NOTES TO THE FINANCIAL STATEMENTS 160

Note 27. Disclosure Entities and Related Parties

SFFAS No. 47, Reporting Entity provides criteria for identifying organizations that are consolidation entities, disclosure 

entities, and related parties, and how such organizations are reported within the Financial Report. For consolidation entities, 

the assets, liabilities, results of operations, and related activity are consolidated into the government’s financial statements. 

For disclosure entities and related parties, balances and transactions with such entities are included in the financial statements 

and certain information about their relationship with the federal government is disclosed in the notes to the consolidated 

financial statements. Disclosure entities and related parties are important to the Financial Report but are not consolidated into 

the government’s financial statements. 

Disclosure Entities 

Disclosure entities are organizations similar to consolidation entities in that they are either: a) in the Budget; b) majority 

owned by the government; c) controlled by the government; or d) would be misleading to exclude. Disclosure entities have a 

greater degree of autonomy with the government than consolidation entities. In addition, organizations may be owned or 

controlled by the government as a result: of a) regulatory actions (such as organizations in receivership or conservatorship); 

or b) other government intervention actions. Under such regulatory or other intervention actions, if the relationship with the 

government is not expected to be permanent, such entities generally would be classified as disclosure entities based on their

characteristics taken as a whole. 

Based on the criteria in GAAP for federal entities, the disclosure entities in the Financial Report are FR System, SPVs, 

Fannie Mae, Freddie Mac, and National Railroad Passenger Corporation (more commonly referred to as Amtrak). In 

addition, there are additional disclosure entities reported by component reporting entities that do not meet the qualitative or 

quantitative criteria in SFFAS No. 47 to be reported in the Financial Report.

Federal Reserve System

Congress, under the Federal Reserve Act, created the FR System. The FR System includes the Federal Reserve Board, 

the FRB, and FOMC. Collectively, the FR System serves as the nation’s central bank and is responsible for formulating and 

conducting monetary policy, issuing and distributing currency (Federal Reserve Notes), supervising and regulating financial 

institutions, providing nationwide payment systems (including large-dollar transfers of funds, Automated Clearing House 

operations, and check collections), providing certain financial services to federal entities and fiscal principals, and serving as 

the U.S. government’s bank. Monetary policy includes actions undertaken by the FR System that influence the availability 

and cost of money and credit as a means of helping to promote national economic goals. The FR System also conducts 

operations in foreign markets in order to counter disorderly conditions in exchange markets or to meet other needs specified 

by the FOMC to carry out its central bank responsibilities. The FR System is considered an independent central bank, and the 

executive branch of the government does not ratify its decisions. 

The 12 FRB are chartered under the Federal Reserve Act, which requires each member bank to own the capital stock of 

its FRB. Each FRB has a board of directors that exercises supervision and control of each FRB, with three members 

appointed by the Federal Reserve Board, and six board members elected by their member banks. The FRB participate in 

formulating and conducting monetary policy, distributing currency and coin, and serving as the government’s fiscal agent, as 

well as the fiscal agent for other fiscal principals. Fiscal principals, generally speaking, relate to banks, credit unions, and 

savings and loan institutions. Additionally, the FRB provide short-term loans to depository institutions and loans to 

participants in programs or facilities with broad-based eligibility in unusual and crucial circumstances when approved by the 

Federal Reserve Board and the Secretary of the Treasury. 

The government interacts with FRB in a variety of ways, including the following:

• The FRB serve as the government’s fiscal agent and depositary, executing banking and other financial transactions 

on the government’s behalf. The government reimburses the FRB for these services, the cost of which is included on 

the Statements of Net Cost;

• The FRB hold Treasury and other federal securities in the FRBs’ SOMA for the purpose of conducting monetary 

policy (see Note 12—Federal Debt and Interest Payable);

• The FRB hold gold certificates issued by the government in which the certificates are collateralized by gold (see 

Note 2—Cash and Other Monetary Assets);

• The FRB hold SDR certificates issued by the government which are collateralized by SDR (see Note 2—Cash and 

