STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES 42

February 16, 2023

The President

The President of the Senate

The Speaker of the House of Representatives

To operate as effectively and efficiently as possible, Congress, the administration, and federal 

managers must have ready access to reliable and complete financial and performance information—

both for individual federal entities and for the federal government as a whole. Our report on the U.S. 

government’s consolidated financial statements for fiscal years 2022 and 2021 discusses progress that 

has been made, but also underscores that much work remains to improve federal financial 

management and that the federal government continues to face an unsustainable long-term fiscal 

path.1

Beginning in fiscal year 2020, the federal government has taken unprecedented actions in response to 

the COVID-19 pandemic to protect public health and reduce economic impacts on individuals and 

businesses. These efforts are reflected in the net cost, assets, liabilities, and budget deficit reported in 

the U.S. government’s consolidated financial statements for fiscal years 2022 and 2021. The ultimate 

cost of these actions and any future actions in response to the pandemic and their impact on the 

federal government’s financial condition will not be fully known for some time. The federal government’s 

COVID-19–related cumulative appropriations totaled $4.5 trillion2 and budget expenditures totaled $4.0 

trillion, as of September 30, 2022.3

In fiscal year 2022, Congress passed two significant pieces of legislation that were signed into law, the 

Infrastructure Investment and Jobs Act (IIJA)4 and the Inflation Reduction Act of 2022 (IRA).5 IIJA 

authorized approximately $568 billion in appropriations over the 5-year period through fiscal year 2026, 

and an additional $94 billion in future appropriations. IRA authorized approximately $433 billion in 

appropriations expiring at various times on or before September 30, 2031. The Congressional Budget 

Office (CBO) estimates that, over 10 years, IIJA will increase the budget deficit by $256 billion, while 

IRA will reduce the budget deficit by $58 billion.6

1As discussed later in this report, an unsustainable long-term fiscal path is a situation where federal debt held by the public 

grows faster than gross domestic product (GDP) over the long term. 

2The $4.5 trillion of cumulative appropriations reflects enacted rescissions, returns of unused permanent and indefinite 

authority, and obligation adjustments that reduced appropriations.

3Amounts presented are from the Department of the Treasury’s Governmentwide Treasury Account Symbol Adjusted Trial 

Balance System.

4Pub. L. No. 117-58, 135 Stat. 429 (Nov. 15, 2021).

5Pub. L. No. 117-169, 136 Stat. 1818 (Aug. 16, 2022).

6CBO’s estimates of the effects of legislation on the budget deficit include both receipts and spending. 
43 STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

Our audit report on the U.S. government’s consolidated financial statements is enclosed. In summary, 

we found the following: 

• Certain material weaknesses7 in internal control over financial reporting and other limitations 

resulted in conditions that prevented us from expressing an opinion on the accrual-based 

consolidated financial statements as of and for the fiscal years ended September 30, 2022, and 

2021.8 About 49 percent of the federal government’s reported total assets as of September 30, 

2022, and approximately 23 percent of the federal government’s reported net cost for fiscal year 

2022 relate to significant federal entities that received a disclaimer of opinion9 or qualified opinion10

on their fiscal year 2022 financial statements or whose fiscal year 2022 financial information was 

unaudited.11

• Significant uncertainties (discussed in Note 25, Social Insurance, to the consolidated financial 

statements), primarily related to the achievement of projected reductions in Medicare cost growth, 

prevented us from expressing an opinion on the sustainability financial statements, which consist of 

the 2022 and 2021 Statements of Long-Term Fiscal Projections;12 the 2022, 2021, 2020, 2019, and 

7A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there

is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected 

and corrected, on a timely basis. A deficiency in internal control exists when the design or operation of a control does not allow 

management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, 

misstatements on a timely basis.

8The accrual-based consolidated financial statements comprise the (1) Statements of Net Cost, Statements of Operations and 

Changes in Net Position, Reconciliations of Net Operating Cost and Budget Deficit, and Statements of Changes in Cash 

Balance from Budget and Other Activities, for the fiscal years ended September 30, 2022, and 2021; (2) Balance Sheets as of 

September 30, 2022, and 2021; and (3) related notes to these financial statements. Most revenues are recorded on a modified 

cash basis. 

