 20, 2015, the U.S. Court of Federal Claims partially dismissed one claim and denied the 

U.S. government’s motion to dismiss with respect to other claims. On August 8, 2017, the court ruled in favor of two states, 

and the U.S. government appealed. On August 13, 2019, the Court of Appeals for the Federal Circuit reversed the August 8, 

2017 ruling, and the two states filed a petition for a rehearing on September 27, 2019. That petition was denied on December 

11, 2019 and the plaintiffs intended to seek further review by the U.S. Supreme Court. At this time, the government is unable 

to determine the likelihood of an unfavorable outcome or make an estimate of potential loss. 

A number of cases were filed in the U.S. Court of Federal Claims and U.S. District Courts in which the plaintiffs allege, 

among other things, that the U.S. government took their property, breached contractual rights of preferred and common 

stockholders, and breached fiduciary duties when the third amendments to the SPSPAs between Treasury and each GSE were 

executed in August 2012. One case also alleges that the U.S. government took plaintiffs’ property and contractual rights 

when the GSEs were placed into conservatorship and entered into the SPSPAs with Treasury in September 2008. In the U.S. 

Court of Federal Claims, the plaintiffs seek just compensation and other damages from the U.S. government. In the U.S. 

District Courts, the plaintiffs seek to set aside the third amendments to the SPSPAs as well as damages, and in some cases a 

declaration that the FHFA’s structure violates the separation of powers. Cases in the U.S. District Court for the District of 

Delaware and the U.S. District Court for the Northern District of Iowa have been dismissed by those District Courts, and the 

Third and Eighth Circuit Courts of Appeals affirmed the dismissals. A case in the U.S. District Court for the Southern 

District of Texas was dismissed by that District Court; and the Fifth Circuit Court of Appeals affirmed dismissal of all claims

against Treasury but allowed one claim against the FHFA to proceed. The plaintiffs have sought review in the Supreme Court 

of their claim that the FHFA’s structure violates the separation of powers, and the Solicitor General is considering whether to

seek further review in the Supreme Court of the claim the court of appeals allowed to proceed. A case in the U.S. District 

Court for the District of Minnesota was dismissed by that District Court, and an appeal is pending. Cases in the Western 

District of Michigan and Eastern District of Pennsylvania remain in litigation, and motions to dismiss are pending. Treasury 

is unable to determine the likelihood of an unfavorable outcome or an estimate of potential loss in these cases at this time. 

In prior years environmental and disposal contingencies were presented separately in this note. 

Insurance and Guarantees 

As discussed in Note 1 L—Insurance and Guarantee Program Liabilities, certain consolidation entities with significant 

insurance and guarantee programs apply FASB standards, while other insurance programs are accounted for in the 

consolidated financial statements pursuant to FASAB standards. See Note 15—Insurance and Guarantee Program Liabilities 

for insurance and guarantee liabilities and Note 12—Federal Employee and Veteran Benefits Payable for insurance related to 

federal employee and veteran benefits. 

Entities Accounted for under FASB 

PBGC, FCSIC, and FDIC are consolidation entities with significant insurance or guarantee programs that apply FASB 

standards, which provide that an entity shall disclose information about certain loss contingencies even though the possibility

of loss may be remote. 

PBGC insures pension benefits for participants in covered defined benefit pension plans. Under current law, PBGC's 

liabilities may be paid only from PBGC's assets. Accordingly, PBGC's liabilities are not backed by the full faith of the U.S. 

government. In fiscal year 2019, PBGC's single-employer and multi-employer pension insurance programs had $128.1 billion 

and $2.9 billion in total assets, respectively. 

PBGC operates two separate pension insurance programs: a single-employer program and a multi-employer program. 

The single-employer program covered about 24.7 million people (excluding those in plans that PBGC has trusteed) in fiscal 

year 2019, down from about 26.2 million people in fiscal year 2018, and the maximum guaranteed annual benefit for 

participants who are in a plan that terminated in fiscal year 2019 and commence benefits at age 65 is $67,295. The maximum 

guaranteed benefit for single-employer plan participants varies with a number of factors such as the date of the sponsoring 

employer's bankruptcy and the age at which the participant commences benefits. The number of covered ongoing plans at the 

end of fiscal year 2019 was about 24,000. 

The multi-employer program covers about 10.8 million participants in about 1,400 insured plans and the maximum 

annual benefit is $12,870 to a participant who worked for 30 years in jobs covered by the plan. The maximum benefit for 
 123 NOTES TO THE FINANCIAL STATEMENTS

multi-employer plan participants varies with covered service and would be lower if the participant worked less than 30 years 

and higher if the participant worked more than 30 years. PBGC projects a high likelihood that the multi-employer program 

will become insolvent by the end of 2025, at which point its financial assistance to multi-employer plans will be limited to 

the premiums collected by the program. Please refer to Note 27—Subsequent Events and PBGC financial statements for 

further details. 