Other Monetary Assets); and

• The FRB are required by Federal Reserve Board policy to transfer their excess earnings to the government, which 

are included in Other Taxes and Receipts on the Statements of Operations and Changes in Net Position.
161 NOTES TO THE FINANCIAL STATEMENTS

• Federal Reserve System Structure

The Federal Reserve Board is an independent organization governed by seven members who are appointed by the 

President and confirmed by the Senate. The full term of a Federal Reserve Board member is 14 years, and the 

appointments are staggered so that one term expires on January 31 of each even-numbered year. The Federal Reserve 

Board has a number of supervisory and regulatory responsibilities for institutions including, among others, statechartered banks that are members of the FR System, bank holding companies, and savings and loan holding companies. 

In addition, the Federal Reserve Board has general supervisory responsibilities for the 12 FRB, and issues currency 

(Federal Reserve Notes) to the FRB for distribution.

The FOMC is comprised of the seven Federal Reserve Board members and five of the 12 FRB presidents, and is 

charged with formulating and conducting monetary policy primarily through open market operations (the purchase and 

sale of certain securities in the open market), the principal tool of national monetary policy. These operations affect the 

amount of reserve balances available to depository institutions, thereby influencing overall monetary and credit 

conditions. 

• Federal Reserve Monetary Policy Action

Monetary policy comprises the Federal Reserve's actions and communications to promote maximum employment, 

stable prices, and moderate long-term interest rates; the economic goals the Congress has instructed the Federal Reserve 

to pursue.

During FY 2023, Consumer price inflation, as measured by the 12-month change in the price index for PCE was 

4.4 percent in April 2023, down from its peak of 7.0 percent in June 2022, but still well above the FOMC 2.0 percent 

objective.

In the beginning of FY 2023, in response to high inflation, the FOMC continued to increase interest rates and 

reduce its securities holdings. In November 2022, the FOMC decided to raise the target range for the federal funds rate 

by 0.75 percent to 3.75 percent to 4.0 percent. In December 2022, considering the cumulative tightening of monetary 

policy and the lags with which monetary policy affects economic activity and inflation, the FOMC slowed the pace of 

policy tightening. The FOMC decided to raise the target range for the federal funds rate to 4.25 percent to 4.50 percent 

in December 2022. By March 2023, the FOMC decided to raise the target range for the federal funds rate to 4.75 

percent to 5.0 percent. In May 2023, the FOMC decided to raise the target range for the federal funds rate to 5.0 percent 

to 5.25 percent. In July 2023, the FOMC continued to raise the target range for the federal funds rate reaching 5.25 

percent to 5.50 percent. 

The FOMC began reducing its securities holdings in June 2022 and, since then, has continued to implement its 

plan for significantly reducing the size of the Federal Reserve's balance sheet in a predictable manner. Since September 

2022, principal payments from securities held in the SOMA have been reinvested only to the extent that they exceeded 

monthly caps of $60.0 billion per month for Treasury securities and $35.0 billion per month for agency mortgagebacked securities. The FRB balance sheet developments may be obtained at https://www.federalreserve.gov/balancesheet. 

• Federal Reserve System Assets, Liabilities, Revenues, Expenses, Gains, and Losses

The FRB hold Treasury and other securities in the SOMA for the purpose of conducting monetary policy. As of 

September 30, 2023, Treasury securities held by the FRB totaled $2,786.7 billion, which excludes $2,139.0 billion in 

Treasury securities used in overnight reverse repurchase transactions. As of September 30, 2022, Treasury securities 

held by the FRB totaled $2,731.1 billion, which excludes $2,908.0 billion in Treasury securities used in overnight 

reverse repurchase transactions. Such securities are included in federal debt and interest payable (see Note 12—Federal 

Debt and Interest Payable). For fiscal years ended September 30, 2023, and 2022, Treasury incurred interest cost 

relating to the FRB’s Treasury holdings amounting to $105.1 billion and $114.7 billion, respectively, which is included 

in interest on Treasury securities held by the public on the Statement of Net Cost. Unrestricted Cash held on deposit at 

the FRB as of September 30, 2023, and 2022, was $638.9 billion and $617.0 billion, respectively, and are included in 

cash and other monetary assets. In addition, restricted cash as of September 30, 2023, and 2022, was $56.3 billion and 

$46.8 billion, respectively; a significant portion is held on deposit at the FRB (see Note 2—Cash and Other Monetary 

Assets). The outstanding SDR certificates issued by the government to the Federal Reserve, valued at $5.2 billion as of 

September 30, 2023, and 2022, are reported under Other Liabilities on the government’s Balance Sheet (see Note 18—

Other Liabilities).