9A disclaimer of opinion arises when the auditor is unable to obtain sufficient, appropriate audit evidence to provide a basis for 

an audit opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements, 

if any, could be both material and pervasive and accordingly does not express an opinion on the financial statements.

10A qualified opinion arises when the auditor is able to express an opinion on the financial statements except for specific areas 

where the auditor was unable to obtain sufficient and appropriate evidence, and the auditor concludes that the possible effects 

on the financial statements of undetected misstatements, if any, could be material but not pervasive.

11(1) The Department of Defense received a disclaimer of opinion on its fiscal years 2022 and 2021 financial statements. (2) 

The Small Business Administration received a disclaimer of opinion on its fiscal years 2022 and 2021 balance sheets, and its 

remaining statements were unaudited. (3) The Department of Education received a disclaimer of opinion on its fiscal year 

2022 financial statements and an unmodified opinion on its fiscal year 2021 financial statements. (4) The Department of Labor 

received a qualified opinion on its fiscal years 2022 and 2021 financial statements. (5) The Security Assistance Accounts 

received a disclaimer of opinion on its fiscal year 2022 financial statements, and its fiscal year 2021 financial information was 

unaudited. (6) As of the date of our audit report, the audited Schedules of the General Fund of the U.S. Government for fiscal 

year 2022 were not issued. The fiscal year 2021 Schedules of the General Fund were not audited to allow Treasury sufficient 

time to continue to implement a remediation plan to address the issues we reported as part of our disclaimer of opinion on the

fiscal year 2020 Schedules of the General Fund. 

12The 2022 and 2021 Statements of Long-Term Fiscal Projections present, for all the activities of the federal government, the 

present value of projected receipts and noninterest spending under current policy without change, the relationship of these 

amounts to projected GDP, and changes in the present value of projected receipts and noninterest spending from the prior 

year. These statements also present the fiscal gap, which is the combination of noninterest spending reductions and receipts 

increases necessary to hold debt held by the public as a share of GDP at the end of the projection period to its value at the 

beginning of the period. The valuation date for the Statements of Long-Term Fiscal Projections is September 30. 
STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES 44

2018 Statements of Social Insurance;13 and the 2022 and 2021 Statements of Changes in Social 

Insurance Amounts. About $52.5 trillion, or 69 percent, of the reported total present value of future 

expenditures in excess of future revenue presented in the 2022 Statement of Social Insurance 

relates to the Medicare program reported in the Department of Health and Human Services’ 2022 

Statement of Social Insurance, which received a disclaimer of opinion. A material weakness in

internal control also prevented us from expressing an opinion on the 2022 and 2021 Statements of 

Long-Term Fiscal Projections. 

• Material weaknesses resulted in ineffective internal control over financial reporting for fiscal year 

2022.

• Material weaknesses and other scope limitations, discussed above, limited tests of compliance with 

selected provisions of applicable laws, regulations, contracts, and grant agreements for fiscal year 

2022.

Overall, the federal government has made significant strides in improving financial management since 

key federal financial management reforms were enacted in the 1990s. Twenty of the 24 Chief Financial 

Officers Act of 1990 (CFO Act) agencies received clean opinions on their respective entities’ fiscal year 

2022 financial statements, up from six CFO Act agencies that received clean audit opinions for fiscal 

year 1996.14

However, the federal government has recently experienced financial management challenges related to 

implementing COVID-19 relief programs. For example, after years of receiving clean opinions, the 

Small Business Administration (SBA), which had substantial activity related to COVID-19 relief 

programs, was unable to obtain an opinion on its fiscal years 2020 through 2022 financial statements. 

Also, in February 2023, we reported on widespread fraud, improper payments, and accountability 

deficiencies in COVID-19 relief programs.15 GAO has made 374 recommendations and 19 matters for 

congressional consideration across its COVID-19 work. As of January 20, 2023, agencies had fully 

addressed 105 of these 374 recommendations and partially addressed 42, and Congress had fully 

addressed one matter and partially addressed another. Further, numerous deficiencies in COVID-19 

relief programs have been reported by inspectors general and other auditors. In addition to the financial 

management challenges related to implementing the COVID-19 relief programs, the Department of 

Education, after years of receiving clean opinions, received a disclaimer of opinion on its fiscal year 

2022 financial statements. 