FCSIC insures the timely payment of principal and interest on Systemwide Debt Securities. Systemwide Debt Securities 

are the general unsecured joint and several obligations of the Farm Credit Banks. Systemwide Debt Securities are not 

obligations of and are not guaranteed by the U.S. government. Outstanding Systemwide Debt Securities totaled $282.9 billion 

as of September 30, 2019. The insurance provided by FCSIC is also not an obligation of and is not guaranteed by the U.S. 

government. Under current law, if FCSIC does not have sufficient funds to pay unpaid principal and interest on insured 

Systemwide Debt Securities, the Farm Credit System banks will be required to make payments under joint and several 

liability. As of September 30, 2019, FCSIC reported an Insurance Fund balance of $5.1 billion. 

FDIC insures bank and savings association deposits, which exposes FDIC to various risks. FDIC has estimated total 

insured deposits of $7,736.9 billion as of September 30, 2019, and $7,376.6 billion as of September 30, 2018, for the DIF. 

The government has guarantee contingencies that are reasonably possible in the amount of $165.6 billion as of 

September 30, 2019, and $185.4 billion as of September 30, 2018. 

PBGC reported $165.5 billion and $184.8 billion as of September 30, 2019, and 2018, respectively, for the estimated 

aggregate unfunded vested benefits exposure to the PBGC for private-sector single-employer and multi-employer defined 

benefit pension plans that are classified as a reasonably possible exposure to loss. The decrease comprised primarily from the 

single-employer program contingencies is primarily due to the increase in the interest factors used for valuing liabilities and

the decline in the number of companies with lower than investment grade bond rating and/or credit scores. 

FDIC reported $0.1 billion and $0.3 billion as of September 30, 2019, and 2018, respectively, for identified additional 

risk in the financial services industry that could result in additional loss to the DIF should potentially vulnerable insured 

institutions ultimately fail. Actual losses, if any, will largely depend on future economic and market conditions. 

Entities Accounted for under FASAB 

The total amount of coverage provided by an insurer as of the end of the reporting period is referred to as insurance inforce. Insurance in-force represents the total amount of unexpired insurance arrangements for the corresponding program as 

of a given date. Insurance in-force is presented to provide the reader with a better understanding of the unexpired insurance 

arrangements that are not considered a liability. It is extremely unlikely that losses equal to the maximum risk exposure 

would be incurred. The table below shows the estimate of insurance in-force as of September 30, 2019 for consolidation 

entities with significant insurance programs that apply FASAB standards in accordance with SFFAS No. 51, Insurance 

Programs. 

 

Insurance In-force as of September 30, 2019 

(In billions of dollars) 2019

Insurance In-force: 

Ginnie Mae - Department of Housing and Urban Development ..................................... 2,092.8 

National Flood Insurance Program - Department of Homeland Security ......................... 1,330.0 

National Credit Union Share Insurance Fund - National Credit Union Administration ....... 1,200.0 

Federal Crop Insurance - Department of Agriculture ..................................................... 109.0 

Ginnie Mae insures MBS and commitments, which exposes Ginnie Mae to various risks. The Ginnie Mae MBS are 

backed by pools of mortgage loans guaranteed by FHA, Public and Indian Housing, Rural Housing Service, and VA. 

Accordingly, Ginnie Mae’s credit risk related to outstanding MBS is greatly mitigated by guarantees discussed in Note 4–

Loans Receivable and Loan Guarantee Liabilities, Net. 

NFIP, administered by DHS, is considered an exchange transaction insurance program and pays claims to policy 

holders who experience flood damage due to flooding within the NFIP rules and regulations. NFIP is authorized to secure 

reinsurance coverage from private reinsurance and capital markets to maintain the financial ability of the program to pay 

claims from major flooding events. 
NOTES TO THE FINANCIAL STATEMENTS 124

FEMA, a component of DHS, is authorized to borrow from Treasury up to $30.4 billion to fund the payment of flood 

insurance claims and claims-related expenses of the NFIP. This authority is used only as needed to pay existing obligations 

for claims and expenses. Insurance premiums collected are used to pay insurance claims and to repay borrowings. As of 

September 30, 2019, and 2018, FEMA had drawn from Treasury $20.5 billion, leaving $9.9 billion available to be borrowed. 

Premiums collected by FEMA for the NFIP based on subsidized rates are not sufficient to cover the debt repayments. Given 

the current premium rate structure, FEMA will not be able to generate sufficient resources from premiums to repay its debt. 

NCUSIF, managed by NCUA, insures member shares (deposits) in all federal credit unions and in qualifying statechartered credit unions requesting insurance. NCUSIF insures the balance of each members’ accounts, dollar-for-dollar, up to 

at least the standard maximum share insurance amount of $250,000. 