Treasury securities are generally subject to the same market condition as other financial instruments. In the open 

market, the FRB purchase and sell Treasury securities as a mechanism for controlling the money supply.

Financial and other information concerning the FR System, including financial statements for the Federal Reserve 

Board and the FRB, may be obtained at https://federalreserve.gov.
NOTES TO THE FINANCIAL STATEMENTS 162

• FRB Residual Earnings Transferred to the Government

FRB generate income from interest earned on securities, reimbursable services provided to federal entities, and the 

provision of priced services to depository institutions, as specified by the Monetary Control Act of 1980. Although the 

FRB generate earnings from carrying out open market operations (via the earnings on securities held in the SOMA 

account), their execution of these operations is for the purpose of accomplishing monetary policy rather than generating 

earnings. Each FRB is required by Federal Reserve Board policy to transfer to the government its residual (or excess) 

earnings, after providing for the cost of operations, payment of dividends, and surplus funds not to exceed an FRB’s 

allocated portion of an aggregate of $6.8 billion for all FRB. These residual earnings may vary due to, among other 

things, changes in the SOMA balance levels that may occur in conducting monetary policy. If an FRB’s earnings for the 

year are not sufficient to provide for the cost of operations, payment of dividends, or allocated portion of $6.8 billion 

aggregate surplus funds limitation, an FRB will suspend its payments to the government until such earnings become 

sufficient. These funds are part of restricted cash at the Federal Reserve (see Note 2—Cash and Other Monetary 

Assets). The FRB residual earnings of $0.6 billion and $106.7 billion for fiscal years ended September 30, 2023, and 

2022, respectively, are reported as other taxes and receipts on the Statements of Operations and Changes in Net 

Position. Accounts receivable, net, includes a receivable for FRB’s residual earnings which represents the earnings due 

to the General Fund as of September 30, but not collected by the General Fund until after the end of the month (see 

Note 3—Accounts Receivable, Net).

Special Purpose Vehicles

In response to the COVID-19 pandemic, Treasury holds equity investments in SPVs established by the Federal Reserve 

Board for the purpose of enhancing the liquidity of the U.S. financial system. Involvement in these programs represents nonpermanent intervention activities designed to help mitigate the economic impacts of the pandemic. Accordingly, the 

government’s equity interests in these SPVs meet the SFFAS No. 47 criteria for classifying our SPV investments as 

disclosure entities. These entities are not consolidated as part of the government’s consolidated financial statements; 

however, the value of the investments in the SPVs, changes in value, and related activity with the SPVs are included in the 

government’s consolidated financial statements (see Note 7—Investments).

Fannie Mae and Freddie Mac

In 2008, during the financial crisis, the government placed Fannie Mae and Freddie Mac under conservatorship to help 

ensure their financial stability. These entities meet the criteria in SFFAS No. 47, for disclosure entities as both: a) 

“receiverships and conservatorships,”; and b) as entities wherein “federal government intervention actions resulted in control 

or ownership” with intervention actions not expected to be permanent. Accordingly, these entities are not consolidated into 

the government's consolidated financial statements. However, the values of the investments in such entities, changes in value, 

and related activity with these entities are included in the government's consolidated financial statements (see Note 8—

Investments in Government-Sponsored Enterprises for additional information).

Amtrak

Amtrak was incorporated in 1971 pursuant to the Rail Passenger Service Act of 1970 and is authorized to operate a 

nationwide system of passenger rail transportation. Amtrak is a private, for-profit corporation under 49 U.S.C. § 24301 and 

D.C. law. It is not a department, entity, or instrumentality of the government. Amtrak’s classification as a disclosure entity is 

attributable to being: a) listed in the Budget; b) financed mostly by sources other than taxes; and c) governed by an 

independent Board of Directors, which is comprised of 10 directors. The Secretary of Transportation, who is a director by 

statute, and eight of the other Amtrak directors, are appointed by the President with the advice and consent of the U.S. 