Accounting and financial reporting standards have continued to evolve to provide greater transparency 

and accountability over the federal government’s operations and financial condition, including long-term 

sustainability. We have reported areas where financial management can be improved, including 

standardizing and clarifying the responsibilities of chief financial officers, preparing government-wide 

13The Statements of Social Insurance present the present value of revenue and expenditures for social benefit programs, 

primarily Social Security and Medicare. These statements are presented for the current year and each of the 4 preceding 

years as required by U.S. generally accepted accounting principles. For the Statements of Social Insurance, the valuation date 

is January 1 for the Social Security and Medicare programs, October 1 for the Railroad Retirement program, and September 

30 for the Black Lung program.

14The 20 agencies include the Department of Health and Human Services, which received an unmodified (“clean”) opinion on 

all statements except the Statements of Social Insurance and the Statements of Changes in Social Insurance Amounts.

15GAO, Emergency Relief Funds: Significant Improvements Are Needed to Address Fraud and Improper Payments, GAO-23-

106556 (Washington, D.C.: Feb. 1, 2023).
45 STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

and agency-level financial management plans, better linking performance and cost information for 

decision-making, and strengthening improper payment and fraud risk management reporting.16

While the U.S. government’s consolidated financial statements provide a high-level summary of the 

financial position, financial condition, and operating results for the federal government as a whole, 

substantial benefits have been achieved as a result of agencies’ preparation and audit of financial 

statements, including

• useful and necessary insight into government operations, including the agencies’ financial 

conditions;

• increased federal agency accountability to Congress and citizens, including independent assurance 

about the reliability of reported financial information;

• greater confidence to stakeholders (e.g., governance officials, taxpayers, consumers, or regulated 

entities) that federal funds are being properly accounted for and assets are properly safeguarded;

• an assessment of the reliability and effectiveness of systems and related internal controls, including 

identifying control deficiencies that could lead to fraud, waste, or abuse;

• a focus on information security;

• early warnings of financial management issues; and

• identification of noncompliance with laws and regulations, which can present challenges to agency 

operations.

The preparation and audit of individual federal entities’ financial statements have also identified 

numerous deficiencies, leading to corrective actions to strengthen federal entities’ internal controls, 

processes, and systems.17 For instance, for fiscal year 2022, the financial statements of the Security 

Assistance Accounts (SAA) were subject to audit for the first time, resulting in all significant entities 

being subject to audit.18 SAA received a disclaimer of opinion on its fiscal year 2022 financial 

statements, and its auditor reported 12 material weaknesses and four significant deficiencies in internal 

control over financial reporting. 

Since the federal government began preparing consolidated financial statements, for fiscal year 1997, 

three major impediments have continued to prevent us from rendering an opinion on the federal 

government’s accrual-based consolidated financial statements: (1) serious financial management 

problems at the Department of Defense (DOD), (2) the federal government’s inability to adequately 

account for intragovernmental activity and balances between federal entities, and (3) weaknesses in 

the federal government’s process for preparing the consolidated financial statements. In addition, SBA 

and Education had continuing material weaknesses in fiscal year 2022 related to loan and loan 

guarantee programs. 

16GAO, Federal Financial Management: Substantial Progress Made since Enactment of the 1990 CFO Act; Refinements 

Would Yield Added Benefits, GAO-20-566 (Washington, D.C.: Aug. 6, 2020), and Emergency Relief Funds: Significant 

Improvements Are Needed to Ensure Transparency and Accountability for COVID-19 and Beyond, GAO-22-105715 

(Washington, D.C.: Mar. 17, 2022).

17A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less 

severe than a material weakness yet important enough to merit attention by those charged with governance.

18The Office of Management and Budget (OMB) and Treasury have identified 40 federal entities that are significant to the U.S. 

government’s fiscal year 2022 consolidated financial statements, including the 24 CFO Act agencies. See app. A of the Fiscal 

Year 2022 Financial Report of the United States Government for a list of the 40 entities. SAA includes foreign military sales. 