The Federal Crop Insurance Program, administered by USDA’s FCIC, is considered an exchange transaction insurance 

program. The crop insurance policies insure against unexpected declines in yield and/or price due to natural causes. In crop 

year 2019 there were approximately 1.1 million crop insurance policies in force. The insurance policies are structured as a 

contract between Approved Insurance Provider and agricultural producers, with the FCIC providing reinsurance to Approved 

Insurance Providers. Crop insurance policies automatically renew each year, unless producers cancel them by a published 

annual deadline. 

The FCIC may request the Secretary of Agriculture to provide borrowing authority funds of the Commodity Credit 

Corporation if at any time the amounts in the insurance fund are insufficient to allow FCIC to carry out its duties. Even 

though the authority exists, FCIC did not request Commodity Credit Corporation funds in the reporting period. USDA has 

permanent indefinite appropriations available to fund certain costs of the crop insurance program; such as premium subsidy, 

delivery expenses, losses in excess of premiums, and research costs. FCIC has no outstanding borrowing as of September 30, 

2019. 

For further information, please refer to HUD, DHS, NCUA and USDA, financial statements. 

The Terrorism Risk Insurance Act of 2002, as amended, created TRIP, which requires participating insurers to make 

insurance available for losses resulting from acts of terrorism and provides a federal government backstop for the insurers’ 

resulting financial exposure. This statue was enacted following the terrorist attacks on September 11, 2001, to address 

disruptions in the market for terrorism risk insurance, to help ensure the continued availability and affordability of 

commercial property and casualty insurance for terrorism risk, and to allow for the private markets to stabilize and build 

insurance capacity to absorb any future losses for terrorism events. Most recently, the Terrorism Risk Insurance Program 

Reauthorization Act of 2019 authorized TRIP until December 31, 2027. The claims process under TRIP commences once the 

Secretary of the Treasury (in consultation with the Secretary of the DHS and the U.S. Attorney General) certifies an event as 

an “act of terrorism.” In the event of certification of an “act of terrorism” insurers may be eligible to receive reimbursement

from the U.S. government for associated insured losses assuming an aggregate insured loss threshold (“program trigger”) has 

been reached once a particular insurer has satisfied its designated deductible amount. For calendar years 2019 and 2018, the 

program trigger amount was $180.0 million and $160.0 million, respectively. This amount will increase by $20.0 million 

annually through calendar year 2027. Insured losses above insurer deductibles will be shared between insurance companies 

and the U.S. government. TRIP includes both mandatory and discretionary authority for Treasury to recoup federal payments 

made under TRIP through policyholder surcharges under certain circumstances, and contains provisions designed to manage 

litigation arising from or relating to a certified act of terrorism. There were no claims under TRIP as of September 30, 2019 

or 2018. 

Other Contingencies 

DOT and HHS, and Treasury reported the following other contingencies: 

The FHWA has a reasonably possible contingency due to their authority to approve projects using advance construction 

under 23 U.S.C. 115(a) and 23 CFR 630.701-630.709. FHWA does not guarantee the ultimate funding to the states for these 

“advance construction” projects and, accordingly, does not obligate any funds for these projects. When funding becomes 

available to FHWA, the states can then apply for reimbursement of costs that they have incurred on such projects, at which 

time FHWA can accept or reject such requests. As of September 30, 2019, and 2018, FHWA has pre-authorized $66.8 billion 

and $60.8 billion, respectively, under these arrangements. Congress has not provided appropriations for these projects and no 

liability is accrued in the DOT consolidated financial statements. Therefore, these are considered reasonably possible. 

Contingent liabilities have been accrued as a result of Medicaid audit and program disallowances that are currently 

being appealed by the states. The Medicaid amounts are $9.9 billion and $6.3 billion for fiscal years ending September 30, 

2019, and 2018, respectively. The states could return the funds through payments to HHS, or HHS could recoup the funds by 

reducing future grant awards to the states. Conversely, if the appeals are decided in favor of the states, HHS will be required

to pay these amounts. In addition, certain amounts for payment have been deferred under the Medicaid program when there is 

reasonable doubt as to the legitimacy of expenditures claimed by a state. There are also outstanding reviews of the state 

expenditures in which a final determination has not been made. 
 125 NOTES TO THE FINANCIAL STATEMENTS

Treasury has a contingency for future draws by the GSE’s. There were no probable future draws accrued at September 

30, 2019 and 2018 and the total amount of reasonable possible future draws is not estimable as of September 30, 2019 and 

2018. See Note 8—Investments in Government-Sponsored Enterprises for further information. 

When a contingency originates from the U.S. government’s involvement in a treaty or other international agreement, the 

responsible reporting entity must establish a contingent liability, and include a required note disclosure to its financial 

statements, or both in accordance with guidance in SFFAS No. 5. Also see Note 19—Commitments for information 

concerning commitments related to treaties and other international agreements.