Senate. The President of Amtrak also is a board member and is appointed by the board. Amtrak does not take actions on 

behalf of the government but benefits the national economy by providing a transportation option in 46 states and the D.C.

The government (through the DOT) owns 100.0 percent of Amtrak’s preferred stock (109,396,994 shares of $100.00 

par value). Each share of preferred stock is convertible into ten shares of common stock. The common stockholders have 

voting rights for “amendments to Amtrak’s Articles of Incorporation proposed by the Board of Directors and for certain other 

extraordinary events.” Although Section 4.02(g) of the Amtrak Articles of Incorporation allow for the conversion of preferred 

stock to common stock, current government administrative policy is to not convert its holdings without congressional 

authorization. Section 4.02(g) of the Amtrak Articles of Incorporation does not limit the timing of conversion or require any 

preapprovals. Conversion is effective the business day following receipt of written notice of the holder’s election to convert.

The government does not recognize the Amtrak preferred stock in its financial statements because, under the corporation’s 

current financial structure, the preferred shares do not have a liquidation preference over the common shares, the preferred 

shares do not have any voting rights, and dividends are neither declared nor in arrears.
163 NOTES TO THE FINANCIAL STATEMENTS

In addition to the purchase/ownership of the Amtrak preferred stock, the government has provided funding to Amtrak, 

since 1972, primarily through grants and loans. Amtrak receives grants from the government that cover a portion of the 

corporation’s annual operating expenses and capital investments. Funding provided to Amtrak through grant agreements are 

included in the Budget and the DOT financial statements. For the fiscal year ended September 30, 2023, the net cost amount

related to grants was $2.9 billion, and total budgetary outlays were $3.2 billion. For the fiscal year ended September 30, 

2022, the net cost amount related to grants was $3.2 billion, and total budgetary outlays were $2.3 billion. 

The government (through the DOT) has possession of two long-term notes with Amtrak. The first note is for $4.0 

billion and matures in 2975 and, the second note is for $1.1 billion and matures in 2082 with renewable 99-year terms. 

Interest is not accruing on these notes as long as the current financial structure of Amtrak remains unchanged. If the financial 

structure of Amtrak changes, both principal and accrued interest are due and payable. The government does not recognize the 

long-term notes in its financial statements since the notes, with maturity dates of 2975 and 2082, are considered fully 

uncollectible due to the lengthy terms, Amtrak’s history of operating losses, and ability to generate funds for repayment. 

Amtrak’s ability to continue to operate in its current form is dependent upon the continued receipt of subsidies from the 

government. 

Financial statements and other information (including loans) concerning Amtrak may be obtained at 

https://www.amtrak.com/reports-documents and https://www.transportation.gov/fy23-afr.

Related Parties

Related parties exist if the existing relationship, or one party to the existing relationship, has the ability to exercise 

significant influence over the party’s policy decisions. Related parties do not meet the principles for inclusion, but are 

reported in the Financial Report if they maintain relationships of such significance that it would be misleading to exclude.

Based on the criteria in SFFAS No. 47, the related parties reported in the Financial Report are FHLBanks, IMF, 

Multilateral Banks, and PEFCO. In addition, there are additional related parties reported by component reporting entities that 

do not meet the criteria to be reported in the Financial Report.

Federal Home Loan Banks

The government is empowered with supervisory and regulatory oversight of the 11 FHLBanks. The government is 

responsible for ensuring that each regulated entity operates in a safe and sound manner, including maintenance of adequate 

capital and internal control, and carries out its housing and community development finance missions. Each FHLBank 

operates as a separate federally chartered corporation with its own board of directors, management, and employees. The 

FHLBanks are GSEs that were organized under the Federal Home Loan Bank Act of 1932, to serve the public by enhancing 

the availability of credit for residential mortgages and targeted community development. They are financial cooperatives that

provide a readily available, competitively-priced source of funds to their member institutions. The FHLBanks are not 

government entities and do not receive financial support from taxpayers. The government does not guarantee, directly or 

indirectly, the debt securities or other obligations of FHLBanks.