For more information, see the Security Assistance Accounts, Agency Financial Report for Fiscal Year 2022 (Washington, D.C.: 

Nov. 7, 2022).
STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES 46

DOD continues to take positive steps to improve its financial management but faces long-standing 

issues. After many years of working toward financial statement audit readiness, DOD underwent full 

financial statement audits for fiscal years 2018 through 2022. These audits resulted in disclaimers of 

opinion, material weaknesses in internal control over financial reporting (28 in both fiscal years 2022 

and 2021), and thousands of audit findings. 

DOD leadership identified a number of financial management–related benefits from these departmentwide audits, as well as operational improvements. Specifically, DOD stated that the audits have been a 

catalyst for business process and business systems reform and that DOD’s audit remediation efforts 

will ultimately result in better support for the warfighter and preservation of military advantage, as well 

as greater financial data integrity, enhanced demonstration of stewardship, and increased transparency 

for Congress and the American people. Examples of financial management–related benefits follow:

• Obligations: Better management of obligations, resulting in the availability of budget funds that 

could be used for more immediate mission-support and mission-critical needs (e.g., for fiscal year 

2022, DOD reported that it identified $43 million in contract deobligations, which allowed DOD to 

reprogram the funds for other needs).

• Real property: Better real property management, resulting in improved real property records and 

redeployment of maintenance costs.

• Inventory: Identification of several billion dollars in (1) usable inventory that was not tracked in the 

inventory system but was available for use in addressing unmet needs, (2) unneeded inventory that 

resulted in freeing up storage space, or (3) inventory that was unavailable or unusable to meet 

mission needs. 

• Systems: Improved accuracy of the systems inventory, consolidation and retirement of systems, 

and reduction of maintenance costs for legacy systems.

DOD has acknowledged that achieving a clean audit opinion will take time. DOD management 

prioritized certain critical areas for improvement (e.g., for fiscal year 2022, its priorities were fund 

balance with Treasury, access controls, and financial reporting, including efforts to identify relevant 

information systems and develop a universe of transactions). DOD reported that it uses the number of 

audit findings closed and material weaknesses downgraded or resolved from year to year to measure 

progress toward that goal. DOD also tracks progress by the number of components moving from 

disclaimers of opinion to clean audit opinions. While DOD’s fiscal year 2022 audit resulted in no 

changes to the total number of material weaknesses reported, DOD reported that 14.5 percent of 

findings from prior year financial statement audits were closed.

Various efforts are also under way to address the other two major impediments to rendering an opinion 

on the accrual-based consolidated financial statements. Regarding the government’s inability to 

adequately account for intragovernmental activity and balances between federal entities, during fiscal 

year 2022, the Department of the Treasury continued to provide information and assistance to 

significant component entities to aid in resolving their intragovernmental differences. Treasury also 

issued additional guidance to federal entities related to accounting for intragovernmental transactions.

Regarding weaknesses in the federal government’s process for preparing the consolidated financial 

statements, in recent years, Treasury’s corrective actions have included improving systems, 

implementing new processes for preparing the consolidated financial statements, enhancing guidance 

for federal entity financial reporting, and implementing procedures to address certain internal control 
47 STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

deficiencies detailed in our August 2022 management report.19 In addition to Treasury’s and the Office 

of Management and Budget’s (OMB) continued leadership, federal entities’ strong and sustained 

commitment is critical to fully addressing these issues. 

SBA’s auditor reported that the urgent need for SBA to implement COVID-19–related programs as 

quickly and efficiently as possible led to deficiencies in internal control processes.20 SBA’s auditor 

reported several material weaknesses in internal control in fiscal years 2020 through 2022 related to 

these programs. We, along with SBA’s Office of Inspector General, have also reported concerns with 

SBA’s internal controls over its COVID-19 programs and have made several recommendations to SBA. 

These weaknesses limit the reliability of SBA’s financial reporting and increase the risk of fraud and 

improper payments.

Education’s auditor continued to report a material weakness related to the department’s controls over 

the data used for estimating the costs of its loan and loan guarantee programs. For example, Education 

was unable to adequately support certain key assumptions used to estimate the costs it recorded for 

the broad-based debt relief for eligible student loan borrowers that was announced during fiscal year 

2022.21 These weaknesses limit the reliability of Education’s financial reporting.

The material weaknesses discussed above (1) hamper the federal government’s ability to reliably report 

a significant portion of its assets, liabilities, costs, and other related information; (2) affect the federal 

government’s ability to reliably measure the full cost, as well as the financial and nonfinancial 

performance, of certain programs and activities; (3) impair the federal government’s ability to 

adequately safeguard significant assets and properly record various transactions; and (4) hinder the 

federal government from having reliable, useful, and timely financial information to operate effectively 

and efficiently. We have made a number of recommendations to OMB, Treasury, DOD, and SBA to 

address these issues.22 These entities have taken or plan to take actions to address these 

recommendations. 

In addition to the material weaknesses referred to above, we identified two other continuing material 

weaknesses. These are the federal government’s inability to (1) determine the full extent to which 

improper payments occur and reasonably assure that appropriate actions are taken to reduce them and 

(2) identify and resolve information system control deficiencies and manage information security risks 

on an ongoing basis. The fiscal year 2022 government-wide total of reported estimated improper 

payments was $247 billion. However, this amount does not include improper payment estimates for 

certain programs. For example, improper payment estimates were not reported for the Department of 

19GAO, Management Report: Improvements Needed in Controls over the Processes Treasury and OMB Used to Prepare the 

U.S. Consolidated Financial Statements, GAO-22-105851 (Washington, D.C.: Aug. 16, 2022). 

20Small Business Administration, Agency Financial Report for Fiscal Year 2022 (Washington, D.C.: Nov. 15, 2022).

21Education announced a student debt relief plan on August 24, 2022, under its authority provided by the Higher Education 

Relief Opportunities for Students Act of 2003, Pub. L. No. 108-76. This plan provided for forgiving up to $10,000 (non–Pell 

Grant recipients) or up to $20,000 (Pell grant recipients) in student loans for eligible borrowers earning less than $125,000 (for 

individuals) or $250,000 (for married couples or heads of household) in annual income. After a federal appeals court issued an 

injunction in November 2022, the plan has been paused, pending the outcome of litigation before the U.S. Supreme Court.

22See GAO, Management Report: Continued Improvements Needed in the Processes Used to Prepare the U.S. Consolidated 

Financial Statements, GAO-21-587 (Washington, D.C.: Aug. 12, 2021). In addition, see GAO, High Risk Area: DOD Financial 

Management, accessed Feb. 8, 2023, https://www.gao.gov/highrisk/dod_financial_management. Further, other auditors have 

made recommendations to DOD and SBA for improving their financial management. See GAO, High Risk Area: Emergency 

Loans for Small Businesses, accessed Feb. 8, 2023, https://www.gao.gov/highrisk/emergency-loans-small-businesses.
STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES 48

Labor’s Pandemic Unemployment Assistance program and the Department of Agriculture’s 

Supplemental Nutrition Assistance Program.

Our audit report presents additional details concerning these material weaknesses and their effect on 

the accrual-based consolidated financial statements, sustainability financial statements, and managing 

federal government operations. Until the problems outlined in our audit report are adequately 

addressed, they will continue to have adverse implications for the federal government and the 

American people.

The 2022 Statement of Long-Term Fiscal Projections and related information in Note 24, Long-Term 

Fiscal Projections, to the consolidated financial statements and in the unaudited Required 

Supplementary Information section of the 2022 Financial Report of the United States Government

(2022 Financial Report) show that, based on current revenue and spending policies, the federal 

government continues to face an unsustainable long-term fiscal path. GAO and CBO prepare long-term 

federal fiscal simulations, which also continue to show federal debt held by the public rising as a share 

of gross domestic product (GDP) in the long term.23 This situation—in which debt held by the public 

grows faster than GDP—means the federal government’s long-term fiscal path is unsustainable. 

GAO, CBO, and the 2022 Financial Report, although using somewhat different assumptions, all project 

that debt held by the public as a share of GDP (debt-to-GDP) will surpass its historical high (106 

percent in 1946) by 2031. Health care and Social Security remain key drivers of federal noninterest 

spending in the long-term projections. In addition, GAO, CBO and the 2022 Financial Report project

that growing debt held by the public and increases in interest rates from recent historic lows will lead to 

higher spending on net interest (primarily interest on debt held by the public). 