By law, in the event of certain adverse circumstances, Treasury is authorized to purchase up to $4.0 billion of 

obligations of the FHLBanks. This authority may be exercised only if alternative means cannot be effectively employed to 

permit the FHLBanks to continue to supply reasonable amounts of funds to the mortgage market, and the ability to supply 

such funds is substantially impaired because of monetary stringency and a high level of interest rates. Any funds borrowed 

from Treasury shall be repaid by the FHLBanks at the earliest practicable date. Treasury has not used such authority. Also, in 

accordance with the Government Corporations Control Act, Treasury prescribes certain terms concerning the FHLBanks 

issuance of obligations to the public. Financial and other information concerning FHLBanks including financial statements 

may be obtained at http://www.fhlbanks.com/.

International Monetary Fund and Multilateral Development Banks

The IMF’s primary purpose is to ensure the stability of the international monetary system—the system of exchange 

rates and international payments that enables countries to transact with each other. Member countries provide resources for 

IMF loans through their subscription quotas (quotas). The IMF also has additional pools of resources that can be used in the 

event of a crisis that requires lending beyond the level available from quota resources: 1) the NAB; 2) bilateral borrowing 

arrangements; and 3) additional allocation of SDRs. Participation in the IMF works like an exchange of monetary assets.

Quotas are the principal component of the IMF’s financial resources and are denominated in SDR. The size of each 

member’s quota is based broadly on its relative position in the world economy. The U.S. holds the largest quota of any IMF 

member. Since 2016, U.S. quota in the IMF has been about SDR 83 billion. The equivalent dollar value of the quota total 

U.S. as of September 30, 2023, and 2022, was approximately $108.9 billion and approximately $106.0 billion, respectively. 

The government has funded a portion of U.S. quota to the IMF for lending, represented by U.S. reserve position at the IMF, 

while the remainder of the U.S. quota is represented by a letter of credit on which the IMF can draw as needed for lending.
NOTES TO THE FINANCIAL STATEMENTS 164

The U.S. reserve position was approximately $32.0 billion as of September 30, 2023, and approximately $31.3 billion as of 

September 30, 2022, with the remaining undrawn letter of credit representing the balance (see Note 2—Cash and Other 

Monetary Assets and Note 20—Commitments). The government’s quota serves as the key determinant for its 16.5 percent 

share of voting rights in various IMF decisions. Since certain key IMF decisions require approval by at least 85.0 percent of

the voting power, the government (represented by the Secretary of the Treasury) holds a substantial voice in the IMF and 

exercises significant influence over IMF policies, including veto power over major IMF decisions.

Some IMF members also supplement the IMF’s resources through the NAB and bilateral borrowing agreements. 

Through the NAB, the U.S. and other participating members make additional resources available to the IMF if required to 

cope with or forestall an impairment of the international monetary system. In accordance with the CARES Act, effective 

January 1, 2021, U.S. participation in the NAB increased by SDR 28.2 billion. Accordingly, the government's participation in 

the NAB as of September 30, 2023, and 2022, was SDR 56.4 billion respectively, which is equivalent to $74.2 billion and 

$72.2 billion, respectively. When the government transfers funds to the IMF under the NAB, it receives a liquid and interestbearing claim on the IMF. As of September 30, 2023, and 2022, loans outstanding to the IMF from the government under the 

NAB stood at $0.1 billion and $0.5 billion, respectively. These loans were reported under Loans Receivable, Net on the

Balance Sheet. The NAB is not currently activated, and the U.S. has veto power over its activation, as well as over most 

changes to its terms or size. The government does not have a bilateral borrowing agreement with the IMF, though it exercises 

indirect control over their activation, since NAB activation is a prerequisite for the IMF to draw on its bilateral borrowing 

arrangements.

As of September 30, 2023, and 2022, the government's total undrawn financial commitment to the IMF was $151.0

billion and $146.4 billion, respectively, which is composed of the quota related letter of credit and the undrawn portion of the 

NAB (see Note 20—Commitments).