The 2022 Financial Report also discusses the fiscal gap, which is a measure of policy changes (some 

combination of revenue increases or spending cuts) that must be made over the next 75 years to reach 

a target ratio of debt-to-GDP at the end of the projection period. For example, based on projections in 

the 2022 Financial Report, if policymakers choose to achieve a debt-to-GDP target of 97 percent—the 

level the federal government reached at the end of fiscal year 2022—they would need to make policy 

changes over a 75-year period (fiscal years 2023 to 2097) that increase projected revenues by 26 

percent, reduce projected noninterest spending by 21 percent, or a combination of the two. The 

projections show that the longer policy changes are delayed, the more significant the changes will need 

to be. 

Since 2017, we have stated that Congress should develop a fiscal plan to place the federal government 

on a sustainable fiscal path and ensure that the United States remains in a strong economic position to 

meet its social and security needs, as well as to preserve flexibility to address unforeseen events, such 

as an economic downturn or large-scale disaster. In developing a fiscal plan, policymakers will need to 

consider the entire range of federal activities, both revenue (including tax expenditures) and spending 

(entitlement programs, other mandatory spending, and discretionary spending) that affect the debt.24 In 

23For more information on GAO’s simulations, see GAO, America’s Fiscal Future, accessed on Feb. 8, 2023, 

https://www.gao.gov/americas_fiscal_future. For more information on CBO’s simulations, see Congressional Budget Office, 

The 2021 Long-Term Budget Outlook (Washington, D.C.: Mar. 4, 2021). 

24Tax expenditures, as defined by law, are provisions of the federal tax code that reduce taxpayers’ tax liability and therefore 

the amount of tax revenue paid to the federal government. Examples include tax credits, deductions, exclusions, exemptions, 

deferrals, and preferential tax rates. 2 U.S.C. § 622(3).
49 STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

September 2020, we raised a matter to Congress, suggesting that it establish a long-term fiscal plan 

that includes fiscal rules and targets, such as a debt-to-GDP target.25

Well-designed fiscal rules and targets can help manage debt by controlling factors, such as spending 

and revenue as part of a long-term fiscal plan. In September 2020, we identified key considerations for 

the design, implementation, and enforcement of fiscal rules and targets.26 For example, the design 

should provide flexibility to address emerging issues, such as an economic downturn or large-scale 

disaster. GAO issues an annual report on the fiscal health of the federal government, which provides 

more information on the federal government’s unsustainable long-term fiscal path.

We have also previously suggested that Congress consider alternative approaches to the current debt 

limit as part of any long-term fiscal plan.27 The debt limit is a legal limit on the total amount of federal 

debt that can be outstanding at one time.28 However, it does not restrict Congress’s ability to pass 

spending and revenue legislation that affects the level of debt in the future, nor does it otherwise 

constrain fiscal policy. Delays in raising the debt limit could force Treasury to delay payments on 

maturing securities and interest until sufficient funds are available, compromising the safety of Treasury 

securities. This risk disrupts financial markets, and investors may require higher interest rates to hedge 

against the increased risks. On January 19, 2023, the federal debt reached the debt limit and Treasury 

began taking extraordinary actions29 to meet the government’s obligations as they come due without 

exceeding the debt limit.30

Further, there are other risks—such as natural disasters and climate change, global or regional military 

conflicts, housing finance, and public health crises—that could affect the federal government’s financial 

condition in the future. These risks are not fully accounted for in the government’s long-term fiscal 

projections. Some of the specific risks that could affect the federal government’s financial condition 

include the following: 

• Federal support of the housing finance market remains significant even though the market has 

largely recovered since the 2007 to 2009 financial crisis. In 2008, the federal government placed 

the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage 

Corporation (Freddie Mac) under conservatorship and entered into preferred stock purchase 

agreements with these government-sponsored enterprises (GSE) to help ensure their financial 

stability. These agreements could affect the federal government’s financial condition. At the end of 

fiscal year 2022, the federal government reported about $224 billion of investments in these GSEs, 

which is net of about $66 billion in valuation losses. The reported maximum remaining contractual 

commitment to these GSEs, if needed, is about $254 billion. 

25GAO, The Nation’s Fiscal Health: Effective Use of Fiscal Rules and Targets, GAO-20-561 (Washington, D.C.: Sept. 23, 

2020). 

26For more information on the design of fiscal rules and targets, see GAO-20-561.

27GAO, Debt Limit: Market Response to Recent Impasses Underscores Need to Consider Alternative Approaches, GAO-15-

476 (Washington, D.C.: July 9, 2015).

28The debt limit is codified at 31 U.S.C. § 3101(b), as amended, and applies to federal debt issued pursuant to authority under 

31 U.S.C. chapter 31. A very small amount of total federal debt is not subject to the debt limit. This amount primarily comprises 

unamortized discounts on Treasury bills and Zero Coupon Treasury bonds; debt securities issued by agencies other than 

Treasury, such as the Tennessee Valley Authority; and debt securities issued by the Federal Financing Bank.

29Extraordinary actions are actions that Treasury takes as it nears the debt limit to avoid exceeding the limit. These actions are 

not part of Treasury’s normal cash and debt management operations. For more information, see GAO-15-476.

30Department of the Treasury, Debt Limit Letter to Congress (Jan. 19, 2023). 
STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES 50

The ultimate role of these GSEs could affect the federal government’s financial condition and the 

financial condition of certain federal entities, including the Federal Housing Administration (FHA), 

which in the past expanded its lending role in distressed housing and mortgage markets. Federal 

actions and strong housing market conditions have strengthened the financial condition of FHA and 

these GSEs, and they have not required Treasury assistance during the COVID-19 pandemic. 

However, risks remain that could affect their ability to absorb unexpected losses under severely 

adverse conditions.31

• Disaster costs are expected to increase as extreme weather events become more frequent and 

intense because of climate change, as the U.S. Global Change Research Program and the National 

Academies of Sciences, Engineering, and Medicine have observed and projected. Key sources of 

exposure include supplemental appropriations to provide disaster assistance, additional losses on 

federal insurance programs (e.g., crop and flood insurance), and damage to federal property that 

might be affected. For example, as currently structured, the National Flood Insurance Program’s 

premiums and dedicated resources are not sufficient to cover expected costs without borrowing 

from Treasury.32 As of September 30, 2022, the Federal Emergency Management Agency (FEMA), 

which administers the National Flood Insurance Program, owed about $21 billion to Treasury for 

money borrowed to pay claims and other expenses. We have reported that FEMA is unlikely to 

collect enough in premiums in the future to repay this debt.33

_________________________

Our audit report on the U.S. government’s consolidated financial statements would not be possible 

without the commitment and professionalism of inspectors general throughout the federal government 

who are responsible for annually auditing the financial statements of individual federal entities. We also 

appreciate the cooperation and assistance of Treasury and OMB officials as well as the federal entities’ 

chief financial officers’ flexibility, adaptability, and ability to issue their financial statements on a timely 

basis. We look forward to continuing to work with these individuals, the administration, and Congress to 

achieve the goals and objectives of federal financial management reform.

Our audit report begins on page 222. Our guide, Understanding the Financial Report of the United 

States Government, is intended to help those who seek to obtain a better understanding of the financial 

report and is available on GAO’s website at https://www.gao.gov.34

31GAO, Housing Finance System: Future Reforms Should Consider Past Plans and Vulnerabilities Highlighted by Pandemic,

GAO-22-104284 (Washington, D.C.: Jan. 13, 2022).

32We have suggested an alternative way to record insurance commitments in the budget such that the federal government’s 

commitment would be more fully recognized. See GAO, Fiscal Exposures: Federal Insurance and Other Activities That 

Transfer Risk or Losses to the Government, GAO-19-353 (Washington, D.C.: Mar. 27, 2019).

33GAO, Flood Insurance: Comprehensive Reform Could Improve Solvency and Enhance Resilience, GAO-17-425

(Washington, D.C.: Apr. 27, 2017).

34GAO, Understanding the Financial Report of the United States Government, GAO-18-239SP (Washington, D.C.: Feb. 2018).
51 STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

Our audit report was prepared under the direction of Robert F. Dacey, Chief Accountant, and Dawn B. 

Simpson, Director, Financial Management and Assurance. If you have any questions, please contact 

me on (202) 512-5500 or them on (202) 512-3406. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report.

Gene L. Dodaro

Comptroller General

of the United States

cc: The Majority Leader of the Senate

The Minority Leader of the Senate

The Majority Leader of the House of Representatives

The Minority Leader of the House of Representatives