Under the IMF Articles of Agreement, the IMF may allocate SDRs to member countries in proportion to their IMF 

quotas. SDR allocations are an international reserve asset created by the IMF to supplement its member countries’ official 

reserves. In FY 2021, the IMF approved a historic allocation of SDRs of $650.0 billion to further support the COVID-19 

recovery. This was the largest allocation in the IMF’s history, which substantially boosted the reserves and liquidity of the 

IMF’s member countries, without adding to their debt burdens. The U.S. received an additional 79.5 billion SDRs valued at 

$112.8 billion as a part of this historic allocation. The SDR allocation creates an asset and a liability on the Balance Sheet but 

does not increase the IMF’s available lending resources. The SDR asset as of September 30, 2023, and 2022, amounted to 

$163.2 billion and $153.6 billion, respectively, and includes the SDR allocation as well as purchased SDR (see Note 2—Cash 

and Other Monetary Assets). The SDR liability as of September 30, 2023, and 2022, amounted to $151.0 billion and $147.0 

billion, respectively (see Note 18—Other Liabilities).

The value of the SDR is based on a weighted average of the U.S. dollar, euro, Chinese renminbi, Japanese yen, and 

pound sterling. More information on the SDR valuation can be found at https://www.imf.org. 

Historically, IMF has never experienced a default by a borrowing country. The government, which is not directly 

exposed to borrowers from the IMF, has never experienced a loss of value on its IMF quota or an instance of non-repayment,

and it is not likely that the government will experience future losses as a result of its additional commitments.

Additionally, the government invests in and provides funding to the MDBs to support poverty reduction and promote 

sustainable economic growth in developing countries. The MDBs provide financial and technical support by means of 

strengthening institutions, providing assistance that addresses the root causes of instability in fragile and conflict-affected 

countries, responding to global crisis, and fostering economic growth and entrepreneurship. The government’s participation 

in the MDBs is in the form of financial contributions used to ensure the effectiveness and impact of the MDBs’ global 

development agenda. The U.S. has voting power in each of the MDBs to which it contributes, ranging from approximately 

6.0 percent to 50.0 percent (see Note 10—Other Assets and Note 20—Commitments for additional information).

Private Export Funding Corporation 

The financial statements reflect the results of agreements with PEFCO. PEFCO, is owned by a consortium of privatesector banks, industrial companies, and financial services institutions. It makes and purchases from private sector lenders, 

medium-term and long-term fixed-rate, and variable-rate loans guaranteed by EXIM Bank to foreign borrowers to purchase 

U.S. made equipment “export loans.”

EXIM Bank’s credit and guarantee agreement with PEFCO provides that EXIM Bank will guarantee the due and 

punctual payment of interest on PEFCO’s secured debt obligations which EXIM Bank has approved, and it grants to EXIM 

Bank a broad measure of supervision over certain of PEFCO's major financial management decisions, including the right to 

have representatives be present in all meetings of PEFCO’s Board of Directors, advisory board, and exporters’ council, and 

to review PEFCO’s financials and other records. However, EXIM Bank does not have voting rights and does not influence 

normal operations. In September 2020, the EXIM Board of Directors unanimously voted to renew its agreement with PEFCO 

for 25 years.
165 NOTES TO THE FINANCIAL STATEMENTS

PEFCO has an agreement with EXIM Bank which provides that EXIM Bank will generally provide PEFCO with an 

unconditional guarantee covering the due and punctual payment of principal and interest on export loans PEFCO makes and 

purchases. PEFCO’s guarantees on the export loans plus the guarantees on the secured debt obligations aggregating to 

$1,891.0 million at September 30, 2023 and $2,228.6 million at September 30, 2022, are included by EXIM Bank in the total 

for guarantee, insurance and undisbursed loans and the allowance related to these transactions is included in the Loan 

Guarantee Liabilities on the Balance Sheets.

EXIM Bank received fees totaling $22.4 million in FY 2023 and $29.1 million in FY 2022 for the agreements, which 

are included in Earned Revenue on the Statements of Net Cost.